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July 6, 2022 | Article | 5 min Business insights

Warehouse automation solutions lead the way for business owners to combat labor shortages while meeting exploding eCommerce demands. However, adopting new technology isn't as easy as just ordering it online. Large warehouse operations require meticulous planning and financial consideration before making such an investment. Is your business ready?

The current economic environment is incoherent and unpredictable, and the gap between available labor and expected growth grows wider every day. As of January 2022, 73% of businesses in the warehousing industry said they have difficulty attracting employees. Global e-commerce sales recently reached $4.28 trillion, a figure expected to surpass $5.4 trillion in 2022, adding further stress to the system.

With skyrocketing demand and a persistent labor shortage, warehousing operations must lean on automation solutions and technology to keep up. Technologies such as AI, drones, robotics, the Internet of Things (IoT), and Augmented Reality (AR) can guide you down a competitive path into the future.

According to the latest reporting from LogisticsIQ, the warehousing automation market could surpass $30 million by 2026, growing at a CAGR of 14%. The numbers and trends all point in the same direction: warehouse automation solutions are the future.

Warehouse Automation Trends

Self serving carriers navigate a warehouse

Persistent labor shortages have accelerated the adoption of many warehouse automation solutions. To keep up with a booming e-commerce market, warehouses and distribution centers must leverage modern technology to meet customer demand. However, a perceived financial barrier to adopting such technologies has kept many operators from investing.

While these technologies can be a significant financial investment, the long-term ROI is far greater than working solely with human labor. Once you shift your thinking from short-term ROI to long-term improvement, the benefits become obvious.

  1. Robotics in Warehouse Operations

    The warehousing industry leaned on robotics well before the current labor shortages. eCommerce exploded over the past decade, forcing players like Amazon and FedEx to pivot towards automation.

    For example, consider Amazon’s acquisition of Kiva Systems in 2012. The Massachusetts-based robotics company specializes in autonomous mobile robots (AMRs), which work alongside human laborers to move heavy shelves of goods around the warehouse. Meanwhile, FedEx partnered with Vecna Robotics (also out of Massachusetts), deploying their AMRs in warehouses around the United States.

    Before the pandemic, most warehouse robots performed tasks with little variation. They could move objects from A to B, but couldn't complete the more complex tasks of their human counterparts. Developers’ focus now is on creating systems that can circumvent this problem, manipulating objects of complex shapes and sizes. These new automation solutions have to adapt to unpredictable warehouse circumstances, leveraging modern AI technology to learn as they go.

    Robots won't replace your workforce. But they can work alongside humans, performing more dangerous and monotonous tasks while human laborers focus on the meticulous. For example, Collaborative Robots, or Co-Bots, can work alongside human pickers to transport items around the warehouse.

    Robotic arms have also come a long way since early applications in manufacturing. Enhanced vision systems and gripper capabilities allow modern robotic arms to perform more particular tasks. They're perfect for repetitive actions like packaging, picking, placing, and sorting.

  2. Increasing Inventory Efficiency with Drones

    Worker uses a drone to navigate warehouse

    Drones are no longer just reserved for hobbyists. They've found a home in several industries, from agriculture to real estate. For example, AI-powered drones have revolutionized the way we look at inventory management and security in the warehouse. With a camera, scanners, and the right processing power, these drones can completely overhaul your current inventory management systems.

    Think about what happens when you order something online. Someone in the warehouse has to find and retrieve the item, and these warehouses—think of Amazon's massive fulfillment centers—can be upwards of 3 million square feet. What if that item is high on a shelf? The worker has to go back, get a lift and return to grab the package.

    Drones streamline the inventory management process. They know where every item is in the warehouse and can direct workers for retrieval. Instead of your human workforce scanning every barcode on the shelf—a task that may take all day—drones can scan them in a few hours. Furthermore, drones make the warehouse safer, as humans don't have to scan items on the top shelves.

    Aside from inventory management, drones also provide heightened security. Companies can turn to drones to keep tabs on their warehouses 24/7, as these machines don't need to eat or sleep. Instead of paying several security guards to roam the warehouse and perimeter, one can monitor the drones’ video feeds.

  3. The Internet-of-Things (IoT) Enhances Warehouse Management

    It's no secret that IoT has revolutionized the way businesses run. Recent reporting indicates that the global IoT warehouse management market could hit nearly $18 billion in value by 2025, with a CAGR of 21.21%.

    Modern IoT technology provides one of the best options for optimizing warehouse management. These warehouse automation solutions can streamline your inventory management system, effectively building a “smart warehouse” that leans on AI and automation.

    With IoT solutions, warehousing professionals can capitalize on:

    • Asset tracking and management. Manage location, transportation, packing, and shipping data in real-time.
    • Inventory optimization. Get the most out of your available warehouse space and decrease time spent locating inventory around the warehouse.
    • Predictive maintenance. IoT sensors can monitor warehouse equipment and leverage machine learning to prevent breakdowns.
    • Automation. Automatically confirms shipping and service tracking, allowing inventory managers to focus on less time-consuming tasks.

  4. Artificial Intelligence (AI) Makes Warehouse Automation Smarter

    Artificial Intelligence (AI) serves as the brain of your entire operation. It links all your warehouse automation solutions together, ensuring that they maximize efficiency. Drones, robots, and IoT technology all rely on this central network to navigate the warehouse and perform their assigned duties; AI also aids human laborers in bolstering safety and efficiency around the warehouse.

    AI can help design safer, smarter layouts for the entire warehouse. According to the Bureau of Labor Statistics, five out of every 100 full-time warehouse employees will suffer an injury at some point. But amid persistent labor shortages, warehouse operators can't afford to lose a single one of these workers.

    AI leverages data to understand how workers use the warehouse, where employees gather, and where the potential for injury exists. Then, it compiles the data to suggest optimized warehouse designs for maximum safety and efficiency.

    Humans can also leverage voice assistance AI technology to perform tasks around the warehouse. Employees can tell an AMR to retrieve specific items from around the warehouse with just a few words—order picking becomes as easy as talking into a microphone.

  5. Better Visibility Across Warehouse Processes Using Augmented Reality (AR)

    Worker uses tablet to view warehouse section

    The best thing about augmented reality (AR) technology is its easy accessibility for inventory management. AR uses your phone or tablet camera to scan objects in frame. Then it uses available data to provide more detailed information about what you're looking at, often rendering items in 3D format.

    Warehouses are vast landscapes with hundreds of thousands of items. AR understands the warehouse layout, every item within, and where to locate those items. Then, it creates an optimized map of sorts to guide workers to the items they need. Arrows appear in AR, and workers can follow them to a destination. The item will even appear on-screen, providing workers with all the information they need.

    But the applications of AR go far beyond scanning inventory. AR can also bolster employee training by pairing with more familiar technologies, especially for younger generations. AR also helps you envision warehouse upgrades before breaking ground, giving insight into layout and traffic flow planning.

Costs of Automating Warehouse Management and Operations

Modern warehouse automation solutions can completely overhaul the way you do business. The question these days is less “how will this technology help?” and more “how much will it cost?” Your bottom line is the most important part of running a business. While you want to capitalize on a booming eCommerce market ASAP, you still need to consider long-term ROI before investing in automation.

The cost of automation depends on how far you're willing to go. On the low end, it could cost between $500,000 to $1 million to implement basic warehouse automation solutions like picking robots. On the high-end, you might run a bill upwards of $25 million to turn your warehouse into a fully-automated and innovative facility.

Because these costs are so steep, it's wise to take gradual steps towards complete automation. Identify the areas of your business that could benefit most.

To calculate your ROI, determine what types of software and hardware solutions you want to apply. Then, calculate the estimated budget for your current warehouse operations, including labor and existing equipment. You must also factor in your average turnover rate and the cost of hiring/training new employees.

Finally, determine the types of warehouse automation solutions you're looking to invest in and how/where they'll save money on labor and maintenance while boosting efficiency and productivity. You can calculate your automation ROI with all this data in hand.

Factors to Consider When Implementing Warehouse Automation Solutions

Forklift operator moving stock

With so many different automation solutions available, you need to carefully assess what will provide maximum benefit to your particular warehouse. Everyone’s needs are different, what works for a different company may not help you as much.

In general, automation proves best for time-consuming, repetitive, process-oriented, and error-prone actions. Consider which warehouse tasks fall into these categories and how automating them will be better for business. Once you've identified these areas, you can take the following steps toward automating your warehouse.

First, seek advice from industry experts, both on the installation and financial sides. These automated systems need to integrate into your current processes. While that may prove easier for smaller systems like drones, large-scale automative overhauls require integration experts which will incur additional expenses. On the financial side, a financial partner with expertise in working with warehouse and logistics operators can help you determine how to strategically fund your capital investment, and its potential impact to your cashflow and overall profitability.

Business owners should also take into account the type of warehouse operation being considered for automation: dedicated, shared, or integrated omnichannel.

  • Dedicated warehouses are designed for a specific channel, product flow, or product type. These types of warehouses look to leverage automative practices to address scale and cost-efficiency.
  • Shared warehouses service multiple channels, such as wholesale and direct-to-customer (DTC). They also entail perishable products, making them most popular in agriculture. Because of their shared nature, these warehouses can leverage technology to support specific flows and order profiles between channels. Still, they can leverage AMRs and other automative solutions to address more labor-intensive tasks.
  • Integrated omnichannel warehouses address all channels seamlessly, leveraging technology systems to manage inventory across a common stock pool. Omnichannel facilities generally offer the most automative flexibility, although operators may have to make sacrifices on cycle time, productivity, and dedicated capacity.

Facing an ever-changing market, warehouse operators are pivoting away from turnkey providers, and towards as-a-service warehouse automation solutions. Investing in robotics-as-a-service and fulfillment-as-a-service can help circumvent hurdles associated with up-front financial risk. Now, operators can play with a variable cost structure to test and learn more about emerging technologies and how they can help their warehousing operation.

Take Your Warehouse Operations Into the Future

Warehouse automation solutions lead the way for business owners to combat labor shortages while meeting exploding eCommerce demands. However, adopting new technology isn't as easy as just ordering it online. Large warehouses require meticulous planning and financial consideration before making such an investment.

Partnering with a trusted financial institution like Bank of Blue Valley, a division of HTLF Bank can help you explore how warehouse automation solutions can impact your business. Work with an expert commercial banker to discuss the level of automation you're looking for, the size of an investment needed and its potential impact to your financial performance.

Get in touch with Bank of Blue Valley, a division of HTLF Bank to speak with a commercial banker with warehouse management insight, and carry your operations into an automated future.