Developing an ROI with Automation
ROI with automation starts with a thorough engineering design phase where a qualified integrator analyzes your picking, slotting, and labor costs to build a data-driven roadmap.
By SOLUTIONS COMMUNITY
Before you automate, you need a thorough engineering design phase. A qualified integrator can help.
Every company is looking to improve its warehouse productivity, because businesses depend on a high-performing supply chain. To get there, the warehouse needs to operate lean, fast, and accurately, and must deliver within a predictable order fulfillment time window. That means warehouses are increasingly turning to automation to meet these goals. But how can a company achieve a return on its investment? That’s the question the warehouse must answer to achieve senior-level buy-in.
If you’re working with a qualified integrator, the first step will be an engineering design phase. You don’t want to simply throw technology at the problem, and a good integrator will ensure that you don’t by working with you to deeply analyze your operations and find the appropriate solutions to help boost productivity.
Working together, you’ll document all your current operations and processes. You’ll document the number of touches and steps, how you pick, and where you’re operating manually and where you’re not. You’ll make note of areas where you still must stop and enter data into an ERP or WMS, and whether you’re still printing and handing out pick tickets or packing sheets. Other manual tasks like wrapping pallets, operating forklifts and the like are all part of this initial analysis, with the purpose of calculating how much labor goes into your operations. This calculation will run from start to finish in your operations.
While you may not have the budget to take on a full automation project, together with your integrator, your analysis will help identify your number one cost center. This is often picking, where industry averages show you spend more than 50 percent of your labor budget. A typical analysis will ask a few questions about your picking operations. For instance, what cost savings could you obtain if your order picking operated at a 99.9 percent accuracy rate? Do you use picking practices that lack pick path optimization and one-touch pick-pack validation? Are you lacking the ability to pick multi-line orders directly into the shipping carton?
When the answer is yes to any of the above, your integrator will likely suggest that you’d benefit from improving your order picking strategy. With that—plus picking automation—you can expect a significant productivity gain and achieve the desired ROI.
Slotting is another area to analyze with your integrator. If you can identify hot zones and SKU movement, you can take action to improve your storage and slotting practices. An assessment will consider a SKU velocity analysis to identify the fastest moving SKUs. Then you can slot them into the picking area’s “golden zone,” and add the appropriate automation to speed up operations and achieve ROI.
While these may be the most common spots to automate, your integrator will work with you to select the best blend of technologies that integrate well and lead to seamless operations. That recommendation should account not only for your current operation, but also for projected order volumes, SKU growth and future business requirements. For instance, you may end up considering traditional conveyor-based pick by voice or pick to light, along with robotics-based order picking and goods-to-person. Or you might use goods-to-person storage and picking together to meet your ROI goals.
Performing the analysis of your operations may take six to eight weeks from start to finish. But once completed, you’ll have a clear road map outlining what your integrator recommends you change and add to achieve an ROI. Keep in mind that you may set an ROI goal of 24 months, and your integrator will provide that scenario for you. But they will also be thinking ahead to the future and may suggest an ROI that stretches beyond that timeframe, because the results may be even more dramatic than what you could achieve in the 24-month timeframe.
Developing the ROI also means looking at the total cost of the investment, not just equipment itself. Software, integration, installation, training, maintenance and support should all be weighed against the expected labor, productivity, space, accuracy and shipping savings. This gives you a more complete picture of both the investment and its expected payback.
All of the information your integrator provides to you will be data driven. They will compare your options, all based off the information they collect throughout the engineering process. The buckets of ROI will usually include labor savings via productivity gains; increased throughput and the ability to support growth without a proportional increase in labor; improved layout and storage of materials; improved space utilization; validation from scanning at putaway and picking; cartonization improvements that lead to better shipping costs and material consumption, and inline manifesting that leads to shipping and material savings.
Usually, the automation you choose will integrate with a robust warehouse execution system, too, which will help manage and optimize your processes. A WES can orchestrate people, equipment and order flow, helping ensure that the individual automation technologies work together as a unified operation. The software will have functions to automate your processes and improve upon your current numbers.
Your top priority in making an automation investment is lowering your costs, along with improving quality, retaining good employees and improving your customer service. You achieve this by fulfilling orders more accurately and on time.
Want to learn more? Head to MHI’s Solutions Community website to view case studies and ROI calculators.
Source: Dan Hanrahan, Numina Group
Reviewed by Solutions Community Marketing Committee
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