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The hidden costs of delaying warehouse automation decisions
23 May 2024
Warehouse automation introduces efficiencies that enable organisations to increase productivity, respond faster to orders, and maximise storage density. However, securing the capital required for these initiatives remains a hurdle some organisations struggle to overcome. Part of the challenge may be that these organisations fail to fully consider the hidden costs of maintaining manual processes.
ADAM FOX, business development manager UK and Ireland at Swisslog elaborates: “From falling behind competitors to rising costs to unpredictable service levels, carefully evaluating the costs of inaction should always be considered as part of the business case for warehouse automation.”
Are you accounting for the cost of inaction?
The costs to a business that decides to continue using manual processes rather than automating are often dependent on whether it is operating in a growing or stagnant industry—but the costs always exist. Businesses in slow-growth sectors may rationalise that there is minimal cost to changing nothing, yet inefficient manual process costs will only increase, as will the cost of maintaining service levels in a tight labour market.
Businesses in fast growing industries, on the other hand, typically need to increase efficiency and expand capacity to keep up with market expansion and protect or grow their market share. In these cases, the reason for inaction is often competition with other areas of the business that are impacted by growth. It may seem prudent to invest in marketing over distribution, for example, but a thorough examination of hidden costs may reveal investments in warehouse automation will do more to enable sustained growth.
“The costs are easier to justify in businesses experiencing rapid growth as this is typically accompanied by the need for more inventory and more SKUs,” Adam adds. “Order picking becomes more time-consuming and the business may need to acquire surplus warehouse capacity even though existing warehouse space is not being used efficiently.”
Uncover the costs of doing nothing
To factor the cost of inaction into the automation business case, some of the less obvious benefits of warehouse automation should be taken into account, as well as the costs of maintaining manual processes.
In terms of costs, business leaders should be asking themselves the following questions:
Can current processes meet current market requirements for speed and accuracy? How will inaction affect market share? Do I have enough space in my facility to cater increased inventory and new products? Do we have the distribution capacity to meet growth projections? These are questions that can fuel the evaluation of hidden costs.
Other points to consider are how much automation will reduce cost per order, whether manual processes are limiting competitiveness, if distribution assets are being used to full potential, and the impact of faster, more reliable service on customer satisfaction.
Adam concludes: “Decisions about investing in warehouse automation are fully informed only when the cost of doing nothing is weighed against the cost to automate and modernise. Remember that a business that isn’t moving forward is essentially moving backward because it is losing ground to more aggressive competitors.”
Learn more about hidden costs
Swisslog's methodology for developing a warehouse automation business case includes accurate projections on productivity improvements, order cycle times, and storage density, as well as a cost analysis for inaction. The automation expert’s latest white paper, The Hidden Costs of Doing Nothing, explores this important topic in more detail.
To access the white paper, download here.
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