Building the Plan for Warehouse Automation

Inflation, changing consumer spending patterns and rising wages are all challenges for the distribution industry, underscored by balancing brick-and-mortar sales and growing e-Commerce.

As e-Commerce continues to show signs of growth and expansion, organizations will lean heavily on their distribution operations to feed their physical locations and fulfill online orders. Designing a greenfield or converting a brownfield site into a true omnichannel operation can be key to sustaining growth in sales and volume while addressing outside challenges like labor costs, SKU proliferation, returns and capacity.

This FORTNA Insight will discuss building a realistic and actionable warehouse automation plan to ensure your operations are ready for today’s challenges and tomorrow’s growth.

1.  Labor costs and turnover
While labor availability is shrinking and competition for skilled workers grows, implementing automation to lessen an operation’s dependence on labor is normally the first business requirement for automation. New processes and operational designs integrated with automated technologies increase productivity and throughput while reducing labor costs.

2.  Inventory management and visibility
A distribution organization’s SKU counts can range from thousands to millions. Having real-time visibility into inventory velocity and turns, potential stockouts and returns will allow operations to meet customer expectations and intervene and react to market fluctuations and seasonality.

3.  Brownfield vs. greenfield
An important decision to make while building your automation plan is whether your current facility and operation can meet your future needs. With current interest rates and real estate costs, organizations are transforming their facilities with warehouse-ready solutions located in small, medium and large footprints to decrease labor costs and dramatically increase capacity and productivity.

4.  Scalability and flexibility
Disruption, geopolitical unrest and natural disasters have an effect on the supply chain. Operations built with flexibility and scalability are best prepared to react to these market fluctuations and promotional and seasonal opportunities.

5.  Return on investment
Understanding the financial metrics and terms by which an automation project will be judged is key to setting the right business requirements. These metrics are normally set by the sponsoring executive or a board of directors. To read an in-depth review of financial considerations within an automation business case, click here.

6.  Data utilization
Leveraging an operation’s data to gain insights into operational performance, sales trends and customer behavior is critical in any automation project. It should be a key business requirement to understand the software and IT infrastructure needed to deliver the tools, dashboards and real-time data.

The above requirements are a good starting point for building your automation plan. Your operation will have very specific needs that automation, in some form, will address. Cost reductions, throughput, safety, space utilization and sustainability are other factors to consider. Working with a supply chain partner like FORTNA, which has experience and expertise in partnering with organizations to build an automation plan, can make this process easier and result in a positive output.

Guidelines for building an automation plan for distribution operations

Culture and staff adoption, integration plans and capital and operational costs are just a few factors to consider. It is essential to deliver a clear and data-backed case that can answer questions on costs and ROI, expected performance and long-term savings. Below are some guidelines for building a solid automation plan.

1.  Analyze and measure multiple scenarios
There should be multiple options to discuss and measure the merits of each, including the option and results for doing nothing.

2.  List the business risks and mitigation plans
A good automation plan will list the business risks and how to address them if they occur. Unexpected obstacles and roadblocks are expected, and working with a supply chain partner like FORTNA, which has been through the process with many organizations, can help minimize these risks.

3.  Determine projected capital investment
The bottom line for each scenario’s investment and how it will be disbursed.

4.  Define projected operating costs
The new automation system will have drastically new needs for maintenance, spare parts and skill level requirements. Understanding these needs will allow for better planning and budgetary considerations.

5.  Establish expected performance and cost improvements
Before building a business plan for automation, benchmark and understand the system’s key KPIs pre-automation to measure improvements and cost savings effectively.

6.  Creation of an implementation plan and timeline
An overall timeline of the automation integration, including key goalposts, testing and go-live date.

Published/Updated 8/27/24