Amplify Your Warehouse Automation ROI

The Automation Imperative

Leading consumer-focused businesses are automating their warehouse networks, generating step changes in service and cost performance. Some companies have already unlocked 20% to 50% improvement in service levels while generating a 25% to 50% reduction in fulfillment costs—all while boosting their resilience amid today’s acute labor shortages.

Despite these success stories, however, many consumer-focused businesses are finding it difficult to make an adequate return or meet their automation design goals in their initial pilot, stopping the project in its tracks. Others have run successful pilots but struggled to scale the technology across their entire warehouse network, and some have been hesitant to restructure their network, preferring to focus directly on warehouse design instead of addressing the broader network strategy. Still others are struggling to create a comprehensive benefits case, making it difficult to gain buy-in across the company.

Three Inspirations for Automating @ Scale

Large-scale warehouse automation was, until fairly recently, considered too costly to generate a reasonable ROI. Although designing and scaling the automation of a warehouse network is still an inherently complex task, some leading consumer-focused businesses are succeeding by:

• Establishing the most relevant use cases for automation within the businesses’ different warehouse archetypes.
• Amplifying existing ROI potential before beginning to automate.
• Running a comprehensive and agile automation effort.

Establish Anchor Use Cases

To successfully automate at scale, businesses require a compelling and actionable business case that can justify the multiyear transformation effort and overcome any ROI hurdles. They should therefore begin by identifying the optimal uses for warehouse automation—uses that will address critical, labor-intensive processes within each warehouse. (See the slideshow below, “Four Steps to Tailoring Warehouse Animation.”)

Amplify ROI Potential

The cost of automation can be high. As a result, even when companies find optimal use cases, the ROI can be poor, or long-delayed—even as labor costs rise. Nonetheless, companies can find ways to amplify their automation ROI—and more than justify the effort. Here are four moves to explore:

Consolidate Warehouses.Businesses can more easily validate their automation investment by thoughtfully consolidating their warehouse network.

Broaden Solution Scope. Finding opportunities for automated solutions in a single distribution center to play multiple roles can boost efficiency and increase returns.

Optimize Inventory. Based on our experience, retailers and CPG businesses in particular can generate higher potential automation ROI through improved planning and the reduction of inventory days on hand, particularly in warehouses that are close to the consumer.

Assess Downstream Benefits. While warehouse labor savings, both direct and indirect, constitute a major portion of the benefits created by automation, we also see value in comprehensively assessing and including potential transportation and store-labor efficiencies

Run an Agile Automation Program

In this final, critical step, companies need to establish and run a comprehensive, agile automation program. While the agile approach is not unique to warehouse transformations, the training, feedback, and iterations of agile will be extremely supportive. The program should be supported by three pillars:

Articulate a C-Level Business Case. Support at the C-suite level is critical to providing a mandate to cross-functional teams, obtaining resource prioritization, and unlocking downstream process changes. But without end-to-end process changes, cross-functional buy-in and sponsorship, and timely capital allocations, the longer-term effort will falter.

Automation strategies often fail to capture C-suite attention because the business case is too focused on a narrow set of benefits, such as cost reduction or greater capacity utilization. Instead, the C-suite often wants to see a more strategic articulation of value, such as how automation will support growth, generate downstream efficiencies, and increase resilience.

Set Up a Transformation Management Office. The transformation must become a critical strategic program for the company and a key part of the overall business agenda. As a result, the business should establish a TMO to support the transformation that is directly sponsored by a member of the executive leadership team and led by a full-time supply chain leader who is responsible for the delivery of the program’s value and for meeting its timeline. This leader should track milestones at the level of the individual workstream, engage closely with external providers, and ensure that there is sufficient leadership attention as well as the day-to-day resources to move the work forward at a steady pace.

As supply chain volatility, labor gaps, and increasing complexity continue to push consumer-focused companies toward automation, it’s imperative that they pause to clearly articulate their unique automation requirements. While warehouse automation presents unprecedented opportunities for companies to scale quickly and generate value, companies need to apply a strategic and comprehensive approach to implementation if they are to generate the best return on their investment.

You can find the full length article on BCG.com