Executive Summary

A decade ago, warehouses were only considered intermediary locations for storing goods. Since then, warehouses have matured to incorporate additional business processes for improving efficiency and minimizing redundancy across their operations. The optimization of production, distribution, and technology usage has been critical in meeting evolving consumer demands.  To sustain these complex needs, businesses are turning to automation to act as a backbone for their daily operations. In the modern supply chain, warehouse automation is no longer reserved for high velocity markets. E-commerce companies, manufacturers, logistics enterprises and retail outlets are embracing these warehouse changes to enhance their quality of

operations and baseline efficiency. This reduction in logistics costs, human error and supply chain wastages allows smaller companies to stay competitive in growing markets.

As US e-commerce sales continue to grow at over 15% annually, suppliers feel the urgency to serve their customers by offering a variety of products at a faster pace. These operational challenges are expensive to tackle, especially as labor and land costs continue to rise.

This whitepaper highlights warehouse automation trends, different methods of systematically driven automation, and how enterprises can prepare themselves for these new opportunities.

Acceleration of Automated Warehouse Trends

Imagine an automated forklift rolling through aisles and feeding inventory into rack tower 50 feet above the warehouse floor, while a robot carries outbound inventory to the dispatch center enabling rapid order processing. Once the order is ready to ship, a driver-less vehicle or drone prepares to deliver the final product. Is this a vision of the 22nd century supply chain? No, these are the opportunities for a modern-day warehouse.

As of 2017 more than 15% of warehouses in the US were utilizing these techniques. Research shows that by the end of 2020, the number of robots in warehouses will grow by 15 times.

Overall, automation is shifting the standard in traditional warehouse operations. With the evolution of warehousing systems and advanced technologies, companies are looking for new methods to maximize order accuracy through automated material handling equipment, conveyor lighting systems, and robotic tools.

Given the chaos of warehousing automation, many organizations are investigating reliable trends for implementing the best business practices. This generates questions like:  What are the available automation techniques? How can businesses embrace these tools? And more importantly what is the ROI and flexibility for starting?

As of 2017, more than 15% of the warehouses in the US were using automated warehouse techniques. This trend will only speed up over the next five years. Research shows by the end of 2020, the number of robots in warehouses will grow by 15 times.

Why is Automation seeing a rise in prevalence?

Warehouse automation has been an ongoing journey in the supply chain world, but what’s fascinating is the recent developments in this technology. So, what is the reason behind the current rush in warehouse automation? There are several lengthy explanations, but in summary there are 4 prevailing reasons behind the sudden rise of these trends.

Increasing Labor Costs

As a business matures and begins receiving more orders, especially at the peak season of sales, they need more operation resources and warehouse space. In today’s world, labor and land are critical expenses, forcing companies to grapple with maximizing ROI for these respective investments. Automation quickly becomes the clear choice in order to maximize productivity benefits for their business strategy.

To increase order fulfillment, order accuracy and delivery speed, warehouses hire supplementary labor. Per the US Bureau of Labor Statistics, total warehouse employment grew 6% in the last year. The high demand for efficient labor pushes high wage rates. Resultantly, the hourly wage of warehouse workers has rapidly increased in the past 5 years. To achieve a high rate of order accuracy and avoid complications, businesses need qualified, efficient, and experienced workers. This makes it difficult for warehouses to get the right skills they need. The main concern is to attract and retain a quality workforce, driving expenditure on the necessary safety equipment and well-being of your workers.

This is one of the influential reasons, why warehouses are turning towards automation. Automated tools, machines, and processes do not require as frequent investments and can work 24/7. Employee management, health insurance, breaks, paid-time off, and training costs quickly eat into operations budgets and are limited by time constrains.

In addition to increasing labor costs, space is another concern. As the volume of orders rises, businesses need more inventory and the appropriate warehouse capacity.

US warehouses are now nearly three times as large as they were 15 years ago. A large warehouse helps manage orders efficiently and cope with growing inventory and the quantity of SKUs. Once a company expands to additional warehouses, a new challenge occurs with managing a supply network. Logistics and complexity climbs, bringing a greater need for system investments.

Order Complexity

As customers shift towards e-commerce and digital purchases, businesses are seeing a healthy rise in the number of online orders. This requires warehouses to manage increased shipments and more complex deliveries. As customers expect shorter lead times and responsive fulfillment, companies are looking to minimize delivery time and maximize order throughput. Peak season sales and standard sales offers increase the volume of these small orders, making it difficult for warehouses to track and deliver orders.

Verifying customer orders and ensuring accurate delivery is challenging as order quantity and SKU variety increases. Each complexity adds another opportunity for human error, order details mismanagement, or order misplacement within the system. If unaddressed, this results in a high rate of return and return management costs. In response, warehouse managers are looking for convenient automation solutions that increase order accuracy rates, delivery time, customer satisfaction and improve their order management process.

High Customer Expectation

A corollary to the previous point, automation is driven by business desires to meet these elevated customer demands, order fulfillment, and manpower limitations. As e-commerce sales grow at an explosive pace, businesses are shifting to meet new customer expectations for order fulfilment. Trends like same day shipping and complimentary standard delivery charges have arisen with the increase in competition in the digital marketplace. Pressure from larger companies has pushed smaller companies to ship smarter and focus on reducing waste to incorporate these changes to their provided services. Automation allows companies to meet these expectations while tackling higher frequency,

smaller pick sizes. This is especially beneficial during peak fourth-quarter retail sales.

Customers are not only expecting quicker delivery, but also variety in the product and supplementary delivery options. This increases inventory variations and value-added services (VAS), resulting in greater SKU management. In 2017, the average number of SKUs in US warehouses increased by 25%. Ultimately, these changes in customer expectations create a demand for more complex outbound needs that can be fulfilled with warehouse and transportation automation.

Automation is key in optimizing a warehouse of any size. The more you automate picking, packaging, shipping, and delivery processes, the less prone you are to human error. A Warehouse Management System makes it easy to manage inventory, orders, material handling, visibility, and order delivery.

Warehouse Optimization

Warehouse optimization is a deciding factor for the future of any organization. Its execution is invaluable and necessary for achieving operational efficiency. Adequate processing incorporates goals for saving time, space, and resources while minimizing errors, improving flexibility, agility, communication, transparency and customer satisfaction. In addition, warehouse optimization considers inventory flow, slotting/placement, storage, packaging, and delivery configurations. The most effective warehouses are those that incorporate these design factors into their operation structure, allowing them to beat the competition and achieve excellence.

There are many challenges in optimizing warehouse processes, among them are human errors, inefficiency, and lack of transparency. It is nearly impossible to address these hurdles without a centralized automated process consisting of a WMS system, material handling equipment systems, barcoding, and integrated data flow. There are five problems warehouse managers face in their day-to-day warehouse management.

1. Inventory Accuracy
2. Space Utilization
3. Redundant Processes
4. Picking Optimization
5. Order Management

  • Throughout fulfillment, companies may struggle with hard inventory values of available stock due to lack of system visibility. Automation can reduce this pain through real time inventory incrementing and deductions.
  • Space utilization becomes difficult without system optimization. Locating order components is also laborious and present opportunities for improving manual work within the system.
  • Redundant processes are inefficient and increase the costs of product handling. This presents an opportunity to increase revenue that can be passed onto customers or reinvested into the business.
  • Manual processes inhibit insight into warehouse or inventory location, preventing businesses from properly utilizing their resources. This is especially relevant for order management and picking efficiency. These factors also become more difficult to manage as number of warehouses increases.

Automation permits optimized processes for managing businesses quickly, efficiently, and accurately. Real-time data and intelligence systems are essential for modern warehouse management.

Enabling Change – What do you need?

Successfully automating warehouse operations requires a holistic approach to provide flexibility for an ever-evolving supply chain operation. One approach might involve designing a WMS, upgrading to a mobile integrated solution, extending to voice interaction, and finally adopting MHE systems. This is only possible by strategically planning technology integration from the start. There are many ways to organize and automate warehouses with the most effective techniques highlighted below.

ERP Systems

Most Enterprise Resource Planning (ERP) systems have basic to advanced inventory, order and warehouse management capabilities. Warehouse managers can use ERP systems to track real-time product status in the warehouse. Even without complementary tools like barcode scanners or a WMS System, you can enter data manually and marginally automate your warehouse to reduce inventory errors.           

ERP systems carry centralized financial data and allow administrators to review real-time system processes. A limitation to this system is that inventory counts aren’t as reliable without product scanning. Another limitation is that multiple users can change data status manually, but overall this still reduces operator errors. An effective ERP System can serve as an initial system automation and will vastly improve transaction management through a digital system.

WMS

A Warehouse Management System (WMS) is essential for modernizing your supply chain. The primary objective of a WMS system is to track and control the storage and flow of products or materials within a warehouse. It also manages inventory interactions including receiving, putaway, picking, shipping and reporting. A typical WMS streamlines

processes and product flows throughout the warehouse. The system can help optimize item picking using real-time inventory data based on warehouse location and preferred retrieval processes. Specifically, it facilitates operation receipts, storage, and movement of goods in preparation of order fulfillment.

Conveyors

Conveyors transport goods inside the warehouse from one point to another, both vertically and horizontally, allowing pickers to be more effective at moving products. Boosted pick rates of approximately 300 units per hour can be realized with these equipment upgrades. System design will determine the style and layout of your conveyor configuration.

RFID

Radio Frequency Identification (RFID) tags, can track products within the warehouse. Scanning the RFID tag traces an item within the facility by sourcing its location. This is a preferred solution for warehouses that handle larger items, which reduces the need for a scanner and enables automated storage and picking. Smaller warehouses tend to not

use RFIDs due to the costs. Bigger warehouses use this because the cost tends to be cheaper than the labor needed to manually process inventory. As RFID scans occur, the system can maintain records of the product’s processing status and use it for record keeping or operation updates.

Automated Sorters

Automated sorters process items by identifying them, sorting, then transporting them to the appropriate destination. This system can be utilized for order processing or inbound inventory separation. A single sorter can sort upwards of 1000 consecutive orders, reducing manual picking operations. This increases productivity by performing multiple tasks simultaneously. This system is ideal for large warehouses since it involves heavy automation and technical functionalities.

Automated Guided Vehicle

Automated guided vehicles (AGVs) are material handling robots that move products with autonomous navigation. They are powered by visual recognition capabilities and system designed algorithms. These vehicles require power supplies for recharging but are usually capable of doing it themselves with minimal human intervention. Basic AGVs have existed for decades, but modern technology is making them more capable, productive, and efficient.

Robotic Picking System

Robotic Picking Systems are used for small item handling and picking. These robots scan and identify items in containers, pick them to totes and packages, and can perform value added services if needed. RPS perform their tasks very efficiently, reducing costs and time expenditure for precision operations. This solution is designed to reduce error for tedious operations in a facility.

What is your ROI? The Top Benefits

Warehouse automation has several benefits that allow companies to improve their bottom-line. Consider the following improvements:

Integrated Supply Chain Systems through IT Infrastructure Automation

Shippers and Logistic Service Providers (LSPs) invest in best of breed supply chain execution systems to gain the latest functionalities and inject efficiencies into their operations. Over time that creates disparate systems and a complex IT ecosystem, driving costs on infrastructure, application maintenance and support.  Ownership of on-premise solutions further increases the cost for shippers.

Technological developments in IT infrastructure automations is reducing IT overhead. Infrastructure automation makes server management, code deployment, quality assurances, and support easier at every level.  Improved flexibility allows us to deploy code fixes across multiple instances in one shot and trigger regression scenarios across multiple applications irrespective of vendor solutions. If regression cases fail, bugs will be logged and alerted to their application systems. Unless regression tests pass, code will not be migrated to higher level environments, minimizing productive impacts. Automating entire supply chain processes is steadily become a reality for many businesses.

How to Start? Best Practices

It is inevitable that e-commerce and retail industries will continue pushing the standard for customer satisfaction. In turn, warehouse management has to respond faster to operational changes to achieve these new goals while maintaining quick and accurate order fulfillment. As system automation increases, warehouse managers find that the barrier to making these upgrades are reduced to simple code changes and software reconfiguration that can be deployed overnight. Overall this reduces confusion and the amount of retraining needed for warehouse operators. So how does a business prepare their facilities for this setup?  Here are a few tips:

Start Small

Initial system automation is not a simple process. The best strategy is to create an incremental plan with ample flexibility for the future. Most businesses start by reviewing each operation level in the facility and identifying the bottlenecks in the system. Solutions to improve these limitations must be

efficient and cost effective, but also scalable. Scalability is determined by its ability to integrate with future and existing solutions. For example, a plan for WMS implementation would require a framework for integration with ERP systems or standard RF technologies.

Training

Change can quickly overwhelm employees if they aren’t prepared. To prevent this, business leaders need to identify their stakeholders (warehouse operators, mangers, information technology specialists, system planners, etc.) and plan how they will adopt new technologies. Developing training schedules for end users is an effective way to alleviate complications during this stage of growth. Communication is important and by involving workers in the transition, businesses can ease their work processes and help make them more productive.

A Trusted Partner

Utilizing specialists can allow companies to achieve a more thorough design and quicker project completion. Ideal technology partners should understand your industry and all the available hardware and software options for your solution. Overall, a warehouse automation service provider must be able to combine technology and engineering expertise to design, optimize, improve process flows, and manpower productivity for a warehouse. Successful partners design robust processes for operational excellence, resulting in clear strategies for reducing labor costs and enhancing warehouse utilization through automation tools.

Start your Journey with ITOrizon

ITOrizon focuses on Supply Chain Management, Enterprise Resource Planning, Enterprise Order Management, and Digital Business solutions. Our strategy is to design, develop, implement, customize and provide production support for our solutions. With years of expertise across varied industries and the latest Gartner and supply chain analytical research, we recommend the best of breed solutions and processes to our customers.

In addition to our consulting services, we specialize in selective software vendor packages and technology platforms to be the SINGLE trusted partner for our customers in their business and IT journeys. We also provide development and support services to take complete ownership of our design and deliveries.

ITOrizon is a leading supply chain system integrator, recognized by Gartner Inc as a Specialty Consulting Firm in Gartner’s 2018 “Warehousing and Fulfillment Vendor Guide”. ITOrizon assists retailers, manufacturers & distributors on their end to end supply chain programs.
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