What is Warehouse Automation? Why Is It Important?

More companies are turning to warehouse automation to streamline processes, boost efficiency and reduce human error. But what is warehouse automation exactly, and how can companies implement it and also benefit from it?

This article will provide a comprehensive overview of what warehouse automation entails, the various types of automation technologies, how to effectively implement a warehouse automation system and the key benefits that companies can realize by implementing these solutions.

What is Warehouse Automation?

Warehouse automation is the use of advanced technologies and automated systems to streamline operations and improve efficiency in warehouse environments. As companies seek to boost productivity, reduce errors, and enhance customer satisfaction, the adoption of warehouse automation is on the rise.

Warehouse automation is widely touted as one of the most effective ways to boost ROI:

“One indisputable fact exists,” according to Supply Chain Management Review. “Warehouse automation is one of the last areas where long-term costs can be significantly reduced.”

But some think of warehouse automation as software, while others think about the idea of automating a warehouse as implementing automated storage and retrieval systems (AS/RS). In reality, complete warehouse automation entails automating a variety of aspects of operations, from automatic data capture to software systems, storage and retrieval, and more.

Still, according to a 2014 report from Monteage Technologies, 90% of warehouses worldwide today are either entirely manual or have implemented only low-level automation into their operations. And while the average logistics division might be looking at a period of four to five years before realizing a return on investment for automation innovation, the payoff is well worth the wait for those who make smart, strategic investments in automation.

The Fundamentals of Warehouse Automation

At its core, automation revolves around identifying repetitive tasks that are process-oriented, time-consuming, or error-prone, and finding ways to automate them. And as anyone in the warehousing industry is well aware, warehouses are rife with repeatable, process-oriented, and error-prone tasks, ranging from manual documentation errors to picking and stocking errors, shipping and receiving errors, and much more.

For this reason, there are many aspects of warehouse operations that can be automated, including:

• Picking automation – The process of picking is a clear example of a repetitive and time-consuming process. Modular shelving systems combined with warehouse robotics are making it possible to automate the picking process, which once depended entirely on humans. And anytime humans are involved, the likelihood of introducing human error is very real.
• Barcode labels and scanning automation – Warehouses rely heavily on documentation to keep track of which items are moving in and out of the facility, where specific items are stored (to speed up the picking and stocking process), and manage inventory. Warehouses save dramatic amounts of man hours by automating these documentation processes with barcode labels, rack labels, warehouse signs, and the hardware necessary to read these signs and labels. Barcode labels combined with the right software and scanning technology can practically eliminate errors and drastically speed up documentation processes.
• Automated vehicles – Forklifts and pallet jacks are among the traditional equipment used to move goods throughout a warehouse facility, but even this aspect of warehousing is becoming automated today thanks to self-guided forklifts and pallet carts, known collectively as automated guided vehicles (AGVs). The key differentiator is that these automated vehicles don’t require human operators; instead, they follow digital paths through the facility to load and unload pallets, boxes, and other containers. AGVs can be implemented in an existing warehouse without a complete overhaul to the layout and overall system, and it’s not an all-or-nothing investment – warehouse operations can add AGVs as necessary, gradually replacing human-operated machines with automated equipment over time. Plus, they can be leased or purchased, so warehouses can even try before they commit to buying.
• Inventory automation – In a 2018 report, “From Cost Center to Growth Center: Warehousing 2018,” Motorola notes that 41% of warehouse facilities were still reliant on pen-and-paper methods for cycle counts. This results in errors related to data entry and transcription, as well as inconsistent inventory processing and, in some cases, disruptions to overall operations. Yet, automating inventory management processes is one of the easiest and most cost-effective strategies warehouses can implement to start realizing the benefits of automation.
• Back-office automation – Inventory automation often goes hand-in-hand with automating back-office processes. According to Motorola’s report, nearly one-third (32%) of warehouses don’t have access to real-time data in their warehouse management system (WMS), leading to inaccurate inventory counts – which can cause supply chain disruptions ranging from mild to catastrophic – and other inaccuracies. In today’s fast-paced warehousing industry, access to accurate, real-time data is crucial.

Relying on outdated, manual processes not only leads to errors and delays, but they are practically guaranteed to have a negative impact on the company’s bottom line. Out-of-stock conditions can lead to dissatisfied partners and customers, damaging brand reputation, and excess inventory that spends too much time sitting idle on racks and shelves continues to eat at bottom-line storage and operational costs. And when downtime occurs as a result of lost productivity or more serious errors, warehouses are either hindering growth or actively lowering profits.

Driven by the demand for less disruption, increased productivity, and improved visibility, Motorola predicted in 2014 that by 2018, just 12% of warehouses would still be relying on manual cycle counts, and that 65% of warehouses would have real-time access to a WMS system from mobile devices.

4 Types of Warehouse Automation

Warehouses can be automated in a number of ways, from automating operations like picking, barcode labels and scanning, and vehicles, to automating back-office processes. Any warehouse that needs to improve their bottom line can benefit from automation.

There are several ways to automate warehouses. We explore a few of the more common types of warehouse automation below:

• Goods-to-person technologies (GTP) GTP technologies are picking solutions that bring items to the worker, rather than requiring workers to travel to the items that need to be picked. Warehouses with GTP systems enter or retrieve orders from a central database like an ERP, and then automated equipment locates the items in the warehouse and moves them to the picking area. Typically, throughput rates of GTP far exceed those in manual warehouses. As a result, companies that leverage GTP technologies can reduce their operating and order fulfillment costs and improve service levels.
• Automated storage and retrieval systems (AS/RS) – Automated storage and retrieval systems (AS/RS) are one type of GTP technology. This warehouse technology automatically brings goods out of and then places them back into storage. Typically, warehouses leveraging AS/RS systems pair them with a warehouse software system that manages the process and assists warehouse workers in processing orders.
• Pick-to-light systems – In pick-to-light systems, operators scan barcodes as LED displays illuminate to guide them to the correct storage location and to indicate how many items should be picked. The operator then places the picked items in containers and confirms task completion by pressing a button near the display. The displays continue to illuminate in each operator’s work zone and direct them to the next picking location.
• Autonomous mobile robots – Autonomous mobile robots (AMRs) especially are being used in e-commerce fulfillment situations to address their high-volume, high-labor requirements. Some AMRs work with warehouse workers by moving through the warehouse floor and meeting up with manual pickers until their totes are full and then transporting it to the pack station. Other AMRs use vacuums and trays to pick boxes and totes from warehouse shelves onto a mobile robotic cart.

Benefits of Warehouse Automation

The benefits of warehouse automation are multi-fold. For warehouse managers just delving into automation, one of the first benefits you realize is a reduction of manual errors. As some studies show, the cost per error ranges from $50 to $300; when you multiply the error cost by the 1%-3% error rate, you realize the significant impact it has on your company’s profits.
Other benefits of warehouse automation include:

• Increased efficiency – Because automated systems nearly instantaneously identify the locations of all items in a particular order, warehouse automation increases efficiency. Better yet, warehouse automation systems optimize routes and maximize productivity during the product retrieval process. Warehouse automation also speeds up order fulfillment when warehouses leverage robots and conveyors; as a result, these companies can offer free overnight shipping. Finally, warehouse automation speeds up both the warehouse management process as well as inventory management by leveraging the technology to automatically count items.
• Maximizing space – Warehouse automation systems maximize warehouse space by utilizing robots and other automated guided vehicles that complete product retrieval and storage tasks and reduce the need for wide aisles that accommodate large pallets and pallet jacks and workers. AS/RS systems also use conveyors and lifters that reduce the amount of space used for aisles.
• Better inventory counts – By reducing human error, warehouse automation can streamline inventory management, allowing for more accurate inventory counts and related inventory data.
• Enhanced safety – Many warehouse automation systems bring the products to the worker, rather than the worker going to the products. As a result, foot and equipment traffic throughout the facility is decreased, enhancing overall warehouse safety. This can also reduce product damage by reducing the need for warehouse staff to manually move products from location to location.

Calculating The ROI of Warehouse Automation

All of these benefits translate into improved return on investment (ROI) for warehouses. In terms of a timeframe, many companies aim for a ROI payback period of 2 years or less for simpler automation solutions, while more complex systems may have a 5-year or less payback period. The exact ROI timeline depends on the specific automation technology, scale, and other factors.

Here’s a method to calculate the ROI of warehouse automation, using the direct costs and the benefits that can be realized from an automated system.

ROI Component	Calculation	Annual Value	Number of Years	Total Value
Equipment Costs	Cost of automation hardware and software	$_________	_______	$_________
Implementation Costs	Integration, engineering, installation, training	$_________	_______	$_________
Energy and Maintenance	Power, maintenance, spare parts	$_________	_______	$_________
Labor Savings	Reduced labor costs (wages, benefits, overhead)	$_________	_______	$_________
Increased Throughput	Additional orders processed per year	$_________	_______	$_________
Reduced Errors	Cost savings due to fewer errors	$_________	_______	$_________
Space Savings	Reduced storage or leasing expenses	$_________	_______	$_________
Improved Inventory Control	Carrying cost savings, less overstock/stockouts	$_________	_______	$_________

How to Implement Warehouse Automation

Effectively implementing warehouse automation involves a strategic, multi-step approach. Here are the key steps to consider:

1. Assess your warehouse operations: Carefully analyze your current warehouse processes, identify areas for improvement, and determine where automation could enhance efficiency. Examine factors like picking profiles, inventory data, and packing/shipping requirements.
2. Research automation technologies: Explore the various types of warehouse automation technologies, such as automated storage and retrieval systems (ASRS), conveyor systems, robotic arms, and warehouse management software. Evaluate which solutions would best fit your specific needs and requirements.
3. Consider scalability and integration: Ensure the automation solutions you choose can scale as your business grows and seamlessly integrate with your existing systems and workflows. Compatibility and flexibility are crucial to this process.
4. Develop a detailed implementation plan: Work with an experienced automation implementation specialist to create a comprehensive plan that addresses factors like cost, workforce training, maintenance, and system optimization. A phased approach can help manage the complexity.
5. Train and prepare your workforce: Invest in training programs to help your employees adapt to the new automated systems. Foster a culture of adaptability and provide continuous learning opportunities to ensure the successful adoption of warehouse automation.
6. Monitor and optimize performance: Continuously track the performance of your automated systems, identify areas for improvement, and make adjustments as needed to maximize the benefits of warehouse automation.

By following these steps, companies can effectively implement warehouse automation solutions that streamline operations, boost productivity, and enhance their overall competitiveness in the modern supply chain landscape.

Warehouse Automation Software and Hardware Solutions

When it comes to a effective warehouse automation, the hardware and software go hand-in-hand:, ie the WMS and the data capturing with a warehouse labeling solution.

Barcode labels provide a fool-proof method for storing valuable data, but barcode scanning devices are necessary to decode barcode symbols and standards and transmit the data to a WMS.

The WMS, in turn, aggregates data about inventory, vendors and suppliers, parts, ordering information, manufacturers, and every necessary detail about an item in a centralized database.

Compatibility is a key consideration when selecting barcode labels, hardware, and software solutions to support warehouse automation. Barcode scanners come in a range of options with varying capabilities such as:

• 1D barcode scanners
• 1D and 2D barcode scanners (read more about 2D barcodes)
• Linear barcode readers
• Image barcode scanners
• Wireless and cordless models
• Omni-directional barcode scanners

Choosing the right barcode scanning system depends on a number of factors including, but not limited to:

• Barcode label symbology
• Durability requirements
• Operating systems and software compatibility
• Scanning speed and distance
• The need for wireless or wired connectivity

Likewise, there are dozens of warehouse management software solutions, which range in features and functionality based on several factors. Some are targeted to specific industries, for instance, with specialized reporting capabilities that can aid in regulatory compliance, while others are better-suited to support certain warehouse automation functions.

Some key considerations include:

• Integration with barcoding technologies
• Ease of use
• Real-time inventory updates
• Scalability and flexibility
• End-to-end transaction management
• Back-office integration
• Robust reporting capabilities
• Compatible mobile applications

When implementing a warehouse label solution, along with the hardware and software components to complete the foundation, you’ll want to ensure that these elements are fully compatible and will work seamlessly together to enable your warehouse to function as the well-oiled machine it should.

Automatic Guided Vehicles (AGVs)

We mentioned AGVs earlier, but they’re worth a deeper dive. AGVs are a relatively newer innovation, and offer direct savings on labor costs and also improve the efficiency and reliability of storage and retrieval processes.

AGVs are essentially robots that rely on markers on the floor of the facility, wires, or laser vision technology to navigate through the building and are able to perform functions such as: 

• Storing pallets, racks, and other containers
• Storing pallets in warehouse racks
• Storing pallets in floor-based deepstacks
• Vertical reel storage
• Horizontal reel storage in cradles
• Controlling the full receiving process for raw materials (from trailer to processing lines)
• Automatic trailer unloading
• Transporting raw materials to intermediate storage

There are an increasing number of AGV options for warehouses to choose from, with varying capabilities. For instance, there are automated carts which can move products on an assembly line or transport goods from warehousing to manufacturing plants.

Because these carts are guided by magnetic tape, setting up the initial flow or reconfiguring the route as necessary is simple. Transponder tags are used to convey when the cart should stop or perform a specific action, such as increasing or decreasing speed, or lifting or lowering.

Some companies offer a range of options spanning everything from standard, basic configurations to completely custom-built AGVs that can be designed to meet highly specialized application requirements.

In the middle of the spectrum are dual-use AGVs, which can operate either manually or as a fully-functional AGV. For some warehouses, dual-use options are a smart investment that can ease the transition from manual to automated processes.

For those already in the trenches of automation or those with specialized applications, the growing availability of customized AGV solutions is a valuable option.

Automated Storage and Retrieval Systems

AGVs, of course, play a role in automated storage and retrieval systems, but they’re not the only automation option when it comes to these functions. Automated storage and retrieval systems (AS/RS) have actually been around since the 1950s, having first been introduced in Europe, Japan, and the United States. AS/RS consist of a few key components:

• Storage and retrieval machines
• Rack structures
• Conveyors such as AGVs
• Warehouse control systems

Pallet lifting and lowering devices are among the most commonly used AS/RS devices. These fixed aisle storage and retrieval machines move pallets into and out of storage locations, and they can be configured to match SKU density profiles, varying load types, and delivery speeds. 

There are also case and load handling devices, which are a scaled-down version of pallet lifting and lowering devices used to handle smaller storage containers.

Newer varieties of case and load handling devices that make use of shuttle cars and robots are known as goods-to-person systems.
The use of AS/RS offers a multitude of benefits, including:

• Reduced space and labor utilization
• Flexibility to operate as a stand-alone structure inside existing buildings or as rack-supported structures (commonly used for cold/freezer storage)
• Consistent and safe product handling
• Consistency in following storage putaway roles
• Maintenance of real-time product tracking and identification
• Order picking and consolidation facilitated by automated replenishment
• The ability to create highly-controlled storage environments, eliminating human access entirely
• The ability to keep products fresh and mitigate recalls
• Ensuring regulatory compliance
• Consumer protection

In addition to these benefits, warehouses implementing AS/RS realize long-term cost savings through improved efficiency, the ability to keep up with increased consumer demand, lowering risks, and boosting throughput and increasing overall inventory accuracy.

According to Westfalia, the average lifespan of an AS/RS is 25 to 30 years, while payback periods are typically between just three and five years.

Frequently Asked Questions