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The Future is Automated: Building Your Business Case for Warehouse Efficiency
The market for warehouse automation is growing and will continue to do so in the coming years. Researchers at Interact Analysis predict that by 2027, 26% of warehouse facilities will have some form of automation technology, up from 14% in 2018. And it’s far from just a trend; businesses all over the world are finding that upgrading their distribution centers with integrated equipment, software, and lifetime service is essential for remaining competitive in the realm of order fulfillment. But while many of the benefits of automation are obvious and quantifiable, the initial investment can seem like an insurmountable barrier. That’s why calculating the ROI of such a transformative project has to be the first step.
Building a business case for warehouse automation will likely include addressing one or two of the most common obstacles to investing in the upgrade: Perhaps there’s a concern that integration will be too complex or that employees will be resistant to the change. Perhaps the prospect of ongoing costs is a significant source of stress. We’ll address all of these considerations and more as we lay out the advantages of investing in smart, scalable warehouse automation solutions.
Key ROI Drivers of Automation
Let’s first cover where your company is likely to experience the most gains. As the labor market becomes more volatile and expensive, bottom-line staffing costs are increasing. Implementing automation solutions enables your warehouse to process a higher volume of orders while also reducing overall headcount and overtime costs. Employees can be shifted to jobs that require more human intervention and remain key players in the order fulfillment process. Moreover, with TGW Logistics as a partner, implementation includes staff training to get your workers up to speed and comfortable with the new material flow.
The retail and consumer goods industries haven’t been the same since Amazon and other ecommerce hubs hit the scene, and that includes the evolution of consumer expectations when it comes to shipping and delivery. Purchasers want their goods as soon as possible, and they’re now accustomed to receiving them as quickly as within the same day. To keep pace, other businesses must consider how to achieve faster order fulfillment. The throughput gains inherent in automating storage, picking, packing, and shipping can make all the difference in meeting this demand—not only because goods flow through the facility at a faster pace but also because more automated processes mean fewer opportunities for errors that cost time to correct. Software integration allows for real-time inventory control and order prioritization, which is crucial for operating at peak efficiency, especially in periods of high demand.
Time costs money, and so does space. Fortunately, optimizing warehouse logistics also means maximizing the use of space, including product storage. Shuttle systems can reach areas workers can’t, allowing goods to be packed higher and more tightly. Goods-to-person (GTP) fulfillment solutions eliminate the need for workers to manually retrieve and return load carriers, also supporting the implementation of high-density storage and reducing wasted time by workers. Instead of acquiring more space, automation allows you to utilize the space you have differently. This reduces facility footprint needs and, of course, the associated costs.
Before-and-After Order Fulfillment Scenarios
Companies typically come to TGW Logistics hoping to generate an ROI in three to five years after an automation upgrade, and we’ve seen this goal achieved repeatedly. While it’s true that the upfront costs of warehouse automation are considerable, warehouse automation completely transforms performance metrics, dramatically boosting efficiency and lowering operational costs.
Typically, the implementation of TGW warehouse automation solutions results in at least 40-50% decrease in labor costs as well as 99% order accuracy. Companies are moving more goods faster and more accurately, while also using human labor more strategically. For example, after partnering with TGW Logistics to automate their central distribution center in Bavaria, Conrad Electronics is now able to process twice the number of orders daily and has considerably increased its storage space.
Sports retailer INTERSPORT Australia has also seen the benefits of TGW Logistics automation solutions across the board, including an efficiency increase of 40%, the reduction of transport costs, and a 93% reduction in the need for external storage space.
Recommended Watch
Want to dig deeper into the ROI of warehouse automation? Watch The Business Case for Automation, where TGW’s Marissa Dierlam and Nathan Wolf unpack how to make automation financially viable. From real-world examples to creative financing models, they explain why the bigger risk often lies in not automating. This video podcast episode offers additional insights on labor costs, funding strategies, and the long-term value of automation for industries like grocery, fashion, and consumer goods. Watch it here.
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Strategic Benefits Beyond Cost Savings
The benefits of automation are even more wide-ranging, however. In addition to lower costs and faster throughput, you can expect to experience these positive impacts:
Automating the most dangerous and/or strenuous duties workers were previously responsible for reduces the chances of on-the-job injuries, including those caused by repetitive movements. Instead of spending most of their day traveling up and down storage aisles and handling bulky goods, pickers in a GTP-supported warehouse are stationed at ergonomically designed picking stations. At the same time, an automated storage and retrieval system safely transports totes or cartons to the designated area.
Warehouses that rely primarily on human touchpoints can be hit hard by labor shortages. Unpredictable periods of peak demand may result in slowdowns due to understaffing. Automation allows for a new level of operational continuity that can be ramped up or down depending on the needs of the business day to day. With workers focusing on the higher-level tasks of order fulfillment and automation solutions reducing the need for hands-on human intervention in the material flow process, your facility can easily adapt to fluctuations in both demand and workforce.
TGW Logistics specializes in solutions that are dynamic and scalable, positioning your facility to respond to customer needs. Using a data-informed process, we’ll audit your current systems and average throughput to design a combination of technology solutions that can handle both your normal days and your busiest seasons without wasting resources. Think areas that can be activated only when needed and workstations that can be easily converted from packing to picking and back again.
TGW Logistics as Your ROI Partner
Your partnership with TGW Logistics doesn’t end when the last test during installation has been run. We’ll be with you from the very beginning of the process through the lifespan of your automation solutions. It all starts with logistics planning: our experts will help you envision the ideal tech stack to meet your supply chain demands. Once you’ve landed on the right combination of software and physical warehouse automation equipment, we will also advise on when and how to implement them. Because our solutions are modular, automating your warehouse can be a phased process in which manual and automated systems can work together as long as necessary, avoiding any considerable slowdowns.
Testing and training ensure that your solutions work together seamlessly and that your staff is fully educated on new duties and equipment. Our Lifetime Services include 24/7 logistics support, from field services to accessing spare parts. Regular maintenance and troubleshooting keep your facility moving, as does TGW Logistics’ resilient, self-healing technology.
We focus on future-proofing, designing energy-efficient equipment and scalable solutions that promote resiliency. Our automation solutions are engineered to incorporate the latest technological advancements, and software upgrades are a part of our commitment to lifetime support.
Automation is a Strategic Decision
It’s no secret that automating a warehouse is a major undertaking, both financially and otherwise. But it’s also a strategic decision that positions your facility to take on the future and remain competitive in the fast-paced world of e-commerce. We’ve outlined all the ways in which automation can pay for itself, reducing operational costs and increasing efficiency. And a TGW Logistics expert can go deeper, providing a personalized consultation and ROI analysis to start you on your automation journey.
Ready to quantify your ROI for warehouse automation? Contact TGW Logistics today for a tailored evaluation.