In today’s fast-changing retail and e-commerce industry environment, warehouse automation can be a powerful tool for meeting new supply-chain challenges head on and using the supply chain to create competitive advantage.

Competitors in the market, demanding customers in a Covid-19 hit economy, multi-channel growth – such forces are creating pressure on firms to achieve greater operational efficiency, reduce costs and to innovate and grow. In this situation, companies are relying on supply chain to drive a competitive advantage.

Among the many options for improving supply chain performance, warehouse automation is one whose benefits, though potentially great, are in many cases only partly understood. While we are all familiar with the concept of productivity, only a few truly appreciate its importance.

How, then, do we achieve faster productivity growth? The answer is that we need to speed the adoption of automation technology and ultimately the speed of innovation. Anything that lowers the ratio of capital cost to labour cost will increase the substitution of technology for labour.

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Because increasing productivity often depends on adopting technologies that are emerging but not yet fully proven, many potential users will hold off until the payoff is clear. Economists refer to this challenge as ‘excess inertia’ or, the ‘penguin effect’ – because, in a group of hungry penguins, most are loath to be the first to test the water, lest they become dinner for a predator. But if no penguin dives in, the whole group risks starvation.

With all the hype around warehouse automation, many managers start to ask why is automation trending now. What are the types of automation out there? Is automation a good fit for my warehouses in the near future, and if so, what’s the ROI, and how do I prepare for it?

Most retailers are well aware of the warehouse operations (four-wall) savings enabled by automating processes such as put away, retrieval picking, sorting, and palletizing. The automation of these processes can improve labour efficiency and quality control and save on other equipment, materials, and expenses.

A typical warehouse with 100 employees costs more than $3.5 million in labour expenses per year (an average production and nonsupervisory employee earns $15.81 per hour at an average of 42.9 hours per week as of 2016). This is not considering health insurance, seasonal labour spikes and overtime adjustments.

Besides rising labour costs, the cost of warehousing space is rising too. In fact, warehouses now are nearly three times as large as 15 years ago. The average size of warehouse in 2000 was about 65,000 sq. ft., whereas now it is over 181,370 sq ft. The increase in size helps warehouses to cope with higher volumes and a growing number of SKUs. However, rising costs in large warehouses are making size expansion less effective in addressing operational challenges.

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An automated warehouse or a micro-fulfillment centre (MFC) can reduce picking costs, increase picking efficiency, and often it can do this with a much smaller physical footprint than alternative distribution models. From a competition and profitability point of view, a micro-fulfillment centre makes good financial sense. Modernising, upgrading, and expanding warehouse automation can help companies with protecting their investment and minimising the risk of unplanned downtime. Depending on how it is set up, an MFC can be equipped to handle demand spikes, such as seasonal peaks or a new product campaign, or it can stock additional products, to make sure demand can be better met with availability of goods. Goods are closer to consumers, creating a more positive experience and reflecting well on the company’s brand.

Automation systems provide a gentler level of handling than some manual systems are able to provide – to the point where even products like eggs can be safely stored and retrieved in an Automated Storage and Retrieval System (ASRS) like AutoStore.

The growth and expansion of MFCs that was already happening at a rapid rate has been further accelerated due to Covid-19. The trend is particularly noticeable in the e-grocery, e-commerce and retail sector. The ability to touch, smell and see products has always driven more consumers in store. But Covid has made consumers seek alternative options, as they prioritised minimisation of exposure.

The flexible, data-driven and robotic solutions such as a hub-and-spoke arrangement, a bolt-on store automation approach, micro-fulfillment centers or a fully automated store; enable organisations to meet rapidly changing customer demands while allowing them to leverage new technologies as they emerge.

Hub-and-Spoke arrangement enables automated fulfillment center to assemble orders for all non-perishable items and then bulk ship to the stores where they are topped off with perishable items allowing the fulfillment facility and automation system to be designed and eliminates the space limitations imposed by integrating automation into existing retail locations.

Bolt-on Store Automation uses robotic automation technologies, to create small fulfillment centers at the back of the store that automate current manual processes for non-perishable item picking while utilising store inventory to top off orders with perishable goods, which allows them to fill complete orders from one location, reducing transportation time and costs.

Micro-fulfillment centers create an opportunity to convert abandoned or underperforming retail outlets into micro-fulfillment centers that serve the same area as a traditional store with automated fulfillment for curbside pickup or home delivery. This strategy sacrifices in-store shopping so is particularly attractive to pure-play e-grocers and retailers but creates the opportunity to optimise the environment by efficiently integrating automated and manual picking.

The Automated Store is a new type of store that combines automated e-fulfillment with traditional shopping. Still an emerging concept, it integrates automation into the shopping environment allowing shoppers to have the flexibility to place their orders in advance or while in the store and can choose to pick their own perishable items or have the store complete their order for pickup or delivery.

There are multiple niche solutions being developed today to capitalise on the growth in fulfillment, the primary automation solutions being used or considered are either robot-assisted picking or goods-to-person automation systems.

Goods-to-person picking is a concept that has been widely adopted in e-commerce and multi-channel warehouses to enable higher productivity and faster order fulfillment times. Instead of pickers walking up and down warehouse aisles to pull orders, the goods-to-person system allows the picker to remain stationary, with an automated storage and retrieval system delivering the products they need to fulfill the next order as it is needed. Pick time is thus reduced significantly, and accuracy is improved.

Another approach is robotic-assisted picking in which a robot guides the picker through the store to optimise travel based on the location of the items to be picked and allowing multiple orders to be picked at the same time. The robot leads the shopper through the aisles in the most efficient manner and even guides the picker on how to package the order, determining which SKUs should be put into which grocery bag based on criteria such as the maximum weight for a bag, crushability and whether items need to be segregated by temperature.

With more than 2,000 warehousing and logistics automation projects completed worldwide, Swisslog not only has fundamental knowledge in F&B, e-commerce and retail, but it has the ability to deliver logistics automation for the whole supply chain network within these industries, starting with large CFC and moving through Dark Store, down to MFC.