4 Reasons Why Investing in Warehouse Automation Makes Sense
Automated storage and retrieval systems (AS/RS) are essential for achieving high-density storage in space-constrained omnichannel fulfillment and distribution environments. With the emergence of advanced warehouse execution software (WES), AS/RS can be integrated with these platforms to create an optimum solution for addressing the growing challenges of e-commerce via inventory storage, replenishment and order picking.
Here are four of the biggest reasons why distribution center (DC) operators should invest in automation:
- Rapid Growth in Order Volume and Velocity
- More human pickers are needed to keep up with increases in SKU quantities.
- The number and frequency of orders lead to congestion, with too many workers in the aisles.
- The congestion begins to impact the time required to pick orders.
- Popularity of E-commerce
- Click-and-collect services have grown to a point where grocers and retailers need more speed and higher efficiency.
- Implementing micro-fulfillment systems can relieve pressures on in-store inventory and staffing.
- E-commerce pick-up and home delivery can be supported by adding AS/RS inside existing stores or DCs and dark stores.
- High-value and Highly Regulated Products
- Accuracy becomes the top priority when picking expensive SKUs and items required to be tightly controlled, such as alcoholic beverages, medical devices and pharmaceuticals.
- Errors in order picking magnify the cost of re-picking when access to high-value or regulated products is restricted in addition to the risk of regulatory penalties and fines.
- Need to Expand Capacity
- It’s always challenging to gain approval for capital expenditures for additional distribution space.
- Increasing utilization of existing DCs requires either investing in new software or filling up the vertical space with more racking hardware and pick modules.
Keeping up With Customers
Despite these challenges, distribution is a growth business. DCs and warehouses now handle an average of 13,985 SKUs, up nearly 7 percent in 2018 from the previous year. 
E-commerce sales direct to consumers continue to transform retailers and manufacturers, who now must compete for buyers by speeding up processing and shipments in order to offer next-day or two-day delivery. More often, customers are requesting delivery within hours on the same day. As a result, we’re seeing a big shift from traditional retail-oriented fulfillment, which used to mean a large DC where there may have been more than 1,000 people working. Now businesses apply two principles to DC operations:
- First, they’re shipping quickly. To accomplish this, they’re opening smaller distribution facilities closer to urban areas.
- Second, they’re also supporting an omnichannel delivery system to ship e-commerce products quickly while also fulfilling the inventory needs of brick-and-mortar stores.
What’s Driving the Adoption of AS/RS?
Operators of distribution centers and warehouses invest in automation, including shuttles and/or AS/RS, for a variety of reasons, but labor tops them all.
Labor is scarce, but even in markets where workers are available, they cannot always be counted on to show up. Humans also become tired or lose concentration when picking, which can lead to order errors. In response, DC operators are seeking solutions to help them manage the resulting workflow unpredictability that labor shortages introduce.
Businesses look to automation as solutions for these challenges:
- 55% — Labor shortages
- 40% — E-commerce fulfillment
- 38% — Outdated storage, picking or material handling equipment
- 21% — Omnichannel fulfillment
Finally, distribution operations are asked to contribute more to overall business objectives. To succeed, processes must be streamlined and costs reduced. Companies expect to maximize their return per square foot on DC capital investments.
Automated systems stabilize all these variables because they’re designed to handle put-away and picking precisely without human involvement or direct interaction.
How to Address Escalating E-commerce Challenges
Complex operations. Significant capital investments. Reliable labor. All three are needed to keep up with today’s order picking and inventory replenishment requirements. Driving the agenda for DC operators: escalating product volume and order velocity from traditional retailers as well as the booming number of e-commerce buyers. Both expect rapid deliveries. Compounding the challenge is the chronic labor shortage that limits the ability of DC operators to fulfill orders efficiently, accurately and profitably.
Solutions can be found from material handling hardware and software suppliers who offer advanced functionalities that integrate AS/RS and WES. Their AS/RS capabilities can enable improved picking accuracy and overcome persistent labor shortages.
Going forward, there’s a strong business case for investments in AS/RS to augment goods-to-person (GTP) processes, in which automated shuttles pick totes from racks and deliver products to people at picking stations. It’s a winning approach for DC operators focused on meeting ever-changing e-commerce and omnichannel requirements.
Download our white paper titled Automate Order Picking and Inventory Replenishment to learn more.
 Roberto Michel, “2018 Warehouse/Distribution Center Survey: Labor crunch driving automation,” Logistics Management, November 5, 2018, (accessed October 24, 2019).