Is it the Right Time to Automate Your DC?
There are always opportunities for many companies in distribution to automate, but such investments are especially appealing right now given the continued tightness in the warehouse labor market. That labor situation is of course exacerbated during peak season for many companies.
This scenario manifests itself first in higher wages and thus operating costs. Notably, in September 2024, Amazon announced a planned $1.50 per hour wage bump for all fulfillment center workers, in effect raising the minimum pay at Amazon to over $22.00 per hour.
That will inevitably put pressure on nearby DCs to increase their wages in response, raising operating costs – and making automation more attractive with an improved business case.
But the labor market tightness is about more than just the impact on costs. In many companies, there are not enough DC workers to consistently get customer orders out the door. In some cases, the lack of labor holds companies back from taking on new business due to capacity concerns.
This represents another reason to consider automation beyond cost savings from increased revenue and customer satisfaction.
There are of course other factors. For example, are distribution costs rising as a percent of company sales? Is the company failing to hit its cost targets on a frequent basis? Is meeting customer service goals also a challenge?
Another key consideration is whether your current distribution center is operating at maximum capacity but could potentially extend its useful life through automation. This approach can defer the need for significant capital investments or substantial increases in lease costs, both of which could far exceed the cost of automating the existing facility.
Of course, a company can and should look at options besides automation to address the common distribution challenges noted above. Improving processes and product flow, which are often associated with changes to the physical layout to a DC, can often deliver significant improvements in cost and/or service.
The old axiom about not trying to automate bad processes is as true today as ever.
The reality is that the term ‘’automation” means different things to different companies, as it should. How a large company with huge DCs thinks about automation is obviously very differently than a mid-sized firm.
The breadth of automation systems is extensive – just attend one of MHI’s ProMat or MODEX trade shows to see hundreds of vendors representing dozens of technologies on display, all hoping to convince you that their systems are the right ones to automate some, or all, of your distribution processes.
Those automation opportunities include more traditional solutions such as conveyors, sortation systems ASRS, AGVs and many more.
More recently, a wide array of new warehouse robotics, “goods-to-person” technologies, automated trailer loaders and unloaders, put walls, and more have offered additional alternatives for warehouse automation.
Then there are the many forms of warehouse software and related solutions, including Voice, Pick-to-Light, Warehouse Management, Warehouse Execution, Yard Management, Labor Management, Slotting Optimization, robot management platforms, and more, adding digital forms of automation to consider in addition to the potential equipment.
For a growing number of companies, the answer to the question “Is now the time to automate your DC?” is likely Yes, at least in part, given the array of options and breadth of operational challenges.
Automation may not be for everyone, but we can probably all agree the future is greater automation for many facilities, with a wide span of alternatives, many of which provide attractive options and strong ROI for companies of all sizes and operational profiles.
For more information about the Solutions Community: mhi.org/solutionscommunity
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