This article is part 2 of a 2 part series on warehouse automation in the logistics industry and how robotics can change the future of warehouse management. If you would like to learn more about the current state of robotics and whether it’s feasible for small to medium sized businesses, please check out our first article in this series, or another on this subject here.
It is extremely important for us to understand how many jobs done by people can be automated to determine if these jobs will be taken over by robots or software in the future. In 2013, 702 different business lines were analyzed by Carl Benedikt Frey and Michael A. Osborne of Oxford University in their paper “The Future of Employment: How Susceptible are Jobs to Computerization“. According to this study, 47% of jobs that people are currently performing seem to be at high risk of being taken over by warehouse automation.
In the Supply Chain and Logistics sector especially in warehouses, engineers constantly work on accelerating existing services, lowering costs and increasing accuracy. As a result, automated processes are evaluated by comparing the same work with human labor. When we examine these decision processes, the life cycle of automation looks a little something like this:
- The work is split apart to analyze the time it takes to complete each individual step.
- Each piece is redesigned and from scratch with new designs to figure out scenarios where more work can be completed with less resources.
- For each new step, a warehouse automation solution produced in the industry is compared with the current workforce and investment analysis to see whether it can be substituted. If the firm’s fixed workforce cost can be used to return the automation investment, it is decided that the investment is feasible.
For example, assume there are 100 employees working one shift for 8 work hours in the warehouse, and the average number of orders prepared daily when used order printouts is 20,000 and the cost of workforce is fixed.
With humans doing it with the above parameters, they can complete around 28,000 orders per day in such a warehouse.
Now, consider how much faster it would be to replace this process with robots in this warehouse. Although the initial investment cost will be much higher due to things like the price of the hardware, software and network connections, they will only need 1/4 of the existing staff. Therefore, the daily average number of orders that can be taken out will be around 75,000, saving the company both money and time in regards to payroll and orders fulfilled.
The crucial thing to pay attention to when making a business investment decision in warehouse automation is whether the profits of automating your warehouse will outweigh the financial burden of installing and implementing this automation.
Some common costs with warehouse automation to consider:
- Within the first two months, you must budget for three to four times the current expenditure.
- The monthly investment at the ninth month will be the same as the current order.
- From the ninth month the Investment costs should begin to bring in returns.
- From the 4th year the investment will start to provide a net operating profit to the company.
- The increase in business volume that the company shows will enable all these calculations to take place much earlier.
Apart from these, other criteria such as currency value of the country of operation, market balance of the sector, and growth plans of the company will have a direct impact on this warehouse management investment decision.
As we have already mentioned, another condition of robotization of the warehouse is the ability of the robot to do the work currently done by people. One of the problems in replacing people with robots in the supply chain, especially in warehouse, is working with delicate or oddly-shaped inventory and packages. Finding robots that can not only handle these types of inventory, but also cheap ones, can make it impossible to switch to automation systems.
The hope is that in the future, we will have the ability to do a simple software upgrade rather than buy entire mechanization systems. This would produce cheaper production lines, easier warehouse automation techniques, and a more cost-effective future. Companies that realize these opportunities and make the right investments will have very valuable future advantages.
We cannot deny that these developments are beginning to occur today. Yesterday it was a Tesla in space; perhaps tomorrow, a fully sentient automated packing system. Only time will tell what factors today will truly account for a future in warehouse automation.