Understanding The Benefits And Implementation Of Warehouse Automation

The worldwide warehouse automation market is growing. It was valued at $16.23 billion in 2022 and is predicted to reach around $71.03 billion by 2032, representing a CAGR of 15.91%. 

This begs the question: Is warehouse automation worth the hype?

In short, yes. 

But before delving into its benefits, let's clarify what warehouse automation actually is. 

In short, 'warehouse automation' is a phrase used to describe the use of automated methods for moving inventory into, inside, and out of warehouses with minimal human help. It aims to reduce labor-intensive and repetitive tasks, including physical work and data analysis.  

More specifically, warehouse automation is split into two categories:

1. Physical automation
2. Digital automation

We'll explore both of these in more detail below. 

Where inventory management is concerned, warehouse automation is essential in modern warehousing because it embraces various technologies and systems designed to automate your distribution centers for maximum efficiency. A recipe of software, robots, and hardware can make tasks like order picking, packing, shipping, and inventory management much faster and more efficient. 

Interestingly, 62% report human error during manual order process management as the top reason for inventory fulfillment issues. Yet, more than 80% of warehouses lack any kind of automation, and over the past decade, only 5% have adopted sophisticated automation technology.

The bottom line: If you want to stay ahead of the curve, you should embrace warehouse automation.

With all that said, let's jump into the nitty-gritty of this guide:

Warehouse Automation: The Basics

There’s traditional warehouse management, and then there's warehouse automation. 

What’s the difference? 

In a nutshell, traditional warehouse management is manual. I.e., old-school methods depend entirely on human labor to receive, store, and dispatch inventory without relying on or using technology (including retrieving real-time data about inventory location). 

Consequently, there's greater room for human error.

In contrast, warehouse automation relies on technology to automate tasks such as order picking, packing, storage, and monitoring inventory levels. Automated warehousing components can include the following: 

Digital automation: 

• Wireless barcode scanners
• Smartphones and tablets
• Cloud-based databases 
• Data analytics platforms

Physical automation: 

• High-speed sorting equipment
• Driverless vehicles 
• Autonomous robots
• Conveyor belts and carousels
• Vertical lift systems
• Fast sorting equipment

...and so on.

The Advantages 

Any supplier considering warehouse automation must consider both the positives and negatives before implementation. So, below are just a few of the benefits of using warehouse automation:

• You can maximize your warehouse space
• Faster product handling
• Access to inventory data in real-time
• Increased order fulfillment accuracy
• Increased productivity

The Disadvantages

In the spirit of fairness, let's turn our attention to some of the disadvantages of warehouse automation:

• The initial investment in the tech you need could be high
• You might risk employee dissatisfaction if they feel they're being replaced by robots
• A high dependence on technology, which isn't infallible

Warehouse Automation Technologies

There are several warehouse automation technologies to be aware of, so below, we've listed a few prominent examples:

• Automated Storage and Retrieval Systems (AS/RS): this technology temporarily stores and retrieves inventory products for order fulfillment when a sale is made. This type of system incorporates a broad range of solutions, including cranes, autonomous robots, vertical lifts, carousels, and loaders. It can also include warehouse control systems (WCS) software that interacts with the aforementioned automated equipment. 
• Conveyor Systems and Sortation: These are roller or belted conveyors used in conjunction with warehouse management software (see below) to cut labor and maintenance costs when sorting inventory for storage, picking, and packing. 
• Robotics and Automated Guided Vehicles (AGVs): Autonomous or self-guided vehicles that handle inventory and move it through your warehouse to its intended destination, ready for packing and shipping. 
• Warehouse Management Software (WMS): This software is designed to improve efficiency when storing and sorting inventory ready for distribution. Such software also monitors inventory between locations and inside your warehouse. It enables warehouse staff and eCommerce vendors selling your products to see and track inventory levels in real time. 

The Benefits of Warehouse Automation

We touched on this above, but let’s delve deeper into some of the benefits of warehouse automation:

Increased Efficiency and Productivity

You can improve warehouse efficiency and productivity by employing such automation in conjunction with your existing experienced team of operatives. Automation reduces the manual tasks your team has to handle, and unlike humans, robotic systems can work continuously, thereby increasing your warehouse productivity. They can also handle high volumes of inventory, which, again, is excellent for boosting productivity.   

On top of that, warehouse automation can reduce inventory damage and shrinkage as there's less risk of products being damaged by human error and the potential for inventory going missing due to damage, admin error, and theft. 

Improved Accuracy in Order Fulfillment 

Most businesses achieve 95%-98% order accuracy. Although high, a 2-5% human error rate still significantly eats into your profits.

This is where automated warehouse systems come into their own. 

For instance, a system that uses:

• Barcode scanners
• AI
• Advanced picking technology
• Inventory tracking in real-time

Can accurately identify, handle, and track inventory across your warehouses, increasing the likelihood of:

• Shipping the correct orders to the correct customers
• Getting orders out on time
• Successfully managing your stock flow

...and more. 

Combining automation systems with procurement analytics can further enhance accuracy by aligning inventory levels with demand forecasts and procurement cycles.

Labor Cost Reduction

Warehouse staff turnover rates are around 43%, and the average hourly wage of warehouse staff has increased by around 10%. Fortunately, automation can help bridge the gap during staff shortages and potentially avoid more expensive staff outlay.

Not only that, but warehouse labor costs account for around 55% of overall warehouse costs, with warehouse pickers spending up to 50% of their time walking or traveling through your warehouse to pick inventory, one order at a time. With warehouse automation, team members can batch-pick to fulfill multiple orders in one picking period.

Enhanced Safety Measures

Automated technology can reduce the physical strain warehouse staff endure when moving and lifting warehouse inventory. For example, suppose your warehouse moves complex and varied inventory stored on high shelves. In that case, automated machinery can address such challenges by doing the majority of the heavy lifting (pardon the pun!)

You Can Save Space

Some reports say warehouse automation solutions use 40% less floor space. 

So, in the longer term, this could allow you to downsize your warehouse to somewhere smaller, ergo, cheaper. Or empower you to carry even more inventory in your existing one - either way, it's a win-win!

Implementing Warehouse Automation

When it comes to implementing warehouse automation, there are several factors to consider before jumping into the deep end:

For instance, before investing in automation, determine your business needs and why. With this at the forefront of your mind, you’re better positioned to purchase the technology that best suits your business’s goals. 

For example, as an eCommerce dropshipping supplier handling high-volume sales, your priority might be automation that tracks this process in real time so that you know precisely where your dropshipping products are in the supply chain. 

Needless to say, when you have a clear objective (like the example above), it’s easier to narrow your research and shortlist systems that can help you achieve your aims. 

To establish your business’s needs, examine pre existing data, including:

• The number of orders picked over different periods. 
• Your SKU list (to determine the volume of inventory that needs managing)
• Your current staffing levels and whether you want to increase or reduce these via automation. 

With that said, here are a few other pointers to consider when researching/implementing a new automated warehouse system:

• Keep your budget and targeted ROI in mind when researching potential systems. 
• Ensure that any potential system integrates with your existing tech stack. This is crucial for seamless adoption, especially when you’re first getting started!
• Build in time and a budget to train existing staff on how to use the new system. This is essential for getting them fully up to speed on operating new automation tools, be they software like Spocket or hardware like barcode scanners. 

Overcoming Challenges in Warehouse Automation

You may face some hurdles when you first implement warehouse automation, for instance:

Initial Costs and Return on Investment (ROI)

The initial outlay can be high, and your ROI may be slow. 

To assess your ROI, work out your existing budget for warehouse staffing and equipment. 

Then, calculate your average staff turnover plus the cost of hiring and training new staff. Next, calculate the cost of buying new automation plus the estimated labor and any cost savings you hope to make, plus training and maintenance of physical automation. 

Then, compare these two calculations to work out your minimum ROI. 

Monitor this figure to see whether you’re achieving your expected ROI. If not, you need to pinpoint what needs improving to reach these targets. 

Adaptation to Technological Changes

When it comes to adapting to any type of technological change, there will be a learning curve for both you and your warehouse staff. 

As mentioned above, providing the necessary training is the best way to address this issue. This goes a long way to ensuring a smoother adoption of your new system.

On a similar note, your team is more likely to embrace these changes if you include them in the process. For instance, you could consult them on plans for managing the transition - for example, getting their input on transition timetables and anticipating any questions they may have.

Successful Warehouse Automation Implementations

Hopefully, you can take inspiration from some of the notable warehouse automation successes listed below:

The most apparent is Amazon. At the time of writing, its website states it has 750,000+ robots working collaboratively with our employees, taking on highly repetitive tasks and freeing employees up to better deliver for our customers.

Elsewhere, entrepreneur Erin Rafferty made $442,991 in just six months when she opened a dropshipping store, finding products via Spocket and selling them on her Shopify store. Spocket uses automation to track orders, fulfill orders, and update inventory in real-time. 

Frequently Asked Questions (FAQs)

Hopefully, the above information provides plenty of food for thought. However, below, we thought it would be helpful to answer a few more frequently asked questions that might crop up:

Are there different types of warehouse automation systems?

In short, yes.

There are three main types of automated warehouse systems:

1. Manual: A warehouse entirely operated by humans. For example, team members use forklifts, ladders, and different types of transport equipment. The only kind of automation at this level is a warehouse operating with warehouse management software.
2. Partial automation: Here, only some stages of order fulfillment and inventory management are automated. For example, your warehouse might use automation to drive to product pick locations to save time, saving employees from manually looking for products. 
3. Full automation: This is where a warehouse is almost entirely automated, with fewer human interactions needed. In this scenario, automation tools stack, locate, retrieve, and move your inventory. 

Can small businesses benefit from warehouse automation?

Yes, they can. For example, suppose you’re a dropshipping store selling products via your eCommerce platform (e.g., Shopify, Wix, BigCommerce). In that case, you can still work with large dropshipping suppliers who use some form of warehouse automation (digital and physical) to fulfill orders.

What warehouse automation trends are emerging?

Several trends are emerging in the field of warehouse automation, most notably:

• Cloud-based warehouse management software - Among other things, this kind of software provides centralized access to inventory and order information, giving the user greater insight into inventory levels in real time.
• Warehouse drones: Powered by algorithms, these are linked to your warehouse management software to source and track inventory in your warehouse
• Mobile cobots: These help human warehouse workers by guiding them through the product-picking process.
• Blockchain technology: Blockchain enables warehouses to connect with third parties via a secure digital ledger, ensuring real-time transparency of consumer demand for improved inventory management.

Is Your Business Ready to Fully Embrace Warehouse Automation?

That brings us to the end of our guide on warehouse automation; we hope you found it helpful!

To summarize, if you’re considering upgrading your warehouse system, it's essential to understand the basics of warehouse automation and its role in managing inventory. This includes how it might positively impact your growing business. Warehouse automation has the potential to save you money and time and provide the data you need to manage your inventory better. 

That said, conducting a cost-benefit analysis before committing to any large-scale investments is also important. Technological advancements in warehouse management can feel overwhelming and present a steeper learning curve than you’d imagined. However, working with the right platform can pay dividends. 

One cost-effective solution to consider is working with a dropshipping solution that centralizes and syncs inventory to one dashboard so that you, as a dropshipping supplier, have reliable real-time data to pass on to your retailers. 

Are you ready to look at the benefits of Spocket’s dropshipping platform to help you better manage your inventory in real time? Find out more about becoming one of our suppliers here.