We are in the golden age of warehouse automation. Supply chain leaders today have a dizzying array of new automated solutions to choose from. These include autonomous mobile robots (AMRs), automated storage and retrieval systems (AS/RS), automated case-handling mobile robots, robotic pickers, and advanced software. While predominantly manual facilities remain, advancements in automation are improving existing facilities and use cases demonstrate in very real ways how robotics will forever alter supply chains.
But while the potential gains from automation can be significant, it’s also important to realize that no two organizations’ needs are the same. There is no cookie cutter approach to warehouse automation and robotics. A successful implementation requires not only strategic planning and investment but also a full understanding of the organization’s own unique needs. Before it installs any automation, a company must have a clear picture of its specific processes and requirements and ensure solutions are tailored to its operations. This involves identifying the needs of the specific sector or market segment that the company is trying to serve, what its growth potential is, and where it currently is in its automation journey.
To show how this can be done, let’s take a closer look at the retail industry. Today’s retail distribution centers are some of the most advanced materials handling facilities ever built, simultaneously supporting fulfillment for online purchases and enabling the efficient stocking of brick-and-mortar stores. These facilities demonstrate the impact automation and robotics advancements can have on distribution operations, including enabling unprecedented performance and throughput levels that were unimaginable a few short years ago. For this reason, reviewing the strategic considerations a retailer may face on the way to making a business case for automation will provide a model not just for other retailers but for companies in other industries as well.
Tackling long-standing challenges
Warehouse robotics and automation can help retailers respond to a variety of longstanding challenges. First, there is the growth of e-commerce. The volume of online purchases continues to increase, even as the rate of growth slows to pre-pandemic norms. According to the U.S. Department of Commerce, despite ongoing inflationary forces, American consumers spent more than $300 billion online in the third quarter of 2024, which represented 16.2% of total retail sales and a 7.4% percent increase over the same period in 2023.
Each online purchase is essentially an ad hoc event, making the resulting fulfillment more complex and demanding than the regular, scheduled replenishment of in-store inventories. Automation plays a vital role in helping retailers overcome these challenges. By automating key processes, retailers can achieve faster throughput, can more efficiently handle a larger variety of stock-keeping units (SKUs), and can maintain exceptional order accuracy. Automated systems streamline order picking, packing, and shipping, reducing errors and speeding up operations. This allows retailers to keep up with the growing demands of e-commerce while ensuring customer satisfaction with precise and timely deliveries.
Then there is the issue of labor. Retail supply chain leaders face an ongoing and problematic shortage of workers. While the “2024 State of Warehouse Labor Report” from the online labor marketplace Instawork found some improvement in the labor market, more than 40% of surveyed businesses still reported that warehouse staffing levels remain a cause of revenue loss.
The implementation of automation and robotics in both existing brownfield and new greenfield warehouses is a direct response to these labor market concerns. All forms of warehouse automation, including robotics, are fundamentally efforts to address the shortage of labor or to increase its efficiency. For example, many automated solutions, such as AMRs, are designed to specifically address the most time-consuming activity in warehouses: the 78% of time employees spend walking.
There are other important benefits. Machines don’t require rest, and they are particularly effective at highly repetitive tasks, which are a leading cause of workplace injuries. Automation also creates new career paths for employees, transitioning them away from physically taxing activities that center on moving items through the warehouse to maintaining and overseeing the systems that assume those tasks. Finally, as the cost of labor rises, the cost of technology continues to decrease.
Implementation: Where to begin?
Automated storage and retrieval systems (AS/RS) provides advanced storage capabilities and fast throughput. But they are typically more costly and take longer to implement than less automated systems.
Courtesy of Vanderlande
While the benefits of automation are clear, selecting the right solution for a specific operation can be daunting. To choose among the variety of automated solutions available, retail supply chain leaders must first consider the needs of their specific sector.
The grocery and food sector is a telling example. Few sectors have experienced as rapid a transformation in recent years as the grocery industry. Before the pandemic, online grocery sales were mostly limited to select metropolitan areas. Last year, online grocery sales in the U.S. reached $95.8 billion, according to the data and technology company Mercatus. Consumer grocery purchases are now split between three very distinct fulfillment models: ship-to-home, delivery, and pick-at-store. Those models and the retailer’s unique needs determine the type of warehouses required. As a result, the grocery sector sees everything from full standalone distribution centers to warehouse operations at the “back of the store” and even so–called dark stores—stores that are solely used as warehouses for online orders and are not open to the public.
Due to razor-thin margins and price-sensitive shoppers, the grocery sector is embracing advanced automation, such as AS/RS and palletizing robots. For example, they are utilizing software and automation to build pallets and pallet cages in a stable and space-efficient fashion with products arranged by store layout. By doing so, leading grocers and food retailers ensure that they can quickly move and stock items while keeping labor costs in check—all savings that enable them to maintain margins while competing on price.
Different considerations, however, are the main focus for automation projects in the apparel and general merchandising industries. In apparel, items need to be moved—typically in bags—without being damaged. Additionally, warehouses often have to manage the processing of returns. In both applications, pocket sorters are often used. In contrast, the general merchandise sector deals with highly variable SKUs and the rapid processing of online orders, making throughput levels and order accuracy critically important. Here, a high-performance AS/RS is often a natural choice.
Build new or sweat your existing warehouse assets?
Automated case-handling mobile robots are a good solution for companies looking for more "incremental" automation. Because they can use existing warehouse racks, they can be implemented faster than a more complex system.
Courtesy of Vanderlande
Where retailers are in their growth cycle and in their warehouse automation journey should also be carefully considered when determining what kinds of automation and robots are needed. These two factors will play a particularly strong role in determining whether a retailer implements new automation or sticks with what it already has. This is particularly true today when the cost of capital is a key consideration. As an example, let’s look at how this decision might play out in different retail sectors.
Fast-growing, mid-market retailers: Most of these organizations currently have largely manual distribution centers. They are predominantly moving to build more advanced, fully automated facilities that include AMRs, AS/RS, and robotic pickers. Primed for growth, they are foregoing the improvement of existing warehouses, as even modernization projects can't keep up with growing sales and risk becoming quickly obsolete.
Slower growing mid-market retailers: These companies are embracing more incremental automation. For example, many are deploying a system that includes automated case-handling mobile robots (ACRs). These robotic units are designed to move and retrieve goods stored in traditional, often pre-existing, warehouse racks. As a result, these systems can often be implemented in just a couple of months, offering a faster implementation timeline.
Other mid-market retailers are choosing to implement an AS/RS, which—while automating many of the same tasks—provides more advanced storage capabilities and faster throughput. These systems are, however, more costly and require a more comprehensive planning and installation process, as they can take a year or two to design and make operational.
The largest retail brands: These companies already rely on largely automated warehouses that utilize AS/RS, robotic pickers, and other solutions. They are increasingly choosing to “sweat their assets” by making incremental improvements—such as adding additional shuttles and more storage capacity to an already existing AS/RS or deploying additional robotic pickers to speed throughput. Such improvements can result in significant efficiency gains, without requiring any large capital investments.
No matter what type of automation is selected, however, successful implementation hinges on a crucially important step: creating an effective business case.The crucially important business case
Before implementing any automation or robotic solution, a company must perform due diligence. It is critical that no project should proceed without first completing a detailed business case. There are several factors to consider, starting with the decision between modernizing an existing brownfield facility or building a new greenfield site. This choice requires evaluating the costs, growth potential, and the return on investment (ROI) associated with a more advanced warehouse system.
Importantly, the business case should not be created in a vacuum. Operational, financial, and legal leaders should all be involved. The process should be sure to incorporate the following steps:
- Determine growth projections: No one has a crystal ball, but growth projections and plans should be carefully considered to determine if a new greenfield facility with advanced automation and robotics is viable and necessary. These cutting-edge solutions often deliver the highest ROI but come with significant upfront investment.
- Determine the lifecycle of existing warehouses: Are they able to process the number of SKUs, achieve the throughput, and provide the storage capacity needed today? What about for the future? If not, can they be modernized to cost-effectively buy more time?
- Calculate the timeframe needed to realize an ROI: How long will it take to achieve the ROI for your automation project over the cost of capital and labor that would be required in its absence? How does this compare to the lifespan of the facility or project in question? Are you looking to see your ROI in three years, five years, or ten? The time required to achieve the desired ROI is key.
- Consider the costs and gains associated with incremental advancements: Even if it seems like a new, fully automated facility makes the most sense, consider the alternative approach of making incremental improvements. If you choose to move forward with a greenfield project, it is good to know you carefully considered existing assets.
- Run the numbers on your dream warehouse: Even if a new facility that delivers the capabilities of high-performance robots and automation is likely out of reach, run the numbers anyway. It can feel safer to upgrade a warehouse than to build a new automated one, but no one wants to invest significant capital in a facility that hinders growth in the future.
- Remember that no automation is automatic: Advanced solutions and robots are never a one-and-done purchase. They must be maintained and managed—tasks that require significant expertise, either from partners or through an investment in employees and training.
About the authors: Jake Heldenberg is the director of North American Warehouse Sales Engineering, at Vanderlande. He oversees the design of warehouse systems that combine intelligent software, robotics, and advanced automation. Andy Lockhart is the director of strategic engagement, warehouse solutions, North America, at Vanderlande, where he provides retail customers with innovative, scalable systems; intelligent software; and reliable services to optimize distribution and fulfillment operations.
