Article > How Much Does Warehouse Automation Cost?

How Much Does Warehouse Automation Cost?

Automation planning on the ground floor of a warehouse.

What is Warehouse Automation?

The goal of warehouse automation is to automate as many processes as possible within a warehouse with the goal of increasing speed and efficiency and reducing human assistance. This automation can come in both the form of software and physical robotics which move throughout the warehouse. Talking to an expert can be highly helpful when trying to decide how to automate your warehouse as they will assess your current processes, and your goals, to help you find the technology to make those goals a reality. 

Facts About Warehouse Automation

Predictions stating online sales will continue to increase continually crop up for those in the logistics industry. This means the demand for warehouse services and an estimated 2.3 billion square feet of additional warehouse space will be needed by 2035 in order to fulfill the predicted increase in demand. And with labor costs averaging close to 65% of the operating costs within a warehouse many operators seek ways to cut these costs. Especially because the volatile labor market currently makes it difficult to keep workers, so logistical companies have less staff to handle close to double the demand. 

With both the budgetary problem and the lack of workers to go around, many turn to automation as their solution. Their goal is to automate as many processes as possible to help warehouse operators ensure they are ready for coming sales trends and can operate at max capacity with very little mistakes. 

How Warehouse Automation Impacts Other Operations

Automation doesn’t just affect your warehouse. In fact, automation can affect other major parts of your business in a good way. As an example, if you automate as many processes as possible within your warehouse using both robotics and inventory management software, you’ll see a ripple effect towards other aspects of your business. Think about how this would roll over to your other operations. Especially with higher accuracy and more data to feed major decisions within your company. The automation you implement today will continually service your business down the road. 

Types of Warehouse Automation Technology

Automatic Guided Vehicles (AGVs)

These vehicles follow a fixed path within your warehouse. They handle materials and can even load carriers without the need of an operator or driver on board. Often they use magnetic strips or sensors and cannot be used with warehouses with a high volume of human traffic. 

Goods-to-Person (GTP)

These technologies are focused on delivering the right product SKU to the right operator or workstation. They often include carousels, conveyors, and lift systems which the product moves on until it reaches its designated destination. 

Autonomous Mobile Robots (AMRs)

These robots use GPS to develop routes through your warehouse at max efficiency and are safe to operate with humans around them. They are often used to help move or bulk transfer bulk stock and work best when moving batches of SKUs to the next processing stages. 

Automated Storage and Retrieval Systems (AS/RS)

These are often both robot and computer aided systems which can retrieve stock or store stock in specific locations. These systems can follow established routes or predefined locations which the machines recognize in order to do their work. 

Pick-to-Light and Put-to-Light Systems

These systems often use lights to show workers what next picking location they need to go to. These lights and LEDs are on racks or shelves next to the item which needs to be picked for an order and have been shown to increase picking efficiency. 

Automated Sortation Systems

These systems allow items to be identified on a conveyor belt using RFID tags or barcode scanners. They are then automatically sorted using a conveyor system. This can be used in all parts of the order process including receiving, shipping, and while picking and packing. 

Voice Picking and Tasking

This picking system is paperless and uses voice prompts to help warehouse workers find picking locations and the items needed for a specific order. These voice prompts are simple and understandable and can be programmed according to your warehouse layout. 

How Much Does it Cost to Automate a Warehouse?

The cost of automating your warehouse varies depending on your automation needs. And when it comes to assessing those needs and finding the right technology it is helpful to hire an expert to advise you. However, there are some general stats for your warehouse automation costs available. 

  • If you want a system which focuses on picking improvement, you will likely find the cost to be between $500,000 to $1 million
  • In searching for a mechanized operation system you’ll find the cost range between $1 million to $5 million, and some enterprise systems can even get up to $15 million 
  • If you want to look at a “dark warehouse” with no operators, you could expect around $25 million

But these are just estimates. Each warehouse is unique with different needs which means the price to automate your warehouse operations will be specific to you. 

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How Much Can You Save Using Warehouse Automation?

While the cost of automation can raise eyebrows, there are many misconceptions around automation which can make warehouse operators wonder if the cost is worthwhile. However, these automations quickly pay for themselves, especially because close to 65% of warehouse operating budget often goes to labor costs, but warehouse automation can reduce those costs by up to 30%. Another way it saves is in inventory fulfillment. Often, this fulfillment is only correct 63% of the time. But with automation tools you can reduce picking errors and increase efficiency. 

Figuring Out Warehouse Automation ROI

When calculating the ROI of automation, start by looking at a breakdown of your budget. Look at the cost of your existing labor, warehouse equipment, any planned expansion in the near future, and any annual increases in costs. Then you’ll want to factor in the average of your costs to hire and onboard, as well as your and staff turnover rates. You’ll want to compare these numbers to the cost of purchasing and implementing warehouse automation solutions. Be sure you have these scoped out and got a quote for their pricing before completing this exercise. When you compare these figures, you’ll get the estimated ROI for purchasing warehouse automation solutions. 

Rules to Follow When Investing in Warehouse Automation

Warehouse automation is exciting and the promises of cutting costs may have warehouses rushing the process. However the best way to get your warehouse automated is to develop a deliberate plan of action. This plan should be developed by an expert and may have many steps over several months to get you to your ultimate goal of a more automated warehouse. Here are some simple rules to follow which will help your transition into automation more sucessful. 

High Quality Is Optimal

When you purchase automation equipment or software do not look for low-cost products. Even if the cost savings is tempting those savings will likely be quickly eaten up by costly and continual repairs. Instead focus on high quality products which have maintenance schedules and are supported by the vendor so you don’t have to worry about sudden down times.

Play the Long Game

Your investment will not give you a complete return overnight. In fact most successful warehouse automation strategies are implemented slowly over several months if not several years. And these strategies involve several steps which ensures optimal performance along the way. Trying to change your warehouse overnight is a recipe for failure. Once you understand what you need to automate your warehouse, look at how you can implement these new technologies in stages so they can build off one another and your staff has time to learn the new processes. 

Get Staff Onboard

Your staff should know automation is coming and help you put it in place. When you get staff involved early not only can you increase your overall chances of success but you can also increase buy in. If you wait to bring staff in on the automation plan until the implementation stages of you may experience unexpected pushback which halts the progress of your automation. 

Get Picky About Your Partner

The right automation partner who specializes in the logistics sector will help you strategize successfully on your automation journey. You need someone who both understands your industry and the pain points you are likely to face in your fulfillment process. Not only can they help you pick out the right softwares and equipment, but they can also help you through the stages of implementation as well. 

How to Reduce Warehouse Costs with Industrial Automation Systems

Utilizing an industrial automation system allows you to streamline and cut costs in several areas, but two of the most prominent are the cost of labor and the cost of real estate. When it comes to feeling limited as a warehouse facility, labor and space are often top of the list. Labor is hard to find and keep, and space is a continual need for any warehouse. Let’s take a look at how we can cut costs in both of these areas. 

Labor

Often manual tasks can be unreliable and littered with human error. Not only is the cost of labor rising, but it’s also becoming difficult to keep labor on staff in the current labor shortage. This labor shortage and the continual revolving door of employees will often cause a high expense in training and onboarding. However some of this can be relieved with automation. You can do this by reviewing any mundane or simple task which workers currently need to perform and analyze how those tasks can be automated. If you find more ways to automate, with robots doing much of the manual labor, employees will find they can work faster, at a higher volume, than before and are safer than they once were in a warehouse setting. 

Space

As online orders skyrocket, many warehouses have found a need to expand yet it’s too expensive to do so. Additional warehousing space and set up is a huge cost to facilities as real estate has been steadily increasing. However with automated warehouse operations you have the ability to maximize warehouse floor space and condense your inventory storage. Which means you can do more with less space and “expand” without actually growing in square footage or purchasing another warehouse location.   

Key Takeaways

In the past, robotics have specifically focused on the manufacturing sectors, but now they are hitting the logistics sector with powerful improvements. Warehouse automation may have a big price tag up front, but these processes bring your facility into the future and allow you to compete faster and more accurately than other warehouse processes which don’t yet have automation within them. And you’ll find many cost reductions both in labor and space come with automating your warehouse. However the transition to an automated facility can’t be taken lightly, it must be deliberately strategic with a plan that could last months or even years to implement. 

Warehouse Automation Cost FAQs

How Much Does a Smart Warehouse Cost?

A smart warehouse facility can cost you anywhere from $1 million to $25 million depending on the technology you purchase and what needs you have. This can include upgrades with robotic conveyor belt systems, robots, inventory management software, and much more. When trying to decide how much warehouse automation will cost your business it is best to find an automation partner who can help you strategize. 

How Is Automation Cost Calculated?

Automation cost should be calculated by reviewing the total cost of your automation technology and subtracting the cost of the savings you gain from said automation technology. The cost of automation up front seems large, however in order to get a true understanding of cost you should take the savings and profits it will gain from your warehouse into consideration. 

Is Owning a Warehouse Profitable?

Often, purchasing warehouse property is considered a good investment. Not only can you use it for your own business, but you can also rent out warehousing space to other businesses to generate more money. Plus it’s been shown that warehouse real estate is often more profitable with greater returns than other forms of commercial real estate.  Especially because it often seems warehousing space can’t be built fast enough and once built becomes filled quickly. 

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