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A Closer Look at ROI Realization

Posted by Kyle Kestler on December 11, 2023

The proposition might raise eyebrows: could an automation upgrade truly self-finance within a 36-month period, or even less? At BoxLogix, we assert with confidence that it's not just plausible—it's a reality we've witnessed across multiple projects. The return on investment (ROI) for automated material handling systems is not a one-size-fits-all but varies significantly based on the system's sophistication and the unique operational landscape of each enterprise.

Understanding the Automation ROI Scale

The journey to ROI is not linear and varies widely with the degree of automation implemented:

Level 1: Intelligent Process Enhancements Investments beginning from $500,000 to $1 million can redefine your operation’s efficiency. Level 1 automation enhances picker productivity and inventory/order accuracy via:

  • Warehouse Management Systems (WMS): Streamlines inventory management and order processing, enhancing overall efficiency.
  • Radio-Frequency Identification (RFID) and Barcode Scanning: Speeds up item tracking and reduces errors in inventory management.
  • Vertical Lift Modules (VLMs): Ideal for high-density storage in a compact footprint, offering quick access to stored goods, particularly effective for parts storage and small item picking.
  • Voice Picking Systems: Improves picking accuracy and speed by guiding workers verbally, enabling hands-free operations.

ROI for such intelligent enhancements is not a distant dream—it can be realized within a rapid 6 to 12 months, as proven by our data-driven implementations.

Use Cases: These technologies are ideal for businesses stepping into automation, looking to improve accuracy in order fulfillment , storage density and inventory tracking. Use cases include small to medium-sized e-commerce warehouses, retail stock rooms, and third-party logistics (3PL) providers requiring efficient pick, pack, and ship operations.

Level 2: Mechanized Solutions for Operational Efficiency With a financial scope of $1 million to $5 million, this tier introduces mechanical precision to your operation, augmenting the Level 1 systems by:

  • Conveyor Systems: Automates the movement of goods within the warehouse, reducing manual handling and improving throughput.
  • Sortation Systems: Quickly sorts and routes products to the correct destination, increasing processing speed.
  • Pick-to-Light Systems: Provides visual guidance to workers, enhancing picking accuracy and speed.
  • Automated Guided Vehicles (AGVs), Automated Mobile Robots (AMRs): Transports goods within the warehouse autonomously, reducing labor needs for material movement.
  • Automated Stretch Wrappers: Automates the pallet wrapping process, ensuring consistency and saving manual labor.
  • Automated Label Applicators: Streamlines the labeling process for faster packaging and shipping.
  • Pick Modules: Optimizes picking and storage in a compact, multi-level structure, maximizing space utilization.
  • Integrated WCS with WMS: Synchronizes various automated systems for seamless operations and real-time data analysis.

The ROI for such mechanized systems is observed typically within 1 to 2 years, as they bring about a notable uptick in efficiency and accuracy.

Use Cases: Suitable for operations that have outgrown Level 1 automation and need to reduce manual transport and handling. This level benefits high-volume distribution centers, larger e-commerce operations, and manufacturers with extensive intralogistics requirements.

Level 3: Semi-Automated Systems Allocating between $5 million and $15 million, this level is where substantial staffing reductions of 25-50% become a reality, thanks to:

  • Unit Load AS/RS: Designed for storing large pallets or containers, enhancing storage density and throughput for bulk storage needs.
  • Mini-Load AS/RS Systems: Specialized for handling smaller loads, such as totes or cartons, facilitating high-speed picking and replenishment tasks.
  • Crane-Based Pallet AS/RS: Utilized for high-density storage and rapid retrieval of palletized goods. These systems are particularly effective in environments where large quantities of pallets need to be stored and accessed quickly, ensuring a swift flow of goods in and out of the storage area.
  • Shuttle-Based AS/RS: Provides flexible, high-density storage solutions, perfect for environments requiring a balance of storage density and picking speed. Shuttle based systems provide operational continuity compared to crane systems: if one shuttle encounters an issue, others can continue operating, which may not be the case with a crane AS/RS where a breakdown can halt operations in that aisle.

ROI for semi-automated systems is typically achieved within 3 to 4 years, shaped by the strategic integration of these technologies into the client's operations.

Use Cases: These systems are a match for operations facing significant labor shortages or high labor costs, seeking to scale rapidly, or needing to increase storage density. Ideal use cases include medium to large distribution centers, multichannel fulfillment centers, and specialized industries like pharmaceuticals and automotive parts distribution.

Level 4: The Vision of Full Automation When the investment soars to $50 million and beyond, we're looking at comprehensive systems that:

Level 4 automation represents the zenith of warehouse automation, particularly evident in greenfield projects. These ventures often encompass a broad spectrum of technologies from each level of automation, meticulously curated and integrated to create a harmonious, highly efficient system.

  • Incorporation of Multi-Level Technologies: Level 4 projects typically amalgamate technologies from Levels 1 through 3, creating a comprehensive automated environment. This includes advanced Warehouse Management Systems (WMS), automated picking solutions, sophisticated conveyor and sortation systems, and high-capacity Automated Storage and Retrieval Systems (AS/RS). The challenge lies in ensuring these diverse systems operate seamlessly together, which is where the expertise of an integrator becomes invaluable.
  • Tailored Solutions for Greenfield Projects: In greenfield projects, where operations are built from scratch, there is an unparalleled opportunity to design and implement a fully optimized automated system. These projects allow for the creation of a warehouse that precisely aligns with a company’s operational and business objectives, leveraging the most suitable technologies from each level of automation.

ROI for these advanced installations is a long-term prospect, typically spanning 5-10 years. They are meticulously engineered to transform operations from the ground up, optimizing every aspect of workflow and material handling. For greenfield projects, the strategic implementation of automation can lead to a significant reduction in the required building footprint compared to a manual operation. This is especially impactful in industries such as cold storage, where construction costs are substantial.

Use Cases: This level is designed for large-scale, high-volume, high-velocity operations where precision and efficiency are paramount. It's ideal for mega-distribution centers, fully automated dark warehouses, and companies in sectors like food and beverage, where consistency and throughput are critical.

Tailoring Your ROI Outlook

Your ROI timeline is as unique as your operation, influenced by numerous factors, including but not limited to:

  • The extent and nature of process improvements.
  • Enhancements in order and inventory accuracy.
  • Gains in overall operational efficiency.
  • Cost reductions in labor, especially in regions with higher wages.
  • The intricacies of labor market dynamics.
  • The volume and nature of daily case or pallet transactions.
  • Diverse outbound order profiles and their implications on logistics.
  • Specific picking methodologies and their operational impact.
  • Fluctuations in order volumes.
  • Real estate costs, which may dictate vertical versus horizontal expansion.
  • Comparing retrofitting costs with greenfield development investments.

At BoxLogix, we understand that each level of automation comes with its own set of strategic benefits, directly correlating to the operational enhancements implemented. Our role as a leading integrator and strategic partner is to ensure that your investment in automation not only promises but delivers a tangible, robust ROI.

Discover how BoxLogix can redefine your operation’s efficiency and profitability. For a deeper dive into the strategic impact of automation on your ROI, connect with our team by clicking the "Contact Us" page at the top of our webpage.

Topics: Warehousing, WMS, Automation