{"id":7516,"date":"2024-09-17T13:05:00","date_gmt":"2024-09-17T18:05:00","guid":{"rendered":"https:\/\/www.mhisolutionsmag.com\/?p=7516"},"modified":"2024-09-17T09:19:59","modified_gmt":"2024-09-17T14:19:59","slug":"building-the-business-case-for-automation","status":"publish","type":"post","link":"https:\/\/www.mhisolutionsmag.com\/index.php\/2024\/09\/17\/building-the-business-case-for-automation\/","title":{"rendered":"Building the Business Case for Automation"},"content":{"rendered":"
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Is the lack of a clear business case preventing your operation from implementing automation? Use this guide to build a compelling justification.<\/div>\n
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BY SARA PEARSON SPECTER<\/span><\/div>\n
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\nE<\/span>very year, MHI\u2019s Annual Industry Report queries supply chain leaders on a multitude of topics surrounding their adoption and deployment of innovative technologies\u2014including automation. Survey questions ascertain budgets, operational challenges, investment plans, obstacles to technology adoption and more.<\/p>\n

Among the biggest barriers to implementing automation? The lack of a clear business case.<\/p>\n

MHI Solutions<\/em> has assembled the following guide to help supply chain leaders outline and define a business case for automation in their operations. For help, we reached out to the experts at three MHI member companies: Designed Conveyor Systems (DCS), FORTNA and KPI Solutions. As automated systems integrators, they\u2019re all well versed in how to build a compelling business case for an investment in warehouse automation.<\/p>\n

It should be noted, however, that the experts at all three firms believe low unemployment and the continued difficulties in staffing warehouses and distribution centers (DCs) make an investment in automation a foregone conclusion. As KPI\u2019s Chief Commercial Officer Jim Kuecker put it, “Automation has become the only way to fill open supply chain jobs\u2014of which there are far more unfilled positions than there are people who want them.”<\/p>\n

“How much lost revenue is the lack of available labor costing your business?” he continued. “The crux of this business case is, if you don\u2019t have enough employees to fill your customers\u2019 orders on time and in full, your customers will quickly become your competitors\u2019 customers.”<\/p>\n

Not compelling enough? The following illustrates nine critical components to include when developing a business case for automation.<\/p>\n

1. Outline Problems and Objectives<\/h4>\n

The first step in building an automation business case is to identify and define the current challenges and inefficiencies in warehouse operations that automation can address. Detail the objectives that automation is expected to meet, such as increased throughput, accuracy improvement or scalability.<\/p>\n

For example, time-intensive walking to manually pick inventory for order fulfillment is both an ineffective use of associates\u2019 time and a limiting factor for increasing throughput. It has even been estimated that picking associates spend up to 70% of their time walking through a facility from location to location, explained DCS\u2019 John Knudsen, project director of consulting.<\/p>\n

“With a fleet of autonomous mobile robots (AMRs), pickers can instead be stationed within certain inventory zones. When items are needed to fill orders, tote-carrying AMRs travel to each picker, who places the picks into the tote,” Knudsen said. “By eliminating walking between picks, associates can focus solely on order fulfillment, thereby increasing their throughput.”<\/p>\n

Mis-picks and high order fulfillment error rates routinely occur in manual picking processes. Deploying automated picking solutions\u2014including goods-to-person systems\u2014improves accuracy by reducing human involvement in inventory management and order fulfillment operations. “In a typical warehouse, the error rate can be between 1% and 3% of orders and can reduce profitability by 11% to 13%,” observed Ron Egan, VP of sales at FORTNA.<\/p>\n

“However, in a warehouse that does not use automation or warehouse management software, the number can be much higher,” Egan continued. “The higher the order error rate, the higher the rate of return, which leads to customer dissatisfaction, higher costs in handling the returns and, in many cases, product loss.”<\/p>\n

Manual fulfillment operations also frequently struggles to handle seasonal peaks in demand. That leads to bottlenecks and order processing delays. Today\u2019s automation technologies\u2014such as AMRs and cube-based automated storage\u2014enable greater flexibility, noted Matt Smoker, VP of consulting services at KPI.<\/p>\n

“These types of automation accommodate seasonal volume fluctuations, business changes and even relocation to a larger facility,” he said. Smoker added that the increasing availability of “as a service” pricing models also contributes to higher flexibility. “Companies can initially test an automated solution (like a fleet of AMRs) in a limited fashion with a small investment\u2014then add or subtract vehicles as needed.”<\/p>\n

2. Identify and Quantify Benefits<\/h4>\n

Typically, companies seek automation to attain specific operational benefits. When crafting the business case, here\u2019s the place to identify and quantify those expected returns. Curt Kincaid, executive VP of solutions and growth at DCS, offered three common examples:<\/p>\n