17 min read

Warehouse Automation Explained: Types, Benefits & Best Practices

June 26, 2021 11:24:38 AM CDT

By Abby Jenkins | Product Marketing Manager

This article explains how to automate your warehouse, why it’s worth it and the challenges you may encounter. Learn about various automation technologies and our advice on when and how to implement them.

This article will cover:

  • When to automate your warehouse
  • How to automate your warehouse
  • Warehouse automation best practices
  • Warehouse automation trends

What Is Warehouse Automation?

Warehouse automation is the process of automating the movement of inventory into, within, and out of warehouses to customers with minimal human assistance. As part of an automation project, a business can eliminate labor-intensive duties that involve repetitive physical work and manual data entry and analysis.

For example, a warehouse worker may load an autonomous mobile robot with heavy packages. The robot moves the inventory from one end of the warehouse to the shipping zone and software records the movement of that inventory, keeping all records current. These robots improve the efficiency, speed, reliability and accuracy of this task.

But warehouse automation does not require physical or robotic automation, and in many cases simply refers to the use of software to replace manual tasks. However, this scenario illustrates how robots and humans work together to accomplish repetitive tasks while minimizing fatigue and injury.

Warehouse Automation

Warehouse Automation

Key Takeaways:

  • Automation can start with a warehouse management system (WMS), data collection and inventory control.
  • While warehouse automation has significant upfront costs, there are many benefits, ranging from improving operations to minimizing human error.
  • The future of automating the warehouse lies in robotics and integrating artificial intelligence (AI) onto the warehouse floor.

What Is Digital Automation?

Digital automation uses data and software to reduce manual workflows. Automatic identification and data capture (AIDC) technology, like mobile barcoding, is an example of digital automation in the warehouse.

The benefits of digital process automation include the ability to integrate with enterprise resource planning (ERP) systems, enhanced security, greater data management efficiency, reduced operational and legal risks, and improved safety—but from the warehouse perspective, it reduces manual processes and eliminates human errors. AIDC technology like radio frequency identification (RFID) and mobile barcode scanning can enhance the worker experience, improve customer service and reduce operational costs associated with human error.

Implementing digital automation technology requires a significant upfront investment. These costs include hardware, software and support contracts and the time and resources required to implement the systems and train employees. In addition, digital automation can increase the risk of lost or corrupted data and cybersecurity threats.

What Is Physical Automation in the Warehouse?

Physical automation is a way to use technology to minimize employee movement and build more efficient workflows. Robots are one example of how it works in the warehouse.

The advantages of physical automation include increased warehouse capacity and efficiency, enhanced reliability and scalability of services and improved performance. The downsides are the significant upfront expenses, the scarcity of a skilled workforce to manage and maintain the system, high maintenance costs and equipment that is meant for highly-specific functions.

To take advantage of automated warehouse systems, businesses need advanced planning and organization. These systems are more suited for large-volume warehouses and distribution centers with space to accommodate specialized equipment.

How Does Warehouse Automation Work?

Warehouse automation works by using software and technology like robotics and sensors to automate tasks. These products work in concert with existing tools like inventory management software.

Warehouse automation helps ensure that business-critical operations in your facilities meet customer demand. It starts with a warehouse management system (WMS) that automates manual processes and data capture, inventory control and supports data analysis. These systems integrate with other solutions to efficiently manage and automate tasks across different business and supply chain functions.

Categories of Warehouse Automation Explained

Warehouse automation varies from relatively simple to quite complex. Basic automation uses planning, machinery and vehicles to reduce repetitive tasks. Advanced systems take advantage of artificial intelligence and robotics.

Warehouse automation categories include:

  • Basic Warehouse Automation: This type of automation refers to simple technology that assists people with tasks that would otherwise require more manual labor. For example, a conveyor or carousel moves inventory from point A to point B.
  • Warehouse System Automation: This type of system uses software, machine learning, robotics and data analytics to automate tasks and procedures. For example, a warehouse management system reviews all the orders that need to be filled in a day and has users pick like items to fulfill all those orders at once so they don’t traverse the warehouse back and forth multiple times.
  • Mechanized Warehouse Automation: This kind of warehouse automation uses robotic equipment and systems to assist humans with warehouse tasks and procedures. Autonomous mobile shelf loader robots that lift racks of products and deliver them to human pickers to retrieve and sort is one example.
  • Advanced Warehouse Automation: Advanced warehouse automation combines mechanized warehouse robotics and automation systems that can replace labor-intensive human workflows. For example, a robotic forklift fleet that uses advanced AI, cameras and sensors to navigate a warehouse and communicate each forklift’s location to an online tracking portal.

Types of Warehouse Automation Technology

There are many types of warehouse automation because there is a wide range of warehouse technology and systems available. Warehouse automation aims to minimize manual tasks and speed up processes, from receiving to shipping.

Warehouse automation technology includes:

  • Goods-to-Person (GTP): Goods-to-person fulfillment is one of the most popular methods for increasing efficiency and reducing congestion. This category includes conveyors, carousels and vertical lift systems. When properly applied, GTP systems can double or triple the speed of warehouse picking.
  • Automated Storage and Retrieval Systems (AS/RS): AS/RS are a form of GTP fulfillment technology that includes automated systems and equipment like material-carrying vehicles, tote shuttles and mini-loaders to store and retrieve materials or products. High-volume warehouse applications with space constraints tend to utilize AS/RS systems.
  • Automatic Guided Vehicles (AGVs): This class of mechanized automation has minimal onboard computing power. These vehicles use magnetic strips, wires or sensors to navigate a fixed path through the warehouse. AGVs are limited to large, simple warehouse environments designed with this navigation layout. Complex warehouses with lots of human traffic and space constraints are not good candidates for AGVs.
  • Autonomous Mobile Robots (AMRs): More flexible than AGVs, AMRs use GPS systems to create effective routes through a specific warehouse. They use advanced laser guidance systems to detect obstacles, so AMRs can safely navigate dynamic environments with lots of human traffic. They are easy to program with routes and easy to implement quickly.
  • Pick-to-Light and Put-to-Light Systems: These systems use mobile barcode scanning devices synced to digital light displays to direct warehouse pickers where to place or pick up selected items. They can dramatically reduce walking and searching time and human error in high-volume situations.
  • Voice Picking and Tasking: The use of voice-directed warehouse procedures, also known as pick-by-voice, uses speech recognition software and mobile headsets. The system creates optimized pick paths to direct warehouse workers where to pick or put away a product. This method eliminates the need for handheld devices like RF scanners, so pickers can concentrate on their task with improved safety and efficiency.
  • Automated Sortation Systems: Sortation is the process of identifying items on a conveyor system and diverting them to a warehouse location using RFID, barcode scanners and sensors. Companies use automated sortation systems in order fulfillment for receiving, picking, packing and shipping.

When to Automate Your Warehouse

Deciding when to automate your warehouse depends on a host of factors. You’ll need to evaluate your processes and procedures, examine your supply chain, recruit in-house expertise and identify gaps in current technology and future business goals.

8 Questions to Decide If It’s Time to Automate Your Warehouse

Answer these questions before committing to warehouse automation projects:

  1. Are your customer orders delayed due to a limited workforce?
  2. Are your existing warehouse processes and procedures labor-intensive?
  3. Is your order fulfillment capacity declining?
  4. Are your inventory counts inaccurate?
  5. Are you still using legacy warehouse management software or manual inventory management tools like spreadsheets?
  6. Is customer satisfaction data indicating problems in the supply chain?
  7. Do you have to increase/decrease your workforce to meet fluctuating demand?
  8. Do you have buy-in from key stakeholders?

How to Automate Your Warehouse

Automating a warehouse requires a project plan. You’ll need to involve stakeholders, create a project schedule, complete a risk assessment and designate goals and deliverables.

First, form a support team and designate project manager(s). They will determine a project schedule and build a timeline and deliverables calendar. Next, make implementation support plans with feedback from all levels of management (including corporate leadership and warehouse managers from all locations). Finally, choose the warehouse automation that best supports your business goals, customer demand, and incorporates feedback from your team, time and available resources. When reviewing automation options, you’ll need to research these options and request demonstrations. Implementing mobile barcode scanning has different requirements than installing an AS/RS inventory management system, for instance.

5 Steps to Automate Your Warehouse

Use this sample five-step plan to get started with warehouse automation.

  1. Create an implementation committee.
    Form a committee of internal stakeholders who have expertise on current warehouse performance, capabilities and challenges, and understand existing technology gaps. Consider adding third-party experts who know about supply chain automation and have experience relative to your industry and warehouse operations.
  2. Collect critical data.
    Successful warehouse automation relies on data about your existing supply chain and business-critical warehouse operations. Before implementing new automation technology, evaluate your current data collection process and infrastructure. You’ll want to assign ownership of data migration to skilled IT stakeholders.
  3. Evaluate your inventory controls.
    Inventory control is at the core of warehouse operations. Before implementing a warehouse automation solution, determine or refine your standard operating procedures (SOPs) for inventory control. Include SOPs for purchasing, shipping, receiving, customer satisfaction and inventory loss. Define the key performance indicators (KPIs) to measure the success of automated inventory control processes and procedures. Evaluate the inventory accounting method currently in place (for example, periodic or perpetual systems) and determine how automation will impact it. Read the guide about inventory control to learn more.
  4. Implement a warehouse management system (WMS).
    WMS platforms feature software modules that help control and track inventory, manage warehouse operations, reduce labor costs associated with manual tasks, and improve customer service. A modern WMS supports mobile devices and should be able to work with your existing enterprise software.
  5. Determine what kind of warehouse automation you want.
    Is your goal to use automation to streamline manual data entry and reduce labor costs associated with back-office warehouse operations and accounting? Or, are you expanding your warehouse footprint or adding locations and think it’s time to use advanced physical process automation like robots and GTP systems? Determining the type of warehouse automation that aligns with goals and customer demand is essential.

Why Should You Automate Your Warehouse?

An inefficient warehouse negatively impacts the customer experience. Automated warehouses do more with less and thrive under increased customer demand.

Benefits of Warehouse Automation

Using automation to improve warehouse operations brings a wide range of advantages, from running more efficiently to minimizing human error. Here’s a list of the most commonly cited benefits:

  • Increased warehouse throughput
  • Better resource utilization
  • Reduced labor and operational costs
  • Improved customer service
  • Reduced handling and storage costs
  • Reduced human error
  • Minimized manual labor
  • Increased productivity and efficiency
  • Improved employee satisfaction
  • Enhanced data accuracy and analysis
  • Reduced stockout events
  • Optimized warehouse space
  • Greater inventory control
  • Improved workplace safety
  • Fewer shipping errors
  • Reduced inventory loss
  • Enhanced material handling coordination
  • Improved order fulfillment accuracy

Challenges of Warehouse Automation

Despite the benefits related to warehouse automation, it also has some challenges. For example, it requires significant capital to get up and running and expertise to establish and maintain the system, which many companies don’t have in-house and can be difficult to find. Additionally, equipment can break down, often at the worst of times, leading to downtime and repair/maintenance costs.

To minimize maintenance issues, you’ll want to set up maintenance schedules. Consider contracting with a third-party vendor that provides skilled maintenance and repair experts to ensure the new systems and equipment stay operational. The high upfront costs for equipment and setup typically pay for themselves over time through efficiencies and increased sales, but businesses need to carefully anticipate and mitigate some challenges with proper risk assessment and planning. The planning phase should include regular inventory audits to verify the accuracy of new data from automated processing against existing records. See below for more details on how much it costs to automate your warehouse.

Warehouse Automation Best Practices

The warehouse’s role in the supply chain has evolved significantly. Modern warehouses provide business-critical, cost-saving functions and add value to customer experiences.

Here’s a list of six warehouse automation best practices to consider:

  1. Integrate with a WMS: Make sure the warehouse automation systems you choose integrate with a WMS platform. Look for a solution that can manage inventory controls, track inventory, monitor and report on labor costs, integrate dashboards and automates these capabilities. Learn more about WMS features and the difference between inventory management and warehouse management.
  2. Invest in Scalable Solutions: Your technology should scale with your business. The system should account for adding future warehouses, employees, equipment and new supply chain partnerships, like 3PLs or drop shippers.
  3. Automate Data Collection: Regardless of the type and level of warehouse automation, you're considering long term, start with a solution that automates data collection, transfer and storage. Cloud-based solutions paired with mobile barcode scanners create a low-cost, low-risk path to automation. This ecosystem will help you eliminate human error, capture critical warehouse performance and inventory data, and store it in a centralized cloud database for further analysis.
  4. Perform Continuous Cycle Counts: Cycle counts monitor inventory levels against the inventory data record and are a key feature of WMS. Once you have automated data collection systems in places, you can automate continuous cycle counts with mobile barcode scanning or RFID sensors. Then you can use dashboards to check for inventory discrepancies.
  5. Optimize Receiving: Warehouse data collection starts with receiving, so you want a system that can collect as much data as possible upfront to help direct warehouse workflows. Identify the incoming product (dimensions, classifications, packaging), then set rules in your WMS that determine how to handle it, where to store it and how to direct available resources to put it away.
  6. Evaluate Warehouse Design: Many physical automation solutions, including GTP and AS/RS systems, AGVs and sortation systems, require specific warehouse layouts and ample space to be successful. Consider reworking the design of existing warehouses and distribution centers to optimize them for automation technology. Work with solutions vendors, architects and contractors that understand your unique requirements. You’ll want to include this evaluation in your implementation budget.

What Warehouse Processes Can Be Automated

Many warehouse processes can be automated, such as bin tracking, cycle counting and order picking. Warehouse process automation leads to more cost-effective operations and reduces product handling costs.

Warehouse Processes that Benefit from Automation

Warehouse Process Automation

The right warehouse automation technology can automate tasks that touch every aspect of order fulfillment and inventory control, including:

  • Receiving: You can use mobile devices to quickly capture data in your warehouse’s receiving area. Integrated software captures, processes and stores data that impacts downstream and upstream automated workflows.
  • Returns: Automated sorting systems and equipment like conveyors can automate return processing procedures. Use them to sort products to return-to-stock shelves or put away in designated storage locations.
  • Putaway: Putaway refers to the act of moving products from receiving to storage. Physical and digital warehouse process automation can make putaway more efficient and accurate. Automating this process can also help facilitate cross-docking, where goods are rapidly sorted, processed and placed onto trucks bound for different destinations instead of being stored in the warehouse.
  • Picking: Manual order picking is the costliest warehouse activity—warehouse travel time can consume as much as 50% percent of working hours. Using GTP systems and autonomous mobile robots can rapidly increase the speed and efficiency of moving inventory from stock locations to fill customer orders.
  • Sorting: Sorting and consolidating warehouse inventory is a time-consuming, often confusing task. Automated sortation and AS/RS systems improve inventory accuracy and quality control by recognizing and handling small or fragile inventory separately.
  • Replenishment: Automated inventory tracking and cycle counting empower automated reorders. When an inventory item reaches a designated par level, the system automatically triggers an order request and flags it for approval. Automated replenishment can help prevent overstocking costs and inventory loss due to spoilage and theft.
  • Packaging: The packaging stage of order fulfillment is critical due to the high cost and environmental impact of packaging materials. Automated packaging and cartonization systems use algorithms to determine the best type of shipping packaging based on product attributes (like durability), dimensions and material costs.
  • Shipping: Automated shipping systems uses conveyors, scales, dimension sensors, printers and software applications to determine available carriers, estimate shipping rates and apply labels to packages for shipment.

Real World Examples of Warehouse Automation

The popularity and growth of ecommerce has increased the demand for warehouse automation. Here are some examples of how it works across various industries:

  • Barcode Scanning: Amazon uses automated barcode scanning and labels to dominate online retail and optimize warehouse operations. This automation is responsible for Amazon’s famously innovative storage system. Unique barcodes are placed on incoming products and on the shelves where they reside. When it’s time to ship a product, employees use the updated picking list to find the product location based on automated routes optimized for efficiency and flow.
  • Picking Automation with GTP Systems: Nike implemented a GTP picking system in its new distribution center in Japan. The automated GTP picking system uses autonomous robots to carry products and packages loaded on shelves or pallets directly to warehouse workers for order fulfillment. The new warehouse automation helped transform logistics and enable Nike to provide same-day delivery to customers in Japan.
  • Inventory Automation with AS/RS Systems: IKEA operates highly automated warehouse facilities worldwide. Its distribution centers feature AS/RS inventory automation systems and equipment, including 100-foot-tall trilateral stacker cranes and conveyor rack systems capable of automatically transferring 600 pallets an hour to dispatch areas.
  • Back-Office Automation: WMS platforms with digital process automation features can optimize back-office operations. iAutomation, a distributor of machine control solutions and services to OEM machine builders, had siloed applications that slowed productivity, as staff had to manually import and export data across multiple systems to support sales and customer service teams. The company implemented NetSuite's Inventory Management, CRM and Manufacturing Execution System to enhance back-office sales and customer support functions with automated barcoding, case management and issue tracking solutions.

Warehouse Automation Trends & Statistics

Warehouse automation will help address insufficient warehouse space, inefficient inventory operations and labor shortages. Online retail sales of physical goods are expected to approach $500 billion dollars, increasing warehouse services demand.

More than 90% of warehouse operators report that cost-cutting measures are critical to successfully balance the need for more space and services and the difficulty of hiring and retaining a qualified workforce to meet demand. Failing to plan for these trends may cost more than the expenses associated with warehouse automation.

What is the State of Robotics and Automation in Warehousing Now?

Modern warehouses focus less on traditional storage roles and more on value-added services, order customization and rapid flow-through processes that stage products according to just-in-time inventory principles.

Here's a list of the digital and physical warehouse automation and robotics trends empowering the modern warehouse:

  1. Robotics: The investment in warehouse robotics startups increased by 57% in the first quarter of 2020 to more than $380 million. The trend will continue to see momentum in a post-pandemic economy and areas with workforce shortages, like Japan.
  2. Cobotics: Cobotics refers to a collaboration between person and robot (cooperation and robotics forms cobotics). Cobots, designed to work with people, do not replace human tasks. Cobots in warehouse automation include AMRs that can scan their environment. This cobot AMR can avoid collisions with humans and human-operated machinery by recognizing changes in its 360-degree field of vision and can safely drive backward when necessary.
  3. Supply Chain as a Service: Warehouse service-based markets are growing to fill the demand for flexible warehouse operations and automated technology like autonomous robots. Companies offering subscription-based, full-service automated warehouse solutions seek to replace manufacturers and service providers that offer automated equipment and system sales.
  4. Blockchain Technology: Although still in its infancy, blockchain technology is a secure automated network that uses cryptography to create data transfers in blocks on a shared digital ledger. Blockchain technology has implications for warehouse operations and inventory management because of its advanced data authentication, validation and transparency. Blockchain databases could allow every stakeholder in complex supply chains to connect and share permanent, automated records for every transaction made, with shared data storage accessible to everyone within the secure network.
  5. Warehouse Drones: Intelligent drone fleets powered by advanced algorithms and connected to cloud-based WMS can help manage inventory inside warehouses. Some warehouse drones are equipped with visual sensors or barcode scanners to track inventory and automate procedures like cycle counting.
  6. Fast Shipping: The “Amazon effect” of one- or two-day shipping has created intense demand for rapid online shipments regardless of who sells the product. Same-day shipping will continue to drive warehouse automation that speeds up order fulfillment tasks like picking and improves the accuracy and cost-effectiveness of automated packaging and shipping procedures.
  7. Warehouse Cleaning: There is already a market for automated industrial-sized robotic floor cleaners that navigate complex warehouse layouts. Now, a new class of automated mobile cleaning robots is emerging to safely sanitize and disinfect high-touch indoor workplaces like warehouses and distribution centers with UV lights and sanitization chemicals.
  8. Mobile Shelving: Amazon is the most famous example of companies using GTP systems powered by AGVs and AGRs. The autonomous robot fleets can load and transport mobile shelving units with stored inventory to designated locations. This enables workers to pick orders with minimal movement and walking time.
  9. Autonomous Vehicles: Autonomous robotic forklifts are already in use at automated warehouse and distribution centers. Autonomous vehicles are expected to move further up the supply chain to include automated delivery trucks that transport inventory between warehouses, manufacturers and retail locations.
  10. ERP Integrations: API technology and machine learning (ML) are empowering automation systems that integrate with ERP suites to create an end-to-end automated business platform. Further improvements in automation and ERP applications will free up back-office workforces to perform more value-added, creative and customer-focused tasks.
  11. Big Data: The move toward cloud-based applications and databases capable of collecting, processing and storing large datasets that are easily accessible will drive data analytics around warehouse operations further.
  12. IoT: Although not strictly an emerging technology, RFID sensors continue to be a driver for new IoT applications that streamline supply chains and warehouse operations. IoT expands warehouse visibility by providing location data on equipment and inventory in real time. The mobility, affordability and real-time inventory tracking capability of RFID sensors provide enhanced data collection capabilities across systems.
  13. Wireless Fleet Management: Innovations in IoT applications, cloud databases and sensor technology has created the ability to manage automated fleet vehicles wirelessly. Onboard computers communicate telemetry to your system with detailed information about equipment location, maintenance schedules and accident alerts.

How Much Does It Cost to Automate Your Warehouse?

The cost of warehouse automation varies depending on the level and type of automation. However, a full overhaul of your existing infrastructure can cost millions of dollars.

To determine if warehouse automation is right for your business, start by calculating your estimated ROI. Estimate the budget for current warehouse labor and existing equipment and include any expected annual increases. Next, calculate your average turnover rate for warehouse employees and factor in the cost of hiring and training new employees. Now, determine the purchase cost of the new automated systems and equipment, and factor in estimated labor and cost savings, training and implementation costs and ongoing maintenance expenses. Finally, compare these figures to determine the estimated minimum ROI for warehouse automation.

In addition to cost and ROI calculations, consider how warehouse automation might impact other operations. For example, if you're upgrading to digital process automation software or a feature-rich WMS solution, how will the new system create value for other warehouse functions? Will you save time and resources with warehouse documentation procedures for purchase orders and invoicing? How will an automated platform improve your cash flow tied to supply chain operations? What about customer service metrics? How will automated warehouse processes and procedures improve your omnichannel and delivery capabilities or product offerings?

Implement Warehouse Automation with Software

Warehouse automation using inventory tracking and warehouse management systems has tremendous potential and will be crucial to the evolution of modern warehouse management. Moving products from one place to another with as little human contact as possible helps create supply chains capable of rapid, seamless order fulfillment. Investing in these machines and advanced devices will help companies continue to meet customer expectations that seem to grow by the day.

Oracle NETSUITE

Written by Oracle NETSUITE