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Warehouse Automation Explained: Types, Benefits & Best Practices

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

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 .

Video: What Is Warehouse Automation?

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:

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

• 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.
• 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.
• 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.
• 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.
• 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:

• 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 .
• 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.
• 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.
• 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.
• 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.
• 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

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 (opens in new tab) , increasing warehouse services demand.

More than 90% of warehouse operators report that cost-cutting measures are critical (opens in new tab) 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:

• Robotics: The investment in warehouse robotics startups increased (opens in new tab) 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.
• 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.
• 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.
• 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.
• 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.
• 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.
• 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.
• 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.
• 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.
• 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.
• 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.
• 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.
• 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.

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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.

Inventory Management

Inventory Management vs. Warehouse Management: What's the Difference?

This article discusses the differences and similarities between inventory management and warehouse management. It also compares inventory management…

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Walmart’s Alphabot: Designing Material Handling System with Simulation

Walmart, the world’s largest retailer by revenue, was looking for an automation technology that would help complete orders faster and at a lower cost in the company’s fast-growing online grocery business. They wanted to evaluate Alert Innovation’s Goods-to-Person (GTP) concept, Alphabot (an AGV or robot-based system), which could automate the grocery pickup process by using autonomous mobile carts capable of operating in all three dimensions within a multilevel storage structure.

Optimizing E-Commerce Warehouse Operations

The global e-commerce sector has seen 320% growth in five years, and demand is increasing following the COVID-19 pandemic. To reduce costs and remain competitive, DHL Supply Chain ran a warehouse operations optimization project. The project involved developing a smart and robust warehouse simulation tool for testing wave picking strategies.

Optimizing Warehouse Operations for Pharmaceutical Distribution Company

Cardinal Health, a billion-dollar pharmaceutical distribution and logistics firm, manages multiple products from brand name pharmaceuticals and generic drugs to over the counter drugs, health & beauty items and their own private label. They face a multitude of typical distribution warehouse challenges that are further complicated by the nature of pharmaceutical products. Brian Heath, Director of Advanced Analytics at Cardinal Health, and an experienced user of AnyLogic software, employed agent based modeling to solve various business problems, saving Cardinal Health over $3 Million annually.

Warehouse Simulation for Choosing Optimal Picking Algorithm

Kuehne+Nagel, a leading global provider of logistics solutions, was involved in planning a new warehouse for one of their clients. The warehouse would process 13K order lines or 750 picking cartons per day. The project included the development of the best algorithm for multi-order picking. It was planned that the orders in the warehouse would be served by workers with trolleys (or fangos). Workers with trolleys would pick the goods and put them in cartons by order.

Warehouse Cluster Pick Optimization

How DHL optimized warehouse order picking and improved efficiency. Analysis using simulation-based modeling increased picking speed and reducing order completion times. The tool integrates with warehouse management systems.

Developing a Forecasting Simulation Model for Efficient Warehouse Operations

A warehouse in Thailand was encountering difficulties because of a number of complicated processes involved in their logistics and storage systems. In order to overcome these and achieve more efficient warehouse operations, EPIC InnoLabs was contracted to develop a forecasting simulation model. This model would be used to predict system behavior based on a number of inputs as well as retrieve the expected values of selected KPIs.

Large-Scale Logistics Network Planning and Optimization

For a delivery network processing 15 billion parcels annually, simulation modeling provided significant saving across key metrics in a package easily accessible to all stakeholders. Find out how in this case study and presentation from Pitney Bowes.

Creating a Workforce Optimization Model for a Micro-Fulfillment Center

Micro-fulfillment centers are small, sometimes highly automated facilities that can fulfill online orders for delivery as well as click-and-collect in-store pickups. They use a combination of automated picking technology and manual picking. Dematic wanted to create a workforce optimization model that they would be able to present to retailers. It would help them understand the staffing required to operate their micro-fulfillment centers and how different scenarios could impact their ability to fulfill orders.

Evaluating Introduction of Warehouse Automation Systems

Symbotic is a warehouse automation solutions provider. Its systems are based on mobile robots that can travel freely throughout a dense storage structure, accessing products in all locations and handling them at a very high throughput rate. The company needed a tool to help their customers learn the impact of warehouse reorganization and compare capital investments against expected operational savings before the actual introduction of automation systems.

Cold Store Warehouse Operations Optimization

Phoenix Analytics is a Turkish consulting company and provider of simulation solutions for various industries. They were involved in developing a warehouse optimization project for one of the biggest ice-cream and frozen desserts manufacturers in Europe and Asia.

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The Ultimate Guide to Warehouse Automation

30 min read

60-Second Summary

Are you considering implementing automation in your warehouse but aren’t sure where to start? This ultimate guide will introduce the different types of warehouse automation and technologies to assist you in choosing the right solution to help your operation successfully meet its goals.

An Overview of Warehouse Automation

Warehouse automation is the process of automating repetitive tasks involved with the movement of inventory in and out of a warehouse, distribution center, micro-fulfillment center, or retail space using equipment, robotics, or software. Warehouse automation is used to streamline inventory handling to reduce overhead costs and speed-up order fulfillment, distribution, or replenishment while driving efficiency and output. Utilizing a form of automation can even minimize worker injury, fatigue, and error when implemented correctly.

Automation can be simple or fairly complex, ranging from using barcode scanners to autonomous robots that aid workers with moving inventory or preparing items for shipping. iHerb, an online health product retailer , uses automation in its fulfillment facilities, relying on the OPEX® Perfect Pick® automated storage and retrieval system, allowing them to process over 40,000 orders per day with same-day shipping.

Rapid Industry Adoption

With the need for supply chain technology and automation growing to meet rapidly fluctuating consumer and market demand, many companies are implementing automation to some degree in their warehouses and fulfillment centers. According to Research and Markets, the global warehouse automation market is expected to reach USD $33.34 billion from 2022-2026 at a CAGR of 13.60% .

Types of Warehouse Automation

Warehouse automation comes in many different forms, all ranging from simple to complex, but the two main types are digital and physical warehouse automation, each of which can be broken down into different categories.

Digital Warehouse Automation

While you may be familiar with the robots and large  equipment used in  warehouses, digital warehouse automation is comprised of the software and data used to reduce the need for human intervention and manual, labor-intensive processes. Digital automation can be used for reading barcodes, automatic identification and data capture (AIDC), radio frequency identification (RFID), and similar applications.

Digital warehouse automation provides many advantages – faster and more accurate inventory handling, improved security, better data management, reduced operational and legal risks, and improved safety. It can also result in higher profitability and reduced expenses. However, digital automation may require significant planning and capital upfront or during the use of software.

Physical Warehouse Automation

Physical warehouse automation can consist of robotics, equipment, conveyors, and similar technology to streamline material handling workflows and reduce manual, labor-intensive processes. Physical warehouse automation has a variety of advantages, including better warehouse space utilization, improved worker safety, more accurate order fulfillment, improved inventory security, and increased inventory storage.

Implementing physical automation in your warehouse can provide a fast ROI, helping to increase profitability, reduce overhead and labor expenses, and improve customer service and satisfaction. However, to implement this type of equipment in your warehouses or distribution centers, you’ll need significant capital upfront and comprehensive planning beforehand. Physical automation systems will also need maintenance and service to keep downtime at a minimum.

Classifications of Warehouse Automation

Warehouse automation can be broken down into smaller categories, ranging from simple pieces of equipment to complex systems that can use both physical and digital automation technologies.

The four main categories are:

1. Basic Warehouse Automation

Basic warehouse automation assists with manual and repetitive tasks to help move inventory throughout points in the distribution or manufacturing process. Basic automation can include conveyors or carousels.

2. Warehouse System Automation

Warehouse system automation typically combines software with warehouse automation equipment, but can include other elements such as robotics, machine learning, and data analytics to automate tasks and workflows involving order fulfillment, inventory management, shipping, returns processing, or similar applications.

This type of automation can include inventory software, warehouse management software (WMS), conveyors, automated storage and retrieval systems (AS/RS), automated sorting systems, or robots.

3. Mechanized Warehouse Automation

Mechanized warehouse automation consists of robotics equipment and systems that assist warehouse employees with tasks and workflows to minimize human intervention in repetitive tasks or reduce labor-intensive procedures.

An example of mechanized warehouse automation is the OPEX® Infinity® AS/RS, a system with a grid racking structure where wireless robots retrieve totes containing inventory, which are then delivered to a presentation port where an operator can fulfill an order.

4. Advanced Warehouse Automation

Similar to mechanized warehouse automation, advanced warehouse automation combines robotics and equipment with machine learning or artificial intelligence (AI) to replace manual and labor-intensive workflows entirely.

Advanced warehouse automation includes autonomous mobile robots (AMRs) that can navigate freely to move goods or perform tasks using AI, sensors, and cameras in addition to other automation.

Types of Warehouse Automation Technologies

Automated storage and retrieval systems (as/rs), goods-to-person systems (g2p or gtp), other types of as/rs systems.

• Unit-Load Systems Unit-load systems handle heavy loads (usually between 1000-5500 lbs.) of full or partial pallets and cases.
• Mini Load Systems Similar to unit-load systems, mini-load systems handle smaller loads of totes, trays, or cartons.
• Crane-Based Crane-based systems are designed to retrieve pallets or totes using a fixed or moveable crane located in an aisle.
• Shuttle Based Commonly a feature of G2P systems, shuttle-based systems deliver inventory using a shuttle, bot, or automated guided vehicle (AGV) that runs on a track within an AS/RS or G2P racking structure. These vehicles deliver totes or trays to a workstation that can be integrated with the system.
• High Density AS/RS Systems A high-density AS/RS system has a dense storage racking structure that relies on AMRs or AGVs to navigate the racking system to find and retrieve totes or trays. Inventory is then delivered and presented to an operator at an integrated workstation to perform warehouse activities.
• Carousel Systems Carousel systems are similar to conveyor systems, but retrieve and store inventory by spinning until an item is placed or removed.
• Vertical Lift Module (VLM) Systems A vertical lift module system (VLM) is a fully automated and enclosed structure where an inserter/extractor is surrounded by totes or trays to retrieve and deliver inventory.

Automated/Automatic Guided Vehicles (AGVs)

Autonomous mobile robots (amrs), pick-to-light or pack-to-light systems, voice-picking, voice-tasking, or pick-by-voice, automated sortation systems, automation software.

• Warehouse Management System (WMS): A warehouse management system (WMS) is a comprehensive software solution typically used to manage logistics, supply chain, and warehouse operations. It can provide visibility into inventory movement, stock levels, and item location while also facilitating communication between automation solutions.
• Inventory Management Software: Inventory management software primarily tracks inventory throughout an organization’s entire supply chain, providing an overview of inventory and stock levels and sometimes stock availability from suppliers. This type of software is commonly used along with a WMS.
• Order Fulfillment Software: Similar to inventory management software, order fulfillment software handles inventory management activities that are focused on order fulfillment – receiving orders, creating item picking lists, guiding order picking and packing, shipping, and tracking.

Processes Suitable for Automation

Timing of automating your operations, five questions to determine if it’s time to automate your warehouse operations:.

• Are your existing tasks, procedures, and workflows manual and labor-intensive?
• Does your workforce increase or decrease based on demand during peak seasons?
• Is inventory data inaccurate or incomplete?
• Are customer orders delayed due to a long or complex order fulfillment process?
• Are inventory levels imbalanced from supply chain disruptions?

Considerations Before Implementing Automation

Warehouse automation challenges, benefits from automating your warehouse.

• Increased throughput and order fulfillment
• Improved order fulfillment accuracy
• Optimized and better utilized warehouse space
• Improved supply chain resilience
• Enhanced data analysis and information accuracy
• Reduced workplace injuries and improved employee safety
• Minimized labor-intensive, time consuming, and repetitive tasks
• Enhanced customer satisfaction
• Higher profitability
• Reduced overhead expenses
• Stronger inventory security and visibility
• Increased sustainability practices and less resources use

Warehouse Automation Best Practices

• Choose a Scalable Automation Solution: With consumer and market demand constantly fluctuating, it’s best to choose a solution that can grow with your business or scale back to accommodate lower demand without impacting existing labor.
• Ensure WMS Integration: The automation solution you choose should be able to integrate with a WMS system to ensure interconnectivity and communication with all warehouse operations, providing accurate inventory and performance data.
• Keep Warehouse Design and Space in Mind: It’s important that the automation solution you choose can accommodate your existing warehouse space (brownfield) or fit the needs of a new fulfillment center or warehouse (greenfield).

Prerequisites for Automating Your Warehouse

• Create a Team of Stakeholders: Who will be involved in the planning and decision-making process? It’s important to put together an expert team involved with your warehouse and logistics operations who have knowledge of current performance, needs, and challenges. This team will also need to work with your automation supplier and/or integrator.
• Establish Your Goals: Before implementing automation, you’ll need to establish your goals and know what you’re setting out to accomplish with automation. It’s important to establish operational objectives, competitive strategy, and long-term goals with room for adjustments
• Minimize labor dependence
• Reduce overhead costs
• Attract investors
• Boost efficiency
• Meet fluctuating demand
• Collect and Analyze Data: To implement the right solution for your operation, you’ll need to understand how inventory and goods are moving throughout your warehouse and supply chain. This will include a baseline of products ordered, inventory path, and knowledge of how automation is expected to change inventory flow.
• Assess the Physical Space: You’ll need to assess the physical space you’ll be automating before introducing new equipment. Consider the building floor space, obstructions, existing and new equipment, seismic zones, and any temperature requirements.
• Consider the Future: Will the automation solution you choose for your current needs benefit future ones? Consider if your solution is scalable to accommodate your growing operations or changes in workflow.

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FM Logistic is a leading provider of supply chain services, including warehousing and handling, transport, and co-packing. In support of the company’s mission to drive innovation in warehouse automation, they partnered with Phronesis to survey 100 companies across three sectors (FMCG, retail, and beauty ) in France, Poland and India, to better understand this market’s needs.

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Inside the Amazon Warehouse Where Humans and Machines Become One

They call me the Master of Robots—or at least they should. I grab a flat package, hold its barcode under a red laser dot, and place it on a small orange robot. I hit a button to my left and off zips the robot to do my bidding, bound for one of more than 300 rectangular holes in the floor corresponding to zip codes. When it gets there, the bot engages its own little conveyor belt, sliding the package off its back and down a chute to the floor below, where it can be loaded onto a truck for delivery.

This is not an experimental system in a robotics lab. These are real packages going to real people with the help of real robots in Amazon’s sorting facility of tomorrow, not far from the Denver airport. With any luck, my robot friend and I just successfully shipped a parcel to someone in Colorado. If not—well, blame the technology, not the user.

Seen from above, the scale of the system is dizzying. My robot, a stubby mobile slab known as a drive (or more formally and mythically, Pegasus), is just one of hundreds of its kind swarming a 125,000-square-foot “field” pockmarked with chutes. It’s a symphony of electric whirring, with robots pausing for one another at intersections and delivering their packages to the slides. After each “mission,” they form a neat queue at stations along the periphery, waiting for humans to scan a new package, load the robots once again, and dispatch them on another mission.

You don’t have to look far to see what a massive shake-up this is for the unseen logistics behind your Amazon deliveries. On the other side of the building are four humans doing things the old way, standing at the base of a slide flowing with packages. Frenetically they pick up the parcels, eyeball the label on each, and walk them over to the appropriate chutes. At the bottom of the chutes, yet more humans grab the packages and stack them on pallets for delivery. It’s all extremely labor-intensive and, in a word, chaotic.

Amazon needs this robotic system to supercharge its order fulfillment process and make same-day delivery a widespread reality. But the implications strike at the very nature of modern labor: Humans and robots are fusing into a cohesive workforce, one that promises to harness the unique skills of both parties. With that comes a familiar anxiety—an existential conundrum, even—that as robots grow ever more advanced, they’re bound to push more and more people out of work. But in reality, it’s not nearly as simple as all that.

If only the Luddites could see us fulfilling online orders now.

This Colorado warehouse is, in a way, a monument to robots. It’s not one of the Amazon fulfillment centers you’ve probably heard of by now, in which humans grab all the items in your order and pack them into a box. This is a sorting facility, which receives all those boxes and puts them on trucks to your neighborhood. The distinction is important: These squat, wheeled drives aren’t tasked with finely manipulating your shampoos and books and T-shirts. They’re mules.

Matt Burgess

Steven Levy

Very, very finely tuned mules. A system in the cloud, sort of like air traffic control, coordinates the route of every robot across the floor, with an eye to potential interference from other drives on other routes. That coordination system also decides when a robot should peel off to the side and dock in a charger, and when it should return to work. Sometimes the route selection can get even more complicated, because particularly populous zip codes have more than one chute, so the system needs to factor in traffic patterns in deciding which portal a robot should visit.

“It's basically a very large sudoku puzzle,” says Ryan Clarke, senior manager of Special Amazon Robotics Technology Applications. “You want every column and every row to have an equal amount of drops. How do we make sure that every row and every column looks exactly equal to each other?” The end goal is to minimize congestion through an even distribution of traffic across the field. So on top of tweaking the robots’ routes, the system can actually switch the chute assignments around to match demand, so that neither the robots nor the human sorters they work with hit any bottlenecks.

To map out all this madness, Amazon runs simulations. Those in turn inform how the drives themselves should be performing. What’s the optimal speed? What’s the optimal acceleration and deceleration, given you want the deliveries to be as efficient as possible while keeping the robots from smashing into one another? After all, a bump might toss a package to the ground, which other robots would spot with their vision sensors and route around, adding yet another layer of complexity to the field. (The robots have sensors on either end of their conveyor belt, by the way, so if a package starts to slip off the side, the belt automatically engages to pull the package back on.)

Amazon runs complex simulations to coordinate the robots on the field.

The temptation might be to get these machines moving as quick as possible. “But it would be like having a Ferrari in downtown San Francisco—all you're doing is stop and go,” says Clarke. “We looked at tuning it to many different parameters and found that more speed and more acceleration actually had a reverse effect. They were just bumping into each other and causing more pileups.”

Ready for more complexity? Amazon had to tweak the built space itself to keep the machines happy. Humans doing things the old way on the other side of the building, for instance, enjoy basking in the photons that pour through skylights. Above the robots’ field, though, the skylights are covered, because the glare might throw off the machines’ sensors. To navigate, they’re using a camera on their bellies that reads QR codes on the ground. Even the air-conditioning units hanging from the roof are modified. On the human side, they blow air straight downward, but above the robots they blow out to the side, because gusts of air could blow light packages off the machines’ conveyor belts.

Worse yet, precarious packages like liquids could send the system into chaos. So although the system is automated, humans still monitor the robots on flatscreens below the field, where the packages come down the chutes, and respond to crises. “Think about if I had a package and it had a gallon of paint in it, and that gallon of paint was damaged and it leaked down one of these chutes,” says Steve McDonnell, general manager of the sorting center. “Within minutes I'm able to shut that chute off, redirect drives to another chute, and I'm done.”

The key here is flexibility—not a word that first comes to mind when you think of robots. Flexibility in the robots’ pathways, in their destinations, in the number of robots on the field at once. You might, for example, think the more machines out there, the better. Amazon could deploy up to 800 drives simultaneously, but that could jam up the floor like traffic in a city. Instead, they’re typically operating 400 or 500, with others parked off to the side and waiting to be circulated in.

Beyond coordinating the robots themselves, there’s the question of how to make them good coworkers for the human employees. The humans’ job is to place packages in 6-foot-tall boxes below the field, taking care not to toss in heavy packages first. To make that work manageable, the robots have to distribute packages between the multiple chutes for a particular zip code, so a given chute doesn’t overflow. At the same time, the system considers how to best group packages downstairs by their departure time, so workers don’t have to run around hunting for them.

“The interaction between the associate and the drives is almost like a 3D chess set,” says McDonnell, “because you can optimize the drive field, but then you can make the associate's job harder below the field.”

Across the field from the human workers distributing packages to the drives, a prototype robotic arm, named Robin, sits at the end of a conveyor belt. Its “hand” is a vacuum manipulator, designed to snag boxes and flat packages.

This robotic arm is a test of what it might look like to further automate the work of shuffling packages around. The idea is that the conveyor will deliver packages to the arm, which would then load the drives. “We're going to feed it a little bit differently than we do with humans,” says Rob Whitten, senior technical program manager. “We're not going to just give it a pile coming down a chute—we're going to kind of toss it softballs. We're going to give it a little more structure so it can handle it.” For parcels it can't manipulate, like if they're too heavy or weirdly shaped, humans would step in to help.

As I walk down the line of human robot-loaders, I come across a worker who has set aside a broken box, which has spilled out bottles and other entrails. That uniquely capable human could do two things here: use his problem-solving skills to say, "Something is wrong, I need to set these aside," and then manipulate those objects with exceedingly fine motor skills.

This robot arm has neither problem-solving prowess nor fine motor skills. Imagine if clear laundry liquid had broken inside a package and soaked the bottom of the box. A human might smell the detergent or feel its stickiness before they see it. A robot arm relying on sight alone would miss the problem, loading the package on a drive robot that then snail-slimes the floor of the field.

Even if they had some semblance of judgment, robots are still awful at manipulating complex objects like bottles. That’s why Amazon is keeping it simple here, with a suction arm meant to stick to flat surfaces, as opposed to an analog of the human hand . For quite some time, humans will need to (nearly) literally hold these robots’ hands.

The bottom line is this: We humans have to adapt to the machines as much as the machines have to adapt to us. Our careers depend on it.

Amazon runs simulations to figure out how to keep their human workers comfortable when loading robots with packages. This includes their range of movement from an ergonomics standpoint and their safety. Or such questions as how best for a human to grab a parcel, scan it, place it, and reach over to hit the button that sends the robot on its way. “There's an art to making it feel seamless between what the robot is doing and what the humans are doing,” says Brad Porter, VP of robotics at Amazon.

It’s the kind of dynamic environment that’s perfect for the development of Amazon’s next iteration of its system. The company is working on a new modular robot called Xanthus with different attachments, say to hold containers instead of using a conveyor belt. This machine will in a sense bridge the divide between fulfillment centers, where humans are loading products into boxes by hand, and sorting centers, where they’re mostly working with those assembled boxes.

Amazon's new modular Xanthus robot can be outfitted with attachments that allow it to carry different kinds of cargo.

“You can see how combined with maybe the addition of a sensor platform, you could have an autonomous drive that's driving totes around,” says Porter. But you can also take that same thin sled and replace the tote-carrying unit with a conveyor top and deploy it in the sorting center.

Herein lies Amazon’s huge advantage: It’s got the funds and the talent to develop robots in-house, tailoring each to solve problems specific to Amazon. Other warehouses are starting to go robotic, but they’re working with other companies’ machines. For instance, Boston Dynamics—maker of the hypnotically impressive SpotMini and Atlas —will soon offer a box-lifting robot called Handle . But it’s a generalist machine, not developed exclusively for one client.

Amazon, on the other hand, can iterate on a robot until it's perfectly adapted for a specific task. “They're building it for themselves, and they're building it for their environment and circumstances,” says John Santagate, research director of service robotics at IDC, which does market research. “It's hard to build any one product that suits all of it.”

And every worker they hire into a machine-facing role is doing something no other human has ever done before—lower-level workers in this facility have been promoted to help oversee the massive system whirring around them, as well as the humans intimately integrated with it. “The fully automated or highly automated fulfillment center isn't a North Star we're trying to hit,” says Porter. “Do we see additional levels of automation, at higher and higher levels? Yeah, I think that will increase as the capabilities of our systems increase.”

Here’s the big question, though. Is this kind of automation bound to replace human jobs entirely, or replace parts of those jobs? “Most of the research seems to suggest that the direction that automation is moving in is the displacement of skills, not jobs,” says R. David Edelman, formerly President Obama's special assistant on the digital economy, and now the director of MIT’s Project on Technology, Economy, and National Security. “That suggests those individuals can, by Amazon, be reskilled or leverage other skills they already have in the same job.”

These days, industries that are short human labor need automation to survive. Consumers still want fresh produce, but California’s farms are facing a labor shortage of 20 percent and are increasingly turning to agricultural robotics . Amazon’s business is booming, yet America is enjoying historically low unemployment, so laborers have lots of options for work. “The demand on that company is increasing, but the availability of resources to fill that demand isn't necessarily increasing,” says Santagate. “In fact it's probably contracting.” Robots are filling the void.

Here in this sorting center of tomorrow, I walk along the edge of the field and hear the morning break for humans, called out on loudspeakers. The drive robots continue to shuffle around for a few minutes, with their incessant electric white noise, until suddenly the place falls almost silent. Having delivered their packages to chutes, the robots have run out of work. They park off to the side of the field, some of them in charging stations. Only when the loudspeakers call the end of break do the machines start up again, ready for their humans to feed them more packages.

If only the Luddites could see our codependency now.

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Improving warehouse operations—digitally

Warehouse operations are increasing in complexity with time. The growth of e-commerce has led to a proliferation of SKUs, and there’s an ever-growing need to delight customers by offering super-fast fulfillment. Technology is a factor as well: as new automation systems come onto the market, operations leaders must face the challenge of keeping pace and understanding which technologies apply and what kind of impact they can generate.

Worldwide, companies spend an estimated $350 billion a year on warehousing, and that number grows each year as pick sizes shrink and costs balloon, raising pressure not just on margins but also on service levels.

The need to improve both sides of the equation may be obvious, but the question is how. Trial-and-error is not an option: companies cannot simply shut down a warehouse so they can tinker with new layouts and workflows to see what works best.

But the better news is that they don’t have to. A few companies are already able to design and visualize their warehouse operations virtually via “digital twin” simulations. The simulations allow companies to create virtual models of their existing facilities, and then test different scenarios—no shutdowns required.

This digital warehouse-design approach lets companies experiment with different floor plans, workflows, and other variables to assess the overall impact virtually. Operations leaders can see the impact of changes in a wide range of factors, including the SKU mix, order and shipment profiles, seasonal demand spikes, productivity initiatives, automation options, and a host of other issues that impact warehouse performance. This level of detail allows warehouse designs to be optimized in advance, before anyone starts moving physical assets.

The process typically takes six to ten weeks. The revamped warehouse designs that result can help companies improve efficiency by 20 to 25 percent, before spending the money to test or pilot the changes (exhibit).

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The power of digital simulations.

Digital warehouse design has a wide range of applications, from productivity initiatives at existing facilities to mergers, warehouse consolidations, and new warehouse construction. Across all applications, however, the benefits are reasonably consistent: sizable savings in operating expenses from productivity improvement, as well as in capital expenses from optimizing the deployment of material-handling equipment, storage assets, and targeted, right-sized automation systems.

The approach removes bottlenecks to improve efficiency and effectiveness, and enables optimal slotting and product flows to meet service requirements at the lowest possible cost. Most important, digital warehouse design identifies the full potential of a given facility, rather than forcing companies to settle for incremental improvements to the as-is layout.

Critically, the process also enables companies to gauge the potential impact of mechanization and automation options across the entire spectrum of vendors and products on the market. These technologies can be powerful tools to reduce space and increase efficiency. But in some cases, incorrect or inappropriate automation can actually create more problems than it solves. Digital modeling lets companies see what is possible from a range of technologies and applications, before they make any investment decisions.

Transcending traditional improvements

Of course, most companies know they need to improve their warehouse operations. But they struggle to identify and make the needed upgrades, due to limited data and internal expertise. Quite simply, many companies lack the full set of capabilities needed to assess various warehouse improvement options and create a business case that incorporates capex investments and running costs.

Some rely on third-party logistics providers, but even those vendors often lack the breadth of expertise to see what is truly possible with alternative warehouse designs and operations. A related problem is that most traditional methods to design or revamp warehouses use computer-aided design software (CAD)—which is resource-heavy and time-consuming, and doesn’t allow companies to calculate the impact of new changes or anticipate second-order effects. Digital warehouse design, by contrast, offers a low-risk way to visualize and optimize layouts, allowing companies to rapidly identify real, feasible solutions that deliver quick impact.

For example, a North American manufacturer decided to consolidate several regional manufacturing and warehouse locations into a single campus, with separate buildings dedicated to manufacturing and warehousing. However, it faced several challenges, including capital constraints, insufficient warehouse space, and a need to move fast.

Instead of relying on traditional tools, the company used a digital warehouse-design approach to simulate various options across warehousing, kitting (assembly of related items into a single “kit” for shipment), and value-added operations. The digital tools allowed the company to develop detailed OPEX and CAPEX estimates for both manual and automated solutions, making it far easier to evaluate various business cases. In all, the company reduced planned capex by approximately 10 percent and operating expenses by more than 30 percent.

Digital warehouse design can also help companies rethink existing facilities. For example, another company deployed digital warehouse-design and simulation tools to optimize and revamp its operations in a warehouse currently in operation. It built models to test various layouts, material-handling-flow scenarios, picking methods, and targeted automation solutions.

Starting from an optimized slotting design, the digital twin analyzed historical orders to estimate the exact labor and equipment requirements by day of the week and by hour of the day. With accurate labor-staffing models, the company was able to choose the most optimal, modular design to implement during the transition. In addition, the company could define precise, engineered standards for each operation of the warehouse, and it could monitor daily labor and equipment performance once the new system was in place. This enabled the company to reduce annual operating expenses by 18 percent.

Similarly, one business had a central regional warehouse in Eastern Europe, with annual costs of several million dollars. By constructing a digital twin, the company analyzed the potential improvements from a proposed layout change (specifically, a picking zone that enabled one-step picking). Looking at both high-season and low-season volume, the company determined that it could reduce input costs by more than 25 percent.

Supply chain risk management is back

Foundational capabilities.

As with most technology, digital warehouse design is not a turnkey solution. To capture its full potential, companies must understand their strategy not only for today and tomorrow, but also well into the future—in terms of product portfolio, customer-order profiles, and other factors. Leadership teams must assess the implications of design changes on the supply-chain network as well. And success requires new capabilities in warehouse design—typically engineers who understand the range of variations and permutations for a space. Most organizations do not yet have internal people ready for these roles, and thus need to source that expertise externally.

As a practical matter, the simulation process must involve operations and warehouse managers—those with the deep day-to-day knowledge and real-world insights that can only come from direct experience. Because these experts will be tasked with implementing any changes to the warehouse after the simulation ends, their buy-in will be essential. The more they contribute during the early stages of the process, the more willing they are likely to be to forego old habits and work in new ways.

Last, companies need to plan for repeated changes over time. Optimizing warehouse performance is a process without a finish line—it must happen again and again, as market forces, technology, and consumer preferences continue to evolve. In fact, digital warehouse-simulation tools could become a new way of setting performance expectations, with the tools embedded as part of the day-to-day management of each distribution center. Estimating daily performance targets based on daily volume, mix, and staffing can help warehouse managers manage the shift’s performance more precisely than any other traditional, static approach to setting goals.

Companies face a growing need to improve their warehouse operations. Digital warehouse design is one clear means to help them do so. The process may be virtual, but the results generate a real impact on performance, providing an edge in an ever-more-complex warehousing landscape.

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Felipe Bustamante is a consultant in McKinsey’s Miami office, Ashutosh Dekhne is a partner in the Dallas office, Jörn Herrmann is a senior expert in the Zürich office, and Vedang Singh is a consultant in the New Jersey office.

The authors wish to thank Aditi Brodie for her contribution to this article.

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• November 13, 2020

The following application of a CODESYS customer, the Gebhardt Intralogistics Group, shows how Digital Twins in the cloud and a cloud-based controller management can speed up the process of updating a large number of PLCs to the point where it’s just a few mouse clicks.

The drive towards fully automated warehouses is stronger than ever before. Warehouse automation suppliers and industry consultants agree that a bigger spotlight has put on the use of automation in warehouses worldwide. LogisticsIQ’s  latest post-pandemic market research study shows that the Warehouse Automation Market will reach the milestone of $30B by 2026, at an annual growth rate of about14% between 2020 and 2026.   DHL, a world-leading logistics company, reports that 80% of its warehouses are” still manually operated with no supporting automation." Mechanized warehouses (those that use conveyors, sorters, goods-to-picker solutions, and other mechanized equipment, but not necessarily” automated”) account for only 15% of total warehouses, and only a tiny 5% are fully automated.   Right now, as the world is facing a pandemic that brings lots of uncertainty, companies have been forced to change their attitude towards warehouse automation from” nice to have” to “vitally important” to survive in the industry. Driven by demographic changes the warehouse automation supplier industry expects a double-digit growth in sales, driven by a growth in e-commerce and the advent of the Industrial Internet of Things, with increasing demand for data analytics and automated operations.   Existing fully automated warehouse systems can provide increased maximum output capacity while reducing logistics-related warehouse space used by up to 60%. Further, an automated system is much more resilient to environmental conditions than human workers - they can work in a refrigerated warehouse section all day long without getting cold feet. Using an efficient automated warehouse system means faster picking, faster packing, and faster shipping of orders.   One of the innovative players in the field of warehouse automation solutions is the Gebhardt Intralogistics Group. Gebhardt is the know-how leader in the field and delivers customized solutions in every area of internal material flow technology, internal transport, optimal storage and goods picking processes. Based in Germany and with subsidiaries in the United States, Poland and Austria Gebhardt is a global provider for versatile and modular solutions that allow optimal material flow in production and storage systems.

Decreasing update downtime using the Industrial Internet of Things

No matter if you are controlling warehouse logistic systems, special machines, mobile equipment or an automated industrial building, all these automation systems need one thing: updates of the control application to add new features, improve performance, adapt to changing requirements. Right now, this can be a time-consuming and costly process that can take the whole system offline. The following application of a CODESYS customer, the Gebhardt Intralogistics Group, shows how Digital Twins in the cloud and a cloud-based controller management can speed up the process of updating a large number of PLCs to the point where it’s just a few mouse clicks.   One of Gebhardt’s main products is a fully automated warehouse with a storage system that consist of long, parallel shelves with rails attached to each level of the shelves. Shuttles span the aisles and ride on the rails of the shelves forming the aisles. Since there are rails on all levels of the shelves, multiple shuttles can travel in each aisle at the same time and provide access to the stored goods. To switch between levels, the ends of each aisle contain lifting devices that allow the shuttles to go up and down. This design is very successful and Gebhardt already has 900 shuttles in service that are each controlled by their own CODESYS based PLC. Every now and then these 900 shuttles that usually run 24/7 need to be updated to the latest PLC code. In the good old days this was done by “sneaker-net”–walking up to every controller, plugging in a developer laptop, and updating the code. This process was awfully slow and cumbersome. Gebhardt used to have a system to roll out updates which was a little more advanced but still involved a lot of manual labor, took a long time, and since time is money in such systems, cost a lot of money.

The old approach

Reducing update times from 120 minutes to just 20 a new and better way

Digital twins of CODESYS PLCs

About the CODESYS Group

The CODESYS Group is the global market leader of manufacturer-independent IEC 61131-3-automation software with over 5 million device licenses sold worldwide. More than 500 control system manufacturers and tens of thousands of companies worldwide use CODESYS’ products.   CODESYS is a software platform for industrial automation technology. The core of the platform is the IEC-61131-3 programming tool ”CODESYS Development System." It offers engineers practice-oriented, integrated solutions for the convenient configuration of automation applications. The goal is to provide users with practical support for their daily tasks. Open interfaces, comprehensive security features, and a convenient connection to a cloud-based administration platform make CODESYS an ideal platform for Industry 4.0. Edge, fog, or cloud systems can be implemented using CODESYS. It makes Data exchange between devices in the Industrial Internet of Things (IIoT) easy. Device manufacturers  use CODESYS to create their own programmable or configurable automation components. To do that, they make the runtime system a part of their product. Using available product options, the functional scope of their device can be flexibly defined. The options include integrated products for visualization, coordinated motion control, and connection to fieldbus and Industrial Ethernet systems. In North America, The CODESYS Group is represented by the CODESYS Corporation, located on Boston’s North Shore.   

About Gebhardt Intralogistics Group

The German GEBHARDT Intralogistics Group stands for material in motion and is constantly moving. Because the future of  material flow systems  is based on constant further development, the integration of new technologies, suitable processes, materials and components. In order to further develop internal logistics in all facets and to deliver customers optimum and ultimate systems every time and under every circumstance, GEBHARDT accumulates skills, creativity, energy, decades of experience, the latest technologies, precision and first-class materials. Efficiency and competitiveness are always at eye level with the market demands. The GEBHARDT Group has subsidiaries in the United States, Austria and Poland.

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