Cost of Inaction: the Hidden Costs of Delayed Automation
Guest blog by MHI Member Company Brightpick
It’s common to hear about the upfront costs of automating a warehouse, but what is the true cost of not automating?
While concerns about complexity, disruption, and initial investment may hold companies back, inaction can be far more damaging in the long run. Today’s competitive market demands lean operations and agile supply chains to manage fluctuating volumes, labor shortages, and rising costs.
Here are five ways delaying automation could end up costing more over time:
1. Increased costs
While businesses face rising costs across the board, labor remains the highest expense – typically accounting for two-thirds of warehouse operating costs. By failing to optimize this significant cost through automation, companies risk placing themselves at a long-term disadvantage compared to competitors.
Automating labor-intensive tasks like picking, packing, and sorting can dramatically reduce operating costs and boost margins, especially in sectors like e-commerce, e-grocery, and pharmaceuticals.
2. Inventory mismanagement
Manual operations are not only costly but also error-prone. 62% of retailers cite human errors and manual processes as the top cause of inventory and fulfillment issues. By relying on manual labor, companies accept higher error rates and less reliable inventory tracking compared to competitors who have embraced automation.
Automated solutions with real-time inventory tracking and simplified workflows help minimize errors and reduce lost stock, and save money.
3. Lost revenue due to poor customer experience
Think of the last time your order arrived several days late, or worse, had the wrong item in it. Slow or inaccurate order fulfillment leads to unhappy customers, high return rates, and even lost future sales. Manual fulfillment makes delivering consistently high customer service more difficult, which places you at a disadvantage to competitors who use automation to increase reliability and consistency.
Automation ensures faster, more accurate fulfillment, which leads to greater customer satisfaction, loyalty, and future sales growth.
4. Reduced Storage Capacity
Manual operations are highly space-inefficient because they are constrained by human limitations. For example, vertical height is limited by how high people can reach, while aisles need to be wide to enable free movement of people or even forklifts (in the case of pallet storage).
5. Employee Dissatisfaction
Warehouse jobs are physically demanding, often leading to burnout, high turnover, and low productivity. Replacing employees can cost up to 25% of their annual salary, so these costs quickly add up.
Automation makes jobs less physically taxing, improving employee satisfaction, retention, and the ability to attract new talent. Workers are able to focus on more rewarding tasks, reducing stress and turnover.
Most companies view automation as a matter of when, not if. While some businesses can take years to make the first step, nimbler companies such as Dr. Max, one of Europe’s largest pharmacy chains, are using automation to jump ahead of their competition today.
Here’s Tomas Seget, Deputy Director of Logistics at Dr. Max, on why they decided to fully automate their supply chain.
“Automation is a core part of our DNA. With over 2500 pharmacies across six countries, we recognized early on that manual processes were not sustainable for us long-term.
“Managing such a large operation requires a degree of efficiency and consistency that humans can hardly achieve. People inevitably get tired and make mistakes. Picking errors can be especially damaging in our industry, where a single wrong pick can delay critical care for a patient.
“Moreover, these days labor is hard to find. Warehouse jobs are physically demanding and, when given a choice, most people prefer other jobs. Labor costs have been a huge headache lately. Plus, the uncertainty of hiring new labor makes long-term planning and growth more difficult.”
For these reasons, automation is a strategic priority for Dr. Max.
“In our warehouses, we’ve installed everything from mini-loads to conveyors, A-frames and AMRs such as Brightpick Autopicker.
Automation has brought many benefits to our operation. For example, after automating our B- and C-movers with Brightpick, we could pick 80% more items from the same footprint, and we’re now thinking of adding additional robots to boost that even more. Faster fulfillment and reduced picking errors have also improved customer satisfaction and inventory tracking. And of course our labor needs have gone down to practically zero, enabling us to reallocate all our manual pickers to quality control instead.
“For years, our manual processes were plagued with inefficiencies. Thanks to automation, we now have happier customers and staff, costs under control, and more scalability in our operations. Today, we operate with greater agility, accuracy, and full confidence in our ability to handle future growth.”
