Delaying automation has hidden costs, explains Brightpick

It’s common to hear about the upfront costs of warehouse automation, 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 with competitors.

Automating labor-intensive tasks like picking, packing, and sorting can dramatically reduce operating costs and boost margins, especially in sectors like e-commerce, online groceries, and pharmaceuticals.

2. Inventory mismanagement

Manual operations are not only costly but also error-prone. Sixty-two percent 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 than competitors that 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 with competitors that 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).

With automation, warehouses can store more inventory in the same footprint, which reduces real estate costs and enables greater product choice for customers.

5. Employee dissatisfaction

Warehouse jobs are physically demanding, often leading to burnout, high turnover, and low productivity. Replacing employees can cost up to 16% of their annual salary, which quickly adds up for businesses.

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, therefore reducing stress and turnover.

Companies should embrace automation now

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.

In 2023, Dr. Max decided to fully automate its supply chain. With over 2,500 pharmacies across six countries, the Prague-based company recognized early on that manual processes were not sustainable 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 their industry, where a single wrong pick can delay critical care for a patient.

Moreover, labor is hard to find these days. Warehouse jobs are physically demanding and, when given a choice, most people prefer other jobs. Labor costs have also skyrocketed 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 its warehouses, the pharmaceutical chain has installed everything from mini-loads to conveyors, A-frames, and autonomous mobile robots (AMRs).

Automation has brought many benefits to Dr. Max’s operation. After automating its “B” and “C” movers, the company could pick 80% more items from the same footprint. Faster fulfillment and reduced picking errors have also improved customer satisfaction and inventory tracking.

In addition, Dr. Max’s labor needs have gone down to practically zero, enabling the company to reallocate all manual pickers to quality control instead. For years, its manual processes were plagued with inefficiencies.

Thanks to automation, Dr. Max now has happier customers and staff, costs under control, and more scalability in their operations. Today, the retailer operate with greater agility, accuracy, and full confidence in its ability to handle future growth.

Don’t wait until you need automation to get it

The cost of inaction is real. By derailing automation, you’re doing your business a disservice. Not taking action, you risk falling behind competitors, compromising operational efficiency, and hindering your ability to meet customer demands and expectations.

Ultimately, the decision to automate is up to you and any decision-makers in your business. It should be a well-thought out and strategic move. While the upfront investment can be a deterrent, it pales in comparison to the long-term gains in efficiency, accuracy, and customer satisfaction with automation. Not to mention the reduction in operational costs.

Don’t be afraid to embrace automation and empower your business to build a better and stronger supply chain – the future of your warehouse operations may very-well depend on it.

About the author

Andrey Bakholdin is the chief growth officer at Brightpick, where he works closely with customers to improve operational processes inside their warehouses.

Brightpick was a 2024 RBR50 Application of the Year honoree for Autopicker, which combines an AMR with machine vision, machine learning, and a robotic arm to pick directly to onboard totes. It offers its systems through a robotics-as-a-service (RaaS) model.