ROI Factors in a Material Handling Automation Project

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Material Handling Automation ROI Factors

SMC, an industrial parts distributor, realized several benefits from implementing a material handling automation system, including increased throughput and productivity as well as improved inventory accuracy.

Introducing material handling automation into a business can be a large and intimidating project. A good deal of time and money are generally invested up front in order make the project successful. However, there are several benefits automation can bring about that help justify these expenses. One popular justification for material handling automation is the reduction in labor needed to move, store, and sort product. Still, there are many ways to see a return on investment outside the more obvious labor reduction.

Quality enhancements

Shipment quality can be a large company expense that is often overlooked when determining system payback. Automation that employs scanning and sorting of products for shipping, or software checks in the packing/pallet build process, can increase overall order accuracy. The fewer incorrect orders sent out the door, the less money spent on paying for item returns and all of the time that goes into correcting these errors. Because of this, increasing order quality a few percentage points goes a long way in reducing costs when looking at a few years’ worth of orders.

Space utilization

As businesses grow, it is inevitable that the building they are in, originally thought to be plenty big enough, seems to shrink until there is simply no room left on the floor to house product or perform manual handling operations. Instead of spending a great deal on a building expansion or a new building all together, automation solutions such as pick modules, ASRS or other goods-to-person technology can be utilized to make better use of the available building space. Many of these technologies make good use of existing vertical space to allow a higher percentage of the building volume to be used. This increases the overall value per square foot of the building.

Increased output volume / product offerings

Simply put, most automation solutions help to increase the product flow rate through a building. Equipment like conveyor and robotics allow products and orders to flow though at higher speeds, and decrease the amount of touches. This means that the maximum amount of orders that can be fulfilled in a day increases. If demand for the product is currently not the limiting factor for the business, then more orders can be processed using automation. This of course leads to an increase in revenue. The same can be said for diversity of products offered. If customers are demanding new items, automation can help to not only process this new demand in time, but also provide the space necessary to store the goods.

Inflation of labor over time

When looking at a return on investment over a span of 2-3 years, one factor than can be overlooked is the increase of labor costs over time. Really, for every labor position saved, businesses are not only removing the cost of one body, but for every sequential year an added percent of that original cost is saved, as it does not need to be paid out as the price of labor inflates.

Reduction of injuries

Often material handling automation solutions include some kind of ergonomic enhancements that make moving product throughout the building easier for operators. Conveyor, robotics, lift tables, good-to-person technology, etc. all can play a role in making day-to-day operations less physically stressful for laborers in the warehouse. This often leads to a safer environment, with less injuries.

All of these factors should be considered when looking at cost justification for an automation project. Big changes to a warehouse will inevitably have an effect on many of these elements. Looking at them in advance can help to maximize the positive result seen when employing a new automation system.

Danny graduated from the University of Cincinnati with a degree in Mechanical Engineering in 2013. Shortly after, he joined the Bastian Solutions team in Cincinnati. Since signing on, Danny has worked on several projects from large scale distribution centers, to manufacturing processes enhancements. He has provided customers with automation and material handling equipment that improves facility workflow, efficiency, and ergonomics.

1 comment

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