CSCMP's Supply Chain Quarterly
December 19, 2014
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Forward Thinking

Warehouse automation projects: beyond labor costs

Professors advise considering broader supply chain implications of distribution center automation.

When it comes to evaluating distribution center and warehouse automation, companies should go beyond labor-cost calculations and take into account the potential benefits of the expanded supply chain capabilities automation can offer. That's the view of Dr. Raj Veeramani and Dr. Ananth Krishnamurthy, who recently conducted a study on the subject. The two University of Wisconsin professors made those remarks at the joint Food Marketing Institute (FMI) and Grocery Manufacturers Association (GMA) Supply Chain Conference held in Orlando, Florida, in January.

Although justification of warehouse automation projects generally revolves around labor-cost reductions, Veeramani said, companies should take a comprehensive view of automation's impact on overall supply chain operations to accurately weigh costs against benefits. For example, automation sometimes can enable higher warehouse throughput while simultaneously adding the ability to handle more product variety. "DC automation will impact your upstream and downstream supply chain," said Veeramani. "DC automation should be viewed in the context of a supply chain strategy."

The professors noted that DC automation is not a new concept—it's been around since the 1970s. They believe that recent technology developments, coupled with demographic trends such as an aging workforce, make it advisable for more companies to investigate automation's potential. In examining the tradeoffs, they advised, it's wise to weigh the costs and benefits of automation against the likely results of doing nothing.

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