Getting an ROI on Your Material Handling Automation Investment

Controller of industrial robotic arm for material handling applications in production line.

Material handling has moved beyond the world of conveyors and pallets. New advanced technologies, equipment, and software are now presenting exciting opportunities for warehouses and fulfillment centers. With the rise of the Internet of Things (IoT), automation, and systems development, all facets of material handling can now be integrated into a highly efficient network, driven by data.

Though this is the way of the future, automation can still present pitfalls to early adopters unsure of the intricacies involved. At last year’s Institute for Supply Management (ISM) conference, Matthew Kuper and Aaron Jones spoke of these promising new technologies and how to best navigate them

Jones described several new technologies either in development or already at work — such as mobile robots, which are increasingly popular in warehouses, allowing for greater efficiency and enhanced safety. Augmented reality, virtual picking, and virtual reality allow users to effortlessly complete tasks, provide training, and perform maintenance. Tags placed on objects for tracking can chart the entire lifecycle of a product, providing data that can, in turn, be used to enhance system efficiency.

Kuper also described how simple automation can yield a significant return on investment (ROI). For example, just by incorporating voice-directed picking into a warehouse management system, users get twice the productivity of radio frequency (RF) picking. And more advanced technologies, like light-directed picking and automated palletizing, yield even better returns.

However, Kuper explained that such systems are only as good as the forethought that went into them. “Many companies make automation decisions uninformed,” he said. Businesses often invest in a robust, advanced system with little consideration given to specific system needs and capabilities. Then, after the fact, vendors will try to charge additional fees for support and maintenance that should have been addressed in the initial agreement.

Here are some tips to avoid these pitfalls:

  • Hire or outsource an industrial engineer. “You need an industrial engineer with lots of data analysis capabilities to be able to spin your data … to figure out what it’s telling you. Every segment of your business, every cycle of a year, you need to study your data.”
  • Encourage vendors and partners to quote multiple options. Start with the data assembled by those engineers, present it to them, and let them provide you with options in terms of good/better/best.
  • Make sure you get a minimum of a one-year warranty.
  • Get a cost-plus arrangement. Your high end is capped, but you benefit if the project is completed at a higher level than the one proposed. This also allows partnerships to grow. (But make sure travel is set at a fixed price.)
  • Set defined terms for system acceptance, identifying how many days of testing will be done and for how many hours.
  • Check credentials (e.g., insurance, safety standards, state licenses).
  • Spare parts should be on-site, as well as maintenance (or, at the least, have local maintenance on hand that’s responsive 24 hours a day).
  • Ensure that there is 24-hour system support available for a minimum of one year.
  • Make sure you own the PLC code.
  • Have vendors plan for operational support even after acceptance, for at least a month. This will allow for a smoother transition to the new system.

Equipped with this knowledge, procurers can ensure that they are getting the best deal, at a fair price. Automation is the way of the future, but professionals should be sure not to make the mistake of automating their decision-making. 

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