No one can tell you the right time to begin your automation journey. There is no dollar amount threshold or piece-per-hour milestone that will trigger a blue-ribbon committee to proclaim your operation as ready. In fact, WERC (Warehousing Education & Research Council), one of the organizations that tracks these material handling metrics, typically doesn’t offer a simple benchmark that tells you to commence automating. So how does an organization decide it is time to begin? Are the challenges you’re facing problems that can be solved by automation?
Like a lot of things with material handling (and life), it depends. While there is no absolute rule, there are some things that you can look at to determine if your operation is ready for automation. When looked at systemically, these indicators can provide a hint that your operation could meaningfully benefit from automation.
Financial Indicators You’re Ready to Automate Warehouse Processes
Obviously, numbers are more concrete than any visual indicator, but they still do not offer an absolute threshold. So, before we look at them, let’s establish a couple of rules.
Rule #1: Labor as a Share of Operating Costs
First, looking at the labor cost as a percentage of total costs reveals only one thing: the percentage of total costs you spend on labor. That number is a simple measurement. But what are you measuring?
Some processes simply require more human involvement, and thus more workers. In some instances, a higher percentage means things are working as intended. However, if we zoom back far enough, some larger trends become apparent. In general, labor accounts for 45-57% of the cost of operating a warehouse. There are many datasets and that number can fluctuate based on location, industry, etc.
So, all things being equal (which they almost never are), if your labor spend is about 50% of your operational budget, you’re on the border. At 60% or above, the chances are you could improve your efficiency significantly by automating some processes.
Why is this so? A high labor spend usually means a lot of workers or a lot of overtime (or both). Those costs can be mitigated by taking the most repetitive processes (long haul routes, for instance) and automating them.
Rule #2: Turnover in Your Warehouse
A second rule might be to carefully look at turnover. Turnover is measured oddly, because you must separate the voluntary turnover from the layoffs/RIFs/terminations. Average voluntary turnover is about 25% annually across all industries, but if you’re operating a warehouse, you’re probably looking wistfully at that figure. Warehousing has much higher voluntary turnover numbers—closer to 35-50%. If you’re in the 40% or more range, chances are no one needs to sell you on automation. Below that and you’ve found yourself again in the “it depends” middle ground.
The nature of manual forklift operation makes it a highly portable skill, and the nature of the work can often be highly unsatisfying (forklift operators are in the bottom 5% of job satisfaction in the US). Automating the most repetitive processes and using the existing human operators for jobs that humans are good at (problem solving, manual tasks, creativity), which improves job satisfaction by eliminating the most brutal, repetitive jobs. Overall, people are typically happier after automation—about 60% have positive impressions of automation.
Do You Actually Need Warehouse Automation?
Obviously, there are situations where the pain points are so great they must be ameliorated. A massive turnover rate or lack of ready labor lends itself so readily to automation that no one with these issues needs to be convinced robots would be more practical.
It is in the gradient between these that the uncertainty lies. If you’ve noticed a complex mesh of many factors suggesting automation, you’re not alone. The reality of material handling is that all these factors are present to some degree in every warehouse. However, if you’re just getting started and thinking automation may be in your future, these financial indicators might signal that you are on the right path, and it’s time for your automation journey to begin.
Warehouse Automation: The Rocrich Difference
If the numbers are telling you it’s time—rising labor costs, throughput ceilings, or a payback window that finally pencils out—the next step is choosing a partner who can turn that readiness into results. Rocrich is your mobile automation team in North America. We say team because we deliver full solutions for even the most challenging materials handling implementations. Our AGV equipment spans a wide range of use cases, and our in-house engineers make sure your system performs on go-live day and well beyond, backed by local support from our service network of 560 partner locations.
What sets us apart is our unique position offering solutions from both Rocla™ and Jungheinrich™ AGVs. That means access to the trucks and software of two materials handling leaders, plus the in-house experts to match them to your specific needs. So once your financials signal that the time is right, we’ll help you pinpoint the right processes to automate and the right solution to hit your goals.