Executive Briefings

Transportation & Distribution's Business Case for Automation Has Changed

Analyst Insight: With the rise of e-commerce, higher customer expectations and skyrocketing transportation costs, the business case for automation has changed. It's not just about accuracy and labor savings anymore. It's also about the incremental revenue and competitive advantage that comes from improving customer service and better managing inventory. – Frank Jewell, Food & Beverage Industry Leader, Fortna Inc.

Transportation & Distribution's Business Case for Automation Has Changed

The business case for automation has changed and it’s time to take another look. There have been huge advances in technology and the costs are coming down. But the real change is in how automation can be justified. Automation can still improve accuracy, decrease space and reduce labor costs.  But now automation can be a driver of incremental revenue and competitive advantage. 

Disruptive changes are taking place. First, SPEED is today’s game changer.  Customers want their orders delivered quicker (next-day or same-day) both at the consumer and business level.  Or they’ll get it from someone else. Second, channels are merging.  Most companies now support an e-commerce channel in addition to their retail and/or wholesale channels, and customers want a seamless experience across all of them. Finally, fulfillment is becoming more complex. Piece-picking is increasing across all channels as order sizes get smaller and require more customization.

At the same time, automation has seen disruptive change.

• There have been tremendous improvements in technology, especially in robotics, goods-to-person, sortation, vision technology, in-line value-added systems and the data intelligence to better optimize flow and labor.

• There are more flexible automation solutions available than ever before; there are more options and better solutions for unique problems.  Companies can automate specific areas or processes of the business in ways they couldn’t in the past.

• Automation solutions are less expensive overall. Automation has reached a tipping point where costs are coming down, driven by greater adoption rates.

These changes in business, coupled with changes in automation, create real opportunity. For example, faster processing allows you to push order cut-off times later, which can lead to revenue gains from larger, more profitable orders.

In a “sell one, replenish one” world, you can see ripple effects from implementing automation. The ability to fulfill every product every day means stores can carry less safety stock because they can now get next-day replenishment on the items they sell each day.  With less inventory in stores, fewer markdowns will be required, because stores are not left with excess inventory that might have to be discounted. And because there’s no excess inventory, back rooms can be smaller and that space can be dedicated to merchandising, which can boost sales. And because automation is highly accurate that leads to less shrink and better inventory accuracy – both in stores and in the DC.

It’s time to take another look at automation.  The business case based on cost savings is still real.  But now automation is also helping to speed up fulfillment, improve inventory accuracy, and improve customer service. And that is decreasing overall inventory, increasing customer satisfaction, decreasing markdowns, reducing expedited shipping costs and ultimately, increasing revenue and margins.

                                                         The Outlook

Automation will drive improvements in speed that will truly change the game in terms of competitive advantage. Companies that take a fresh look at the business case for automation will find the investment more justifiable than ever before. And the ripple effects of adopting automation will be felt throughout the business.

The business case for automation has changed and it’s time to take another look. There have been huge advances in technology and the costs are coming down. But the real change is in how automation can be justified. Automation can still improve accuracy, decrease space and reduce labor costs.  But now automation can be a driver of incremental revenue and competitive advantage. 

Disruptive changes are taking place. First, SPEED is today’s game changer.  Customers want their orders delivered quicker (next-day or same-day) both at the consumer and business level.  Or they’ll get it from someone else. Second, channels are merging.  Most companies now support an e-commerce channel in addition to their retail and/or wholesale channels, and customers want a seamless experience across all of them. Finally, fulfillment is becoming more complex. Piece-picking is increasing across all channels as order sizes get smaller and require more customization.

At the same time, automation has seen disruptive change.

• There have been tremendous improvements in technology, especially in robotics, goods-to-person, sortation, vision technology, in-line value-added systems and the data intelligence to better optimize flow and labor.

• There are more flexible automation solutions available than ever before; there are more options and better solutions for unique problems.  Companies can automate specific areas or processes of the business in ways they couldn’t in the past.

• Automation solutions are less expensive overall. Automation has reached a tipping point where costs are coming down, driven by greater adoption rates.

These changes in business, coupled with changes in automation, create real opportunity. For example, faster processing allows you to push order cut-off times later, which can lead to revenue gains from larger, more profitable orders.

In a “sell one, replenish one” world, you can see ripple effects from implementing automation. The ability to fulfill every product every day means stores can carry less safety stock because they can now get next-day replenishment on the items they sell each day.  With less inventory in stores, fewer markdowns will be required, because stores are not left with excess inventory that might have to be discounted. And because there’s no excess inventory, back rooms can be smaller and that space can be dedicated to merchandising, which can boost sales. And because automation is highly accurate that leads to less shrink and better inventory accuracy – both in stores and in the DC.

It’s time to take another look at automation.  The business case based on cost savings is still real.  But now automation is also helping to speed up fulfillment, improve inventory accuracy, and improve customer service. And that is decreasing overall inventory, increasing customer satisfaction, decreasing markdowns, reducing expedited shipping costs and ultimately, increasing revenue and margins.

                                                         The Outlook

Automation will drive improvements in speed that will truly change the game in terms of competitive advantage. Companies that take a fresh look at the business case for automation will find the investment more justifiable than ever before. And the ripple effects of adopting automation will be felt throughout the business.

Transportation & Distribution's Business Case for Automation Has Changed