Executive Briefings

Warehouse Automation Has Had Its Ups and Downs

Automation appears on its face to be a sound strategic move for a distribution center. But turn the clock back a few years, and vast expensive warehouse automation projects were notorious for proving in practice to be inflexible gridlocks, a bottleneck in the flow of goods heading from factories to customers.

Warehouse Automation Has Had Its Ups and Downs

In the U.K., for instance, the high-profile collapse of a warehouse automation project almost 10 years ago led to board-level departures and write-offs in the tens of millions of pounds at upmarket grocery retailer J. Sainsbury.  Further back, the failure of a warehouse automation project is seen as a contributory factory in the bankruptcy of FoxMeyer Drugs, then the United States' fourth-largest pharmaceutical distributor.

But while people are far more flexible, and come with a much cheaper incremental price tag, labor-intensive warehouse operations rapidly eat into profit margins.

Throw in the fact that warehouses need to be optimally located in order to balance inventory holdings against drive times for the trucks ferrying orders out to customers, and it's clear that the design and placement of warehouses has a lot riding on it. Such factors have some big companies working to show they can gain competitive advantages through their supply chain prowess. Retailers, both online giants like Amazon.com and established brands like Wal-Mart, are facing off in a much-publicized battle to dominate the market to fulfill customer orders on a next-day or same-day basis from windowless warehouses (dubbed "dark stores") scattered across the United States.

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In the U.K., for instance, the high-profile collapse of a warehouse automation project almost 10 years ago led to board-level departures and write-offs in the tens of millions of pounds at upmarket grocery retailer J. Sainsbury.  Further back, the failure of a warehouse automation project is seen as a contributory factory in the bankruptcy of FoxMeyer Drugs, then the United States' fourth-largest pharmaceutical distributor.

But while people are far more flexible, and come with a much cheaper incremental price tag, labor-intensive warehouse operations rapidly eat into profit margins.

Throw in the fact that warehouses need to be optimally located in order to balance inventory holdings against drive times for the trucks ferrying orders out to customers, and it's clear that the design and placement of warehouses has a lot riding on it. Such factors have some big companies working to show they can gain competitive advantages through their supply chain prowess. Retailers, both online giants like Amazon.com and established brands like Wal-Mart, are facing off in a much-publicized battle to dominate the market to fulfill customer orders on a next-day or same-day basis from windowless warehouses (dubbed "dark stores") scattered across the United States.

Read Full Article

Warehouse Automation Has Had Its Ups and Downs