The business case for warehouse automation has never been stronger, and the return on investment has never been shorter. Nevertheless, organizations both large and small face a significant hurdle when advancing automation initiatives.

That hurdle is, of course, securing the required capital. Current debt, rising interest rates, economic uncertainty and competition from other strategic initiatives within the organization are just some of the factors that can limit access to funding and delay crucial automation projects. 

The good news is that new financial options are available today for moving ahead with warehouse automation. What’s changed is the maturity of today’s technology. Previous systems would sometimes become obsolete before realizing any return on investment. But the promise of performance and the ROI of new-generation systems are reducing the risk for financial services companies, which are in turn offering new fiscal solutions. That has created a resale market that allows for a more accurate projection of value at the end of a lease. 

There are a couple of significant differences between what was offered in the past and what’s available today. The first is that these new options recognize that successful automation is about more than hardware. In the past, companies interested in leasing automation were stuck having to pay for the soft costs required to implement the system outside of the lease. The new solutions are structured to cover all elements of a project, including software, configuration, installation and auxiliary equipment such as conveyors.

The second difference is that the end-of-lease terms are now well-defined up front, and highly favorable to the lessee. Both capital and operating leases are available with terms that generally extend from 36-84 months. With a capital lease, the lessee pays either nothing or 15% down at the beginning of the lease. There is then a one-dollar buyout at the end of the lease, at which point the lessee owns the system. With an operating lease, the lessee has the option of buying the equipment at a pre-determined price at the end of the lease, extending the lease, or returning the equipment. 

These leases are available for a wide range of warehouse automation systems, including shuttles, robotic palletizing systems, cube-based storage systems, item picking robots and cranes.

What’s perhaps most exciting about these new financial options is that they not only help warehouse operators address their labor challenges, but also create labor savings that can put the lessee in a cash-neutral or cash-positive position over the course of the lease. 

In addition to providing new financial options for companies planning to automate, the leases create opportunity for organizations that might have thought automation was beyond their reach. Now, small and medium-size businesses can add the automation needed to keep pace with larger competitors, while third-party logistics providers can align lease terms with their customer contracts to protect themselves from financial exposure at contract end. 

These leases are also ideal for companies seeking to reserve capital for other investments, or as a hedge against future economic conditions; retailers seeking to establish or expand their e-commerce presence; and operators concerned about getting locked into automation systems that won’t meet their future needs.

Bob Hoffman is senior director of consulting, e-commerce and retail with Swisslog.