For many companies, trying to recruit and retain hourly workers is one of their biggest fulfillment challenges. Automation and technology have evolved dramatically in the past five years. In many solutions, the cost of technology has decreased below that of the average worker when you consider the fully loaded labor costs for benefits, taxes, training and recruitment. This is discussed later in this article.
Utilizing various technologies allows companies to retain, develop and train their core staff that will continue to support the long-term growth. While these technologies do decrease the dependency on human labor, there still must be a strong, robust core of workers to manage the processes. As your company considers evaluating and selecting the right technology for your business, here are four important considerations.
1. Available and Reliable Labor
Most markets throughout the United States are suffering from a shortage of reliable and quality hourly labor. Competition from other companies, which use hourly workers, is making it difficult to attract sufficient employees to meet today’s as well as future labor needs.
As a result, this is quickly driving up the fulfillment cost per order as companies compete for a dwindling labor pool. At the end of summer 2021, there were over 10 million available jobs in the country in a wide variety of retail, service, and construction sectors. With the unemployment hovering near 5%, there is no sign that the available labor in many markets is going to improve any time soon.
The data suggests that wage rates will be pushed higher in competition with other businesses. In addition, wages may have to rise significantly to bring people off the sidelines to meet local market needs and grow businesses in the future. With the new Federal infrastructure bill in the works and the likelihood it will pass as legislation, this could make fulfillment recruitment and staffing that much harder.
2. Human and Robotic Collaboration
Currently, most automation and robotics are deployed in the picking of orders, with the predominant technologies being goods to person and collaborative robotics. The major benefit is the reduction in travel time and distances walked by pickers throughout the day. Studies show that pickers in medium to large warehouses often walk as much as five to eight miles per day. About 75% of their time is lost in travel time.
Robots do the traveling between zones in the warehouse. Employees remain stationary or within a short distance within a pick zone. With goods to person technologies, the worker stays in a single location with either conveyors or robotics transporting the picked items to the next zone or to packing.
In the most productive environments, picking rates can easily double those of manual operations, to as high as 400 picks per hour per picker.
3. Cost Justification
In many fulfillment environments, labor is more than 50% of the cost per order excluding inbound and outbound shipping. With a national average for warehouse labor averaging almost $13 per hour (source: Indeed.com), the fully-loaded hourly wage projects to $23 per hour when recruiting, training, benefits, voided overtime and other employee costs are factored in. If your company is growing, looking at the future planned order levels, anticipated labor costs and recruitment challenges makes robotics and automation more attractive and cost justifiable.
It’s not uncommon for collaborative robots to be implemented at a ratio of 2 to 3 robots per picker to achieve maximum effectiveness. From a cost perspective, different automation manufacturers offer solutions where the 2 to 3 robots come at a lower operating cost than that of a full-time employee with benefits, making this very attractive financially.
With goods-to-person technologies, these can provide some of the highest picking rates from a fulfillment and technology perspective. These also have a slightly higher cost with an ROI that can be from 9 to 12 months, to possibly as high as 24 to 36 months, depending on the selected technology. However, once the ROI is achieved, these investments continue to deliver significant annualized savings without wage rate or benefit increases employees expect.
These technologies also provide companies with reliable, increased operating hours with fewer employees as companies scale to peak or add shifts at a much lower cost and without the recruiting headaches.
With robotics, the most common acquisition approach is Robots as a Service (RaaS). In general, this means there is an annual renewal fee based on the number of bots deployed. With goods-to-person technologies, these are typically equipment purchases with annual maintenance and support costs.
4. Complex Fulfillment Environments
Given today’s operating environments, small to moderate-sized warehouses are able to cost-justify robots and automation at the present hourly wage cost structure eliminating heavily manual processes.
To achieve growth, companies often add large SKU assortments which often adds distance to the pick path with an expanded warehouse footprint. Certain merchandise types such as apparel or shoes greatly add many color and size SKUs that look similar. Robots and automation reduce errors in manual picking from mis-picks of wrong colors and sizes for similar products.
Businesses such as third-party logistics (3PL) which store and fulfill large customer assortments for multiple businesses have been the earlier adopters. These assortments often have a wide variety of product SKUs.
The new picking technologies in complex fulfillment environments allow companies to onboard new workers and to make them highly productive in a shorter time compared to manual picking environments.
Consumer demand is driving order fulfillment companies to plan and achieve much higher order fulfillment levels. These technologies become the best tactic for supporting the process long term while controlling and reducing costs. These technologies become more cost-effective especially with the high cost of labor and unavailability of labor. One automation approach doesn’t fit every company. It is imperative to compare various technologies and options against your needs and operations to determine the right course of action. When applied appropriately, robotics and automation will reduce costs, improve productivity and customer service with greater order accuracy.