The future of warehouse automation: Key trends and winning strategies

This article describes three trends that are shaping the future of warehouse automation, how these trends have made automation accessible to medium-sized businesses, and tactical advice on how to get started.

The business case for warehouse automation has never been stronger: technology costs are decreasing, the e-commerce boom is, in the long run and despite current market conditions, showing no signs of slowing down, and service providers are more able than ever to meet the industry’s growing demand. Add to that ever-increasing consumer expectations and the future of warehouse automation is looking particularly bright in 2023 and beyond.

The opportunities are vast, especially for medium-sized businesses as previous challenges of cost, scalability, and modularity continue to shrink in this new era of warehouse automation. But where do you start and how do you know if automation is the right strategy for your business? It’s a complex and often difficult task, one that our experts unpack as they discuss three key trends and considerations that are shaping the future of warehouse automation, that every logistics manager should take into account.

Trend #1: Rapidly decreasing technology costs

As automation technology continues to mature, coupled with increasingly favorable economies of scale, costs have rapidly decreased. The cost for industrial robots, for example, are expected to have decreased by 60% in 2025 compared to 2017. In addition, the dramatic evolution of available technologies, especially over the past 10 years, continues to unlock wider opportunities as solutions become increasingly more modular and scalable.  

Why this trend is important:

• Warehouse automation is now far more viable and accessible not only for large players, but medium-sized companies as well who previously had to consider affordability above all else.
• Previous scalability concerns have been overcome with the development of new modular automation technologies.
• It is now more possible than ever to integrate new technologies into existing and/or more traditional automation setups, allowing for gradual deployment and implementation.

Trend #2: Land and labor costs continue to increase

While the cost of automation has plummeted, the price and competition for land and labor has skyrocketed in the Nordic region, representing a major shift in the cost-benefit ratio. Both trends are expected to continue in 2023 and beyond as the industry’s demand for high-quality, well-located logistics facilities, as well as qualified and experienced workers to manage them, continues to greatly outstrip the real estate and labor market’s ability to supply them.

Why this trend is important

• A key benefit of warehouse automation is its ability to optimize space utilization where the full height of the building can now be leveraged and the need for aisles can be removed to enable highly efficient operations in a smaller area.
• Pressed margins and fierce competition make reducing operational costs key to survival in the new market.
• A well-thought-out strategy is absolutely crucial to pinpoint the most profitable and successful balance of warehouse space, technology, and humans.

Trend #3: The e-commerce boom and evolving customer expectations

Despite recent market conditions, the seemingly unstoppable rise of e-commerce has forever changed the retail space. In this new paradigm, retailers need to deliver increasingly complicated omnichannel experiences to customers who are engaging across several different touchpoints at any given time. Customer expectations have evolved correspondingly and rapid fulfilment with next day deliveries directly to the doorstep is at the very top of almost every customer expectation list.

Why this trend is important:

• The e-commerce boom is showing no sign of slowing down and is anticipated to represent 24% of global retail sales by 2026.
• A responsive supply chain that enables faster order fulfilment and reduced lead times is becoming increasingly important to remaining relevant and competitive.
• Warehouse automation poses immense potential as a supporting strategy to rise to the e-commerce and consumer expectation challenge.

From trends to implementation strategies

Within these trends lies immense opportunity and it is evident that the time to automate is now. Identifying the right automation strategy for the right context is, however, not a simple task and making informed decisions about the benefits, risks, and costs is crucial.  

While the right automation solutions can improve operations, have a positive financial impact and enable you to reach your business objectives, opting for the wrong solution can have the opposite effect. If investments are made in a solution that is unsuitable for your products, operations, and customers' needs, you risk being left with a substantial investment that delivers suboptimal performance and restricts your ability to make strategic decisions about the future of your business.

Our experts recommend the following five steps for logistical managers who are considering or planning an investment in warehouse automation.

1. Define your main reasons for automation. Is it to reduce operating costs, increase speed of fulfilment, or create capacity for future growth? These insights will form the basis of your strategy and a clearer picture of what you can and, perhaps more importantly, should, automate will start to emerge.
    
2. Assess your current warehouse operations. This includes a deep analysis that maps everything from performance and product flows to product constraints, volumes, and future outlooks. 
    
3. Evaluate different solutions and vendor alternatives. The warehouse automation landscape looks very different than it did 10 years ago, and logistical managers now have access to more vendors and technologies than ever before.  Evaluating multiple solutions and vendors is key to identifying the most suitable option that will meet both your needs and budget.
    
4. Calculate the business case and return on investment. Key to any successful warehouse automation strategy is achieving the right balance between the required investment and anticipated financial (and operational) benefits. Be clear about your business case and how the return on investment will be calculated.
    
5. Plan for deployment. Be as detailed as possible by outlining timelines, necessary steps, and required resources for every phase of deployment. Contingency plans and risk management strategies are also an important part of this stage.

Start your automation journey with BearingPoint

With more than 25 years of experience in helping various industries, ranging from pharmaceutical and fashion to manufacturing and groceries, to map out optimized automation strategies, BearingPoint intrinsically understands your full value chain. By looking holistically at the entire picture, we make sure that you reap the full benefits of automation.