Labor Versus Automation: How Will You Address Fulfillment Challenges?

Whether you’re a manufacturer, traditional retailer or a dedicated e-commerce retailer, keeping up with escalating order volumes and ever-increasing customer expectations is permanently fixed at the top of your company’s list of priorities. At the distribution center (DC) level, where service level agreements (SLAs) are often made or broken, DC operators are feeling the brunt of this unrelenting pressure. There, high order volumes and the proliferation of SKUs translate to inventory management constraints, dwindling distribution center (DC) floor spaces and the persistent push for more throughput. For many executives and operators, addressing these challenges starts with answering the age-old dilemma: add more labor or introduce automation?

This decision weighed heavily on the minds of 171 U.S.-based MHE executives who were surveyed for a recent research initiative, conducted by Honeywell Intelligrated in collaboration with Modern Materials Handling and the Peerless Research Group, entitled The Impacts of e-Commerce, Fulfillment Challenges and Improvement Priorities.

Among the top order management, fulfillment and distribution challenges cited in the report, fulfilling orders faster and at lower costs was the most pressing shared concern. And when it came to identifying the constraints standing in the way of achieving the necessary operational efficiencies to overcome these challenges, the majority of respondents cited not having sufficient workforce to handle increasing fulfillment volumes — followed by lack of floor space and inventory adaptability.

But here’s where things really start to get interesting. When asked how their organizations were responding to growth requirements, the top two answers were: 1) changing existing facilities by adding automation; and 2) changing existing facilities by adding labor. We know from other recent research reports that 80 percent of warehouses are still manually operated without any supporting automation. While it seems clear from our research that 44 percent of respondents are at least planning to add automation, it’s clear there are still two distinct schools of thought when it comes to the labor versus automation question.

On one hand, we’re seeing an increased willingness to add automation and start taking steps toward digitizing and connecting DC operations. For this camp, automated storage and retrieval systems (AS/RS) are a logical entry point, helping to improve inventory management and address SKU proliferation while avoiding capital investment for facility expansion by exploiting the unused vertical space in the warehouse (i.e., growing up, not out). 

On the other hand, adding labor still makes sense for those willing to accept the challenges that come with today’s labor pool. We know that finding, training and retaining skilled labor are never-ending battles for DC operators. But, as many businesses are locating their DCs in high-population centers to facilitate better regional fulfillment activities, they have the advantage of tapping into larger local workforce pools. However, we also know that 60 percent of supply chain jobs require skills which only 20 percent of the workforce possess, so finding folks with the necessary qualifications is not an easy proposition.

Regardless of where your business sits on the spectrum of manual versus automated processes, Honeywell Intelligrated has the experience, expertise, hardware and system software to help you fulfill more orders at lower costs. Whether it’s through our GoalPost™ labor management software, Momentum warehouse execution system or The Connected Distribution Center platform, we can help your company exceed customer SLAs and maximize the efficiencies of your fulfillment operations.

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