Warehouse automation: Building a data-driven business

summary

Today, supply chain and fulfillment leaders find themselves in the crosshair of two contradictory trends, whether they support omnichannel thriving retailers, inter-company stubborns, and top e-commerce brands. On the one hand, capital remains strict, interest rates remain high, and uncertainty is inherited. This is the reality that constraints and calls for greater scrutiny of the proposed capital project. Meanwhile, these same experts are putting pressure on processing more orders more at a faster rate, while managing increasing labor costs. To meet these demands, the core material handling process must be effectively automated, from storing products to packaging and picking items for shipping.


For others, growth is a driving factor in automation efforts. To stay competitive, attract more customers and support expansion plans, the fulfillment business needs to expand beyond what is possible with facilities that rely on manual processes. Meanwhile, in industries like grocery stores with thin margins, automation becomes essential to achieve operational efficiencies that manual systems simply cannot provide.


For these reasons, warehouse and distribution center leaders are increasingly responsible for developing and managing automation efforts, while at the same time ensuring that modernization projects are financially sound and provide the desired return on investment (ROI). This challenge is an applicable reality, whether they are moving Brownfield warehouses away from manual operations or beginning to refine cutting-edge art distribution centres, regardless of where your organization is on its automation journey. To ensure success, both require creating business cases based on data.

Basics of warehouse automation projects

In its 2025 annual report, MHI found that 45% of warehouse leaders plan to invest in automation over the next three years. Respondents to the MHI survey also identified the top three companies’ barriers to technology adoption. These include a lack of business cases, a lack of budgets, and a lack of understanding of technology.


On the surface, these barriers are not at all surprising. An attractive business case for important capital projects is essential. Companies always and naturally decide whether investments in new systems and solutions are feasible based on whether or not they make money in the time frames that the organization needs. Intangible assets and more accurate orders of customers, such as better service to stores for stock replenishment, are very important, but if the justification of new automation projects does not match the balance sheet, they are not sufficient.


Additionally, if the organization lacks sufficient budgets and funds, the organization will not invest in automation projects. And, of course, technology is not just a massive automation project if decision makers don’t understand the technology involved and its value.


For these reasons, a strong, comprehensive, data-based business case should be considered the basis for warehouse automation projects. These barriers need to be addressed directly and provide stakeholders with the critical business, financial and operational insights needed to make confident, informed decisions about automation. A data overview and core considerations to consider in the business case of a warehouse automation project reveal why.

Building a warehouse automation business case

More than peace of mind, you need a strong business case. This is an important factor in securing capital in highly competitive situations. In many cases, the ability to create informed, data-backed proposals determines which projects receive funding. Therefore, it is essential for material handling professionals to remember that automation exists fundamentally to reduce labor-related costs, but far more can be fixed and resolved. From the Brownfield site to the Greenfield facility, every element of the project must be carefully evaluated. It is a process that begins with the basics.

Define the ROI goal. What exactly is your core goal? Are you focusing on not only reducing labor costs, but also faster throughput, increased storage capacity, improved order accuracy, or reducing workplace injuries? And what is the desired time frame for achieving ROI? For example, a three-year payment period for a contracted 3PL, or a decades long-term investment for sustainable growth in retailer plans? Equally important is identifying opportunities to improve the current process. Automation alone allows organizations to do the same thing faster, but also allows new and different approaches that are better and more effective. Finding these opportunities should be part of any effort to define the goals of an ROI. Understand the costs associated with current systems and processes, as well as the costs of proposed automation. It is essential to place dollar value on intangible and often overlooked costs. For example, looking at hourly wages and salaries of warehouse employees, does welfare benefits also explain? When considering maintenance, do you need to spend parts and labor to get your old machines up and running? For automated systems, are the additional costs of hiring skilled workers in robotics and programming addressed? Where can I find all the Pain Points Points that Automation can solve? Also, which dollar value can I assign? A strong business case requires a comprehensive consideration of current and potential spending. This information is important to inform you if there is sufficient budget if it is consistent with the ROI goals. The core of an effective business case is accurate data. For warehouse and distribution centers, this includes gathering accurate information about SKUs, order profiles, store layouts, and storage and throughput needs needed to achieve growth forecasts. This data is crucial in designing effective automated systems and accurately predicting ROI within a specific time frame. However, it is essential to explain the time required to compile this information, especially in older warehouses where important data can be scattered across multiple systems. The right diligence here lays the foundation for informed decision-making and robust ROI strategy. Involve the right people within your organization. Warehouse automation is not something that most people know well, including executive leaders, executives and other decision makers for capital projects. This is especially true for businesses just beginning their automation journey. Technology is a big unknown, including important learning curves. Early involvement of these individuals during the creation of business cases is important to understand why it is important to gain a competent understanding of automation. Equally important is that you have practical knowledge of current processes, but you can also be enhanced to oversee and maintain automated systems. By including everyone in the creation of the business case, participants become engaged stakeholders. Consider creating a free technology business case. Today’s technology market is more diverse and broad than ever before. For example, rapidly growing retailers may decide on an expanded design, construction and implementation timeline (providing maximum throughput and storage capacity) for automated storage and search systems (AS/RS), but it is not suitable for your current needs. Instead, they may choose an automated case-processing mobile robot (ACR) system. This can be deployed within a few months and integrated with existing warehouse racks. However, business cases for both technologies must be developed to assess potential opportunity costs, such as slow growth and limited scalability. In many cases, combined strategies can be a viable path to advance. For example, retailers quickly deploy ACR systems, while also planning new distribution centers featuring AS/RS, and sequencing data from the ACR systems to guide the design.

Perhaps most importantly, when creating data-based business cases for your warehouse automation journey, it is important for supply chain and fulfillment leaders to remember that is exactly that. Like all journeys, the final outcome reflects not only the planning, care and visionary, but also the stakeholders. Technology insight is important, but the difference lies in the value, experience and lifespan of the partner.