5 Steps to Building a Business Case for Automation

Step 1:  Defining the value of automation

While some will look at an automation project in pure numbers and its effects on operational and capital expenses, defining the true value beyond financial graphs and charts is critical for communicating its overall value.

Value can be viewed as a lever of sorts, increasing the positive factors of implementing automation and, at the same time, lowering negative impacts on the business.

Increased positive factors after automation include:

• Revenue
• Growth
• Quality
• Service
• Flexibility

Decreased negative factors after automation include:

• Risk
• Order fulfillment time
• Operational costs
• Working capital
• Taxes
• Labor costs

Step 2:  Define automation opportunities and alternative scenarios

Examining multiple automation alternatives and weighing the pros and cons is important, as decision-makers will want to know their options regarding value, expense and ROI. Answering some important questions early on can help define the goals and needs for the operation.

• Can the operation stay in the same facility, or is there a need for a new building?
• Does the operation need to add to its distribution network? Where do these new nodes need to be located?
• If staying in the same facility, how do you best utilize capacity and automate inventory and throughput in a small footprint?
• Can the local labor pool support current operations, or is automation necessary?
• Can robotics make a significant impact on cost savings and productivity?

The other critical component of an automation business case is a detailed report on the cost of doing nothing. For an executive, maintaining current operations while optimizing what is available is the least risky and cheaper option. The cost of doing nothing can be analyzed in terms of lost opportunities to service and gain new customers, as well as recruiting and retaining the labor required to fill regular shifts and cover overtime.

Step 4:  Identify business risks and mitigation plans

Just as important as the benefits and advantages automation can deliver to an operation, there will be obstacles and risks that can derail and delay a project. While exploring the potential of an operation, it is key to recognize the potential pitfalls and how to mitigate them. Below are some of the most common risks and mitigations with warehouse automation:

High investment levels
Use cost-benefit analysis to ensure the investment will return appropriate cost savings, productivity gains and operational savings. A phased approach can also spread costs over a longer period of time.

IT and internal alignment
Most new automation projects will include a software component that can deliver dramatic results but also raise a system’s complexity. Connecting a warehouse management system (WMS) or warehouse execution system (WES) to a company’s enterprise resource planning (ERP) software can stress an IT department. Invest the time to work collaboratively with IT pre-implementation to ensure collaboration and support for the implementation.

Employee resistance to automation
Fear of job loss, changes in job responsibilities and the anxiety of change itself can all affect employees’ acceptance and ability to work in a new automated environment. Create transparent communications and training strategies that illustrate the benefits of automating, how it will affect them on a day-to-day basis and the overall operational goals.

Scalability
Disruptions and changes in customer demand and expectations are now a normal part of the supply chain. Selecting automation that cannot scale with business growth and does not address SKU proliferation will lead to disappointing results and ROI—keeping growth and expansion in mind when planning and creating an automation business case will give operation flexibility for future growth.

FORTNA Can Help

Creating and presenting a business case for automation can be daunting as you work through its many components, personalities and agendas. Partnering with a supply chain expert like FORTNA, who has guided many organizations through the automation business case process, can help you collect and analyze your operational data and find the best-fit automation and processes for today and in the future. We can also assist in the presentation to decision-makers, helping ensure that the benefits and solutions are data-backed and the expected results and ROI are met.