While our continuing efforts to find and deploy the “next best technology” to improve our work processes is deeply embedded in our managerial “DNA,” what appears to be the “best” can come at a steep cost, which may not be fully recoverable or meet expectations about its value for productivity gains.
There’s been a “tool” that financial managers have used for years to define the potential value of an acquisition of capital equipment, real estate, and other tangible operational benefits. It is the ROI (return on investment) assessment.
I have adapted the tool for use with technology acquisition assessments for warehouse and distribution center productivity improvements. This adaptation includes the areas of performance and costs that are unique to this environment.
Beginning with this article, I will discuss the elements of this ROI, with particular attention to the human worker cost “tradeoffs” with automation replacements.
But first, a question. Do you know how the food on your table at home made its way to you from where it was grown or raised? Sure, you could say “from the supermarket,” which is correct. But what about the earlier steps in the food journey? When I ask this question of people, very few can give me all the steps or “waypoints” in the food journey. This series of articles focuses on the warehouse or distribution centers that supply the supermarkets, schools, and restaurants throughout the country.
An overview of the areas of performance for which automation can be considered include all processes that are typically performed in a warehouse or distribution center. The flow of products through these venues starts with receiving, then put away (into storage locations), order fulfillment (otherwise known as “selection” or “picking”), replenishment of the picking locations from reserve (“overflow”) locations, packing, and loading.
All these functions have traditionally been done by humans, with an emphasis on applying technologies like voice and RF (radio frequency) scanning of barcodes in devices that humans use to make them more efficient and accurate. This trend is called “human augmentation” because it still centers on making human workers more productive. Only since COVID has there been an effort on the part of large supermarket chains to replace humans with robotics, increasingly augmented with AI (artificial intelligence) for tasks like unloading a truck (receiving) and relieving humans working in these processes of time-consuming activities like moving pallets of products from one location to another. This latter activity is called “travel time” and it has always been considered detrimental to a human’s task completion speed when calculating productivity benchmarks. In these specific use cases, robots are more efficient than humans, while in other processes such as order selection, augmented humans still perform more efficiently than robots. (See my article: Task Completion Speed)
Next Up: How to calculate the full cost of a human worker. Does the proposed technology provide enough of a productivity gain, viewed as the result of the elimination of worker headcount, to justify acquiring the technology? This is the main reason for the ROI assessment for many companies.
About the Author
Tim Lindner develops multimodal technology solutions (voice / augmented reality / RF scanning) that focus on meeting or exceeding logistics and supply chain customers’ productivity improvement objectives. He can be reached at linkedin.com/in/timlindner.
