Warehouse Challenges that work in favour of Automation

Necessity is the mother of invention, and inaction is the mother of business downfall.

There’s a growing concern in the logistics and warehousing sectors to overcome challenges resulting from rising customer expectations, operational inefficiencies, and labour shortages. Automation claims to provide a remedy for these warehouse challenges, so much so that it can serve as an invisible competitive edge for your business. 

In our latest whitepaper on The True Cost of Not Automating Your Warehouse, we list some of the challenges that make the case for automation.

Lack of skilled Human Resources

There is still a labour shortage in the warehousing sector.

While the Jobs in warehousing have increased by 20.5% during 2017, according to the U.S. Bureau of Labor Statistics. But there aren’t as many people available to meet the growing demand for labour.

Less individuals are joining the workforce, which raises salary demands, increases turnover, and makes it harder to find skilled workers. Data from the US Bureau of Labor Statistics indicates that employee turnover is still expensive, with over 4.3 million voluntary resignations reported in December 2021, after setting a record in November. Notably, Mckinsey’s recent survey of almost 600 workers found that 44% have little to no interest in returning to traditional employment within the next six months, further taxing businesses. As a result, many businesses hire temporary workers, which can lead to mistakes and uneven performance.

Source: How to play the new talent game and win back workers,2022

What makes this worse?
 
High Turnover Costs: Hiring and training new hires is costly, and these expenses are made worse by frequent turnover.

Greater Dependency on Temporary Workers: Using temporary staffing can lead to a lack of consistency, which can cause operational disruptions and unreliability.

Limited expansion Capacity: Companies find it difficult to scale operations and lose out on possible expansion possibilities when they lack the requisite manpower.

Serving Customer Expectations amid Operational Complexities

What used to fast few years back is too late now – it is not only important to offer enough choices but also the ability to fetch them as soon as possible. According to McKinsey & Company, 74% of consumers are willing to pay more for expedited shipping, and over 40% of consumers demand same-day delivery. Likewise, according to Statista, 72% of customers are hesitant to use a brand again after placing an inaccurate order. Warehouses are under tremendous pressure to prioritize speed, accuracy, and adaptability.

Source: Navigating dynamic labor: Building strong warehousing operations,2023

According to Deloitte, e-commerce is expected to account for 25% of global retail sales by 2025, and warehouses are facing more difficult problems. These days, it’s commonplace to deal with a variety of inventory kinds, variable order volumes, and multi-channel fulfilment. These demands are difficult for manual systems to achieve, which results in expensive inefficiencies.

Source: Warehouse employment keeps falling — and more layoffs loom,2024

What makes it worse?

Order fulfilment issues: Using manual methods raises the risk of errors, miscounts, and mispicks, which can result in returns and consumer complaints.

Missed deadlines and delayed processing: During busy times, manual systems frequently find it difficult to manage large order quantities, which leads to missed deadlines and delayed deliveries.

Inaccurate stock levels and poor decision-making result from manual procedures’ frequent absence of real-time data.

Rise in Real Estate and Operating Expenses

The cost of renting a warehouse has increased significantly. After a 30% spike in 2022, rental rates in the U.S. and Canada rose by 6% in 2023. Rents increased even more sharply in the Southeast and Southwest, rising by more than 10% in places like Las Vegas and Central Florida. Warehouse operators are under more strain as a result of these hikes, which have been exacerbated by increased demand and high construction costs. Effective use of available space is more important than ever.

As fresh supply entered the market, vacancy rates in Mexico increased from 0.9% to 1.4%, while demand surged by 8% over prior highs due to nearshoring activities. Nevertheless, fierce rivalry was maintained by scarcity and high construction costs, which led to a noteworthy 19% increase in rent. In Brazil, vacancy rates fell 320 basis points to an all-time low of 11.4% due to high demand for Class AAA spaces and a dramatic decline in new buildings. Costly debt has caused development to lag considerably, which is predicted to further restrict vacancies and keep rent rises going until 2024.

Errors in manual inventory management might result in inconsistent supply levels and unhappy customers. According to studies, ineffective procedures can cost companies up to 20% of their earnings in missed sales and handling returns.

What makes it worse?

Suboptimal Space Utilization: Manual processes and inadequate inventory control result in an inefficient use of warehouse space, which raises expenses even further.

Greater Energy Costs: Manual systems are typically less energy-efficient, which raises utility costs.

Operational Inefficiencies: Antiquated manual procedures lead to resource waste, time wastage, and redundant tasks.

Risks to Safety & Compliance

The rate of injury and sickness cases among warehouse workers was 5.5 (5.5%) per 100 full-time warehouse workers, according to the Bureau of Labor Statistics’ (BLS) most recent workforce data. This is a significant decrease from the rate of 4.0 in 2020. The dangers of manual labour — such as heavy lifting, repetitive motions, and the possibility of accidents — can result in expensive workers’ compensation claims, increased insurance costs, and fines from the government.

Improving Warehouse Safety Culture and Safety Training with Loss Trend Analysis,2024

What makes it worse?

Higher Injury Rates: Because manual labour is more physically taxing, employees are more likely to sustain injuries.

Compliance Risks: Violating safety rules may result in penalties, harm to a company’s reputation, and a hostile work environment.

Poor Morale and High Absenteeism: Safety issues and injuries can have a negative impact on staff morale, which can lead to absenteeism and decreased productivity.

The Economic Price of Inefficiencies

According to research, inefficiencies in warehouses can result in a 30% waste of operating expenses. Poor space use, labour-intensive jobs, and inadequate processes are the main causes of these losses. These inefficiencies have a direct impact on profitability and make it more difficult for organizations to grow.

What makes it worse?

Work-Intensive Tasks: Manual procedures that need a lot of work, such picking and packing, raise operating expenses.

Unoptimized Workflows: Businesses are unable to realize their full potential due to inefficient workflows, which waste time and resources.

Lost or Delayed Sales Opportunities: Missed revenue opportunities and a decline in market share result from inaccurate order fulfillment or sluggish processing.

To explore this topic in depth, click here to read our whitepaper.

As warehousing automation in 2025 continues to evolve, automation has become a necessity for businesses looking to stay competitive. Addverb Technologies, with its innovative solutions, proven expertise, and commitment to customer success, is the ideal partner for your warehouse automation in 2025. By choosing Addverb, you can unlock the full potential of your warehouse, improve efficiency, and drive business growth. Don’t wait – take the first step towards a smarter, more automated warehouse today with Addverb Technologies.