5 Ways to Reduce Warehouse Costs with Automated Storage

Reducing warehouse costs is a growing priority as costs continue to rise with the ever-changing economic environment and customer expectations. I don’t just mean the cost of your physical space. The costs associated with operating a warehouse encompass a lot more than paying “rent”. Other contributing factors include labor and with that, the potential cost of injury and workers compensation, picking accuracy and productivity as well as the cost of processing returns due to picking errors and more.

How will your facility, and your bottom line, be impacted? To start, ask yourself:
  • How much labor does your picking operation require?
  • What is the value of additional floor space?
  • Are picking operations fast enough to meet customer demand?
  • What is the cost of an absent, or injured, worker?
  • How much does a picking mistake cost?

Investing in automated storage and retrieval systems—such as Vertical Buffer Modules, Vertical Lift Modules, Vertical Carousel Modules or Horizontal Carousel Modules – optimizes manual picking processes, which leads to reduced warehouse costs and increased profits. That’s because, by implementing automation, multiple areas of a manufacturing or distribution facility will benefit from savings in inventory accessibility, floor space, time, improved ergonomics and better accuracy.


1. Reduce Warehouse Labor Costs

How much labor does your picking operation require?


Picking involves much more than grabbing an item off a static storage rack or shelf. In the typical manual distribution center, picking means an operator receives a paper list of instructions about what to pick and where, travels to the correct storage location, refers to the paper pick list to determine the number of items required from that pick face, picks the items, confirms the pick by marking the paper, then delivers the items for packing.



Because distribution centers are packed with pallets, cases and pieces, order fulfillment is frequently acknowledged as the most labor-intensive and costly activity. That’s because travel in a conventional, manual fulfillment operation can account for as much as 60-65% of a picker’s time.


Implementing one or more automated storage unit lets your order fulfillment staff work smarter, not harder. That’s because these solutions present stored items directly to an operator. The “goods to person” method eliminates time spent walking from one pick location to another within a warehouse.


These automated solutions are equipped with indicator lights that illuminate the item’s location and pick quantity required. This cuts the time spent searching for a specific stock keeping unit (SKU) upon arrival at the pick face. The result is more time to spend picking.


For More: 5 Tips to Improve Order Picking Accuracy


Further, because the automated solution interfaces with both inventory management and order management software, the picks are sequenced so the machine’s movement is optimized to match the required picks. This means all items can be picked in one rotation, or cycle, of the machine’s storage bins or trays, further maximizing pick time.


All three of these functions can optimize an existing labor force, increasing productivity from 200% to 600%. Because an automated solution enables just one worker to handle the picking assignments of multiple operators, as many as two-thirds of a facility’s workforce can be reassigned to other, non-picking tasks—without a loss of throughput. Alternately, implementing these automated storage solutions can compensate for scarce or unreliable labor.


Facilities implementing an automated solution to increase picking capacities most often choose to maintain current labor levels. Increased picking capabilities enable the consolidation of multiple picking operations, meet increasing order demands and accommodate the addition of more SKUs to inventory.



2. Reduce Warehouse Floor Space Costs

What is the value of additional floor space?


Automated storage equipment opens your facility’s floor space by utilizing your building’s height to store inventory overhead. This eliminates both the footprint required by static shelving and pallet rack, as well as the aisles required to access them. Further, automated systems utilize tightly configured totes, bins, dividers, drawers and specialty holders. These components separate and organize the maximum number of stored items possible in each of the system’s trays or bins.


To further maximize every square inch of storage space within the automated system, inventory management software is integrated. Programmed to dynamically manage the cube space within the automated storage system, the software keeps shelves holding the inventory as tightly compressed as possible. Because of this capability, automated storage systems eliminate the empty reach-in space required by shelving. As a result, the equivalent amount of inventory held in 120 bays of static shelving can be condensed as shown below.


System Wasted Floor Space
(based on 20' ceiling)
Wasted Unit Density
Shelving 70% 50 - 70%
Drawers 80% 60%
Flow Rack 70% 60%
Pallet Rack 70% 60%
Horizontal Carousel Module 30% 25%
Vertical Carousel Module 10% 20%
Vertical Lift Module 10% 10%
Vertical Buffer Module 20% 30%


The value of the freed-up floor space depends on its new use. Open space can be used to store larger volumes of the same SKUs or accommodate expanded inventory of new SKUs. Alternatively, the opened-up areas can be repurposed for other, revenue generating processes. Additional light manufacturing for customization, kitting of related items, or enhanced quality control processes are value-added activities that can positively impact the bottom line.

3. Reduce Picking Costs

Are picking operations fast enough to meet customer demand?


Operators picking manually are often restricted to filling one order at a time. Limited by paper pick lists and a lack of picking optimization software, they may visit the same popular SKU pick faces multiple times in a day. For a facility with static shelving or pallet rack, this translates into pick rates of approximately 50 lines per hour.


Alternately, an automated storage and picking solution facilitates batch picking. The process groups orders with a common item, or items, together. Multiples of the same item are picked, then sorted to their appropriate orders for shipping at a nearby workstation. This means multiple orders can be filled at one time—up to 750 lines per hour, as shown here.


System Bag & Tag
(lines per hour)
Pick & Toss
(lines per hour)
Shelving 10 - 35 30 - 75
Drawers 10 - 35 30 - 50
Flow Rack 25 - 45 75 - 150
Pallet Rack 35 - 60 95 - 200
Horizontal Carousel Module 75 - 200 225 - 750
Vertical Carousel Module 50 - 175 150 - 225
Vertical Lift Module 50 - 150 125 - 175
Vertical Buffer Module 50 - 175 125 - 200


Because automated storage technologies utilize integrated inventory management software, batch picks can be completed in a single rotation, or cycle, of the unit. Batch picking with an automated system eliminates bottlenecks associated with waiting for one last item to complete an order or finish a manufacturing process. Batch picking can also be used to prioritize orders by importance or by inventory availability. This enables customer order cut-off times to be extended, increasing a company’s competitiveness and customer satisfaction. Time is money when it comes to picking orders. Therefore it's important to avoid unknown inventory shortages. Be sure to keep an eye on inventory regularly. Learn more about inventory shrinkage.


4. Reduce Workplace Injuries and Absences

What is the cost of an absent, or injured, worker?


Manual picking operations utilizing shelving or pallet rack for item storage can require a picker to reach, bend, lift, twist, stretch, push or pull to retrieve inventory. The storage units are characterized by:

  • Wasted space due to inaccessibility
  • Poor visibility of products in the back
  • Last-in/first-out (LIFO) stock rotation
  • Unsafe picks due to storage position (height or distance)


To avoid potential injury, it is often recommended that workers pick items from the 'golden zone,’ which extends from the belt height to the shoulder height of the average individual. Items within this zone can be grabbed or moved without either stretching or bending.


In contrast, automated storage systems present stored items at the proper ergonomic, golden zone work height. This creates a safe working environment that minimizes injuries from bending, reaching and stretching. Further, walking and climbing are no longer necessary. Not only does this reduce fatigue, but also the chance of worker injury is substantially lessened. In turn, absenteeism, insurance premiums and claims for worker’s compensation will be reduced.


To further safeguard workers, a variety of safety systems are integrated in the automated systems. Light curtains, emergency stop buttons, presence-detecting safety mats, software-enabled access, automatic shutter doors and photo eye sensors prevent pinch points and entrapments while a worker is interfacing with the machine.

5. Reduce Picking Errors

How much does a picking error cost?


The cost of a picking error includes not only the cost of the item, but also the expenses associated with shipping the item back, processing it upon receipt, returning it to inventory and loss of customer satisfaction. Further time is lost in correcting the mistake by picking, packing and shipping the correct item back to the customer.


An estimated 35% of facilities experience ongoing mispick rates of 1% or more. Although 1% sounds like a slim margin for improvement, it adds up quickly.


Because automated storage systems incorporate advanced picking and real time inventory tracking technologies—such as light-directed indicators that pinpoint the precise SKU location and quantity to be picked—picking accuracy increases up to 99.9%. The storage system mitigates human error and produces better inventory control. Not only will this contribute to a dramatic reduction in picking mistakes, but it will result in tremendous cost savings. Further, customer satisfaction will improve, likely leading to an increase in repeat purchases.

For More: 5 Pick to Light Technologies for Laser Accuracy