Making Automation Pay: 8 Questions Before You Bet the Warehouse On It
Issue #009 – October 15, 2026
In This Issue (tl;dr):
Warehouse automation can be a game-changer or a multimillion-dollar mistake. Often, the difference isn't the technology. It's the decisions made before buying it. Here’s a true automation horror story and eight questions that can help you avoid starring in the sequel. Before you invest millions in warehouse automation, make sure you're solving the right problem and getting your money's worth.
Psst, don't miss the bonus quarterly contest winner announcement at the end of this post.
(Especially if your name is either Patrick Williams or Caleb Sullivan.)
Several years ago I helped an electronics distributor plan and implement a multimillion-dollar miniload automated storage and retrieval system (ASRS). The executives had already decided to buy it before I got involved. My job wasn't to justify my client’s investment; it was to help make their chosen system work in their warehouse.
Fast-forward a few years. I attended a professional organization's tour of the same facility. The executives I'd worked with weren't there that day, and the employees conducting the tour didn't know me.
As our guide walked our group through the facility, there was the ASRS. It was empty. Dark. Silent. He didn’t even mention it as he led the group past it.
Not exactly what you'd expect from a multimillion-dollar investment.
I innocently asked our guide, "What's the deal with the ASRS?"
He rolled his eyes and said the vendor had convinced the company to buy it, but it hadn't proved useful. They'd stopped using it and planned to rip it out it to reclaim the floor space.
Not long after that, they did.
A multimillion-dollar automation system had become a useless, multimillion-dollar warehouse ornament.
I don't know every reason for that outcome, and I don’t mean to throw shade on ASRS technology itself. I’ve been involved with ASRSs since the late 1980s, I know they can be terrific when properly applied. But this experience reinforced something I've learned repeatedly: Some of the costliest automation mistakes begin before the equipment arrives.
In an earlier issue of The Flow Zone, I discussed the “shiny object” trap. But now, let's assume you're seriously considering automation. How do you know it'll actually pay?
Here are eight questions I'd ask before signing the purchase order.
Are We Fixing the Right Problem?
1. What specific problem are we trying to solve?
"We need automation" isn't a business problem. "We need to reduce cost per unit by 20%" might be. So might increasing throughput, improving accuracy, expanding capacity, or meeting tighter service commitments.
Automation is a tool, not a goal. Define the destination before buying the vehicle. Otherwise, you might buy a Ferrari when you really need a pickup truck.
2. What are our functional requirements?
Define what success at your planning horizon will look like, in meaningful terms: costs, throughput, capacity, service levels, flexibility, etc. Then consider all feasible alternatives, ranging from simple, manual methods to mechanization to high-end automation.
One caution here: vendors can be terrific technical resources. I know, because I spent much of the first half of my career working for vendors, and I have good business relationships with many excellent vendors today. But vendors also have products to sell. That's not a character flaw; it's their business model.
When considering a major investment, get independent, unbiased advice from someone knowledgeable who doesn’t have a financial stake in which solution you choose. Define your requirements clearly and objectively, and then invite qualified vendors to show how they can satisfy them.
In other words, be requirements-driven, not solutions-driven. Let your requirements drive the solution, not the other way around.
Remember the sensible advice of Inviscid Man: “Don’t cut butter with a chainsaw.”
3. What does the data actually say?
Ah, yes—data. That inconvenient stuff that occasionally interferes with a good idea.
Study your real operating profiles: SKUs, dimensions, orders, lines, units, inventory, growth, exceptions, etc.
Averages alone won't cut it. My dad used to say, with a grin, “When your head is in the furnace and your feet are in the freezer, on average you’re doing okay.” Touché, Dad. A system that handles an average Thursday beautifully but chokes during peak season isn't a success. It's an expensive bottleneck. So, plan for realities, not averages.
Are We Ready to Automate?
4. Have we improved the process before automating it?
Suppose employees walk too much, handle products repeatedly, and do the Cha-Cha Slide around stagnant inventory and forklift traffic. If you automate that mess, you could actually make it more expensive.
Instead, start by simplifying workflows, eliminating needless steps, shortening travel, reducing touches, and standardizing work. Then see where automation will add value.
Automation should amplify good processes, not institutionalize bad ones. If you automate a bad process, you're just doing dumb stuff faster and with less labor.
Heed the wisdom of Inviscid Man: “Don’t pave the cowpath. Pave the right path.”
5. Is our operational foundation really ready?
The age-old mantra is true: “Garbage in, garbage out.” Successful automation needs accurate item data, reliable inventory records, sensible processes, integrated systems, trained workers, qualified maintenance and support staff, and disciplined management.
That's a lot to ask.
If your warehousing operation runs on tribal knowledge and heroic employees constantly putting out fires, then robots won't magically fix it. And then you might have more expensive fires to put out.
Will Automation Really Pay?
6. How much total labor will it save?
Suppose a warehouse currently has 53 pickers, 6 replenishers, and 8 packers. And the automation proposal promises to significantly reduce the picking labor.
Great! But wait…how many people will you need for decanting? Replenishment? Packing? Maintenance? Support?
Is the work disappearing, or just showing up elsewhere?
Savings in one department doesn't automatically mean savings for the whole operation. You might be playing a multimillion-dollar game of Whac-a-Mole™.
Calculate and compare the net labor savings across the entire operation, including any new work the automation creates.
7. What Happens at peak...and when things go wrong?
A warehouse can look fantastic on paper and on the internet. Unfortunately, warehouses operate in the real world.
Can the system handle seasonal peaks and evolving order profiles? What's its true capacity limit? What happens when technology or equipment fails? How will orders get processed during downtime, and how long will recovery take?
Remember Murphy’s Law. Plan for the likely reality and the worst-case scenario, not for a perfect day in the vendor’s demonstration.
8. Is the business case realistic and compelling?
This question is the biggie. A spreadsheet showing positive ROI alone shouldn't be a permission slip to spend millions.
Alternative solutions come in three flavors:
Possible: Positive returns, if everything goes according to plan. (“Hmmmm…that could work.”)
Realistic: Credible assumptions, understood costs and risks, and a reasonable expectation of attractive returns. (“Yeah, that might be a good solution.”)
Compelling: Strong financial and strategic benefits, a high likelihood of success, and better overall value for the business than all other realistic alternatives. (“Wow! We’d be morons if we didn’t do that!”)
To build a good economic business case, include turnkey costs. Factor in maintenance and support. Include downtime. Figure the total cost of ownership (TCO). Evaluate capital costs. Challenge assumptions.
Compare the solution with simpler, less risky, less expensive (i.e., boring) process improvements and layout changes. And compare it to mechanization. If these things can deliver reasonable results more quickly, and for less money and risk, then should you still invest in high-end automation?
To be a compelling solution, a positive ROI alone isn't enough. Compared to the other alternatives, it should be a no-brainer slam dunk.
The Bottom Line: Don't Automate to Impress. Automate to Improve.
I'm a big believer in warehouse automation when it makes good business sense. Done right, it can dramatically reduce costs, increase capacity, improve service, and mitigate risk. Done wrong, though, it can consume capital and create headaches that last for years.
Sometimes the best solution is sophisticated automation. Sometimes it's mechanization.
And sometimes it's mundane: a smarter layout or a better process developed through good, old-fashioned industrial engineering. It might not have blinking lights and rotating gizmos, but your CFO and your shareholders will appreciate it.
And nobody wants to spend millions on the world's most expensive warehouse ornament.
Let us know if you want an objective opinion about when and where automation might make sense for your warehouse. And we'll show you the money.
Until our next episode...thanks again for joining us! And keep an eye out for Inviscid Man in a warehouse or DC near you.
Stephen (Steve) T. Hopper, P.E.
Founder & Principal
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