The trade-off between a warehouse’s free capacity and efficiency is a constant challenge for decision-makers in supply chain and logistics. A warehouse that is too large is not cost-competitive – at the same time, opting for a more compact design can lead to significant performance issues, such as stock-outs. The high fixed costs of automation technologies further complicate this situation. Businesses need flexibility in their operations, and whether or not automation technologies can function under volatile demand environments is often an open question.
In a case study, we compare an automated with a manual solution and analyze cost and performance drivers. Our results show that demand volatility above 19% compromises service level fulfillment. In addition, only varying demand volatility can cause the automated solution to pay off between 2 and 6 years. Based on these findings, we recommend paying close attention to demand volatility in your own warehouse planning.
You can explore these selected results for yourself in our interactive website, which is best viewed in desktop version. Using different levers, you can change the analyzed parameters of this study to reflect varying warehouse conditions. For more in-depth context, the research study and results are also available for download. If you have any questions or suggestions, please do not hesitate to contact us.
Request a copy of the study "Warehouse automation and volatile demand – A strategic fit?".