In your warehouse, efficiency and accuracy directly affect your financial returns. So, an investment in efficiency and accuracy can have direct returns — if it’s the right investment.
A growing number of warehouses are investing in automation and AI technology.
Traditional automation can streamline processes, enhance efficiency, ensure consistency and free up human resources to add additional value. Within this, robotic process automation (RPA) uses small software bots to perform specific tasks like data entry and invoice processing.
At a higher level, AI can analyze large datasets, derive recommendations and adapt its algorithms to help predict trends, personalize customer interactions and create a more proactive organization. For example, AI can help predict when machines will need maintenance, reducing downtime and optimizing maintenance resources.
In a recent Grant Thornton webinar, attendees indicated that they’re seeking a range of warehouse operation improvements from automation and AI solutions.
These technologies offer a broad set of capabilities, but solutions must be fine-tuned to your situation. You can start by aligning them with your business goals.
Alignment and assessment
To make sure that your automation, AI and other solutions are efficient and effective, you need a technology strategy. Your strategy needs to be aligned with your business objectives. Only 19% of the webinar attendees indicated that their technology solutions were “very well” aligned with their business objectives.
To improve this alignment, start by clearly defining your business objectives. For example, are you seeking to expand your market or reduce costs? Next, assess the maturity level of your current technology using a capability maturity model to evaluate your infrastructure, processes and overall readiness.
Current state
To determine your organization’s current position, conduct surveys and interviews, review relevant process documentation, evaluate the performance metrics you have, and review your infrastructure and capabilities. For example, can your servers handle an increased load from automation? Do you have the bandwidth for real-time analytics? Review processes like inventory management or order fulfillment to reveal gaps, redundancies and bottlenecks. Look for issues like pain points that need to be addressed, risks that need to be mitigated, or data weaknesses that are limiting your decisions. Take an inventory of your team’s skills and readiness. Are team members ready to implement solutions that include automation or AI? Finally, consider downstream and upstream processes that might be affected by your proposed changes.
Desired state
To define where you want to be, use what you’ve learned to inform an analysis of strengths, weaknesses, opportunities and threats (SWOT). Your desired state might not be full optimization, at least not in the near term. “We understand that everybody would like to ultimately score the highest score and get to that truly optimized process state,” said Grant Thornton Growth Advisory Experienced Manager Mary Fredendall. “But it’s important to ask: Is this something that you're ready for, organizationally? If you’re crawling today, it's not realistic to run tomorrow. You're going to want to start to walk and then get very successful at walking.”
Fredendall emphasized the importance of this step: “Identifying business goals and assessing the current state is key for selecting technology that's going to match your objectives. It also ensures that, organizationally, you're ready for it — and you can sustain it.”
The SWOT assessment helps you see how the size and maturity of your organization should determine the scope of your technology initiatives. “For example, if you are early in maturity, implementing basic barcode scanning systems to track inventory movement and update stocking levels can reduce manual workload, minimize errors, and free staff to focus on higher-value activities,” said Grant Thornton Growth Advisory Manager Dyan Brown. “Down the road, you can adopt technologies like RPA to streamline operations and reduce errors for tasks like invoice reconciliation or order management. Finally, you can upgrade to advanced AI for real-time data analytics, autonomous decision-making, and personalized customer experiences.”
Sustained success
To sustain successful change, you need a plan for adoption and change management — especially if you’re moving toward advanced technologies like AI. Consider appointing a change champion to focus on adoption, from planning to implementation and iteration. Build in enough time to become stable at each of these phases.
Transformation doesn’t happen without strong partners. Screen your vendors carefully, insist on clear service level agreements, and forge healthy relationships. These steps will help you maintain the alignment between your tactical transformation and your strategic goals—and facilitate any adjustments.
Apply a similar mindset to selecting technologies for long-term success. Consider your current state, and the desired state you can reasonably achieve. Factor in scalability, integration, adoption, data flows, workflow impacts, employee role changes, training, customization requirements, implementation costs, ongoing maintenance, ROI and the timeline to achieve ROI. Bring the broader team into this discussion, to get key insights from their experience with your current processes and systems. By getting input early, it’s easier to overcome resistance later.
Any technology customization can have a large impact on your implementation. Fredendall said, “in general, the best practice is to be very careful about customization. There are certainly times when it’s not only warranted, but highly beneficial. However, there have been times when very high levels of customization can make maintenance much more taxing, especially over the life of the system.”
When you consider the life of the system, target an ROI in five years or less. “If you're going to have a 20-year payback period, then the solution is probably not the best fit,” Fredendall said. “We tend to look at a two-to-three-year, perhaps up to five-year, payback. Focus on quantification anywhere that you can. Don’t leave it up to anecdotal evidence to prove the business case.”
Establish benchmarks along the way—including pre-implementation benchmarks—so you can measure your progress. Key metrics might include labor costs, materials costs, error rates, rework, headcount or downtime. Find out what data and analysis already exist in your organization. To facilitate continuous improvement, supplement your benchmarks with milestones, dependencies and any redundancies necessary for risk mitigation. These will help you measure progress, identify the causes of any underperformance, reassure stakeholders that business continuity issues are addressed, and prepare for possible regulatory review in the future.
Future improvement
The benchmarks you created will play an important role going forward, especially if you need to further enhance your original implementation. Benchmarks can tell the story of what you’ve done in a quantifiable way that is compelling for decision makers.
Beyond the benchmarks, you will want to continue regular audits of your processes and potential security vulnerabilities. Maintain two-way communications with those affected by the changes, from line operators to CFOs, ensuring they get the information they need, when they need it.
Even the best-planned implementations will impact your processes. Keep your front-line people informed about any changes, and make sure your organization maintains quality customer interactions.
Improving your processes with advanced technology involves many considerations beyond the technology, with many stakeholders and much diligence required. But the benefits can be truly transformational — and they often extend beyond new efficiencies. People who were doing tedious, error-prone jobs can add value in new ways. Processes that once frustrated people can demand less time and provide more value. Quality improvements can lead to defect reduction and happier customers.
As you step away from time-consuming processes to focus on what you do best, powerful things can happen.
Content disclaimer
This Grant Thornton Advisors LLC content provides information and comments on current issues and developments. It is not a comprehensive analysis of the subject matter covered. It is not, and should not be construed as, accounting, legal, tax, or professional advice provided by Grant Thornton Advisors LLC. All relevant facts and circumstances, including the pertinent authoritative literature, need to be considered to arrive at conclusions that comply with matters addressed in this content.
Grant Thornton Advisors LLC and its subsidiary entities are not licensed CPA firms.
For additional information on topics covered in this content, contact a Grant Thornton Advisors LLC professional.
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