The surprisingly quick ROI of automated storage and retrieval systems

03/05/2021

An examination of all the sources of cost-savings vs. traditional storage systems shows why the investment in automated storage and retrieval systems pays off so rapidly, with an ROI anywhere from 6 to 18 months.
Prospective customers often ask us: What’s the typical payback period to ROI on a Modula vertical lift module (VLM) or horizontal carousel (HC)? The answer we give surprises most of them: anywhere from 6 to 18 months.

At first blush, that sounds quite fast for a unit that costs tens of thousands of dollars. But once you dig deeper and look at the multitude of ways that one Modula VLM or HC can save on expenses and capital outlays, that quick ROI makes sense.

Let’s go through the costs in detail:

Saving space with AS/RS

Logistics real estate consulting firm Prologis projects warehouse rents will increase 5% in the United States and 4% around the globe in 2021. This is likely due to a surge in inventory with relatively little storage space to accommodate it, as recently reported by DC Velocity.

Our automated storage systems, particularly our vertical lift modules, hold far more items on each unit of floor space than traditional shelving systems (up to 90% less square footage required). For many of our customers, that space savings has meant that they didn’t have to move their operations to a new, larger warehouse.

Avoiding the capital requirements for building a larger facility is a tremendous saving, of course. But it can also pay off in other ways. For example, space that was consumed by storage can be converted into an area for other profit-generating activities. Many automotive dealers who’ve bought our VLMs have taken advantage of this space-saving. Moreover, reducing the necessary size of inventory storage space can lower building and maintenance costs.

Saving energy with AS/RS

Reducing the heating, cooling and lighting requirements for a warehouse area — due to a smaller overall footprint — can trim costs. These expenses are particularly notable if you’re storing cold or perishable items. Modula now offers a VLM that controls the temperature and humidity in the unit – a much more efficient approach than trying to regulate the environment in a large, traditional warehouse. You can even save on electricity by using one of our Modula Green VLMs, which employ an inverter that recaptures energy through the machine’s downward movement and trims power needs by 40%.

Greater efficiency with AS/RS

The productivity advantages of a VLM or horizontal carousel over manual methods are stunning. It’s not unheard of to see gains of 300% or more. By automatically bringing an item to the operator rather than forcing the operator to hunt for it on a shelf somewhere in the warehouse trims retrieval times to fractions of the norm.

Often manufacturing and warehouse areas are not optimized and a lot of space is wasted. A functional layout and an efficient use of the available space can help companies operate efficiently. Moving items from one location to another in a facility is a cost that doesn’t add value and potentially can cause damage to the goods.

More accurate pick rates with AS/RS

With traditional warehouses, human errors are nearly unavoidable, as workers use printed lists to pull dozens of units from shelves day after day. Delivering the wrong item to a client is an expensive error – a waste of time, extra delivery costs and an unhappy customer. Industry estimates for the cost of a mispick are up to $100 per incident. So even a couple of errors each week can cost an organization $10,000 a year. With laser pointers, alphanumeric LED bars, put-to-light systems, and similar aids guiding operators to units and quantities to retrieve, Modula automated storage and retrieval systems all but eliminate mispicks.

Enhanced workforces with AS/RS

According to Zebra’s 2024 Warehousing Vision Study, labor recruitment and/or labor efficiency and productivity have been top challenges for 60% of warehouse operators. Industry studies have shown that vertical storage solutions can increase workforce productivity by up to 85% because one worker is able to handle the same volume of work previously performed by multiple operators.

Moreover, working with a VLM or HC is a pleasure for most workers, particularly compared to traditional systems. They don’t walk around all day, stooping or climbing ladders to retrieve items. Consequently, turnover tends to be lower. And because the machines are easy to operate, you don’t need highly qualified candidates to run them.

This also translates into reduced costs associated with workplace injury claims. An operator using an automated storage system to move material is unlikely to feel strained by the effort – everything is delivered at an ergonomically correct height.

Better inventory tracking with AS/RS

Because the units trace the movement of items – in and out – the tasks associated with inventory monitoring are all but eliminated. That saves on time and resources and the expense of hiring someone who specializes in such matters. Furthermore, the company has better insights into its supply chains. Particularly when one of Modula’s warehouse management systems is coupled with the company ERP or DMS. No longer does an organization have to worry about having not enough or too many items in stock.

And a subset of inventory tracking – one that many employers are uncomfortable in recognizing – is securing parts against theft. Like it or not, valuable items end up going somewhere other than their intended designation at times. By housing them in an enclosed machine with limited, and traceable access, these losses drop precipitously.

In conclusion: Quick ROI for an automated storage and retrieval solution

The reason so many businesses get a quick ROI on their investment in automated storage & retrieval solutions is that the right material is delivered exactly where it’s needed, when it’s needed and how it’s needed.

Of course, each operation will have a different variable to reaching ROI, depending on the starting point. Modula’s experts are happy to give you an idea of what you can expect. Just fill out this form to begin the conversation.

 

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