Warehouse Automation: Building a Strong, Data-Driven Business Case

Summary

Today, supply chain and fulfillment leaders, whether they support thriving omnichannel retailers, business-to-business stalwarts or top e-commerce brands, find themselves in the crosshairs of two contradictory trends. On one hand, capital is tight, interest rates remain high and uncertainty reins, a reality that calls for constraint and greater scrutiny of proposed capital projects. On the other hand, these same professionals face mounting pressure to process more orders at greater speed, all while managing increasing labor costs. To meet these demands, they must effectively automate core materials handling processes, from storing products to picking items for packaging and shipping.
 
For others, growth is the driving factor in automation efforts. To stay competitive, attract more customers and support expansion plans, fulfillment operations must scale beyond what is possible with facilities that rely on manual processes. Meanwhile, in industries like grocery, where margins are razor-thin, automation becomes essential for achieving operational efficiencies that manual systems simply can’t provide.
 
For these reasons, warehouse and distribution center leaders are increasingly tasked with developing and managing automation efforts while simultaneously ensuring that their modernization projects are both fiscally sound and deliver the desired return-on-investment (ROI). This challenge is a reality that is applicable regardless of where an organization is in their automation journey, whether just beginning to transition a brownfield warehouse away from manual operations or refining a state-of-the art distribution center. To ensure success, both require the creation of a data-informed business case.

The cornerstone of any warehouse automation project

In its 2025 Annual Report, MHI found that 45% of warehouse leaders plan to invest in automation over the next three years. Respondents to MHI’s survey also identified the top three company barriers to adopting technologies. They include lack of a business case, lack of budget and a lack of understanding of a technology.
 
On the surface, these barriers are not at all surprising. A compelling business case for any significant capital project is essential. Businesses always–and rightfully–decide whether an investment in new systems and solutions are viable based on whether they make money in the timeframe the organization requires. Intangibles like better service to stores for inventory restocking and more accurate orders for customers are exceptionally important, but they will never suffice when the justification for a new automation project fails to align with the balance sheet.
 
Nor will organizations invest in an automation project if they lack the sufficient budget or funds to do so. And just as understandably, no technology–let alone an extensive automation project–should ever proceed if decision makers do not understand the technologies involved or their value.
 
It is for these reasons that a strong, comprehensive and data-informed business case should be considered the cornerstone of any warehouse automation project. It should address these barriers directly, providing stakeholders with the critical business, financial and operational insights needed to make confident, well-informed decisions about automation. An overview of the data and the core considerations that should be factored into the business case for any warehouse automation project reveals why.

Building the warehouse automation business case

A strong business case is necessary for more than peace of mind; it’s a critical factor in securing capital in a highly competitive landscape. In many cases, the ability to craft a well-informed, data-backed proposal determines which projects receive funding. For this reason, it is imperative that materials handling professionals remember that although automation fundamentally exists to lower the costs associated with labor, it can fix and solve far more. From brownfield sites to greenfield facilities, every element of the project must be carefully evaluated. It is a process that begins with the fundamentals.

• Define the ROI goals. What exactly are the core goals? Beyond cutting labor costs, is the focus on faster throughput, increased storage capacity, improved order accuracy, or reducing workplace injuries? And what’s the desired timeframe for achieving ROI? For instance, is it a three-year payout period for a contracted 3PL, or a long-term investment spanning decades for a retailer planning sustained growth? Equally important is identifying opportunities to improve current processes. Automation alone enables organizations to do the same things faster, but it also enables new, different approaches that are better and more effective. Finding these opportunities should be part of any effort to define ROI goals.
• Understand the costs associated with current systems and processes, as well as those of proposed automation. It is imperative to put dollar values up against intangible and often overlooked costs. For example, when looking at hourly wages and salaries of warehouse employees, are benefits also accounted for? When considering maintenance, are parts and labor outlays required to keep older machines up and running considered? For automated systems, is the added cost of employing workers skilled in robotics and programming addressed? Where are all of the pain points automation can solve, and what dollar value can be assigned to them? A strong business case requires a comprehensive look at current and potential outlays. This information, when aligned with the ROI goals, is crucial to inform whether sufficient budget exists
• Get the right data. The core of any effective business case is accurate data. For warehouse and distribution centers, this involves gathering precise information on SKUs, order profiles, store layouts, and estimated storage and throughput needs required to achieve growth projections. This data is pivotal in designing effective automated systems and in accurately forecasting the ROI within the given timeframe. However, it’s essential to account for the time needed to compile this information, especially in older warehouses where critical data may be scattered across multiple systems. Proper diligence here lays the foundation for informed decision-making and a solid ROI strategy.
• Involve the right people within your organization. Warehouse automation is not something most people, including executive leaders, board members and other decision makers for capital projects, are familiar with. This is particularly true in businesses that are just beginning their automation journey, where technology is a big unknown that involves a significant learning curve. Involving these individuals early during the creation of the business case is important to ensure that they understand why it is important for them to gain a working understanding of automation. Equally vital is involving warehouse floor employees, who not only have hands-on knowledge of current processes but who can also be upskilled to oversee and maintain automated systems. By including everyone in crafting the business case, participants are turned into engaged stakeholders.
• Consider creating business cases for complimentary technologies. Today’s technology market is more varied and extensive than ever. For instance, a fast-growing retailer may decide the extended design, construction, and implementation timeline of an Automated Storage & Retrieval System (AS/RS)–which offers maximum throughput and storage capacity–isn’t suitable for their current needs. Instead, they might opt for an Automated Case-handling Mobile Robot (ACR) system, which can be deployed within months and integrates with existing warehouse racking. However, business cases for both technologies should be developed to evaluate potential opportunity costs, such as slower growth or limited scalability. Often, a combined strategy can be a viable path forward. For example, a retailer might deploy an ACR system immediately while simultaneously planning a new distribution center featuring AS/RS, with the added advantage of sequencing data from the ACR system to guide the design.

Perhaps most importantly, when creating a data-informed business case for any warehouse automation journey, it’s important for supply chain and fulfillment leaders to remember that it is just that–a journey. Like all journeys, the final outcome reflects not only the planning, care and forethought applied, but also the people involved. Technology acumen is important, but the difference lies in the values, experience and longevity of your partners.