The world of CEP is becoming increasingly competitive - and increasingly expensive. The surge of demand for parcels since the Covid-19 pandemic, combined with an increase of cheap, small parcels, are just some of the factors that are behind this.
For many hubs and depots, this pressure is made harder by high labour turnover, seasonal recruitment challenges, fluctuating volumes and unpredictable peaks. Even when enough staff can be found, the cost and complexity of scaling labour up and down make it difficult to keep the cost per parcel stable.
As a result of this rising demand, CEP companies are finding that they must ensure they can provide competitive services, and automated robotic solutions are one way in which they are aiming to achieve these goals. These solutions offer faster service, higher reliability, and help make hubs and depots more efficient at operating. However, as with any investment, the business case for robotic automation and the financial costs associated must be carefully considered.
Although robotic automation may seem like an approach that allows greater efficiency and will help save money, it must be carefully considered by each hub or depot as it may not always be a wise choice. While robotic solutions save manual labour and have high accuracy rates, CEPs must weigh up whether they actually add benefits in the individual areas that they need.
Initial factors to consider include the geographic location and related regulations of the area in which the CEP operates, as areas in Northern Europe, for example, may have stricter regulations for labour and lifting and higher wages than in some other geographies. As a result, robotic solutions can be a good option in areas where labour is scarce or expensive, whereas less benefit will occur in areas where labour is affordable and plentiful.
Similarly, the hub or depot itself must be considered. Implementing a robot requires physical space, both for the robot and around it. While green fields sites are more likely to be set up in a manner that has this type of space, existing brownfields sites may need to consider a significant redesign or extension in order to cater for the space needed. In this case, adding robotic automation must be carefully considered in order to understand whether it is feasible and helpful.
Once the pre-determined factors such as space and labour availability have been considered, the CEP must consider more operational factors that will be crucial for creating the business case.
The factors that must be included at this level relate to the day-to-day operations of the facility in order to fully understand what robotic solutions are likely to offer. At the operational level, the requirements define the task, meaning that if a robot does a task faster and more cost efficiently than manual labour, it may be worth considering. Each operation within the hub or terminal should be considered to determine this with full understanding of what is and is not possible from a robot (link to article).
Alongside this, automation-readiness metrics must be considered. These include the cycle time, in order to ensure that there is a clear understanding of how long parcel movement takes and how or if this could be improved by robotics. The peak load also requires consideration, as these maximum surges must fit into the proposed robotic solution, or the extra labour that would still have to occur around peaks must be considered.
An understanding of the business case also requires consideration of the return on investment that is provided by a robotic solution. In most CEP operations, this is around three years, however each organisation must decide individually what is acceptable for their needs.
The basic ROI logic is simple to calculate: compare the total cost of the robotic solution with the operational value it is expected to create. However, a useful calculation must go beyond the purchase price and include the realities of implementation, integration and ongoing operation. One way to illustrate this is:
ROI* = (Operational savings + productivity gains + avoided costs – total cost of ownership) / total cost of ownership
In practice, this means comparing the cost handled per parcel before automation with the expected cost handled per parcel after automation. The calculation should include current staffing hours per operational hour, current throughput, manual touch points and cost per shift, then compare these with the robotic solution’s expected throughput, required supervision, uptime, service costs, spare parts, power consumption and guaranteed performance levels.
Each robot will bring a different ROI, as they operate across different processes, which has different implications. A robot tipper may have a shorter ROI as it performs one job, whereas an AMR is more difficult to calculate as factors such as where it is being implemented, whether there is space, and if this can occur without disrupting or shutting down the terminal must feature in the calculations.
A significant common misconception relating to the cost of robotics is that the cost only extends to the hardware. As robotic solutions are both hardware, software, training, service and maintenance, the ROI must take into account the full cost of implementation and operation.
As such, it is vital that the integration, implementation and maintenance are considered when calculating the ROI. This includes system design considerations, as there can be a need to redesign the parcel handling system. After installation and comissioning, it can make a significant difference to have a comprehensive support setup through a trusted supplier to ensure integration causes minimal disruption and will work from day one. Alongside this, different support options can include operational site support, hotlines for emergencies, training, and even spare parts strategies.
Robotic automation can provide a powerful tool to CEP operators who are struggling under the lack of labour, rising costs, and rising competition. They offer a way to redistribute and upskill labour, while ensuring that reliability is increased.
Robotics should be evaluated as an operational business case, not a technology purchase. The right solution can reduce cost per parcel, improve reliability and ease labour pressure, but only if the ROI accounts for the full implementation reality and is grounded in the specific hub or depot’s parcel flows, space, labour situation and peak requirements.
*This is an illustrative business-case formula adapted to the article’s point, where total expected benefits could include:
And total cost of ownership should include:
