Nicholas Davis

WMS Delivery Manager

Experienced Solutions Architect with a demonstrated history of working in the logistics and supply chain industry. Skilled in Operations Management, WMS implementations, Leadership, Resource Management, and Business Process Improvement. 

Financial Considerations for an AGV Implementation

Given the proper operational landscape, Automated Guided Vehicles (AGVs) can serve as a mechanism to slash an operation’s bottom line drastically over their investment period and beyond. These vehicles have a wide range of capabilities, don’t take lunches or breaks, have no vacation time, and exponentially increase the safety and accuracy within the building. Before crunching the numbers to determine how long these typically large investments will take to hit their payback date, there are several considerations that must be made around the operation itself and whether it is an application fit for these vehicles.

The first thing to consider when determining if you have an AGV-friendly operation is whether your site has a constant and consistent flow. You will be paying top dollar for automated vehicles, so the worst thing you can do is to pay for assets that will sit idle during slow or seasonal periods. These vehicles are designed and configured such that they expect to start the next task as soon as they finish their last one. Operations that have heavy seasonality throughout the year or the inability to spread work across the business day will not get the best utilization out of their investment.

Secondly, volumes and order profiles should allow for an environment that will keep the vehicles working in an optimal fashion.  The ideal situation for an AGV would be one where the vehicle grabs inventory to store in the warehouse and then receives another nearby task for something like outbound picking or a replenishment.  Just like a manual forklift or transportation equipment, traveling empty is simply cost. Ensuring that your operation allows for a variety of work to occur concurrently (task interleaving) will have an enormous impact on the utilization of an AGV system.

The cost reduction that comes with an AGV implementation doesn’t stop at wages and fringe. If you feel that you may benefit operationally from an AGV system, it is important that the added value around safety, accuracy, and damage is also considered. Automated facilities will see impactful reductions in safety issues and near misses. Inventory and picking accuracy numbers will skyrocket with the removal of the human element. And lastly, handling damage will undoubtedly decrease. The vehicles have sensors to determine where to pick up inventory and will be placing inventory in very exact locations. If ever given the chance to look down an aisle where automation performed the storage, you will be in awe of the preciseness and consistency of these systems.

Making a heavy investment in technology is not something to be taken lightly. Many considerations must be made when looking into AGV systems to ensure that the functionality fits the operation. AGVs will not always be the right solution for a given site. However, certain situations are more conducive to enjoying all the benefits of automating your warehouse including a lack of product seasonality, limited daily volume fluctuations, ability to interleave tasks, and the value of benefits not directly tied to the operational gains. The key to success when evaluating the fiscal impacts an AGV implementation will have for your operation is to ensure that the operation can fit a mold where vehicles are optimally utilized.