Tariff-Proofing Manufacturing? Don’t Forget About Logistics
Amid rising tariffs, many companies are looking to increase automation within manufacturing. But why stop there?
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As executives scramble to offset increased costs due to American tariffs, automation has emerged as a critical opportunity area. But while companies are assessing how to automate their manufacturing lines, another automation opportunity sits right under their noses: logistics and warehousing operations.
Think about it: for many companies, warehousing and logistics costs represent 10-25% of total sales. If you're optimizing production while ignoring these operations, you're essentially fixing your bathroom fixtures while your roof leaks.
Design for Outcomes, Not Tasks
How to get started? The most successful automation strategies focus on designing for specific outcomes (ie, DfX) rather than mechanizing existing tasks, transforming operations from a cost center to a competitive advantage. Start by focusing on the outcomes you need operations to deliver.
Digital Strategy Must Be Customer-Centric
This isn't just about installing fancy technology – it's about understanding that every logistics decision ultimately impacts customer satisfaction. To design your automation strategy around customer outcomes, build a data strategy that starts with a customer order and work back from there. The companies succeeding in this space are using digital twins and simulation tools to test concepts before implementation, allowing them to design optimal systems without the constraints of existing infrastructure. Best Buy, for example, is implementing warehouse automation systems with AutoStore to meet customer expectations on speed of delivery.
Building the Right Skills
Even the most sophisticated automation system is worthless without people who understand how to implement, maintain, and optimize it. Our data and analysis found that warehouse managers today need to be 1.7x more digitally savvy than just a year ago. Yet many organizations are failing to cultivate the right talent, with retail in particular significantly behind in infusing digital capabilities into logistics roles than its tech and industrials counterparts.
While technology companies show 100% digital adoption for inventory management and 80% for automated warehousing, specialty retail lags at just 68% and 77%, respectively. Food and drug retail performs even worse at 53% and 71%. The digital divide is even more dramatic in areas like inbound freight management and customer fulfillment, where retail consistently scores among the lowest across industries.
For inspiration, look to companies like Lenovo, which implemented a proprietary smart employee management system and established dedicated learning centers to showcase AI and metaverse solutions. The result? Employee efficiency improved by 40% and equipment efficiency by 25%, all while generating 6,000 new job opportunities. This isn't about replacing humans with robots – it's about creating human-machine teams that leverage the strengths of both.
The Automation Imperative
Tariffs may have forced your hand on manufacturing automation, but it’s a mistake to stop there. Extending automation across operations means sustained competitive advantage.
So while reviewing your manufacturing automation strategy, take a walk through your warehouse. That employee manually counting inventory? That's your next opportunity. Your manufacturing team is already thinking about automation expertise. Bring that thinking downstream to create truly integrated operations where humans and machines work together to deliver exceptional value.
Because in today's environment, half-automated is fully vulnerable.