Rising warehouse labor costs continue to pressure logistics budgets, pushing manufacturers to find smart ways to improve productivity and optimize headcount. The challenge isn't a lack of solutions - it's knowing which combination of tools and strategies is right for your operation.
A practical starting point is an honest assessment of where your facility stands today. Are your warehouse operations still rooted in manual processes or have you deployed technology that actively keeps labor costs in check?
Penske Logistics developed a four-stage warehouse automation framework to help manufacturers answer that question and build a clear roadmap aligned with their budgetary and operational goals.
The True Cost of Warehouse Labor
Labor can account for up to 65% of total warehouse fulfillment costs (excluding transportation), making it the single largest line item in most manufacturer's warehousing budgets.
That burden has grown significantly in recent years. Wage pressures, a persistently tight labor market, explosive e-commerce growth and expanding SKU counts have all driven up both facility size and staffing requirements. According to the U.S. Bureau of Labor Statistics, warehousing and storage employment has grown substantially over the past decade, and average hourly wages in the sector have followed suit.
Hiring enough workers is only half the battle - retaining them is equally costly. High turnover undermines training investments and makes it nearly impossible to build a skilled, efficient workforce. These pressures have accelerated interest in technology-driven solutions that reduce dependency on headcount while improving throughput.
A Four-Stage Framework for Warehouse Automation
Choosing the right technology stack can feel overwhelming, particularly for manufacturers without deep logistics expertise. Penske's four-state automation guide simplifies the decision by mapping where a facility currently operates and what the next steps look like.
The four stages are:
- Crawl: Largely manual, paper-based warehouse management
- Walk: Basic automation leveraging existing ERP systems
- Run: Advanced Warehouse Management Systems (WMS) fully deployed
- Sprint: High-end automation: picking robots, AGVs, sophisticated storage systems
From Walk to Run: Where the Real Gains Are Made
Companies in the Walk phase have introduced some automation, typically through their existing Enterprise Resource Planning (ERP) system. However, ERPs are general-purpose business tools – they were never designed to manage the complex, real-time demands of a modern warehouse.
The Run Phase, by contrast, revolves around a purpose-built WMS – software specifically engineered to optimize receiving, putaway, picking, packing and shipping operations.
The Migration Challenge
Moving from Walk to Run isn’t a simple software swap. A critical part of the transition involves mapping ERP-based interfaces to the WMS - for example, connecting order confirmation workflows and inventory data between the two systems. This integration work can take months and requires special knowledge of warehouse processes and technology architecture.
That complexity is precisely why many manufacturers turn to third-party logistics providers (3PLs) to guide and manage the transition.
How 3PLs Accelerate the Journey
Partnering with an experienced 3PL gives manufacturers access to both the technology expertise and the operational know-how needed to make automation work in practice. Specific ways 3PLs drive improvements include:
- Slotting optimization – Positioning inventory in bulk or active locations to pick orders at ground level to increase pick speed and reduce travel time
- Wearable scanning technology – Equipping workers with hands-free devices to accelerate pick rates and reduce errors
- Velocity-based inventory management – Segmenting inventory into slow, intermediate and fast-moving categories to streamline flow
- ROI modeling – Using engineering tools to quantify the productivity return on specific capital investments before committing
The Growing Role of 3PLs in Warehouse Management
Outsourcing warehousing to 3PLs has become a mainstream strategy – and demand for IT-enabled warehouse services continues to grow as supply chain complexity increases. for managing warehouse complexity and cost.
Shippers increasingly expect their 3PL partners to deliver:
- Warehouse and distribution center management technology
- Real-time inventory visibility across the supply chain
- Data integration between inbound and outbound supply chain partners to minimize downtime and dwell time
- Delivery speed improvements through optimized internal warehouse operations
Logistics providers that can track the flow of inventory through and around the warehouse, monitor product velocity and provide advanced notice of arrivals deliver measurable gains in efficiency - reducing engine idling, cutting dwell time and accelerating order fulfillment.
The Bottom Line
Warehouse labor costs aren’t going down on their own. The manufacturers best positioned to compete are those actively moving up the automation maturity curve – from Walk to Run – with a clear strategy, the right technology and experienced partners to execute the transition.
Whether you’re evaluating a WMS implementation, exploring3PL partnerships or simply trying to benchmark your current operations, the four-stage framework offers a structured way to move forward with confidence.
Contact us to learn more about where your warehouse operations fall on the automation spectrum and start building your roadmap for success.
DISCLAIMER: The content provided is for general informational purposes only. Penske makes every effort to ensure the accuracy of the information presented; however, the information herein is provided without any warranty whatsoever, whether express, implied or statutory. In no event shall Penske be liable for (i) any direct, incidental, consequential, or indirect damages (including loss profits) arising out of the use of the information presented, even if Penske has been advised of the possibility of such damage, or (ii) any claim attributable to errors, omissions, or other inaccuracies in connection with the information presented.