Supply Chain Performance
Supply Chain Performance

How do 3PL and businesses tackle sharing capital expenditure for warehouse automation?

In today's fast-paced e-commerce world, the pressure is on for warehouses to automate. But, who bears the cost?

On April 4, 2023

Over 50% of respondents think companies are responsible for automation initial Capital Expenditure

The answer is, both 3PL and companies share investments in automation projects. According to FM Logistic survey*, the results speak for themselves, with a majority of e-commerce warehouses (67%) planning to increase their automation budget compared to 50% of B2B warehouses.

But, how do they determine the budget allocation? The majority of surveyed companies allocate 1-19% of their total capital expenditure towards automation. This strategic partnership between 3PL and companies is driving the success and growth of automation in the warehouse industry.

3PL vs Companies: who is responsible for the initial capital expenditure?

Companies and 3PL providers both play a role in funding warehouse automation. In e-commerce warehouses, slightly more respondents (54%) in our survey indicated that companies take the lead in funding the initial capital expenditure for automation, while 44% said it’s the responsibility of the 3PL provider. The situation is similar in B2B warehouses, where 52% of respondents said the company is responsible and 47% said it is the 3PL provider responsibility.

Additionally, when it comes to funding, many companies consider the initial investment in automation as a capital expenditure (Capex) and adjust it over a period of time.

Companies and 3PL providers contribute to funding automation for both e-commerce and B2B warehouses, and many companies treat the initial investment as a capital expenditure spread out over time.

Do companies set aside funds specifically for automating their warehouses?

In our survey, we consulted companies from three different sectors: FMCG, Retail and Beauty and Luxury. As a result, it appears that the allocation of budgets for warehouse automation varies by industry sector. Companies in the FMCG and Retail sectors are more likely to have a dedicated budget for automating their e-commerce warehouses, while companies in the Beauty and Luxury sector are less likely to do so .

Additionally, the trend continues for B2B warehouses, with more companies in the FMCG and Retail sectors planning to increase their budgets for automation in the next 2-3 years. This is in contrast to companies in the Beauty and Luxury sector, who have been quicker to automate their e-commerce warehouses and have already invested in automation.

Among the surveyed companies in these three sectors, we can expect to see a surge in automation budgeting for both e-commerce and B2B warehouses in the FMCG and Retail sectors in the near future, while the pace of automation in the Beauty and Luxury sector may be slower due to earlier investments.

FM Logistic Capital Expenditure recommendations 

According to the survey, the initial capital expenditure for warehouse automation projects is generally carried out by the companies. Most surveyed companies estimate their automation budget to be less than 20% of their total Capex. The survey also reveals that most companies consider the cost of such projects as Capex and adjust it over time. “As for Capex management, we see all types of situations. We are seeing an interesting new business model for our clients: RaaS, Robot as a Service, which enables a company to fully benefit from robotic process automation by renting the robotic devices and accessing a cloud-based subscription rather than purchasing the equipment”, says Patrick Bellart FM Logistic Robotization and Automation Director.

An automated warehouse project is more than a financial decision: it’s a strategic move, with powerful long-term benefits that companies should take into account when calculating the initial ROI. What is certain is that each automation project requires a tailor-made approach.

Download our white paper on warehouse automation to gain complete insights into our report.

* FM Logistic surveyed 100 respondents across three sectors – FMCG (46), Retail (40), Beauty & Luxury (14) – based in India (40), Poland (30) and France (30).

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