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Five reasons why Industry 4.0 will permit even small warehouses to adopt automation

Many have written about the impact that Industry 4.0 will have on warehousing and distribution and why companies should embrace this fourth industrial revolution. But if you own or operate a small warehouse or distribution center, you may be thinking, “How will Industry 4.0 help me?” or “Isn’t this for big companies only?”

I believe many of the benefits of I4.0 will extend to small operations. This post will explain why.

In this context, I am defining I4.0 very broadly. For me, it includes things like the Internet of Things (machines talking to machines), big data, artificial intelligence, machine learning, as well as collaborative robotics.

1. True Plug & Play 

The problem with traditional automated material handling systems has always been they require a significant amount of project specific engineering, and coding of controls and software. Conveyor systems, for example, often need specific PLC code to optimize behavior such as priorities at a merging point to get maximum throughput. These “traffic rules” are different for each layout and also depend on the users exact processes. 

The costs of customizing, installing and commissioning a system do not have a linear relationship to the size of the system. While the overhead may be manageable on large systems, on smaller systems those costs can represent up to 40% of the total solution. This has always made automating small operations cost prohibitive.

By combining IoT principles with artificial intelligence and machine learning, this problem can be overcome. Imagine that you will simply place conveyor elements (or any other automated equipment) on the floor. Each element will automatically identify itself to all others and “connect” to its neighbors. This way the system is able to map itself and understand how it looks.

Meanwhile, applying big data analytics to the current, still manual operation will provide an understanding of the warehouse user processes. This allows the establishment of a first, base-line logic for running the new automated system. Once the physical automated systems are placed and used, machine learning will quickly determine how to use the equipment better and set the right traffic rules to match the system’s layout and user processes.

All this means that no more project-specific coding of controls and software will be required, significantly reducing the overhead costs to a level where automation becomes compelling for small operations.

2. Smart systems can adapt to warehouses built for humans

Most warehouse, and certainly small ones, have been designed to be operated by humans. They have rows of shelving and people with trolleys walking through them to collect orders.  Until recently, implementing automation would require these processes to be completely replaced. Heretofore, automated systems, such as robots, required a very clearly defined environment that was free of unexpected interruptions. And while a manual warehouse may look very organized, there are many small deviations that are easy for people to deal with, but not for robots. Just imagine a larger product protruding a few centimeters into the storage location of the product next to it, or a worker leaving their trolley in the aisle for a few minutes to use the restroom.

Changing such a warehouse like that is a big step that can easily cause disruptions and risk. 

Now, a new generation of collaborative robots is emerging. These robots are not only safe to work alongside humans, but also use advanced sensors and artificial intelligence to adapt to changing circumstances.

Now companies can simply deploy one or two collaborative robots within their current operation. Humans will work alongside the robots, eliminating the need for drastic changes to the warehouse or the processes.

Over time, more and more robots can be added to gradually increase the level of automation.

3. Small companies don’t want to stay small

Many of the small companies in the field of logistics plan to grow, sometimes very quickly. Most early stage e-commerce companies have big ambitions, but exactly how fast, or in what direction they will develop is uncertain. This means any automation will need to be flexible so the company can start small, but scale fast when growing. 

New technology such as autonomous mobile robots are perfect for this scenario. You can start with only a few. Due to peer-to-peer communication and intelligent software these vehicles are easy to implement, providing payback even in small numbers. Still, when the time comes to expand, this is as easy as buying (or leasing) more vehicles, placing them in your warehouse and powering them up.

The new vehicles will identify themselves to the existing ones and the entire fleet will adapt and optimize itself to make best use of its new robot-colleagues.

4. Smart distribution networks will help to keep warehouses small

This may seem contradictory to the previous point, and indeed it applies to a different group of companies. E-commerce is pushing the boundaries of delivery times. Same day delivery is increasingly an expectation and offered by many companies in larger population areas. By default, this requires products to be stored close to consumers in areas where there is often little space to build a warehouse. 

To help keep warehouses small and still keep good service levels high, Industry 4.0-related science is being used. Predictive shipping is one example, where goods will be shipped from a central warehouse to a smaller urban warehouse even before you order it. This concept relies on big data as a source to understand and accurately predict customer behavior.

The other method is distributed order fulfillment. A specific product may be available within the customer’s area at any number of locations. These locations could be the seller’s urban warehouses, a third party warehouse, a store, or even awaiting pick-up at a consumer’s home who wants to return it. By connecting all these sources in a real-time network, the most efficient source location for the product can be found. Again, big data and artificial intelligence will manage the complexity of this process, while blockchain technology will allow secure transfer of data and money between potentially competing providers.

5. Small companies are entrepreneurial – but may have limited cash

Investing in automation requires a long term vision, combined with an entrepreneurial approach. This is even more true when investing in new, groundbreaking technologies. This mindset is often found at small to medium size companies or founder-owned companies. Decision processes can be shorter, which can make it easier to realize a vision. This is why small start-ups are often at the forefront of adopting new technology.

Cash may be a challenge, and investing in automation typically requires serious capital investment. But here new technology may also help. 

Traditional automated systems have been highly customized and difficult to install, remove or change. Uncertainty about the company’s future, linked to an asset with very little value outside of that company will lead to expensive financing. 

“Plug & Play,” self-learning and high flexibility also implies that it will be just as easy to remove equipment and give it back to be re-used somewhere else. This re-use capability will reduce financing risk, making it less expensive. It will also support different models such as rental or leasing.


All of these observations have caused me to strongly believe that the real growth in warehouse automation will not be with traditional, large systems. While those systems will always be there and also become infinitely smarter, they will be fewer in quantity while there are thousands of small warehouses that have historically been too small to automate. With Industry 4.0, size will not matter anymore.

In case you are working in a larger logistics operation, stay tuned for my next article “Five reasons why Industry 4.0 will help reduce complexity for large, automated warehouses.”

As always, I am interested to hear your opinion on this topic.  Leave your comment below or contact me directly.