Why Warehouse Automation Projects Should Start with a Financing Strategy

One oversight continues to derail otherwise promising automation projects: businesses focus on technology first and financing second. Here, Marco Wagner, Global Head of Intralogistics, and Olivier Pierrel, Intralogistics Sales Manager, discuss how agreeing the strategy for financing warehouse automation and building a strong business case can help organizations accelerate their warehouse transformation.

Is the project economically viable?

It is natural for warehouse managers and procurement teams to begin a warehouse automation project by thinking about technology. They are focused on improving efficiency, increasing capacity, and solving operational challenges. The problem is many organizations spend months designing the perfect automated warehouse system, only to realize they don’t have the budget, funding, or financing structure to support the project.

Projects rarely fail during implementation. They fail when they don’t happen. They get postponed, delayed, or canceled because funding was not considered at the outset.

Before designing the perfect warehouse, understand where the money for financing warehouse automation is coming from, the level of operational savings the new warehouse will generate, and what level of external and internal investments are available to make the business case for the project economically viable.

Why choose finance over capital?

One of the most overlooked aspects of financing warehouse automation is the opportunity cost of capital. Many warehouse managers think using company cash is free because there is no visible interest expense attached. In reality,  every dollar, pound, or euro invested in warehouse automation is one that cannot be invested elsewhere. That capital could potentially generate returns through business expansion, acquisitions, or product development. If such an opportunity arises six months later, it may be lost for lack of capital.

That is why the CAPEX vs OPEX conversation should take place at the start of a project. With an OPEX approach, the investment in warehouse automation is spread over time, can be matched against the future savings generated by automation and the company gains the operational benefits of automation while preserving cash and working capital.

And it is not just future opportunities that should be considered but risks too. The right financing structure allows organizations to modernize operations without exhausting cash reserves. This creates flexibility and resilience when markets become volatile or unexpected challenges arise. Financing gives companies options.

Can finance facilitate business case approval?

One of the biggest barriers to warehouse automation is the internal approval process. Projects stall because internal approvals take too long, funding structures don’t align with business objectives, or stakeholders cannot agree on how the investment should be financed.

A board may be reluctant to approve a $10 million project because there are always competing investment priorities, whether that’s an acquisition or a new IT system. At DLL we help customers translate a large investment into a predictable monthly operating expense. When the conversation is about a manageable monthly cost that aligns with future savings and operational improvements, the decision-making process can be accelerated significantly.

In addition, financing can dramatically change how the financial metrics of a business case look. If an automation project takes five or six years to pay back when funded through capital expenditure (CAPEX), an operating expenditure (OPEX) structure may allow the business to see positive financial benefits much sooner – or even immediately.