Automated Storage and Retrieval Systems (AS/RS) have become a cornerstone of modern warehouse automation strategies. Whether the technology involves shuttles, cube-based systems, cranes, or goods-to-person solutions, the business case is typically built around a common set of objectives: increasing throughput, reducing labor requirements, improving accuracy, and maximizing storage utilization. Yet one of the most important decisions in any AS/RS implementation often receives far less attention than the technology itself: SKU selection.
Companies frequently spend months evaluating vendors, software platforms, and automation architectures. However, even the most advanced AS/RS can fail to deliver expected returns if the wrong products are placed into the system. In many cases, the difference between a highly successful deployment and a disappointing investment comes down to a simple question: Which SKUs should be automated?
The Purpose of AS/RS Is Productivity, Not Storage
One of the most common misconceptions about AS/RS is that its primary purpose is to store inventory. While increased storage density is certainly a benefit, the real value of automation lies in improving warehouse productivity.
AS/RS creates value by reducing manual labor associated with inventory handling. Every automated retrieval eliminates walking, searching, traveling, and material movement. The more frequently a product is handled, the greater the opportunity for automation to generate measurable savings.
This is where SKU velocity becomes critical.
Not all inventory contributes equally to warehouse activity. In most distribution centers, a relatively small percentage of SKUs generates a disproportionately large percentage of order lines, picks, and replenishment activity. These high-velocity items create the majority of warehouse work and therefore present the greatest opportunity for automation.
Why High-Velocity SKUs Belong in AS/RS
The strongest AS/RS business cases are generally built around automating the products that move most frequently.
Consider two products:
SKU A is picked 2,000 times per week.
SKU B is picked 10 times per month.
Both consume storage space within the AS/RS, but only one generates meaningful operational value.
Every time SKU A is automatically retrieved, labor is eliminated and productivity improves. Over the course of a year, those savings accumulate rapidly. SKU B, on the other hand, occupies valuable automated storage capacity while contributing very little to throughput improvement or labor reduction.
Simply put, high-velocity SKUs produce the transactions that justify the investment.
When organizations prioritize their fastest-moving inventory for AS/RS storage, they maximize:
Labor savings
Pick productivity
Throughput performance
Equipment utilization
Return on investment
This is why leading warehouse operators often use ABC inventory analysis to determine AS/RS eligibility, with A-items receiving priority placement within the automated system.
The Hidden Cost of Selecting the Wrong SKUs
Many automation projects encounter challenges not because the technology underperforms, but because the SKU strategy was flawed from the start.
A common mistake is attempting to place too many slow-moving products into the AS/RS simply because capacity is available. While this may increase storage utilization, it often reduces economic utilization.
An AS/RS filled with low-velocity inventory can create several problems:
Lower Labor Savings
Products that rarely move generate few picking events. As a result, automation replaces little labor activity, weakening the original business case.
Reduced Throughput Benefits
System resources become occupied storing inventory that contributes minimally to order fulfillment activity, limiting the throughput impact of the investment.
Longer Payback Periods
If labor savings and productivity gains fall below projections, the expected payback period can extend significantly beyond the original ROI model.
Capacity Constraints
As demand grows, operators may discover that high-velocity items no longer have sufficient space within the AS/RS because slower-moving products are consuming capacity.
The technology itself may be performing exactly as designed, but the financial return can still disappoint.
Focus on Activity, Not SKU Count
One of the most important lessons for warehouse leaders is that AS/RS success should not be measured by the number of SKUs stored within the system.
Instead, it should be measured by the percentage of warehouse activity flowing through the system.
For example, placing 1,000 high-velocity SKUs into an AS/RS that captures 80% of total picking activity will typically generate greater value than storing 5,000 SKUs that account for only 40% of picks.
The goal is not to automate the greatest amount of inventory.
The goal is to automate the greatest amount of work.
That distinction has significant implications for system utilization and overall project economics.
The Importance of Continuous SKU Evaluation
SKU selection should not be treated as a one-time exercise conducted during system commissioning.
Demand patterns change. Product popularity shifts. New items are introduced while others decline.
As a result, warehouse operators should periodically re-evaluate which products belong inside the AS/RS. High-velocity inventory today may not be high-velocity inventory next year.
Organizations that continuously align automated storage capacity with current demand patterns are often able to sustain higher utilization rates and stronger ROI throughout the life of the system.
ROI strategy
Consider a simple ROI example. Assume a company invests $5 million in an AS/RS and expects to save $1 million annually through labor reduction and productivity improvements. The original business case assumes the system will handle 75 percent of warehouse picking activity.
If the company correctly slots high-velocity products into the system, the projected labor savings can be achieved, resulting in a payback period of approximately five years. However, if management fills a large portion of the AS/RS with slow-moving inventory, the system may only process 40 percent of warehouse picking activity. Annual savings could fall to $600,000, extending the payback period from 5 years to more than 8 years. The technology has not failed. The SKU strategy has.
Final Thoughts
AS/RS technology continues to play an increasingly important role in warehouse automation strategies. Yet successful implementations depend on much more than selecting the right hardware or software platform.
The most effective AS/RS deployments are built around careful SKU selection.
High-velocity products generate the majority of warehouse activity and therefore create the greatest opportunity for labor reduction, throughput improvement, and productivity gains. Conversely, filling automated systems with low-velocity inventory can significantly dilute returns and extend payback periods.
For warehouse and supply chain executives, the takeaway is straightforward: an AS/RS should be designed around activity, not occupancy. The objective is not simply to store products in an automated system. The objective is to automate the work that drives operational performance. In most facilities, that means ensuring the highest-velocity SKUs receive priority access to valuable AS/RS capacity.
The difference between a successful automation investment and an underperforming one may ultimately come down to a decision that appears deceptively simple: choosing the right SKUs.
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