Many companies with aging Material Handling Systems are looking for ways to lower cost and improve performance. By following 3 strategies, companies can realize significant cost savings from their current material handling equipment while increasing service life and reducing downtime.

Industry experts agree that with very little capital expenditure, you can increase the performance of older (+5 yrs.) conveyor and sortation systems by 10 to 20%. This is primarily due to the accumulation of natural changes occurring in the company’s business model, management team, and customer order profiles, along with advancements in MHE system technology.

The following table shows the typical benefits that can be derived from a pro-active approach to system optimization management:

Still, many companies grapple with the question - how can we reduce costs of our current operation without hurting output? But, it may not be all that complicated. For example, by following a few simple steps companies can gain months or even years of prolonged MHS service life at lower cost. The approach consists of (3) easy to remember strategies – Reduce, Reuse & Recycle.

Reduce: An effective way to reduce cost is to determine how efficiently your MH systems are running by doing a performance audit. A performance audit can help you zero in on productivity drains, evaluating such areas as picking, conveying, and sorting rates. Whether you utilize internal resources or hire an industry expert, a comprehensive audit will analyze systems from both an operational and functional standpoint, including a final report detailing recommended adjustments. Thus, you will be able to pinpoint and fix inefficiencies, realizing cost savings from improved productivity rates and system performance. Recently, Distribution Digest posted two articles that will help you get started (See Distribution Center Audits – Real Value, or Marketing Exercise? & Guidelines for Successful Distribution Audits.)

Another reliable and effective way to reduce cost and get the most out of your aging MH equipment can be found in Preventative Maintenance (PM). In particular, it can reveal if your equipment is functioning properly or if it requires a tune-up. Regularly scheduled preventative maintenance can help you determine when components will fail so you can do corrective work on them before they break down. Thus, you can keep systems running at peak efficiency and avoid the high cost of malfunctioning equipment, including downtime for emergency fixes and hefty replacement expenses for components beyond repair. As a result, you can cut expenditures on equipment overhauls and maintain your capital.

If you do not have sufficient in-house maintenance capacity to perform a proper PM program, consider outsourcing to your local MHE provider.

Reuse: To reuse existing MHE and avoid the high cost of replacement, consider retrofitting, which can boost efficiency by 15-20% or more. By retrofitting the equipment, your system will be able to function beyond its initial capacity limits and be in better condition to satisfy increased production demands. This can involve upgrading components, increasing speed/capacity, or incorporating new technology as many new technologies work well with older equipment.

Companies seeking to retrofit material handling systems and equipment can choose from a number of readily available technologies. For example, they may consider setting up a crossdocking capability, or adding a Warehouse Control System (WCS) to enhance performance and broaden access to real-time operational data. They can also choose to incorporate volume and weight data for checking and invoicing or integrate sophisticated induction and sorting capabilities. Some companies can perform the less complex retrofits in-house, utilizing illustrated step-by-step instructions provided by the MHE vendor, while others may opt to outsource it to service professionals.

By reusing equipment instead of replacing it, you can enjoy considerable savings. For one thing, the cost of retrofitting is often less than 60% of new equipment cost. Moreover, by retrofitting and modernizing your equipment, you boost its reliability, renew its service life, while cutting maintenance and operating expenses. Furthermore, by retrofitting, companies can ensure compliance with current federal and state safety regulations, thereby helping reduce work-related injuries and insurance premiums, including workers' compensation. Finally, a retrofit allows for parts standardization, further trimming costs as well as making parts easier to replace.

Recycle – a new, but rapidly growing “Green” approach: Instead of purchasing new equipment when operational requirements change, companies should begin to consider buying Remanufactured Equipment whenever practical. While this is a relatively new approach for the materials handling industry, as the “Green” movement continues to grow, it will become a more common alternative.

With this approach companies will be able to take advantage of lower capital equipment costs, as remanufacturing retains much of the original item's value while removing a big chunk of new equipment overhead generated from material and transportation costs. Indeed, the remanufacturing process which includes - disassembling, cleaning, replacing non-working parts, refinishing and reassembling - requires less labor, energy and resources than purchasing new equipment. And, remanufactured equipment often offers the same warranty as new.

Companies who choose remanufactured equipment may someday enjoy significant tax savings as well. The Remanufacturing Institute (TRI) (www.reman.org), a prominent remanufacturing industry organization, is lobbying Congress to approve legislation giving tax credits of up to 20% to companies that buy remanufactured equipment. If/when passed, the bill (H.R. 5659) could mean millions of dollars of tax savings per year for some firms.

In short, by reducing, reusing and recycling, companies can realize considerable cost savings while boosting the return on investment from material handling systems and equipment. While companies must understand that these strategies can't push back new capital expenditures indefinitely, these 3 strategies represent effective ways to get the best performance and value out of aging MHE and systems.

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