In today’s dynamic DC environment order fulfillment processes are becoming even more demanding and complex. While there may be many contributing factors it appears that SKU proliferation and volatility (as in here today gone tomorrow), frequent changes in customer order profiles, and the explosion of small Internet orders, are among the major drivers especially for consumer goods retailers. In addition, the focus on “lean” that most companies have adopted makes DC improvement project justification all the more challenging. Still, the quest for higher levels of productivity is unrelenting.

Caught between decreasing productivity, aggressive competition, and the accelerating flow of advanced technologies, today’s distribution executive senses an urgency to act. Yet the very complexity of the problem argues hesitation. Some search, often in vain, for assurances that the decisions made will be the right ones, and that the productivity, efficiency, and throughput goals will be realized.

Addressing The Issue of Automation Complexity and Justification

Based on responses received from various surveys relative to DC automation, complexity and justification appear to be major stumbling blocks for many companies. There are several reasons for these concerns, such as:

• vendor tendency towards excessive equipment, control, and software complexity,
• ill-advised experimentation with new methods and/or technologies,
• inadequate project planning relative to options and alternatives,
• subjective decision making and justification.

Given that DC operations are inherently complex, the central question then appears to be - are automated processes more productive than conventional mechanized processes?

The answer is not as clear cut as we would like for it to be. We are going to try avoiding the “it depends” response by addressing a few important pros & cons:

Pros - Automatic equipment/systems such as weigh-in-motion, label print and apply, case filling and sealing, sorting, palletizing, and the newer generation of AGVs and robotics, are examples of where automation will definitely increase throughput and productivity. This is true because automated equipment of this type can operate in the typical DC environment reliability and efficiently without on-going human interaction.

Cons – Because all automated equipment has a maximum production rate/speed, there can be operational and flexibility issues relative to incremental capacity. Whereas, in manual operations often labor can be moved and adjusted to accommodate peak volume periods, with automated processes once the maximum throughput capacity is reached the options are often limited to working overtime, adding a second shift, or expanding the operation. This is sometimes described euphemistically as being a “scalable” solution.

Finally - Vendors are generally not willing to guarantee that the deployment of their automated equipment and/or system solution will equate to higher levels of DC performance. This is because simply designing an automated process as a tool for increased throughput and/or productivity is not enough. This tool must be properly and safely applied. It must be properly integrated into the overall operation. Operators must be taught to understand its proper use. They must be taught to have faith in its ability; not to fear or suspect it. It must be properly managed. And above all, it must be continuously updated and maintained.

Incremental Justification

The following approach is sometimes referred to as “incremental justification” - or maybe it’s just common sense. In any case – it’s the best way to avoid over stating the ROI associated with an automation project.

Before considering a higher level of DC automation, a company should examine all of its operational areas such as, receiving, put-away, picking, value-added services, order consolidation and shipping to determine how they can be simplified and streamlined. Go beyond the “low hanging fruit” stage, look for functional improvements in slotting, order batching, pick path routing, and workflow simplification.

Often these types of incremental upgrades when taken together can yield as much as 10% to 20% improvement in overall productivity, and can be realized with a relatively small initial investment (see - Pro-Active Approach to System Optimization Management). After these upgrades have been made, what remains should be consistent enough to consider automating and at that point may or may not be justified.

Consider Flexibility & Adaptability

Highly automated bolt-to-the-floor systems can be difficult to reconfigure once installed. If your business is in anyway fashion orientated, then you know that year-to-year changes in products, customer order profiles, and value added services are normal and to be expected. Therefore, all throughout the system planning stage the need for operational flexibility must be stressed. In addition, many DCs have at least one or two huge peak seasons per year when they may require a large pool of temporary labor. In this case, automation may be a benefit or a hindrance depending on how it is designed and applied.

Final Thoughts

Complexity is the 21 century is a reality that we must learn to live with. While we don’t have to know how digital information travels through cyberspace in order to send and receive e-mails, in order to avoid panic and chaos, we must understand what our options are when the system temporarily goes down.

In the same way DC managers should understand that failure of a high capacity automated process can be expected and potentially difficult to recover from. Therefore, when considering deploying new technology, or even processes that are new to the operation, a well conceived backup plan, or temporary work around, that will keep your operation running while faults are being corrected, is essential. This is especially true if experimental or prototype equipment is deployed in the mainline system.

As it relates to the deployment of automated material handling systems - it’s all about the planning, organization, and implementation of the complex factors which affect the realization of productivity, efficiency, and throughput goals.

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