First Thoughts
  By Dan Gilmore - Editor-in-Chief  
     
   
  November 15, 2007  
     
 

DC Automation – Readers Respond, Round 2

 
 
Gilmore Says:
Neil Glenney of Material Handling Dynamics and a 30+ year veteran of the material handling industry said our piece caused him to send feedback on an article for the first time in his career! He shares some very interesting perspective.

What do you say? Send us your comments here

As we cruise into a Holiday week here in the US, as promised we are offering part two of the many interesting comments we received on my column on The Two Paths for DC Automation), where I suggested that two somewhat opposing forces (high and growing labor costs and challenges, need for greater flexibility), are gradually driving companies towards two extremes in distribution center automation: either highly automated facilities, to drive out labor costs and headaches, or those with little automation, to maximize flexibility. Moderate levels of automation would be squeezed – not eliminated, of course, but companies would tend to drift to one of the extremes.

Two weeks ago, we posted a number of excellent responses we received on the subject (See Readers Respond – Two Paths for DC Automation?). Here are some more.

Dr. Wolfgang M. Partsch, of Supply Chain Executive Advisors, agrees that DC automation has traditionally been more prevalent in Europe.

“We in Europe use much more automation in warehouses and build a lot of fully automated high rise storage,” he writes. But, he says the return on that expensive investment often isn’t great.

“Sometimes they were built as a monument for the company or the owner, sometimes as a wrong strategic decision, because the key question was never formulated: What inventories do I need in the future always on stock for immediate supply? Only this simple question killed a lot of investments in additional warehouse space and useless fixed assets.”

He thinks manual warehousing using RFID can drive high productivity. “Low cost solutions have emerged, which can transfer a manually-controlled block storage in a fully automated warehouse in a very short time, simply by using low cost RFID-tags mounted in the storage floor and navigation antennas mounted on forklift-trucks,” said Partsch.

Sean Neil of St. Onge also offered some very strong perspectives. He notes that in many sectors, such as consumer packaged goods, automation of the case picking process is “the holy grail,” but that “the problem with the automated systems that are being installed in the food, beverage and chain drug distribution operations is that the equipment is very expensive. Using the conventional models, most companies cannot justify the capital spend. Typical financial justification models which calculated NPV and the benefits of the automation are applied looking for a 3 year (or better) return on investment. Companies need to take a longer term look at the investment and focus on the strategic benefit to the supply chain.”

Neil Glenney of Material Handling Dynamics and a 30+ year veteran of the material handling industry said our piece caused him to send feedback on an article for the first time in his career! He shares some very interesting perspective. “We were engineering projects back in the 80's that were far more automated in manufacturing and DC operations than we are finding today in 2007,” Glenney wrote us, saying companies were more focused then on keeping a competitive operations edge.

He says that the rise of ERP systems, and the tremendous resources and attention required for implementation, was a key factor in automation projects being scaled way back starting in the 1990s.

“The IT groups seemed to be driving projects from the many business activities such as sales, marketing, billing, inventory management, HR, delivery and especially accounting! The real manufacturing and material handling engineering personnel seemed to be now over-ruled by the newly minted MBA's,” he added.

He sees many poor distribution projects being pursued today, without enough time to really get the design and automation systems right. For example, “The new 100K square foot DC now being completed in the west side of Phoenix - decision to move-in June 1, 2007 and has to be running in October. There was no time to plan anything more than a shelf system and some very basic conveyors. This had to be completed for the holiday rush coming up - they stated ‘maybe next year to do some retrofitting’”

Bill Robinson of QuantiSense says industry dynamics in retail mean designing a flexible approach is critical.

“In the last 20 years automation in the DC has had to take two enormous mid-course changes in direction. The first came in the 80s and 90s when it became apparent that vendors would actually collaborate if you asked them. This meant that mass shipments packed at the convenience of the supplier could be packed in a convenient way for retailers, marked, and ready for sale,” he wrote. “This changed the mass holding and sorting areas into flow-through areas. The second came in the late 90s when retail distribution centers suddenly had to begin to ship directly to their customers based on web orders. This required a manual intervention in the automation processes designed to send cartons efficiently to store. Based on this history lesson, retailers would be smart to design their distribution centers with the utmost flexibility.”

M. Jericho Banks of Select Marketing says high levels of automation based on new technology are coming.

“Automated picking and order bundling is just over the horizon in a revolutionary system invented by an American and being tested currently,” he said. “It can accomplish the same tasks as a conventional DC in a footprint about two-thirds smaller and construction costs and times less than half as much. Additionally, this system--with its one-third sized footprint--is about twice as productive as current DCs.”

Hmmm. We better dig into that.

So there you have it. We’ve had more letters based on publishing the first set of letters that we’ll include in the Feedback section soon. We’d welcome even more thoughts from our readers. The full text of the responses excerpted above can be found below in this week’s feedback. They are really good.

No issue next week.

What is your reaction to our reader comments on this issue? Do you agree that the two extremes – highly automated and manual – will expand, and the middle will shrink? Or will we see the status quo? Why? Let us know your thoughts at the Feedback button below.

Let us know your thoughts at the feedback link below.

 
 
     
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