More on DC Automation:
Thanks for the opportunity to provide another perspective to your article. As St. Onge Company continues to perform DC master planning for our clients we are hearing about the increased costs of employee turnover. Distribution jobs do not lend themselves to a high level of loyalty. Not that distribution center employees are not loyal but at a $10 to $12 per hour wage rate its hard not to make a move to another job for a 10% increase.
Our detailed master planning process requires the optimization of the current operation as a baseline. This established baseline is then used as a comparative mechanism to justify different levels of automation. I would argue that you cannot and should not automate a process that has not been optimized. As one of my partners says, “Automation enables process. Automating a suboptimal process will yield a suboptimal result.” The optimized baseline provides the foundation for designing the automation as well as the productivity and financial benchmark to ensure effective use of capital.
There are a number of technologies that have matured from concept to viable options. AGV’s are a great example of this. The technology was installed in a number of manufacturing plants in the 1980’s and 1990’s. Some of these multi-million dollar systems never provided beneficial use. They sat in the corner gathering dust. I was at Promat in the 1991 and saw the demo of the Caterpillar AGV loading a tractor trailer. The demo was a success but it has not been until the last year or two that companies have deployed AGV’s to perform this task. The technology has evolved, the applications have been simplified and the units have increased their reliability (ex: the previous units had 14 circuit boards with 3 adjustments pots, current units have 1 circuit board with not adjustment pots). What was previously and idea is a now a viable technology application.
The automation of the mixed pallet is the Holy Grail of the Materials Handling Industry. With about 60% of the labor of CPG distribution centers focused on picking mixed SKU pallets, automating this process holds the key to significantly reducing labor and the associated problems. 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.
Sean O. O'Neill
St. Onge Company
I have been in the Material Handling engineering business for more than 30 years and this is the 1st time I have responded to an editor - your recent article on 'The Two Paths for DC Automation' really got me motivated to write you back. (BTW, for reference I have attached my resume only to indicate the extent of my industry history and why I am so passionate about this subject).
First, some Cliff Notes history!
I feel 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.
Why in my experience? The customer's were in FEAR of losing their competitive advantage back then when the trend to export work overseas to save money (labor, process equipment, facilities, etc.) began.
Changes in the 90's were very interesting to my business - I had to totally change my approach to selling engineering/design services!
Why the changes during that period of time?
Businesses were now thinking less about MRP systems and MRP II and for the first time we starting to focus on the trend of ERP. At this point we were constantly running into project delays due to the fact no one seem to know who was "integrating-the-integrators"? 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. The decision process to think strategically (like you would consider from an MBA client) seemed to quickly turn into short-term thinking. I found some of this due to decision makers wanting to quickly "climb the corporate ladder" and not wanting to stick it out through an automated system implementation/test/and acceptance program. Times were about making systems flexible and easy to install. Some marketing campaigns' were advertising "Simple, Quick and Affordable"!
Today I find the best analogy to describe many of the company's we are working with today as "there is a new circus coming in town"!
Maybe the business will start 'when that next big order hits' and we need something installed yesterday (reference the new 100K square foot DC now being completed in the west side of Phoenix - decision to move-in June 1st 07' and has to be running this month. 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"?
Also, there are "stories" floating around through the corporate ranks that we too often have to defuse that "automation at XYZ Company just didn't workout" When I ask why they respond with a typical blank stare. The stories seem to get passed around the "top floors" like a chain letter would be to 8th graders - changes from conversation to conversation!
We need constant help to defuse these myths of automation failures! I feel most of the people we are meeting with at decision levels are not reading success stories in trade magazines but instead get basic info mouth to mouth among their peers. Yes, this practice has always been out there but, the people making these decisions today seem to have NO background, or have actual working experience in an environment that has build-up to a successfully implemented automation system. Decisions about automating their operations are NOT for the "faint-of-heart" - decision makers must understand the benefits of leading the organization around a common goal to make every move as simple as possible. First by breaking down the many outdated 'tribal practices", they have been executing over the years with constant turnover of personnel, and understand the most basic of all engineering principals - 'making things simple (streamlining operations) is the most difficult program any company could ever undertake to begin an automation project'!
The best advice I ever received was while working on a new MFG/DC Greenfield project for Mars, Incorporated (the M&M candy bar people in their industrial division manufacturing automatic coin changers) was the driving force of every function within that operation - "Do It Right the First Time" and "Touch it Only to Add Value"!
How simple is that? There were no wasted steps anywhere it that operation and the automation worked perfectly the 1st time and the culture was totally integrated.
I have been using this theme as the basis of every material project now for some 20 years! The only problem today is that people like John Mars just don't seem to be involved with improving their DC operations - they seem to be passing it on to overseas production and 3rd party distribution.
Some good news!
I have completed projects for people like Ma Boyle at Columbia Sportswear in Portland, OR, and her son Tim Boyle (President), who hired the "right mgt team" to automate their DC's because they decided the real reason to automate - 'It's their CORE Business'!!
Sorry for too many words - I just couldn't stop once I got started!
Neill E. Glenney
Material Handling Dynamics
Solution Providers Group
Automated picking and order bundling is just over the horizon in a revolutionary system invented by an American and being tested currently. 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. In brief terms, it does the same job and more of it, in a smaller facility that costs significantly less to build in a shorter period of time.
M Jericho Banks
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. 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 stores.
Based on this history lesson, retailers would be smart to design their distribution centers with the utmost flexibility.