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About the Author

Cliff Holste is Supply Chain Digest's Material Handling Editor. With more than 30 years experience in designing and implementing material handling and order picking systems in distribution, Holste has worked with dozens of large and smaller companies to improve distribution performance.

Logistics News

By Cliff Holste

August 7, 2013



Rapidly Changing Logistics Requirements Drive Higher Levels of DC Automation

Satisfying the Need for Operational Flexibility & Agility


Holste Says:

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To actually determine the amount of automation that can be justified, you need to have metrics to measure the impact of automation against.
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Previous Columns by Cliff Holste

Sorting It Out: Achieving Sortation System Success

Sorting It Out: Optimizing System Performance

Sorting It Out: Shippers Looking For Small Footprint, High Density Storage & Picking Solutions

Sorting It Out: Shippers Searching For More Flexible, Adaptable, Scalable & Cost Effective Solutions

Sorting It Out: Ten Factors Driving Small Parcel Shipping Volume

More


Food and beverage distributors have been the leading adopters of automated material handling technologies going back over 50 years to the early days of AS/RS (Automated Storage & Retrieval Systems). Today, many of these distributors depend on automated systems to process 10,000 cases per hour through a single facility. At that level, material handling automation technologies along with the sophisticated sorting, controls and software systems to manage and operate them, become a justifiable necessity.

For the typical consumer goods distributor benefiting from automation is a bigger challenge. Many of these distributors are shipping less than 10,000 cases per day making it much more difficult to justify even basic levels of automation. However, they too are under pressure to reduce labor and improve efficiency in a DC environment that is becoming more specialized and demand driven. One of the key drivers for the adoption of automation is the need for more flexible, agile, and scalable material handling solutions.

According to interviews with a variety of logistics executives, key characteristics of the warehousing and distribution center business model are rapidly changing. The following are just a few of the stated examples:

 
  • Proliferation of items, especially slow moving SKUs
  • Shorter lead times for processing and shipping orders – once 2 or 3 days, now becoming next day or even same day
  • Higher proportion of small orders due to E-Commerce and other multi-channel marketing strategies
  • More severe and later seasonal spikes in volume
  • Ever increasing demand for highly customized VAS
  • Difficulties in attracting and retaining qualified labor


Both large and small distributors across a wide variety of market sectors are facing these challenges.

Based on surveys and phone interviews, consumer goods distributors could use some help in determining; (A.) when to automate, (B.) how much to automate, and (C.) what types of automation solutions are appropriate.


A. When to Automate

Industry experts consider the following to be good indicators for when it’s time to upgrade operations:

 
  • when the ability to meet daily throughput volume is being compromised
  • can no longer meet quick response shipping requirements
  • Mix of small and large orders causes higher levels of system inefficiency
  • experiencing frequent bottlenecks and system interruptions
  • operational productivity is declining
  • amount of overtime is increasing
  • experiencing higher than normal employee turnover rates


These are all clues that the current DC order fulfillment methods are insufficient and/or are no longer optimized.

Going forward it is important to understand that comparing new more automated methods to existing sub-optimized operations will result in calculating an inflated ROI. To avoid this mistake, make sure your operation is running as effectively as possible, start by first focusing on the “low hanging fruit” such as: slotting, replenishment, location and inventory tracking, vendor compliance, and picking, packing, and shipping productivity.


B. How much to Automate

 

The most labor-intensive operations can usually support some level of automation. For instance, in the typical direct-to-consumer business model, the areas of picking and packing can represent 50% to 60% or more of the total DC labor cost. Tracking, storing, and processing thousands of SKUs of vastly different sizes and shapes present additional challenges. Key variables are:

 

 
  • product type (size, weight, cube and handling/storage peculiarities)
  • order volume (min, max, and average)
  • and, the number of units required to fill orders (order profile).


Items that are considered to be non-conveyable will probably fall outside the scope for automation requiring manual processing methods with mechanical devices to assist.

To actually determine the amount of automation that can be justified, you need to have metrics to measure the impact of automation against. Unfortunately, many companies do not have good measurable data or operating standards in place to use as the basis for evaluating alternatives.


C. What types of Automated Solutions are Appropriate

 

Full case and split case pick/pack operations lend themselves to certain types of automation. Batch order picking of full case orders for example, is fundamental to automated conveying and sorting systems. Whereas, the need to quickly process a large number of small orders of less-than-full-case quantities, is the ideal environment for various types of automated product-to-picker solutions.

The increasing demand to build mixed case pallet loads is one of the key drivers for automatic sequencing and robotic palletizing solutions. Important advancements have been made in the design of robotic handling devices and sophisticated controls and software systems required to build these integrate stacking patterns.

DC executives should consider the flexibility, adaptability, and scalability of automated solutions when comparing them to the more conventional bolt-to-the-floor solutions. This is especially true for Automatic Guided Vehicles (AGVs) systems which are gaining popularity in the DC environment. There are dozens of automation technology providers in the market today who offer their material handling solutions separately or as a part of an integrated solution.


Final Thoughts

Automation technologies at some level can help most DC operations become more competitive. The path to selecting and deploying a cost effective solution can be challenging, but well worth the time and effort.

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