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Cliff Holste

Supply Chain Digest
Material Handling Editor

Logistics News

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.

Feb. 10, 2016

Logistics News : Looking Beyond Cost Reduction for Additional Benefits

The Role that "Soft Benefits" Play in Justifying a DC Automation Project


Shippers who are expecting to increase capacity through the adoption of higher levels of automation often find it necessary to look beyond the traditional cost reduction strategies for justification. They often look for “soft benefits” that are the byproducts of processing higher volumes with more efficient methods. For example, systems and methods that:

  • improve communications between departments
  • Improve inventory accuracy
  • improve workplace safety
  • reduce operator training time
  • speed-up order fulfillment processing
  • track mobile assets throughout the DC
  • reduce shipping errors and improve customer service

When purchasing automated equipment such as an automatic print-and-apply case labeling system, or robotic palletizing, soft benefits are generally not a factor. A new piece of automation that increases capacity and/or reduces labor can easily be evaluated on a standalone basis. This is particularly true in a multi-shift operation.

Holste Says...

Going forward, indications are that automation in the DC will be a factor in recruiting tech-savvy workers.

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The adoption of semi-automated technologies such as, batch order picking and sorting, goods-to-person, or other types of integrated systems that save time through the elimination of redundant, overlapping or opposing activities can be difficult to cost justify on their own merits. Financial planners understand that traditional cash flow models and justification time frames may not provide a true picture comprehensive picture of all of the benefits that a company can realize through its investment in automated and semi-automated processes.

However, in spite of the justification challenges, industry surveys indicate that many shippers plan to add more automated and semi-automated technologies to their operations in the near future. That said, among those not currently using automation, the perception remains that automation is too costly and does not provide sufficient operational flexibility to accommodate rapid changes in customer order profiles.

If a company is going to take full advantage of technologies that can grow the business, then a more comprehensive evaluation and justification strategy may be required. The following graphic lists important “soft” or intangible benefits, along with a suggested metric, that planners may want to consider:


Suggested Metric for Justification:

Ability to respond to fluctuations in demand

The maximum level of throughput that can be achieved in a short period.

Ease of data acquisition

Time to acquire critical data

Improved speed to complete orders

The percentage of on-time shipments

Improved company image to customers

Ascending or descending sale curve

Improved Cost Control

Declining per piece handling cost

Automated information conversion

Accumulative time spent by analysis retrieving data

New product introduction

Time measured in months or weeks

Reduced software upkeep (maintenance)

Historical costs

Reduced production lead-time

Lead-time associated with an order

Reduce business risk

Flexibility to handle changes associated with customer demands and order profiles

Improved space utilization

Cost of expansion or building a new facility

Reduced setup times

The percentage reduction in set up for VAS

Improved communications

Sales forecasting speed and accuracy

Value of real-time information

Higher ship complete factor

Improved safety

Lower workman’s comp claims

Better working environment

Lower labor turnover rate

Less product damage

Reduced customer claims/back charges

Improved inventory security

Reduced shrinkage

Improved inventory accuracy

Accumulative cost of stock-outs and shipping errors

Improved throughput

Greater overall shipping capacity


The next best opportunity to learn more about automated system technologies and how they can best be applied can be found at MODEX 2016 April 4 – 7, 2016 in Atlanta, GA. Check-it-out at: www.modexshow.com

Final Thoughts

Going forward, indications are that automation in the DC will be a factor in recruiting tech-savvy workers. It may already be a contributing factor behind the rapidly growing trend toward material handling automation among grocery, beverage, and pharmaceutical distributors, who traditionally have a longer planning horizon than general merchandise distributors.

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