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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.

September 21, 2016

Logistics News : Growing Economy Drives Investment In Automation Projects

Success Depends on Project Planning


When planning a highly mechanized/automated material handling project, companies expect that the new system will be capability of handling future growth in a more efficient and productive manner. The new system capacity may be 2X or 3X current volume. The savings generated by the project will fluctuate based on actual sales volume, usually beginning small in the first year, and then gradually increasing as the number of customer orders and volume of goods shipped increases. This should be reflected in the payback calculations showing a gradually increasing ROI as volume grows over the forecasted period. However, if business conditions change such that the projected volume levels never materialize, then the company’s investment in automation may not be fully realized.

Does this mean that companies should shy away from investing in projects that are tied to growth? Not at all! If you don't invest in the future, it will surely be bleak. Instead, observe the following important project planning principles when working through the financials of your project.

Holste Says...

Engaging the task force early in the life of the project helps to ensure that the right personnel are available when they are needed.

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  • If the system is large or especially complex, and obtaining the necessary volume to justify the project is unrealistic, it may be a good idea to divide the project into steps or phases that are more readily manageable. This approach also allows for some adjustments to be made to future phases to accommodate business realities and/or operational changes.

  • To help ensure that your project stays on budget and on schedule, an experience Project Manager (PM) must be a key player throughout the design and implementation phases. A PM is often included as part of the system providers services. But, you need to understand that the provider’s PM works for the benefit of the provider. To increase your comfort level, you can hire a consultant or industry expert to provide independent PM services.

  • Prepare for extra help and training at startup to avoid costly delays.

  • Plan for workarounds if/when there are unexpected interruptions to shipping schedules.

Because stuff happens, the last two points cannot be over stressed. In addition to the PM, an internal startup support task force should be assembled well in advance of the project completion date. The mission of the multi-discipline task force is to provide all the technical and management resources needed to keep the project moving forward and on schedule. Engaging the task force early in the life of the project helps to ensure that the right personnel are available when they are needed. When people unfamiliar with the original planning and system design are brought onboard in the late stages of the project, there is a danger that overall system objectives, no matter how well documented, will not be fully understood or properly supported and implemented.

Final Thoughts

The inflection point for where automation can be justified is constantly dropping. Small businesses are now finding that there are affordable, scaled down solutions available. Often material handling providers can propose low end solution that can be quickly deployed, and that will provide benefits once enjoyed only by large scale high volume operations.


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