While doing a series of phone interviews for our 2011 report on Automatic Case Picking (ACP), which will be published soon, I spoke with a logistics executive of a large U.S. based hard goods retailer (we will refer to them as the XYZ Company) who has a relatively small amount of full case picking volume, but is never the less interested in automation. Here’s why.

First a few company statistics:

1. XYZ operates out of (8) regular full service DC’s located across the U.S., which are in the 350K to 550K sq. ft. range plus (2) smaller import facilities (managed by expediters).
2. Each DC serves several hundred retail stores.
3. Product offerings include 67,000 SKUs, of which 95% are shipped in less than full case qty.
4. Full case picks amount to less than 5,000 per day.
5. 70% of non-palletized volume is picked to carts pulled by powered tuggers, 10% picked by order picker trucks, and 15% by manual push carts.
6. Pallets, cases, and individual items are all bar coded.
7. The normal operating schedule for the DCs is single shift going to OT or 2nd shift during peaks.

We are sharing the following additional information in order to point out that while the XYZ Company claims to be a conservative company “deep pockets with short arms” it has a long history of exploring, developing, and deploying improved material handling technologies, including automation, that will work in their operation and has a proven ROI.

For example:

• The XYZ Company was an early adopter of batch order pick-to-belt and sorting technology installing one of the first such systems back in the mid 70s. The system is still operating daily in one of the company’s original DCs processing a relatively small volume of fast moving (seasonal) full case SKUs.

• The company has another relic from the past – a chain-in-the-floor towline. It is understood that the next time it breaks down, which could happen at any time, it will be removed – no longer worth the cost and effort to keep it running.

• A few decades ago (well ahead of the industry) XYZ developed its own “home-growing” WMS. They are a long time user of RF scanning and have recently adopted voice picking technology for split case picking. They are currently considering deploying vertical lift modules (VLM) that will allow them to store and pick slow moving SKUs in less space with a more ergonomic floor accessible picking method.

• While most of their DCs are in the 30 ft. clear height range, they are considering NA & VNA storage configurations designed to optimize storage space (some DCs are now locked) while increasing picking productivity.

For the most part, XYZ is interested in automation that will reduce picking costs, headcount, and improve throughput capacity while avoiding expanding its existing facilities or building new. However, they have a higher than typical amount of hard to handle and non-conveyable products, which has stymied investigation into high levels of automation.

An Impressive Array of Automation Possibilities are Available for XYZ to Contemplate

With such a small amount of full case picking volume, ACP would probably not be justified on a standalone basis. However, integrated into an overall automation initiative, real ROI may be achieved.

The following are a few possibilities that come to mind - some of which were presented in the SCD report “Automated Case Picking 2009”:

• For starters, XYZ could consider ACP solutions like the Gantry Robot System (ref page 24 of the 2009 ACP report), which conserves floor storage while improving cube utilization. The system creates a high density, floor stacked inventory (pod) of full case SKUs then automatically order picks the cases to a conveyor that transports them to palletizing or direct to a shipping trailer(s). System designs and layout configurations are flexible and easily scalable - XYZ may need only one or two “pods”.

• XYZ’s manual push cart operation, that processes 15% of the volume, represents “low hanging fruit” – in our opinion. In a blog posted last week (“Are U.S. Distributors Falling Behind The Automation Technology Adoption Curve?”) we reported on a low cost AGV that we believe has real potential for a variety of low volume picking and order assembly operations. The idea is to eliminate as much non-value-added labor (such as walking) as possible. That is exactly what this new generation of flexible path AGVs are designed to do.

• Then, leaving the best to last, there’s the “tugger” operation which processes 70% of XYZs volume. This labor intensive operation can be improved by adopting AGV/robot-based case and piece picking technologies. We mention this in the February 16th blog (referenced above) and in the 2009 ACP report (page 20), where we described two types of systems (Product-to-Picker & Picker-to-Product), either one of which offers potential savings for the XYZ company.

At this point it is important to note that mobile-robotic automation is a product-to-picker technology that changes the game - delivering lean without operational or cost tradeoffs. This technology will be presented in an upcoming SCD videocast scheduled for March 3rd – “Lean & Warehouse Automation Can Go Together”. During this webinar you will learn about components of mobile-robotic automation systems, see how the solution works and experience actual operations via a set of case study video segments.

 

The XYZ Company has a huge amount of slow moving SKUs, that is the ideal environment for a product-to-picker solutions like mini-load AS/RS (see – “Managing Slow Movers With Product-to-Person Technology”)

• Another “tugger-like” possibility, although less automated than AGVs, that would offer XYZ increased productivity would be to replace the existing tuggers with center control rider pallet trucks that can be equipped with Crown’s new QuickPick™ Remote Advance System as describe in Distribution Digest Top Stories (“New Products from Crown Equipment Offer Potential Path to Higher Distribution Center Productivity”)

Important Store Benefit: - If XYZ Company adopted any of the above automation technologies they would have the additional capability of being able to build (automatically or manually) store ready pallets, where the items are palletized by aisle and in replenishment sequence. The cumulative labor savings across their retail chain alone could be more than enough to justifying the capital investment in automation at the DCs.

The upcoming Supply Chain Digest APC report for 2011 will include case histories demonstrating that ACP is not “science fiction”, and that these are real solutions that are in fact being implemented in real companies with real results and ROI.

Final Thoughts

The XYZ Company has a large and complex logistics operation. Their challenge is to keep their DC operations responsive and competitive. There’s no way that we could possibly gather enough information in a 30 minute phone interview to properly asses the automation potential for the XYZ Company, nor was that our objective.

Our point is that product mix alone is not a determining factor on the adoption path to material handling automation at the DC. What’s required is a comprehensive analysis that compares and contrasts the company’s changing business and operational requirements to available material handling solutions. Each product category presents its own set of conditions and challenges leading to appropriate processing methods. The end result is a fully integrated blend of technologies that often includes manual, mechanized, semi-automated, and automated systems each capable of delivering specific processing and financial results.

For sure there are many challenges facing today’s busy logistics executives. Being aware of the rapidly changing world of DC automation is critical to avoid falling behind and having to play catch-up.

Agree or disagree with Holste's perspective? What would you add? Let us know your thoughts for publication in the SCDigest newsletter Feedback section, and on the website. Upon request, comments will be posted with the respondent's name or company withheld.

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