Holste Says: Trying to make an aging system perform in ways for which it was not designed can put the future of the business at risk. What Do You Say? Click Here to Send Us Your Comments Click Here to See Reader Feedback

Recently, we reported on strategies that can extend the life of an aging DC material handling system. However, at some point companies know that adopting more up-to-date methods is inevitable.

Complicating the adoption process is that there are many more options for order processing automation than most DC executives and operations managers realize. The speed, at which system providers are bringing automated solutions to market, along with the number of deployment proof points that have been establishes in just the last few years, is truly impressive. This would appear obvious to anyone who attended ProMat 2013. See our Day 1 & Day 2 video review.

Companies, who are considering DC automation, should first have a consensus among the planning team managers as to what the system objectives and business issues are relative to adopting new and more highly automated processing methods.

In today’s quick response environment, while throughput and order accuracy are still highly important system objectives, the key business factors are flexibility and agility. Operations that have these characteristics have the inherent capability to quickly and efficiently adjust system operations to changing order profiles, while providing customized value-added order processing and palletizing services - all within a 24 hour (or less) shipping window.

With the understanding that companies are unique in their individual approach to the marketplace, and therefore require, to some extent, customized solutions; we offer the following as a starting point for the search by listing a number of key variables or attributes that can differ across technologies and providers.

• Initial System Cost: Hardware, software, implementation, building modifications, training, etc, can vary widely depending on how much new equipment and technology will be integrated into the current operation. All of which will need to be justified based on a combination of hard and soft benefits. Independent industry experts can assist in the development of a preliminary project planning objective and budget.

• Flexibility & Agility: How will the automation handle business/consumer changes, customer order profile changes, and SKU changes relative to velocity and varying carton sizes and weights? The equipment and technology must be able to continually support the evolution and integration of value-added-services (VAS).

• Throughput (cases per hour shipped): This can be tricky to calculate due to the incremental way systems can be implemented. For example, automated picking may improve productivity and flexibility but not bump-up throughput. Deployment of an automated package sorting system may increase throughput but require changes in order fulfillment and/or packaging operations. Throughput is therefore a function of the slowest mainline operation.

• Supporting Labor Cost: How much labor will be needed to staff the new system, or in related work processes upstream and downstream from the new system?

• Process Complexity & Replenishment: How complex will the system be to manage, especially relative to replenishment - an often overlooked factor? High capacity order fulfillment systems must be supported by equally robust active stock inventory and pick-face replenishment systems.

• Footprint Requirements: How much floor space and vertical height is required and optimal (these are two different numbers)? You might also want to assign a cost to this space usage.

• Changes Required to Existing Building: Scope and cost of any building changes needed for each alternative system technology under consideration.

• Expansion Capability (Scalability): How “small” can you start, and how easy and expensive will it be to expand the system over time?

• Maintenance Issues/Uptime: What sort of system maintenance will be required? What are the technical skills required (can you do it with internal resources?), and, what is the projected level of uptime and/or the MTBF (Mean Time Between Failures) for key pieces of equipment and systems?

• Percent of Total Volume That Can be Handled: Each alternative automation technology under consideration will likely vary in terms of how much of your total order processing volume that they can physically handle. Some percentages will probably require manual processing.

• Proven Implementations: How and where has each solution been implemented, both generally and within your industry or type of distribution model? That does not mean a company shouldn’t consider partnering with a system provider to jointly develop a new-to-market solution. But, among more established solutions, see where your type of application has been successfully deployed.

• Power Consumption: How much energy will each system under consideration use?

• Safety: Are there important differences in the level of safety and risk of injury between the different alternatives?

• Backup Plan: Understanding that customer orders must be shipped every day, what contingencies are available in the event of a major system failure?

• TCO & Total ROI: What is the project total cost of ownership (TCO) over five years, and then what is the total ROI for each solution?

Of course, other criteria can be added that is more specific to the companies operation and the specific technologies being considered, but we think this is a good list from which to start the search and evaluation.

Final Thoughts

Abandoning the old for the new is not without risk. It requires considerable thought and planning. However, trying to make an aging system perform in ways for which it was not designed can put the future of the business at risk. Look for a middle ground where integrating new automated order fulfillment processes with updated receiving and shipping operations provides the desired flexibility and agility going forward.