September 13, 2017

Sorting It Out: The Typical Distribution Center Business Model Is Rapidly Changing

Can Automation Provide Flexible, Adaptable Solutions?

Most shippers, across the broad spectrum of the consumer goods marketplace are being forced to make critical changes to their operating model. This is especially true for small to medium size independent shippers. The following are but a few of the market dynamics driving the changes.

• 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 value added services (VAS)
• Difficulties in attracting and retaining qualified labor

Based on surveys and phone interviews, consumer goods shippers could use some help in determining; (A.) when to upgrade operations, (B.) what is the business case for automation, and (C.) what types of automated solutions are appropriate.

Holste Says... 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. What do you say? Click here to send us your comments

A. When to Upgrade

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 picking and shipping 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. Consider hiring an independent industry consultant to assist in this effort.

B. The Business Case For Automation

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 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 shippers do not have good measurable data or operating standards in place to use as the basis for evaluating alternatives.

For more information see – “Understanding Key Drivers for DC Automation” & “What is The Correct Level of DC Automation”

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. 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 goods-to-picker solutions and robotic picking solutions.

For more information see – “Searching For Cost Effective Solutions to Piece Picking Challenges”

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 mechanized 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. A great place to start your planning process is at industry trade shows such as Modex 2018 in Atlanta, GA. April 9 thru 12, 2018. You can quickly check it out and pre-register at www.Modexshow.com

Final Thoughts

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

Any reaction to this Expert Insight column? Send below.

Your Comments/Feedback