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Focus: Distribution/Materials Handling

Feature Article from Our Distribution and Materials Handling Subject Area - See All

From SCDigest's On-Target E-Magazine

- March 11, 2013 -

 
Logistics News: Different Perspectives on ROI Drive More Aggressive Adoption of Distribution Automation in Europe than US, Expert Says


End-to-End Automated DCs becoming Commonplace in Europe, Marc Wulfraat Says; A More Strategic View

 

 SCDigest Editorial Staff


A variety of factors are pushing companies in Europe to adopt highly automated distribution center systems, one of which is a more longer term view of the business and return on investment.

That according to Marc Wulfraat, president of MWPVL International, a consulting firm that has recently done a lot of work in the Euro market and seen many of these systems first hand over the last 18 months.

SCDigest Says:

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Wulfraat says there is simply a different mindset regarding the payback period from that level of automation - with US companies generally looking for faster ROI than many European companies will accept.
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"What we've seen [in Europe] is a significant adoption rate of automation that is far ahead of what we have here in North America," Wulfraat said during a recent interview on the weekly supply chain video news broadcast from our Supply Chain Television Channel and CSCMP.

In the manufacturing area, especially in what is often called the "fast moving consumer goods" sectors such as food, beverage and paper products, Wulfraat said, "Europeans are well ahead of us. The facilities that have going up over there are upwards of 150 feet high, and the entire systems that these facilities are designed around are for handling pallets in pairs, rather than single unit loads."

Moving everything in pallet pairs enables companies to almost double-up throughput of a facility using the same square footage, Wulfraat notes.

As an example, Wulfraat says that "as pallets come off the production lines, they are moved horizontally to the high bay warehouse in pallet pairs either through overhead monorails, inverted monorails that are floor-mounted, with laser-guided vehicles with double pallet capabilities, or by conveyors."

Regardless of approach, those pallets are usually moving two at a time, Wulfraat said. "Even the AS/RS systems in Europe are twin-masted, and have double pallet capabilities for movement and storage, so everything is doubled up even out to the loading dock," he says.

The automation continues at the dock, Wulfraat says, with prevalent use of automated truck-loading (ATL) technology, Wulfraat also noted.

"You see 24 pallets being loaded at a time without human intervention in the space of just 10 minutes," he says.

Retailers also Automating

In addition to highly automated systems on the manufacturing side, retailers, wholesalers and other more pure distribution companies in Europe are also deploying automation, but of a different sort, Wulfraat.

"What you are seeing there is a tremendous adoption rate of goods-to-person type technologies," Wulfraat says. "And we're not talking about your grandfather's carousel, but multi-shuttle type systems [from Dematic] for case picking. There are literally thousands of these shuttle carriers out there right now."

(Distribution/Materials Handling Story Continues Below )

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Distributors are using a wide variety of different robotic technologies in their DCs, Wulfraat says.

"The level of automation, the adoption rate, even the pace at which vendors are innovating in Europe is significantly faster than we are getting here," Wulfraat said.

Why is Europe So Far Ahead of US in DC Automation?

Why is the North American market so far behind what leading European companies are doing in terms of DC automation?

Experts cite a variety of reasons for this dichotomy. Land costs per square foot tend to be a lot higher in Europe, providing a strong financial incentive to develop a smaller plot and build up, which lends itself to automated pallet storage and retrieval.

Labor costs, regulations and the level and intensity of unionism are often higher in Europe as well, giving companies another incentive to invest in automation systems that reduce the number of workers needed in a DC. This is especially true for new construction, because once a facility is in place, laying off workers can be very difficult in some locations.

Wulfraat says that in some areas of Europe "the wage rates for middle class blue collar labor are much higher than we are used to seeing in the US, so say in a country like Denmark it's not at all unusual to see a fork truck driver cost upwards of $70,000 fully loaded." Regulations that restrict what companies can ask workers to do, the level of guaranteed vacation and other factors all combine to "make the use of labor just that much less attractive there versus here," Wufratt added.

Two other interesting factors also come into play, Wulfraat notes. First, it is much more common for government at all levels to get involved in providing financing for some of these giant projects, Wulfraat says, often at very attractive rates. Whether that is good or bad policy is another matter, but it does serve as a catalyst for automation, Wulfraat says, that is not really seen in the US. Often, it is the federal or state governments from the area where the automation company is headquartered that will make such financing available, a process made easier by use of the Euro currency across countries in Europe.

Even more interesting, Wulfraat says there is simply a different mindset regarding the payback period from that level of automation - with US companies generally looking for faster ROI than many European companies will accept.

"I think the European companies tend to be more strategic in their thinking, they look further out in to the future," Wulfraat said. "It's not that the return on investment perspective is missing, it's just not as pronounced as what we have in North America."

Wulfraat has more to say, as you will find in the video below of the full discussion he had with SCDigest editor Dan Gilmore.

Marc Wufraat on DC Automation Trends in Europe

 

 

 

 


Any reaction to these comments on DC automation trends in Europe? Should US companies take a longer view in terms of ROI? Let us know your thoughts at the Feedback button below (email) or in the Feedback section. Anonymity will be provided upon request.


Recent Feedback

Europe and US are both Western Mature Markets with fairly similar characteristics from the capital markets.  Therefore, hurdle rates should be similar for same-sector/same-risk projects, and the payback challenge is the same across the two mentioned regions.  While increasing hurdle rates to compensate for poor sensitivity or risk analysis is used often, I have never come across indications that this practice is more widespread in the US.  


Johan Vinkx
Logistics Engineer
Business Student
Apr, 07 2013
 
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