July 2004 | Commentary | Supply Chain Technology

Achieving Success with AS/RS

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Storage is one area of the supply chain that can provide increased efficiency, cost savings, and other benefits. In fact, automated storage/retrieval systems (AS/RS) can eliminate the need for physical inventory, according to Jurgen Conrad, CEO and president of Viastore Systems Inc., which develops and implements AS/RS and other automated material handling systems.

"Correlating equipment control with information control is the key to material control," Conrad says. "Material control means pinpointing exactly where material is located, knowing its status, and being able to get it where it's needed, exactly on time."

Achieving improved material control is one of the most important functions of an AS/RS, Conrad notes. Using an AS/RS to automatically store and retrieve product provides the means for controlling the movement of material, and eliminates the possibility of human error.

A secondary, but no less important benefit of an AS/RS system is the immediate reporting of moves completed, which provides a critical link in the chain of information systems that control inventory.

"Simply stated, using an AS/RS with an inventory tracking software system lets you know exactly where all your inventory is at all times, eliminating the need for physical inventory," Conrad says.

The benefits of material control through AS/RS systems are visible and decisive within an enterprise's supply chain. In many businesses, for example, AS/RS systems measure and analyze sales that are lost due to poor customer service. Accurate records may also be available to measure production costs resulting from material shortages.

"Material control is the key to dramatic reductions in these areas of loss," Conrad notes.

Reducing Inventory Costs

Perhaps the most dramatic savings can be realized from a simple reduction in inventory value. In the past, studies indicated that average inventory carrying costs were about 30 percent of value annually. Carrying costs today can range as high as 40 to 45 percent of value per year.

These are excess inventories that are:

  • On-hand well in advance of need.
  • Segregated for manufacturing well in advance of need.
  • Known to be received and in-house, but not locatable.
  • Inaccessible because paperwork has not yet been processed.
  • In excess of that required for insurance against shrinkage, such as theft.
  • Partially complete product unfinished because of material shortages.

"AS/RS systems contribute to improved inventory accuracy by providing control over and instantaneous reporting of material moves to the host computer system," Conrad says. "Managing in-process inventory offers many benefits. It is common for the value of material to multiply several times from the time it is received as raw material until it is delivered to a customer as a finished product.

"A company may realize large inventory cost savings if it has the ability to change the proportion of product held as raw material vs. the proportion of product held as work-in-process or finished goods."

300-Percent Increase in Productivity

Where would an AS/RS system have the most impact on the bottom line within an enterprise's supply chain?

"The use of automation has the potential to increase shipping and receiving productivity by as much as 250 to 300 percent," Conrad says. "The manual storage, replenishment, and staging of inventory also can be completely eliminated in many cases."

In addition, AS/RS systems can produce operating savings resulting from reduced product damage due to multiple handling by lift trucks, and lower utility costs through reducing expensive refrigeration in freezers and cold storage. A typical AS/RS design also saves many cubic feet of unnecessary building space because of its dense storage capacity.

Some industries are more suitable than others for AS/RS installations. Virtually all industries use AS/RS to some degree, but it is more common in the automotive, heavy machinery, large appliance, and office furniture industries, simply because these industries historically have had more capital equipment dollars to spend. These industries have been leaders on the "bleeding edge" of technology, and they have helped develop AS/RS systems to what they are today.

"From Viastore Systems' perspective, AS/RS is an ideal solution for any company that has a relatively high throughput rate, works multiple shifts, and has peak or seasonal throughput rates that may be difficult to deal with," Conrad says.

"In a typical AS/RS system, inventory is received, stored, and transported by an automatic Storage/Retrieval (S/R) machine that just by its inherent design reduces or eliminates product damage and uses less energy than most conventional system designs. It also requires less maintenance.

"Automotive and Tier 1 automotive suppliers have always been big users of AS/RS and there has been a big move recently in the food industry," Conrad adds.

An AS/RS system helps increase response time to a customer demand through its flexibility. The current trend in overall automated materials handling systems design is toward extraordinary flexibility in order to be able to react quickly to market variations. Productivity increases can reach as high as 150 percent or more.

For the customer, consistent service, short delivery times, and the possibility of having a late-arriving order filled the same day are extremely important. An AS/RS implementation provides the capacity to run an order completely through the system.

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