Material Handling Technology: Beyond the Nuts and Bolts

Automated storage and retrieval systems are enabling Cardinal Health’s Medical Products and Services group to boost productivity by 30 to 35 percent, reduce the footprint of its distribution centers, operate in a significantly more controlled environment, improve accuracy, and compress order cycle time, reports Dan Sobeck, vice president and general manager of distribution services for Cardinal. Based in McGaw Park, Ill., Cardinal provides products and services supporting the health-care industry.

Comparable benefits are available from other types of material handling technology, notes Norman Saenz Jr., manager of logistics for Fort Worth, Texas-based Carter & Burgess, which specializes in distribution operations planning, architecture/engineering design and construction. Despite these incentives, the potential power of such systems often goes untapped.

“While most well-educated managers realize that technology and equipment can make their operations more productive and effective, they may not understand the potential savings involved, or have the time to do the analysis required to assess the real potential in inventory accuracy and savings,” says Saenz.

Don’t overlook the benefits of material handling technology, agrees Don Derewecki, executive vice president, Gross & Associates, a material handling logistics firm based in Woodbridge, N.J.

“Companies that survive will be those that leverage the power of material handling technology, while companies that don’t take advantage of such systems will be outperformed by their competitors,” he warns.

While benefits such as headcount reduction and productivity improvement are important, they’re just the beginning, he says. Even more significant is the technology’s ability to compress response time, enabling companies to meet customers’ increasingly exacting standards and narrow time-windows, which in turn can deliver a strong competitive advantage.

Understanding the Nuts and Bolts

Material handling covers everything that happens in a warehouse or distribution center from the time a truck backs up to the door until it backs away from the dock with completed orders, says Derewecki. Material handling can be automated—which he describes as being “as human-free as you can make it”—or mechanized, providing a mechanical assist such as a conveyor takeaway system.

“Order picking from a case flow rack to a takeaway conveyor using pick-to-light technology is very upgraded mechanization, but it stops short of full automation,” Derewecki explains. “You still have to have a human picking the product out of the facility.”

While fully automated systems cost millions of dollars, you can achieve significant benefits from much smaller investments, Derewecki notes. He advises companies with limited funds to invest first in improving their information systems support for the operation. “That’s where you’ll get the biggest bang for the buck,” he says. Then, move into the hardware.

Where to start? “Follow the money,” Derewecki says. “Where are the most people working who have the potential to have their productivity and throughput capacity improved? In most operations, it’s in order picking,” thus that’s where many companies choose to invest their material handling dollars.

“Paper-based order picking can be enhanced with various technologies,” observes Saenz. Radio-frequency, pick-to-light, and voice technology can be effective solutions that deliver good results.

Starting Simply

What kinds of options do you have? “You can start simply, and add information system support to the picking operation without fully mechanizing it,” Derewecki says. This might enable you to batch pick, for example, to a shelf cart. The next step could be to mechanize the takeaway, having employees pick to a takeaway conveyor with sortation capacity at the end, and the system automatically sorting batches into orders.

Other material handling options include carousels, A-frames, automated storage and retrieval systems, and pick-to-light carts.

The optimum material handling solution will vary by facility. “We call them ‘right tech’ solutions,” Saenz says, “the right technology for a specific company, based on volume, products, and layout.”

The right tech often includes a blend of technology depending on product and order characteristics. One company may put its fast-moving SKUs on pick-to-light technology, for example, and use horizontal carousels and static shelving for slower movers.

A facility that uses one technology for all SKUs may be suboptimizing at least a part of its operation. “You have to know what your fastest moving items are, and use the most effective picking method for them,” Saenz says.

The ABCs of Automation

While doing so isn’t right for every company, automating a distribution center can deliver three critical benefits for the right operation. These benefits include reduced operating costs, particularly through headcount reduction; reduction in facility footprint thanks to greater density and height; and improved business processes, such as family grouping, higher pick accuracy, and ergonomic working conditions, says Helmut Prieschenk, CEO of the parent company of Witron Integrated Logistics Corp., a systems integrator specializing in warehouse automation and material handling technology, based in Arlington Heights, Ill.

Sound business cases for warehouse automation can be made for applications that range from as little as 5,000 to several hundred thousand lines per day, according to Prieschenk. Based on the modularity and scalability of today’s AS/RS technology, companies can start with one module and expand their operation depending on changes in business requirements.

Companies that justify use of automation often look at the overall cost per pick—assembling operating data for their existing facility, including number of SKUs; throughput; inventory; headcount; maintenance; and costs to create a snapshot of their current cost per pick. Then, they compare this number to that of semi-automated and automated solutions to see whether automating makes dollars and sense.

Automating the Fast Movers

Take Cardinal Health’s Medical Products and Services group, which has automated four of its 60 distribution facilities. “About 10 years ago, we spent a lot of time evaluating what type of automation was the best fit for us,” recalls Dan Sobeck. “We sought technology that would provide the most efficient throughput, based on the markets served by a particular facility.”

The company’s health-care customers—which include hospitals, laboratories, physicians’ offices, and freestanding surgery centers—have different requirements, and order characteristics vary widely. Products also differ considerably, from a box of sutures to a case of custom sterile apparel. So the selected technology had to be flexible.

In addition, the company was experiencing a tremendous growth of SKUs. “Our buildings were reaching capacity without full utilization of the storage cube,” says Paul Ancona, senior engineering manager for the Medical Products and Services group of Cardinal Health. As a result, Cardinal Health looked for technology that would enable it to maximize cube utilization.

“We looked at automated storage and retrieval systems (ASRS), pick-to-belt, pick-to-light, pick-to-voice, and carousels,” Sobeck recalls. After analyzing throughput data and taking into account productivity and space factors, Cardinal Health identified ASRS as the option that would deliver the best throughput and require the smallest footprint of a distribution center.

Cardinal Health then piloted ASRS technology in its medical products distribution center in Detroit. “We selected an active location for the pilot, because we wanted to make sure the technology worked in existing locations as well as in new facilities,” Sobeck says. The company considered three or four potential suppliers, selecting Witron Integrated Logistics Corp. to implement one ASRS module with six cranes.

Results at the pilot site exceeded expectations, Sobeck says. “We anticipated a learning curve associated with the new technology, which required a transition from a traditional paper-based system to a state-of-the-art paperless system. But we underestimated the impact the new technology would have on our employee base,” he says.

In addition, Paul Ancona points out, automating the facility meant managing the DC and its workforce differently than in the past. After working with the new system for an initial period, performance improved dramatically, Sobeck reports. As a result, about one year later, the company installed the ASRS technology in a new DC in Dallas, consolidating five facilities into one.

The Dallas implementation, which included one ASRS module with eight cranes, achieved results faster than the pilot project in part because lessons learned from the implementation were shared with project managers.

“We spent a lot of time with the team in Detroit, and learned what went right and wrong from the people on the floor,” Sobeck says. Dallas managers visited the Detroit DC, and managers from Detroit went to Dallas to help when the facility was brought up live.

In addition, warehouse associates in Dallas were already comfortable working in a paperless environment, having used a warehouse control system before the ASRS technology was installed. Nonetheless, Sobeck says, the facility still went through a three- to six-month learning curve.

Lessons learned from both the Detroit and Dallas implementations were applied to the next ASRS installations in 2001. A module and 14 cranes were installed in an existing distribution center in Montgomery, N.Y.

“This one was a little more complicated than the others,” Ancona notes, “with integrating pick-to-belt technology and a double shoe sorter as well as the ASRS.” A new DC in Dixon, Calif., was automated at about the same time.

“The ASRS keeps improving at each installation,” Ancona says. “Cranes continue to improve; programmable logistics controllers continue to improve; and we continue to get the most updated technology.”

“There isn’t one piece of material handling equipment or technology that fits everything,” Sobeck points out. “One thing we’ve learned is the importance of looking at your business—where it is and where it’s going—to find the technology that best fits your application.”

Cardinal Health identifies the right mix of technology for each of its locations, looking at channels served, product mix, and activity across SKU, then analyzes where the ASRS module is cost effective. Even Cardinal Health’s automated facilities use traditional RF technology, forklift trucks, and order pickers in a manual environment where appropriate.

The costs of information and control systems have come down significantly while the benefits have increased, Derewecki says. As a result, smaller companies and others who have historically not been able to justify mechanizing or automating an operation may find the payoff is there.

Taking it to the SaraMax

Take SaraMax Apparel Group Inc., New York, which supplies branded and private label undergarments to mass merchants. Driven by the need to satisfy its customers in terms of order response time and accuracy, SaraMax began looking for a new solution.

When the company decided to consolidate three warehouses run by third-party logistics providers into a single company-operated DC, “we wanted to put in place material handling technology that would allow us to receive an order and ship it in three days,” says Stanley Greenstein, president and chief operating officer of SaraMax.

After reviewing options such as flow and sortation systems, SaraMax found that a pick-to-light order picking system would be most effective. The apparel company took 110,000 square feet of a 180,000-square-foot DC in Sayreville, N.J., subleased the remainder, then outfitted the facility with a two-tier pick-to-light area, very narrow aisle storage using turret trucks, and real-time feedback audit stations. Product is pulled based on quantity needs either by turret truck or order picker truck.

SaraMax asked Gross and Associates to help create the footprint of the facility, determine the space allocation for the pick-to-light system, and assist with evaluating the functionality of three candidate systems. Other than that, the company handled the selection and implementation on its own.

The implementation went fairly smoothly, in part because SaraMax took the time to get to know the system before changing it.

“We knew the core software had information weaknesses that would need to be addressed,” Greenstein says. “But we installed the base package first, got familiar with the functionality, then made enhancements after going through the learning curve.”

The pick-to-light system from W&H Systems has five induction points, with each point handling up to 230 SKUs. With the new technology, “we can create 36,000 to 40,000 picks a day—the selection of multiple units into a product bag or poly carrier—which translates into approximately 1,500 orders packed and shipped each day,” Greenstein says.

Accuracy is at 99.75 percent before auditing.

Great Time to Buy

Wonder whether material handling technology can deliver a strategic advantage for your operation? With vendors motivated to sell, now is a great time to buy, according to Don Derewecki.

“The pressure to produce things better, faster and cheaper to comply with ever-increasing customer requirements is only going to accelerate in the future,” Derewecki predicts. He advises managers to proactively seek the right material handling solutions rather than waiting until customers impose their requirements.