Supply Chain Gain: Simplified Sorting

Tags: Materials Handling

Warehouse automation allows distribution centers to take a hands-off approach.

Materials handling professionals share a favorite expression: If you apply automation to a bad process, worse things happen faster.

It’s the nature of the game in today’s warp-speed world to throw technology at a problem and expect a solution. IT can help, but without proper due diligence and planning— consideration for why problems may be occurring in the first place— efforts to automate can be anything but routine.

Warehouse mechanization is an area that businesses routinely view with an eye toward efficiency by better utilizing human resources and inert assets.

“Reducing staff has always been the justification for arming distribution centers with automated systems. In today’s global market, however, cost reduction alone is no longer enough to ensure survival,” says Lawrence Dean Shemesh, president and CEO of OPSdesign Consulting, a Marlton, N.J.-based warehousing and distribution design consulting firm.

Shemesh has witnessed a lot of change during his career; one of the most profound being a shifting cost justification for warehouse automation. “In decades past, an old business adage applied: ‘You can have it fast, good, and cheap— pick any two,’” he says.

Today, materials handling equipment manufacturers and integrators believe they can deliver all three. But businesses resist sinking capital into projects that aren’t easily reversible. So they aim high, move slow, and inevitably stick with the status quo.

“Companies are challenged with extending the life of aging hardware,” says Kelly Reed, partner, materials handling integration, for Raleigh, N.C.-based consultant Tompkins Associates.

“There is pent-up demand for expanding or modifying automated warehouses,” he says. “Capital is still tight, however, so DC managers are strategically targeting refurbishments or small upgrades pending a turnaround in credit availability,” he says.

To make matters more difficult, businesses often wait until the last minute to engage new projects, which creates tighter deadlines for manufacturers and integrators to complete new installations on time and within budget.

Finding the Right Fit

Due diligence may take longer, and businesses may rightfully fear the repercussions of rash decisions. But for those that approach automation projects with calculated caution, the returns are manifold.

“Companies are beginning to realize the value of higher levels of automation,” says Reed. “They are emphasizing denser storage to save space; ergonomics; and demands for increased accuracy.”

Warehouse densification may be a relatively new progression for some U.S. industries, given the expansive spaces available on the market. But with inventory cycle times decreasing, carrying costs rising, and DC consolidation the norm in challenging economic times, companies are looking at practical ways to squeeze more out of less.

Companies are emphasizing denser storage to save space; ergonomics; and demands for increased accuracy.

U.S. industry is learning from European companies that have long embraced pick-system automation— largely because of constrained spaces, higher labor and land costs, and economic policies that encourage long-term capital investment justified by large upfront investments.

All these factors argue for greater use of automated storage/retrieval systems (AS/RS), which offer a more compact footprint and reduce future real estate costs. The impulse to remove human touches and better utilize warehouse space has catalyzed widespread efforts to automate. But the human imprint will always remain an integral part of warehouse operations.

In this regard, order picking is an area where many businesses see opportunities to facilitate human efficiency and accuracy by automating stockkeeping unit (SKU) movement to and from pick stations and loading docks. There’s no shortage of ways materials handling equipment buyers can integrate conveyance, sortation, and racking systems, technology, and labor; but the reasons for doing so are becoming clearer.

“The case for further automation is being fueled by the global trend toward higher SKU counts, smaller orders with higher frequency, compressed order cycle time requirements, and a plethora of value-added services that add cost to every order processed,” says Shemesh.

Software controls that provide the brains to the materials handling system have also advanced significantly. “These control systems are more user-friendly and provide real-time information and dashboards that measure and present overall system performance,” says Reed. “But we are just seeing the tip of the iceberg. Control systems will take on more sophisticated business rule processes.”

Conveyors, sortation systems, and AS/RS are only as smart as the software systems in place to orchestrate movement within the warehouse.

Outside the four walls, the materials handling equipment industry is taking a cue from its customers by consolidating, a trend that could have a mixed impact on buyers. “Mergers and acquisitions will likely continue as the large materials handling companies continue to pursue efficiencies of scale,” Reed notes. “While consolidation can help cut costs and drive economies of scale, it also reduces choice and competition.”

automation innovation

Regardless of how industry moves, innovation will continue to shape the trajectory of how businesses leverage materials handling as a competitive differentiator within the supply chain. For example, automation creates opportunities for warehouses to reduce energy consumption, with controls in place that can intuitively turn off systems when they aren’t in use.

More strategically, sophisticated materials handling systems allow DCs to build store-ready pallets comprising multiple different SKUs— an upstream efficiency that is especially advantageous for high-volume businesses and their end customers.

“More efficient picking and packing technologies offer the ability to process orders faster, enabling later cutoff times for same-day shipping, as well as increased pick accuracy,” says Reed.

But with businesses wary about investing significant upfront capital in new equipment— and with DC networks in constant flux— setting the right deployment strategy demands a great deal of planning and input from multiple logistics functions and partners.

“The volume of differing approaches warrants detailed data analysis and a thorough understanding of goals and objectives before tackling any automation initiative,” says Shemesh.