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Warehousing & DC Equipment Update: Automation’s evolving role

Labor savings within the four walls of the warehouse/DC is no longer the primary driver behind choosing a highly automated system. Today, materials handling automation solutions represent a broader supply chain play that improves inventory replenishment, advances piece picking, and cuts transportation costs.
By Bob Trebilcock, Editor at Large
September 01, 2011

Late last year, sister publication Modern Materials Handling featured Office Depot’s new distribution center in Newville, Pa., on its cover. At the heart of the DC is an integrated piece-picking solution that combines mobile robots for high-density storage and conveyance; light-directed picking to ensure that the associate picks the right item; and a high-speed conveyor and sortation system to get the product to the packing zone.

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While this level of automation has been common on high-speed assembly lines for years, it represents a new level of sophistication in distribution. Although the technology allows Office Depot to get a significant amount of throughput from a relatively small labor force, labor savings within the four walls of the DC wasn’t the primary driver behind choosing a highly automated system.

Rather, the solution represents a broader supply chain play; it is an enabling technology that will allow Office Depot to completely retool the way inventory is replenished at the stores serviced by that DC. “We believe that the future belongs to the brave,” says Brent Beabout, Office Depot’s vice president of global network strategy and transportation. “We are in a commodity business and the supply chain is a differentiator. We plan to be on the front end of that.” 

That is a different way to view materials handling automation, particularly in distribution where the historical approach to system justification was based on a reduction in head count. It got us to thinking: Is Office Depot unique? Or, is something changing in the way the user community looks at automation today? Does the future belong to the brave when it comes to automation inside warehouses and DCs?

To find out, we talked to 10 industry leaders about the state of automation inside the four walls. Here’s what we learned.

The labor equation
There is a sense that something is going on in the market: Nearly everyone we interviewed agreed that end users are taking a harder look at automation than in the past even if that has not yet translated into more orders.

“We may be too early in the cycle to be conclusive about what this interest will mean to the market,” says Bruce Strahan, president and CEO of The Progress Group. “But I do believe that end users are looking back at the past three years and concluding that all of the layoffs and downsizing they went through was not fun. They want to be prepared for another downturn in demand without wondering every day whether they need 10 more people or 10 fewer based on fluctuations in volume.”

What’s more, as companies like Office Depot look to logistics as a profit center and an enabler of their broader corporate goals “they are trying to use automation as a competitive advantage over their competitors within their industry,” says Sean O’Farrell, business development manager for Witron.

Solution providers describe an evolving view of automation among the end user community, especially when it comes to automation in the distribution center. Traditionally, that has involved conveyor and sortation systems. That perception, however, is changing.

“More intelligence is required in the distribution center today than in the past, when it was mostly about moving pallets out the door,” contends Larry Strayhorn, president of TGW Systems. That complexity is driving interest in automatic guided vehicles (AGVs), robotics, and automated storage solutions along with semi-automated solutions involving software, lights and voice. “Every company is trying to drive costs out of their supply chain and the DC is the next link in the chain for optimization,” Strayhorn says.

Reducing labor has always been the key metric for deciding whether to automate and that remains the case for many projects. However, with so many organizations already running bare-bone operations, new ways to think about labor and automation are emerging at some companies.

“Our customers are gaining confidence, they are sitting on cash, and they have access to cheap capital,” says Jim Stollberg, vice president of global product management for Dematic. “If you look at the unemployment rate, they clearly are not hiring back people. Many are choosing to put that capital to work in automation.”

Stollberg and others believe that many of those jobs may not come back. Having already eliminated labor, companies are looking at the costs associated with labor in a different way to justify automation. Those include the increasing cost of training employees given the high turnover rate in many DCs and the inability to find enough labor.

“If a new employee goes out to lunch and doesn’t come back, which is happening, the cost of bringing a new employee up to speed is now part of the calculation,” Stollberg says.

What’s more, there’s a growing acknowledgment that in distribution, lights out automation rarely makes sense, while there is an ROI in making the remaining workforce more productive. “One of the first automation projects I ever worked on years ago was in a manufacturing setting where we were focused on getting rid of as much labor as possible to the point that we probably over-automated,” says The Progress Group’s Strahan. “Today, there’s a recognition that you’re still going to have people in the equation, so how do you enhance what your people do with automation.”

That may be as simple as adding semi-automated solutions, like voice-directed or light-directed picking to a manual process. “Voice and light technologies haven’t changed a lot over the years, but end users have realized they can make the associate on the floor faster and more accurate,” Strahan says. “They’re making decisions that affect the product the end customer receives as much as it affects their internal ROI.”

Those types of technologies also address the diversity of today’s workforce. “The fact is, you can put a headset on a Spanish-speaking person while the associate next to him is speaking English, and they can both get the job done,” Strahan adds. “That’s pretty attractive.”

That approach might also involve adding a mini-load automated storage and retrieval system (AS/RS) or carousel to deliver product to an ergonomically designed workstation, adds Tom Coyne, CEO of System Logistics. “The goal is not to eliminate the human component,” Coyne explains. “It’s to help the associate reach their potential by eliminating walking, eliminating reading, eliminating waiting, or any other extraneous process. The goal is to help the associate rather than eliminate the position.”

In that same vein, companies are looking at their manual processes and asking how they can eliminate the non-value added labor component. “They justify the project not by eliminating a position but by getting better performance out of their people,” says Bruce Buscher, vice president of sales for the smart handling division of Jervis B. Webb.

For example, Webb installed an AGV system to automatically remove bins of cardboard from workstations over a two-shift operation. “The cardboard had to be removed several times during each shift and each cycle took someone away from the workstation for about 15 minutes,” says Busher. “We designed an AGV to handle special trash bins. When a bin is full, a line worker pushes a wireless call button and the AGV takes the trash out for them.”

Last, but not least, companies are looking at automation to create a safer and more ergonomic work environment, especially in the context of an aging workforce. This is already an issue in Europe, where regulations are reducing the amount of weight workers can move at any one time, or during a shift.

That is becoming a concern to some U.S. facilities. “One of our customers is adding automatic palletizers to their tote handling processes,” says Jim McKnight, senior vice president for system sales and marketing for Intelligrated. “Since a tote can weigh 50 to 60 pounds, there’s a big ergonomic and safety factor to putting in a palletizer beyond reducing labor.”

About the Author

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Bob Trebilcock
Editor at Large

Bob Trebilcock, executive editor, has covered materials handling, technology and supply chain topics for Modern Materials Handling since 1984. A graduate of Bowling Green State University, Trebilcock lives in Keene, NH. He can be reached at 603-357-0484 and .(JavaScript must be enabled to view this email address)


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