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Four Reasons Why Material Handling Automationis a Good Investment for Your Operation
White Paper
www.viastore.com · [email protected]
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If you currently have a mostly manual distribution operation, you may think that material handling automation is something you couldn’t do—or more accurately, something you couldn’t afford. If you believe that automation is an ‘all in’ concept that is too expensive, or overkill for your distribution center (DC), you might be missing out on an op-portunity for business gain. That’s because there is compelling return on investment (ROI) from automation.
Making the Case for Automation.
Solutions such as automated storage & retrieval systems (AS/RS) carry a quicker ROI
than what many DC operators might think, and can be scaled down to automate only
those parts of an operation that bring the quickest and strongest paybacks.
Depending on the size of your operation, even incremental levels of automation may
make sense. If you are considering automation but are unsure how to measure ROI,
here is a breakdown of some key areas of payback, as well as some information that
can serve as general benchmarks for justifying automation. While individual facilities
might gain more from one ROI driver than others, four leading areas of payback to
keep in mind are:
• Labor savings
• Space savings
• Throughput and flexibility gains
• Reduced maintenance and supervision
In a 2001 white paper on AS/RS benefits and justification on behalf of MHI, the de-
ployment of an AS/RS for reserve pallet storage to support carton picking from pallets
was compared to using manually operated turret trucks in a very narrow aisle (VNA)
configuration for the same application. Under the VNA concept, it takes 16 operators
to operate turret trucks to meet the application requirements under study (1,632
pallet picking positions and 11,424 reserve pallet positions) while the AS/RS concept
eliminated this operator labor entirely.
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While there is some labor involved in AS/RS maintenance, the study concluded
it is less than the maintenance expended on turret truck equipment, and time
needed for supervision is significantly less. The study also found that the VNA
concept generally requires close to two times the floor space as the AS/RS
concept. Overall, the study concluded that the AS/RS concept carries a lower
lifecycle cost and higher ROI than the VNA concept, with payback of just over
two years for the system under study.
Of course, much has changed in recent years due to the rise of multichannel
fulfillment and ecommerce. Generally, piece picking is up as are the number
of stock keeping units (SKUs) at many DCs. Orders may be smaller than in years
past, but many DCs are processing a higher volume of orders and picking more
pieces per shift. Perhaps more than ever given these trends, the benefits of au-
tomation—accuracy, labor savings, and maximizing throughput within existing
space—makes the payback proposition from warehouse automation stronger
than ever.
Beyond these higher level benefits, what are some of the operating character-
istics in a DC that make automation a good bet? Let’s examine some of these
thresholds to see how automation can help, and wrap up by explaining the
different levels or increments that automation is often deployed in.
The Volume NumbersDepending on your operation, evaluating the number of pallets received per
day, number of cases picked or shipped per day, and number of pieces picked
per shift is a good place to start. In general, if more than 3,000 pallets are re-
ceived each day, more than 90,000 cases are picked or shipped per day, or more
than 100,000 pieces are picked per shift, automation could have a positive and
short ROI.
You should also look at your number of orders picked per shift and the number
of lines per order. A warehouse management system (WMS) with real time
data collection, reporting tools and metrics allow DC managers to easily see
order picking trends and analyze which zones of a DC, times of day, or months/
times of the year when the DC is busiest. This helps in designing an automation
project, and when deployed, a properly designed system can easily ramp up its
pace of work on activate cranes to accommodate the busiest peaks in fulfill-
ment activity.
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By contrast, with manual material handling, ramping up
capacity often means scheduling, adding and supervising
more labor. An automation system tied closely to an intelli-
gent WMS or WES software (which integrates real-time with
automated equipment and manual resources) can adjust to
spikes in work that fall within defined parameters on the fly.
In the multi-channel world where orders are being picked
for end consumers, wholesalers and stores, all from the same
facility, automation provides more flexibility to handle this
ever-changing equation of a larger volume of smaller orders.
More SKUsWith the ability for more customization and variables among
products, a larger number of SKUs are a factor to deal with in
most DCs. Often, the difference between SKUs is minor and
not noticed in a manual, non-automated picking environ-
ment. By contrast, AS/RS or other automated systems that
are integrated to a cohesive material flow and WMS software
platform have precise inventory control built in. The AS/RS’s
control platform shares its inventory positon and require-
ments with the warehouse control and WMS platform in real
time. As a result, the DC operation has a more precise, real
time grasp of inventory than could be reasonably hoped for
under manual methods of inventory collection, and without
tying up labor resources on data collection tasks.
System agilityIf every DC had a crystal ball or magic eight ball, there wouldn’t be the lack of predictability within distribution operation. Hot
orders, changes to orders, and order complexity all require a level of flexibility that isn’t available in a manual picking, non-in-
telligent software-driven environment without labor intensive workarounds. The ability to change, adapt and prioritize orders,
while still optimizing operations is something only automation can help with.
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This agility is accomplished by the establishment of rules in the warehouse control/material
flow software that governs the automation. When automation such as a mini-load AS/RS is
deployed, the control system is configured to hold commonsense rules about how to speed up
hot orders, or start sending loads or picks to a packing or shipping lane which was just opened
at the WCS or WES level to accommodate a spike in work. System agility is built into the
design of the system with a bit of upfront software configuration. This leads to throughput
gains for an automated facility versus manual environments in which accommodating change
usually means flipping schedules, adding or moving workers, or expediting hot orders outside
of the system.
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There are other common-sense reasons why material handling automation is a good fit for
certain environments, including:
• If the work environment is in a refrigerator or freezer, automation is a great solution for
keeping valuable employees out of harsh environments.
• Automation may also be easily justified for a 2 to 3 shift operation, especially if em-
ployees earn $45,000 per year or greater or if there is labor shortage.
• Another reason to choose automation is lack of space. If you are not able to expand
your facility capacities in throughput, a vertical automated solution may be a good fit.
• Finally, automation may be easier to justify when there is senior management support
to integrate savings between Merchandising/Retail and Distribution Center Operations/
Logistics P&Ls.
Automation Levels and BenefitsThere are different levels of automation depending on the specific criteria given. Each higher
level includes the levels before it. This simple guide helps to determine where to start auto-
mating to achieve the biggest impact for the lowest investment.
• Level 1 – Automate receiving, put away and pick slot replenishment
• Level 2 – Automated layer picking with manual pick
• Level 3 – Automated replenishment, case/tote buffering, “Goods to Person” delivery
• Level 4 – Fully automated random case unitizing and piece picking
CONCLUSION Overall, automated solutions allow for building construction savings, Full Time Employee (FTE) reduction, stock out reduction, order selection efficiencies, replenishment efficiencies, and improved inventory and order accuracy. The systems are worth consideration and investment when the given criteria are met.
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viastore systems is a leading international provider of automated material handling solutions
including automated storage and retrieval systems (AS/RS), conveyor and sortation systems,
warehouse management systems (WMS) software, warehouse and process controls, and integrated
SAP logistics solutions for new systems and for modernizing and updating existing systems.
The company employs over 450 people worldwide and has annual sales of over US$207 Million.
INTRALOGISTICS SYSTEMSn Automated Storage & Retrieval Systemsn Conveyor & Sortation Solutionsn Shuttle Systemsn Retrofits/Modernizationsn Services
INTRALOGISTICS SOFTWAREn Warehouse Management & Execution Systemsn SAP Logistics Solutions
viastore systems Inc.
4890 Kendrick SE
Grand Rapids, MI 49512
USA
Tel. 616 977-3950
www.viastore.com
