Distribution Center Efficiency

Hi, I am Cory Flemings from abco automation.  Have you ever considered automating your warehouse? Have you ever thought about what would be required to justify putting in automated systems inside your distribution center?

I would like to point out the acronym, S.A.L.T., as a way to hang your thoughts together and think about what the issues might be as you consider automating your warehouse.

The first letter up here for S. A. L. T. stands for Space.  Now space seems rather obvious doesn’t it? In warehouse operations we are always worried about having enough space. But the problem is once you realize that the walls are closing in and that the rivets on the walls are starting to pop it’s too late.

Because it takes anywhere from 9 to 18 months to build more space. To plan it, to get city permission, to get the approvals, to actually pour the concrete. And even in automated systems if you’re going to consider putting things up in the air with automatic storage and retrieval systems as an example. The data analysis the design, the engineering work is taking somewhere between 9 and 18 months to put those systems in.

So as you start to see your walls close in, give yourself about two years of planning time. Otherwise you’ll find yourself behind the eight ball.

Another place to consider for savings and return on investment for automation is Accuracy. This is one of my favorites.

I went through a warehouse one time and said, “Hey, how is your accuracy?”

And they said, “Oh it is really good.”

I said, “Oh really? How good is really good?”

They said, “It’s at 98%”.  While not being the brightest bulb in the box I realized that’s only 2%, or 2% of their orders are going out incorrect.

“How many cases do you ship out a day?”

“Oh we ship about 65,000 cases per day.”

So I pulled out my calculator and realized 1300 cases per day were going out incorrectly. And at $40 a box which is an industry average cost of return logistics to get the product, ship it back to the distribution center, check it out, restock, then you are talking $13 million a year if you work 250 days a year.

$13 million.

And if you have a two-year return on investment your shiny new material handling system can cost $26 million and you will breakeven. In two years.

This is a great place to look, this accuracy, for return on investment in a material handling system as you consider automation.

Labor is the third one. Does your warehouse look like an ant farm? I was going through a warehouse in California. And there are people all over the place. It was like the Indianapolis 500 on the aisle with fork truck drivers going by.

And the vice president of distribution pulled me aside and said, “Before you get too involved in the details, I am trying to figure out how I get something from the receiving dock into that pick face, where that man over there is picking, with as few people as I need to have.”

And that’s where automation can come in. Automatic storage and retrieval systems, automatic re-supply systems, AGV’s, there are a lot of different kinds of automation you can use to get by with less labor.

Additionally, as we move distribution centers further and further away from the population centers people are getting harder and harder to find. And if you find yourself in that position automation might be the way to do that.

For example, 50%, according to one grocery retailer, 50% of the people who apply for a warehouse job can pass a background check.

50%.

And that’s for the people who apply for the job. And in the Southeast he said only 25% can pass a background check and drug test. So people, if you’re having trouble finding them you might want to consider automation.

And finally the last bullet down here the T. stands for Throughput. There are wonderful technologies that are coming out these days that can help improve your throughput.

I’m talking to those who might say, “I just can’t get things out fast enough. No matter how much I try or how many people I throw at my distribution operation I can’t get things through the distribution center fast enough”.

Well, a couple of ideas.  Automation, like A-frames.  A-frames can do for small stackable products. Let’s spell this correctly, A-frames. They can do anywhere from 1200 to 1800 32 piece orders, an hour. That’s a lot of volume.

Product-to-person systems, P2P, I call them things like shuttle systems, carousels, things like that.  These things can do 3x the speed in order lines as pick-to-light or pick-to-voice.  That is somewhere between 600 and 1000 order lines per hour. So there are lots of opportunities for you to consider automation in your throughput.

And there is a lot of money available especially in accuracy to help justify the cost of some of these automated systems.

If you have any questions or would like us to take a look at some of your data and do some analysis for you here at abco we would be happy to help you out just give us a call.

Call 803-517-7534 and speak to Amy about scheduling an appointment with abco automation.  If you liked our Whiteboard Insights and want to learn more download our supplemental whitepaper here.