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Material Handling Systems Integrators Don’t see Distribution like You Do

As a material handling systems integrator, we meet people all the time that have the concept of distribution as a game, more specifically as a Monopoly game. “Well, we need a new distribution center, so let’s plunk one down here on Baltic Avenue.” (Definitely can’t go on Boardwalk – not with those rents).

They don’t see a distribution center as more than the sum of its parts. They see it as a monolithic “Distribution Center,” just a piece that they need to have, but not a piece that adds value to the company.

Obviously as a material handling systems integrator with a fondness for efficiency and squeezing the full potential from a distribution center, we see it a different way. We know that your supply chain can be a competitive advantage. It can help you outsell your competitors, win new market share and delight your customers.

So why do so many people view distribution as a necessary evil?

Misconception: They do not see their distribution centers as investments; they see them as a sunk cost. If you look at all the advances of distribution center automation in the last 20 years, from carousels to robots to AGV’s as ‘cost’, then you are more likely to see distribution centers as just a piece to plop down. Not as something that will give you an advantage over your competition.

In fact, you may be operating under the premise that all of your competitors have distribution centers designed exactly like yours.

News Flash: They might not be.

Stubbornness: “Well when I came into this business we did our distribution that way and it has been fine for 30 years.” Stubbornness is markedly different from misconception. It is an actual aversion to change itself; an adherence to the status quo for no reason other than “that’s how we always have done it”, and they can’t see a new way.

Unaware: The last, and I think the predominant, reason that people don’t see distribution as an advantage is that they just aren’t aware that their distribution center can be a competitive advantage. And why is that? Their consultant or material-handling systems-integrator hasn’t shown them that it can be. After all, that’s really our job – to show you how you can improve your distribution center.

We help you and provide you all the ammunition to internally sell the “new way” to those who say “that’s how we always have done it.” We know that there is often a person in the supply chain who senses there must be a better way…

If that is you, give us a call, let’s talk.

Infographic: S.A.LT. for Material Handling Design

by Travis Baker

The acronym, S.A.L.T., is a great jumping off point for looking at material handling design. It stands for Space, Accuracy, Labor and Throughput. It is also a good way to analyze your distribution center for improvements that might be made by transitioning to an automated material handling design from a manual one.

Let’s break down the infographic and look at the acronym of SALT.

Download the full-size .pdf of Infographic S.A.LT. for Material Handling Design here

Space. The first component is the space, or footprint, that your distribution center uses. With a one million square foot DC you actually need 50-60 acres of land when all is said and done. However, the great thing about land cost is that you only pay for the dirt, not the air above it. Therefore if you can go up and use a high-bay warehouse, which tops out at around 110 feet, you have around 3.6x as much storage space as a traditional 30 foot clear distribution center.

Accuracy: Accuracy is very important in a distribution center. Especially with the cost of returns and shipping, not to mention the cost of lost goods. Nearly 10% of all purchases in retail sales are returned. Much of that has to do with errors from the distribution center.

A 97% accuracy rate though it sounds great means that 3% of your shipments are wrong. On a low end that can mean $650,000 in errors assuming a 30 million orders a year and $.30 for shipping and return. That is also assuming no products were lost or damaged. The high end could be $13 million (or higher), which assumes higher shipping cost, higher cost of return and product that would be lost or damaged.

Labor: Labor is one of the most expensive parts of a distribution center. However, smart material handling design can lower the cost of labor. For instance, an automated material handling design can take a distribution center that needs 100 people and reduce labor by 60% by using technology. Technologies such as product-to-person (also known as goods-to-man) allow for selectors to fulfill orders quicker and more efficiently than an army of workers fanning through an enormous DC.

In many interviews we have had with distribution center executives they say that even with people who want to work in the distribution center, only 25% can pass a drug screen and background check. Therefore with less reliance on labor you can cherry-pick the best associates for your operation.

Throughput: Throughput is the distribution center’s reason for being. The peaks and valleys in distribution can be extreme, which is why you need a deep analysis of the numbers in your distribution center. Over the course of a year a child based retailer (IE a toy store) can have a throughput of X in July and 10 times that amount of throughput in December.

While obviously you can’t use every technology for every product, it is interesting to look at how different technologies can increase throughput dramatically. An A-frame for instance can perform up to 1600 picks per hour and Pick-by-Voice can average around 250.

Hopefully this article demonstrated the effect that the acronym S.A.L.T has on material handling design. If you need help with your material handling design contact abco automation.

Filed Under: Accuracy, Labor, S.A.L.T. Principle, Space, Throughput, Uncategorized

5 Reasons to Choose a System Integrator for Your DC Project

by Cory Flemings

So why should you use a system integrator instead of a manufacturer for your distribution center project? After all, a manufacturer knows the product best and will be able to give you the best price too, right?

Well, not always.

The main reason a system integrator is the best partner for your distribution center is their ability to choose. Integrators have flexibility to choose from different suppliers that will work best for you. This is opposed to a manufacturer trying to shoehorn a solution with one of the products they make.

Let’s explore these advantages:

Efficiency: Whether defined by cost or performance, system integrators can source the most efficient components for your application. Not all of the technologies that would yield the most efficient solution can be sourced from the same manufacturer. But why can’t manufacturers just integrate different technologies?

Bias: Even if some manufacturers say that they are free to use any competitor’s components, what are they more likely to push you towards? One of theirs, right? And who can blame them? They know the technology better; they make more money, and lower their risk by pushing something they make vs. buying it from a competitor. Which leads us to…

Competition: Manufacturers are less inclined to use a competitor’s technology. Obviously manufacturers are not in the business of helping their competitors by integrating their technology solutions; they are in the business of selling their own. System integrators, on the other hand, are not constrained in their choice of vendors since they aren’t really competing with the manufactures; the manufacturers are their suppliers.

Cost: Just because one manufacturer makes one component cheaper doesn’t mean that all their components are the best value. If manufacturer A makes an inexpensive #1 and #2 component, but #3 is expensive, and manufacturer B makes an inexpensive #3 and #4 but everything else costly, doesn’t it make sense to mix and match and save money? That’s where a system integrator help you can lower your aggregate system cost.

Experience: A good system integrator has a variety of experience with different technologies. Instead of being a manufacturer that has one set of solutions, a system integrator can have both the access to, and experience with a variety of technologies.

So what do you see as the best reasons to work with a distribution center system integrator vs. a manufacturer? Let us know by commenting below. And if you would like to talk to a system integrator about your distribution center project contact abco automation.

Filed Under: Return on Investment ROI, Uncategorized

An Efficient Distribution Center from Pulling the Weeds

by Cory Flemings

In my last post, I talked about the Pareto Principle, or the 80-20 Rule, and of falling into the trap of a single-technology system for the entire SKU base. In this installment, I want to talk about the fast-moving SKUs and how dealing with them can make your distribution center more efficient.

The fastest-moving SKUs in the distribution center are the top 20% of the SKU base. These SKUs generate, around 80% of your volume.

Now, the ratio of 80-20 is not always exact; nor is it proportional to 100%. For example, some companies have an 80-30 relationship meaning that 80% of their volume is generated by 30% of their SKUs.

That’s OK.

It just means that the slope of the curve for your operation is not quite as steep as Mr. Pareto would suggest. What is important is that you identify the group of SKUs that do generate 80% of your volume, and focus on these. These make you money!

The principle of efficiency is to concentrate the fast-moving, frequently-touched SKUs in single area. “Pull the weeds” – eliminate all other slower–moving SKUs, so you can efficiently service the 20% of your product base that generates 80% of your volume. By pulling the weeds, you can make even more money because you will generate business with less effort.

Now, the top 20% really has two sub-sets: the top 2% (AA-movers), and the next 18% (A-movers).

The top 2% have wings. They practically fly out of the distribution center by themselves. If you run a distribution center, you know right now which these products are in your gut. Your employees all talk about them.

Remember when the iPod Nano® came out? The cartons practically came with retro rockets to move them faster through the supply chain. Distribution centers couldn’t keep them in stock.

And that’s the problem with these SKUs; replenishment. The most difficult part of managing these SKUs is not picking them – you can do that with snow shovels. The difficulty is keeping up with the replenishment tasks.

When you think about technologies for the top 2%, think in terms of replenishment. How do I replenish the pick location with as little movement as possible?

Specific technologies will vary, of course, upon the SKU or carton size. The principle is to replenish the largest unit practicable. In full-case picking, the replenishment unit is always a unit-load, or pallet.

When the Nano came out, we were suggesting this product be replenished by the pallet-load as well. The picking was done by a pick-to-light display over a set of pallet locations for the AA movers. Think about it; if you were to replenish those Nanos at the case-level, how many man-hours per day would you spend replenishing the pick slot? You would be back every 15 minutes with more cases. For the AA-movers, tackle the replenishment tasks first.

The next 15% — the A movers — require that you “pull the weeds.”

Think about how many products your selectors have to walk past to get to the products they need to fill an order. If 80% of your volume is done by the top 20%, it stands to reason that you need to get the other SKUs out of the way.

Now that you have this 18% concentrated in one area, what can you do?

Technologies to consider:

Automated picking systems (A-frames) – these systems automatically pick the order for you. They can generate as much as 2,400 32-piece orders per hour! The drawback of A-frames is that they are form-factor specific; they require small, lightweight cuboid-shaped or stackable products.

They are ideal for pharmaceuticals, cosmetics and office supplies. They are off the table for apparel, poly-bagged items or irregular shapes. There are automated machines for all three bandwidths of the Pareto curve, so if you have these types of products, they are something to consider.

Mini-load-replenished put-to-light or batch-picking systems – most people are well-familiar with pick-to-light technology. The following application may also be done with pick-to-voice. The new twist here is to glue the pick-to-light locations onto the side (the long, down-aisle side) of a mini-load. What you have now is an automatically-replenished pick-to-light location.

What is so special about this?

You get the picking efficiency of pick-to-light (250 lines/hr +) and no people required for replenishment. All of the replenishment stock is in the air above your head (nobody can get to it to cause shrinkage or inventory changes), and the control system tells the mini-load crane when to bring down more stock. But wait! That’s not all! You can also use the crane to swap out SKUs no longer needed during the picking shift to condense your pick zone even further. (Be careful – this must be carefully engineered – do not try this at home!)

Pick-to-light with zone-bypass conveyor systems – This technique embeds the conveyor system into the flow-rack and consists of two conveyors: a transport conveyor (the highway), and the picking spur. The transport conveyor is closer to the back of the rack, and the picking spur is on the pick-aisle. This arrangement allows the conveyor system to bypass pick zones the order tote does not need to visit, and only visit the ones it needs.

This is, of course, not an exhaustive list, but merely some examples to get the juices flowing. I would be interested to hear some examples of how your company concentrated your A-movers and pulled the weeds. Have a clever use of technology to solve this problem? Let us know! Learn more about new ideas in distribution; Download abco AUTOMATION’s whitepaper!

Filed Under: Pareto Principle, Uncategorized Tagged With: 80-20 Rule, pareto, slow movers

Expanding the Pareto Principle in Distribution

by SethWeisberg

Only 20% of the SKUs in your distribution center make up 80% of your volume.

This point, to most people in distribution, is not a big surprise. Most people already know the 80-20 rule, or at least have heard of it. What is a surprise to most people in distribution is that they are missing huge opportunities in efficiency by not applying the rule. As a systems integrator I see different distribution centers every week. No matter what industry I go to – from apparel to auto parts – everybody does distribution the same basic way. Oh, there are nuances, of course, but by and large, they use the same application of technology for their entire operation. They ignore the Pareto Principle.

Let me explain.

Italian economist Vilfredo Pareto observed in 1906 that 80% of the land in Italy was owned by only 20% of the population. Later, business-management thinker, Joseph M. Juran, further developed the 80-20 rule and named it after Pareto by observing that 20% of the pea pods in his garden contained 80% of the peas.

In the distribution center, like the garden, the same principal holds true (in general).

Balance is not always good. Leveraging the natural imbalance of product movement is an opportunity to drive tremendous benefits to you and your company. Single-technology distribution systems assume that all products should be handled the same way. Think about it – if you have a static pick slot for every SKU in your distribution center, and you have a person walk to every location, you have a single-technology system. Single-technology systems make the assumption in the chart on the right.

Mr. Pareto would suggest that we should apply different technologies on the 20% of the SKUs that generate 80% of your business than we do on the 80% of the SKUs that only generate 20% of your business. In other words, we need to apply multiple technologies to optimize the efficiency in different “bandwidths” of the Pareto Curve of your SKU base.

Get this principle right and you are well on the way of creating a world-class distribution operation.

In subsequent posts, I will talk about what technologies apply to different parts of the Pareto curve, and why. Stay tuned!

Want to learn more about leveraging the Pareto Principle in your distribution center? Contact abco automation for a consultation.

Filed Under: Math, Pareto Principle, Uncategorized Tagged With: 80-20 Rule, distribution, distribution center principles, Pareto principle

abco automation Partners with Dematic North America

by SethWeisberg

abco automation, an integrator of distribution solutions, announces the addition of Dematic as a strategic partner. Dematic, a provider or warehouse logistics automation technology, will provide key components for the warehouse solutions offered by abco.

When asked about the abco automation and Dematic partnership, Cory Flemings, VP of Sales for abco automation said, “abco automation is not just another systems integration house; we bring specialized product-to-person expertise steeped in over 10 years of working with European systems integrators. Partnering with Dematic will allow us to do this in our time zone, in English and with an American supplier who can supply spare parts right out of Kentucky. We bring the efficiency of European distribution concepts to American-built technologies.”

“abco automation doesn’t believe that one technology fits all SKUs. Working with the Pareto Curve, we apply different technologies to different product velocities which yields ‘more bang for your distribution buck.’ Most system integrators use a one-technology-fits-all philosophy which doesn’t take advantage of the natural imbalances that exist within SKU movement.

“Without a strong technology partner like Dematic, we couldn’t do what we do. abco automation is extremely pleased that we have been selected to be a Dematic partner; there isn’t another partner out there who can offer what Dematic does.” Flemings said.

When asked about the relationship, Steven Buccella, VP Corporate Sales and Business Development said, “We believe our partnership will be mutually advantageous. We both bring something unique to the partnership and are very excited about the future synergy between Dematic and abco automation.”

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About abco automation – abco automation is an American firm specializing in the design and implementation of American-built, capital-efficient distribution systems. We are a straight-speaking, flexible, fun-to-work-with, American company that designs and installs product-to-person (P2P^sm) picking systems at a fair price. We specialize in identifying and applying the right technology for fast-, medium- and slow-moving products. All of abco automation’s designs rely on looking at the customer’s solution through the lens of the Pareto Curve. abco automation designs capital-efficient systems that do more, in less space, with fewer people.

Please visit abcoAUTOMATION.us for more information.

About Dematic Corp. – Dematic designs, implements & life cycle supports logistics systems for the factory, warehouse, & distribution center. Engineered systems are built around process improvements, automated material handling technologies, and software. Typical solutions optimize logistics performance by reducing building space requirements, fulfillment time, and labor to operate while increasing throughput, accuracy, and ergonomics.

Dematic is a global company with operations in 22 countries. North American presence includes an engineering/manufacturing headquarters in Grand Rapids, Michigan, and 18 sales/engineering/service offices. Prior to adopting the Dematic name, the company was known as Rapistan. For more Dematic information, visit www.dematic.us.

Filed Under: News, Press Release, Uncategorized Tagged With: abco, dematic, news

Material Handling Systems Integrators Don’t see Distribution like You Do

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Infographic: S.A.LT. for Material Handling Design

Download the full-size .pdf of Infographic S.A.LT. for Material Handling Design here

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5 Reasons to Choose a System Integrator for Your DC Project

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An Efficient Distribution Center from Pulling the Weeds

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Expanding the Pareto Principle in Distribution

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abco automation Partners with Dematic North America

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Material Handling Systems Integrators Don’t see Distribution like You Do

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Infographic: S.A.LT. for Material Handling Design

Download the full-size .pdf of Infographic S.A.LT. for Material Handling Design here

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5 Reasons to Choose a System Integrator for Your DC Project

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An Efficient Distribution Center from Pulling the Weeds

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Expanding the Pareto Principle in Distribution

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abco automation Partners with Dematic North America

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