New drivers behind the bullish outlook for warehouse automation

This past week at ProMat 2011--a material handling trade show held at Chicago's McCormick Place--I got a chance to assess the outlook in industry toward investment in automation as our economy claws its way back to sustained growth. ProMat showcases all kinds of products used in warehouses--including some relatively low-tech items like pallets--but it's also the biggest show around for sophisticated systems like automated storage and retrieval (ASRS) systems and digitally controlled conveyor and sortation systems that can quickly shuttle and shuffle the exact mix of goods needed for delivery, all while using minimal human labor.

These types of systems are the technologies used in the warehousing operations of companies like Amazon, United Parcel Service, Walmart, and every major consumer goods company. Instead of using just people and lift trucks to handle goods, the big facilities tend to rely heavily on automation. The automation starts with software systems for order management (called enterprise resource planning or ERP systems at the corporate level, and warehouse management system, or WMS software, to plan goods movement in warehouses). The WMS typically integrates with a warehouse control system, or WCS software layer. It's the WCS that communicates with and coordinates the automation systems like sortation systems, ASRSs, or even robotic arms that automate repetitive tasks like building pallets. For a peek at some of these systems, take a look at this video report I compiled at ProMat.

Historically, one of the biggest drivers for the materials handling automation has been the ability to reduce labor. As I ventured onto ProMat's show floor to write stories for the official show daily produced by Modern Materials Handling, one the core questions I had on my mind was whether companies are investing in more automation before investing in more labor as the economy improves.

We all know that U.S. unemployment remains high, even while signs of an improving economy continue, such as positive readings for the nation's manufacturing index the past 19 months (through February 2011). But sales of automation equipment for warehouses also took a big hit during the recent recession. According to the Material Handling Industry of America (MHIA), which sponsors Promat, material handling automation equipment shipments dropped 33  percent in 2009, and as of last September, were expected to rebound to 3 or 4 percent growth for 2010. According to a recent look at the state of the material handing industry from Modern Materials Handling, MHIA now expects that 2010 equipment shipments will actually do a bit better when the full 2010 numbers come in--about 7 percent growth. For 2011, the industry is expecting overall growth in the 10 percent to 11 percent range.

So are companies looking at implementing more automation as a way to keep up with distribution volume as the economy improves, rather than hiring more people? Well, it's probaby not that simple a tradeoff. For one thing, distribution and logistics is just one part of the economy, and can hardly be expected to solve our employment problems. Second, material handling system vendors sell worldwide, so their sales growth isn't tied just to the U.S. economy. Third--and this is a point I heard from a few people at ProMat--material handling automation isn't implemented just to reduce labor. It's also done to achieve a level of order accuracy that companies would be hard pressed to achieve with more labor alone.

At a ProMat press conference, I asked Chris Cole, CEO of Intelligrated, a major vendor of materials handling automation systems and integration services, if labor savings was still the key driver behind warehouse automation today. Not exactly, Cole said. For many companies, materials handling automation is a way to achieve a level of order accuracy and process improvement that you can't achieve manually. Not only can automation systems ensure high accuracy at high volume, they can also figure out how to pack containers or pallets so that they become easier to put away on store shelves. So end-user companies don't see warehouse automation simply as a replacement for labor, says Cole, but more so as a productivity enhancer that reaches out beyond the four walls of the warehouse. "Even in Third World regions where labor rates are lower, our customers are telling us that the capabilities of the automation have reached a point where [the systems] are able to do things and achieve an accuracy level that you can't achieve just with more labor," said Cole.

I heard a similar train of thought from other vendors at ProMat 2011. At the SICK Inc. booth--a vendor of sensors and automatic identification products--I discussed the concept of process improvement with John Ashodian, SICK's market manager for retail logistics. Ashodian demonstrated a new version of camera-based system called the ICR880 that uses SICK's vizualization software to troubleshoot the causes of bad bar-code reads. With this type of system, the warehouse facility not only has a high-speed, hands-off way to read bar codes on boxes on a conveyor line, if a read is bad, they have a diagnostic tool for pinpointing why, as Ashodian explains in the clip below.

 

Don't get me wrong, not all warehouses need automated sorting systems or camera-based reader stations. Some simply don't have the order volume or product mix/complexity to get enough payback from labor savings. But as I learned at ProMat, warehouse operations also are being pushed by customers and by internal efforts to continually improve order accuracy and the ease and reliability of working with shipments that come out into and out of a facility.

Comments

[William Taylor]

Excellent overview and thoughts about an exciting area (at least for those of us who have worked in fulfillment centers or DC's). Thanks.

[warehouse management systems]

The systems ease of use through all of this complexity is the best I’ve encountered.

[Warehouse Management Software Systems]

Automation systems use in a company is did a big help for them. Like you said, WMS, ERP and other automation system it helps and assists the company with regards to inventory, managing products and even contacting consumers about any changes or comments. Hence, will tighten and improve the partnership of manufacturer and the customers.

[Ethan Mudgett]

I understand why many companies have decided to make their warehouse automated: to enhance performance and improve accuracy. But for me, warehouse work can be made better if companies can balance their employment of human labor and automation to reduce the risk of higher unemployment rates.

[Roberto Michel]

Good point Ethan. Human labor should not be undervalued or overlooked in blind pursuit of automation. Maybe human labor can do the job more efficiently, if work teams or lean practices are employed along with simpler automation assists like new carts, racks, or the pick to light systems. It all depends on what's more profitable given the order flow/mix/complexity for a warehouse. I also think that companies that invest in highly sophisticated automation have to make careful ROI projections and consider a service level agreement that takes the risk out of things like the system being down too much of the time. Like any "fix," you look at the simpler, less disruptive solution first, and that might often be a matter of better training or work team scheduling--not automation.