Automation - is it the answer?
June 1st 2008

Retailers and manufacturers are operating against a backdrop of reduced margins, a deflationary market and a lack of skilled labour. Gordon Smith, CEO at SDI Group, a leading provider of systems for all aspects of distribution centre materials handling, looks at the issues

Whilst I don't have much time for the doom mongering that is on our front pages every day, there is no doubt that the downturn is on its way and as always only the fittest will survive.

Inevitably when a downturn happens organisations look to their supply chain as a way of saving money or risk seeing their margins eroded by distribution costs. So where should you start? In simple terms when a product arrives from overseas it needs to be booked in, sorted and shipped out as soon as possible.

As well as speed, accuracy is key – delivering the wrong product to the wrong place costs money. In reality, if we are talking about high volumes being handled at speed, then automation is an option that should definitely be explored. It offers an excellent opportunity to increase productivity and can be designed to take into consideration possible future requirements. For example, as part of the project we recently undertook for Moss Bros, we ensured that the conveyor systems can be upgraded to support further automation and sortation if the business requirement arises, making it as future proof as possible.

Cost benefits In the past some organisations have been nervous about investing in automation due to a lack of understanding of the benefits it can bring and concerns about payback.

However, automation in distribution has matured in the past three years with new concepts, better technology and system integration compatibility so in the majority of cases, when benchmarked, automation solutions are more cost beneficial than traditional solutions. That said the decision to go for an automated option does require some vision but the companies that are reaping the benefits are those that have taken a measured risk.

At SDI we are aware of these concerns and consistently deliver each project on time and on budget, which means that clients can be rest assured that their ROI is guaranteed. In fact in recent years there have been some high profile success stories which have resulted in a quiet confidence within the sector. We have delivered solutions for clients such as Matalan, Levi, Nike, TNT, Prada, Monsoon, Asda George, HMV, JC Penny and Borders Books – all of which have brought real business benefits such as optimised workforce and increased operational efficiency, performance, visibility and control.

Another key benefit that automation can bring during a recession is that it helps organisations to sweat their assets by enabling them to stay in their existing warehouse whilst increasing their volumes.

Let's face it, the land bank in the UK isn't getting any larger and rental prices are definitely rising. We have recently completed a project for Magna Automotive which has created an additional 10,000ft2 of space within its manufacturing facility to support extra production capacity. This meant the company didn't have to move to a larger, adjacent site, eliminating additional rental costs and the added expenditure associated with transferring the manufacturing operation.

The lack of skilled labour in major distribution areas is also a key consideration for companies looking to cut their supply chain costs as they face having to pay considerably higher wage bills to get the right workers. In addition, health and safety is often on the agenda, particularly in our increasingly litigious society. Many of our automated solutions are designed to optimise the workforce and a recent project we undertook for a leading high street retailer resulted in no increased staffing requirements despite achieving a 500% increase in volumes and a 60% increase in warehouse capacity.

Maximising productivity I also predict that we will be seeing an increase in the number of 3PLs considering automation as an option. Traditionally, 3PLs have shied away from this area because, with their average contract lasting between 3-5 years, they have not been prepared to make the investment.

However when these contracts are coming up for renewal they are finding that they have achieved all the productivity possible with manual systems and will have to look at automation as a way of getting contracts renewed.

Looking forward I believe that issues related to the scarcity of skilled labour, and the need to reduce the time to market and cut costs are set to advance demand for automated warehouses over the next few years. The smart organisations will invest wisely and reap the benefits of faster reaction and cycle times, high picking accuracy, manpower savings, store friendly picking, RFID, tracking, tracing, information transparency and visibility with a significant reduction in damaged stock. So is automation the answer? In many cases, yes.

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