Warehouse Automation- is now the time to invest?

Warehouse Automation - The Logistics Business UK

The warehouse automation market is in a strange place right now. On the one hand, thanks to the measures taken to survive the recession, we hear that many companies are sitting on strong balance sheets, have good cash flow and hence could afford to invest in their business. On the other hand, continuing market jitters and lack of growth is putting companies off making investments and automation suppliers are finding orders hard to secure at the moment.

This might seem a sensible thing to do for investments that bring quick wins, but warehouse automation has a lead-time measured in years, rather than weeks or months, especially if it is to go into a new building. Indeed it would not be unusual for a significant sized system to take two to two and a half years from start to finish. Therefore in making the decision to automate you need to be thinking about what the market will be like in two and a half years. Today’s situation is almost irrelevant.

So why does it take so long? Well the time to develop a requirement specification, plan the layout, go through a competitive tendering process for the automation, obtain capital approval and do the legal and commercial negotiation can easily take six months. If a new building has to be designed and built then finding a site, getting planning permission, preparing a design and tendering for the build can be carried out in parallel but is likely to make the process even longer. Manufacturing the equipment and putting up the shell probably takes another six to eight months – the building does not need to be fully fitted out before you start installing the automation, just weather proof. Then there is maybe nine months of installation and commissioning work followed by maybe 3 months of testing. After this there is a 3 month ramp up period, and add in that you don’t want to be doing this during the lead in to your seasonal peak (if you have one), and before you know it two and a half years (or more) has gone by.

Of course warehouse automation is not for everyone, but for many it is an important, some might argue essential, part of creating a low cost, high service level operation. Productivity is improved through the reduction in wasted operator time, service levels are increased through greater accuracy and faster response, and space utilisation is improved often resulting in a smaller, cheaper building. So if that’s what you want it’s no good waiting till sales pick up and you run out of capacity. You have to think two or three years ahead. And because the suppliers are a bit quiet at the moment there are some great deals to be done. Now may be a good time to start.

Before you do though, it is as well to be aware of the downsides of automation. The greatest downside is that it fixes more of your costs than is the case with a more manual operation. Also it requires something of a mind-set change for the operations team, particularly if the processes are to be highly automated. They have to be treated more like a production line than a conventional warehouse. This requires more planning and attention to keeping the “machine” fed with work. Equally you should not be fazed by some of the perceived downsides.  In the main this is not new or bleeding edge technology. Most of the techniques and equipment have been around for forty or more years. Performance has improved enormously over that period, but this is not high risk. It is also very reliable equipment. Sure, anything that moves can break down and those are the events that we hear about but in reality these very rarely cause a serious problem if managed appropriately. And finally, these systems are often thought to be inflexible- and in some cases that has proved to be true- but almost always because flexibility was not designed in from the start.

Downsides of automation - The Logistics Business UK

As with all things, there is a right and a wrong way to go about automation. First off is sound planning. Research your business and make sure you understand your stock and order profiles. Equally don’t make wild and unsubstantiated predictions. Where you cannot be sure then make certain your supplier knows you need flexibility to cope with a range of conditions. Beware though that flexibility, when talking about automation, should probably be spelt £flexibility – it will usually cost more so only ask for it where you are sure you need it. Next is a clear requirements specification. Here it helps to have someone who has done it before and knows what to ask for. In particular the specification should describe how you plan to test the system and its performance.

Then it’s on to tendering and the important thing here is the contract terms. Hopefully, once agreed you won’t have to refer to it again but the contract should be clear and relate to the system, performance and test regime you are looking for. Next is the tender process and don’t assume that, because the suppliers are expert in the equipment and systems they provide, they will also be expert in your business. It is a surprising fact that almost of none of the people you will come across in the suppliers’ companies will ever have tried to operate one of the systems they sell. You have to be involved and take ownership of the solution. If you don’t have the expertise to do that bring in qualified people, such as consultants, who do.

The installation process is similar to most capital projects and of course requires careful project management. The key point in this phase is to try not to change your mind about what you want. Suppliers love changes because they can recover margin that they probably negotiated away and will use them as an excuse to extend and therefore de-risk the programme. Then it’s onto inspection and testing. Of course the supplier will want to test everything but make sure you carry out your own tests and make them as thorough as you can. There is no such thing as too much testing. And finally remember that after the implementation phase of the project there comes the exploitation phase. This is after you’ve gone live and is the phase where you make sure the system is optimised to the business as it now is, rather than as you thought it would be when you planned it two or more years ago.

So, is now the time to invest in warehouse automation? Only you can answer that but remember you are not deciding if you need automation today, but if you will need it in two or three years. If you do then get on with it now. But make sure you get professional help.