Thanks to the lingering rough economy, many merchants have experienced the pain of layoffs due to decreases in demand. After all, labor is the number-one cost in a distribution center. Now the challenge is how to make the core staff more productive.
In any DC, automation has long been recognized as the main “force multiplier” getting the most return out of each man-hour you are subsidizing. Vertical consolidation, pick modules, carousels, directed picking and conveying systems are on every distribution center manager’s wish list in one form or another.
Warehouse automation can, under more normal circumstances, be expected to cost up to $10/SF of DC “footprint.” But in this contracting economy, there is a good supply of used equipment available, and these budgets can be dropped anywhere from 25-50%.
When Swiss Army Brands constructed its new North American headquarters and distribution center, “we looked all alternatives to save cost while maintaining efficiency and quality,” says vice president Jim Cary. “We were able to procure a pre-owned material handling system that was 35% less the cost of new equipment. At the onset of the project we never anticipated this being an option, but it saved us significant dollars and the system has delivered the results our business demands.”
A timely additional benefit of purchasing equipment this year is the recently revived “Bonus Depreciation” buried in the 1,100 pages of the recently executed stimulus bill. Any business purchasing new equipment in 2009 can expect to benefit from deductions from their federal tax liabilities worth more than 20% of the price tag.
This incentive applies to all of the hardware involved, as well as the soft costs and software that make it work as a “system.” To take full advantage, however, you must go into a project prepared to properly track all of the costs.
Stephen B. Harris is vice president, construction and real estate, for management consulting firm The Beacon Group.