Time to automate your DC?

Most multichannel operations these days are under pressure to reduce labor and improve efficiency and overall accuracy while spending less money. The best way to do this typically involves some automation help in the warehouse.

But automation is not a magic bullet. In some cases, results don't meet expectations. Budgets are exceeded, timelines are not met, and expected savings don't materialize.

Most merchants could use some help in determining when to automate, how much to automate, and what types of automation solutions make sense in various operations. Here are some guidelines to consider.

For starters, we should note that the key characteristics of a typical pick/pack, less-than-full case, highly seasonal business model have changed in recent years, affecting warehouse operations. Among these changes:

• Disappointing sales and corresponding reductions in future sales plans

• More attention placed on managing inventory

• Shorter lead times for processing orders

• Getting the biggest payback

  More severe and later seasonal spikes in volume

• Increased “free shipping” offerings

• Higher customer expectations of service levels

Both large and small businesses are facing these problems, and they are not limited to one type of industry. So systems must be sized appropriately, as well as designed to fit the specific needs of each company.

There are many automation options available today. The key to success is finding one that is both scalable and flexible, and also cost effective.

You must also have the necessary infrastructure to support the level of automation you are considering for your facility. Having the facility, staff and system support in place is critical to making the technology work for you.

You'll probably know when it's time to automate: When your ability to meet order volume or accuracy requirements is compromised; you can no longer meet service levels; and overall operating costs are rising, you have reached the basic threshold. But first, make sure that you are optimizing as much of the existing conventional operation as possible.

Choices and options

In many cases, you can make significant improvement without investing in automation. Also, comparing an automated solution to a sub-optimized operation in place will result in calculating an inflated return on investment.

To make sure your current operation is running as effectively as possible, focus on slotting, replenishment; location and inventory tracking; vendor compliance; and picking and packing productivity. These key areas represent opportunities to maximize processes and ensure they are well managed before investing in automation.

The most labor-intensive areas can usually support some level of automation justification. In the typical direct-to-consumer business model, the areas of picking and packing can represent up to 50% to 60% or more of total warehouse labor cost.

Because of this, many automation options are designed to address these high labor cost areas. Most justifications for automation are centered on the reduction of warehouse labor. Be aware, though, that in many cases this will not justify the expenditure.

The basic objective is to always select the proper level of automation. Most companies today are looking for a 12- to 18-month payback; that's easy to say, but not so easy to do.

To develop the best ROI case, you need to have solid data and be able to measure the impact of automation on the operation. Many companies do not have good measurable data or operating standards in place to use as the basis of measurement for investment or improvement, but this is crucial to making good decisions about the proper level of automation.

The pick/pack environments lend themselves to certain types of warehouse automation or technology applications. The need to quickly process a large number of small orders of less-than-full-case quantities with a high fourth-quarter spike is a key difference from a traditional full-pallet processing operation.

Having to track, store, and process thousands of SKUs of vastly different sizes and shapes presents additional issues. Key variables are product type (weight and cube), order volume (peak and average), and the number of units required to fill orders (order profile).

Remember that one size rarely fits all; you must define your unique business and operating requirements before evaluating automation options. Without a detailed set of operating metrics and requirements, the chances of finding the right system are slim.

Here are three examples of technology options, with potential “best fit” and budget costs.

1. Pick/pack to light

   This technology uses location lights to direct activities such as picking and packing. It eliminates the need for paper instructions, as the employees follow the lights to complete their tasks.

   The lights indicate the activity to be performed and require confirmation that the correct task was completed. A good fit in many applications, successful implementations of the pick-to-light model usually occur where:

   • Orders are multiline
   • A relatively few SKUs are in the product line — usually less than 2,500
   • A large number of SKUs per order
   • A high degree of order accuracy is required
   • A medium- to high-order volume
   • A potential for high-density pick area

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