It’s not the ancient wisdom of the East to choose a process to conform to its environment; it’s just common sense. In bonsai gardening, tending a tree whose roots are circumscribed by a twelve-inch pot requires you to prune the branches carefully by hand, whereas a twelve-foot yew hedge can withstand the stress of shaping with a chain saw. The same principle applies to fulfillment. No matter what kind of product you’re handling, the current economic climate exerts considerable pressure on managers to slow down and consider carefully what expenditures are truly necessary and prudent. This note of caution is as applicable to automated picking technology as to any other capital expenditure for material handling equipment. Even in boom times, some operations simply may not require the most up-to-the-minute refinements in automated picking.
Bigger, better, best?
What principles should you apply when trying to decide whether to increase the level of automation in your picking process?
Over the last few years, significant technological advancements have shortened the product life cycles of order-picking technologies. At the current rate of change, we can predict that today’s state-of-the-art technology will continue to become obsolete at a pace that warrants operations managers to exercise caution when determining the technology necessary to support their warehousing and distribution operations.
In a majority of warehouse and distribution operations, order-picking represents the most expensive operational area. Increasing the size and complexity of order-picking operations seems inevitably to bring up the question of whether to apply advanced order-picking technologies. Labor shortages and ergonomic issues have played a major role in stimulating the redesign of traditional warehouses to incorporate more and more automated processes. In specific instances, calculating return on investment (ROI) and payback analysis can also tip the balance in decisions involving advanced order-picking technologies.
Take your pick
Operations managers face heavy pressure to respond to customer demands to reduce cycle times and management demands to lower operating costs while simultaneously increasing order accuracy and providing better customer service. Optimizing picking processes to meet these demands requires the development of a process with a strong logistics backbone, and this is primarily achieved through efficient order-picking procedures.
There is no doubt that justifying and then implementing advanced order-picking technologies can be extremely profitable for a business. Whether or not you choose to automate, the key benefits of efficient and accurate picking processes include increases in customer and employee satisfaction, productivity, better utilization of space, reduced operational costs, and reduced order-picking cycle time.
Examine each of these factors either as a concern or as an opportunity in your operation, and use the planning process to gather and analyze the data you need to help achieve targeted improvements.
Not so fast
Some managers simply assume that the best way to achieve their goals is to resort to advanced technology. To make this assumption automatically may mean that you are overlooking basic improvements that can be made to increase order-picking efficiency. Managing increasing order volume and a broad SKU mix poses a new set of challenges and requirements for growing companies. Inefficiencies associated with the following strategic and tactical issues will affect the economic value of the order-picking operation directly:
- Order management and order release
- Order picking methodologies
- Pick fixture selection
- Pick area layout
- Item profiling and slotting
- Pick area and zone balancing
- Order routing and consolidation
- Direct and indirect labor skills
- Work schedules
Techniques such as proper pick fixture selection, slot sizing, work zone planning, order routing, dynamic scheduling of resources across pick zones, and use of visual aids will enhance your operation’s ability to take advantage of opportunities for efficiency without having to employ advanced technologies.
Soft pedal
The phrase “advanced order-picking technology” may not have the same meaning for all operations managers. A majority, however, are able to make a clear distinction between “soft” and “hard” automation applications.
Soft automation in order selection is driven primarily by software changes. Examples are enhancements to existing systems or implementing a new computer system or software program to group or arrange orders. Warehouse management, order management, radio frequency, and voice recognition systems fall into the soft automation category.
Soft technology is relatively easy to transfer to a new location and typically represents only a fraction of the acquisition costs. Applying soft automation has proved a wise choice, for instance, for Madison, VA-based Plow & Hearth, a catalog distributor of home furnishings and country living products. “We’ve realized significant benefits through soft automation,” says vice president of fulfillment Buzz Van Santvoord.
Automated dispensing/picking machines, automated storage and retrieval systems, robotics, vertical and horizontal carousels, pick-to-light, and pick-to-belt are all considered hard automation applications. These material handling systems present significant operational benefits when applied in high-volume and like-product order-picking environments.
That said, advanced, hard-automation order-picking technologies are not necessarily applicable in every situation. For one thing, such systems require significant capital reinvestment to accommodate changes to product, order profiles, and throughput volumes. And if you are contemplating relocating your warehouse, you should keep in mind that migration costs for hard automation picking systems can be sizable. When you have to choose what kind of picking system to use in your DC, consider these factors:
Long-term location strategy
Unless you are positively committed to your current facility for the long term, don’t invest in hard automation. Dismantling and reinstalling physical equipment is always challenging and sometimes can be cost-prohibitive.
Item characteristics
Unless you have similar products and very high volumes, automatic dispensing machines are probably not the way to go. This sorting and picking equipment operates most efficiently in an environment where those two characteristics are present — CDs, cosmetics, or pharmaceuticals, for instance, are suitable for automatic dispensing equipment. Large, unlike, non-conveyable items — furniture or garden implements, for example — are not ideal candidates for hard automation.
Throughput volumes
High growth resulting from same-business and similar items may justify hard automation implementation. However, if the expected growth will come through acquisitions, you must evaluate the characteristics of the new product mix.
Seasonal demand
Seasonal peaks can be misleading. If you implement an advanced pick technology based on peak volumes, it will diminish capital asset turnover. Instead, you could expand work schedules by extending the number of hours worked or adding another shift to cover peak throughput requirements.
Labor
When you have access to a low-skilled, highly stable workforce at reasonable wages, continue to use traditional methods. This will help you retain the flexibility in your current system. Using advanced technology will generally require more skilled labor, which may be difficult to find and retain.
Return on investment
If you are using the payback method to cost justify your capital investment, three years or better payback is considered a healthy return and an indication to choose an automated material handling system. If the payback is not as strong, then the risks of applying advanced technology will probably outweigh the perceived benefits.
Go with the flow
Since flexibility and mechanization or automation maintain an inverse correlation, it is wise to evaluate and act on opportunities for improvement in the traditional order-picking environment before you seriously consider automation. To help achieve targeted improvements, you have to gather and process the right data. Having thorough knowledge of your operation’s product flows, information flows, and key data that drives decisions is the secret of continuous improvement.
You might also consider using computer simulation to demonstrate how advanced pick technologies work under a variety of predictable conditions. Computer simulation is becoming more common and less costly to use in justifying automation.
Selecting proper pick fixtures and slotting product efficiently will help achieve your desired goals, and often these procedures will buy you some time before you finally decide to implement advanced picking technologies. Sweeping changes made without proper due diligence in order-picking methods is a recipe for disaster. The simple, but common, characteristic of human resistance to change can always cause a new system to fail. Misapplication of technology can lead to day-to-day operational breakdowns. Considering the potential risks, it is imperative that you stay certain about the future of your business direction and environment, because these important factors play a major role in deciding whether to apply advanced picking technologies.
Ravi Madala, managing principal at Keogh Consulting, is involved in planning, designing, and implementing supply chain execution systems. He can be reached at (440) 526-2002 and at [email protected].