Should You Automate Your Warehouse?

9/30/2014
Automation technology is transforming warehouse operations by creating new efficiencies in space utilization, productivity, and inventory management. Despite these benefits, some organizations remain hesitant to invest in automated storage/retrieval systems (AS/RS), thinking that they are too expensive or too much of an undertaking.

Are you one of these skeptics? In order to maintain a competitive advantage – especially in the ever-changing, fast-paced apparel industry — you should take the time to gauge whether the technology is a good fit for your operation. The approach is easy, beginning with an analysis of the warehouse's existing framework and design.

As a first step, take into consideration these five questions:
  • 1. How much inventory (in pallet positions, if appropriate) must you store in a given design year (for example, 5 or 10 years out)? The capacity of the system defines the cube of the warehouse. If you have less than 500 pallet positions of storage, you may not be a candidate for automation.
  • 2. How many SKUs are in your inventory? This number will indicate how selective the inventory should be, therefore opening the doors for using multiple-deep systems.
  • 3. How many SKUs make up 80 percent of the annual sales volume and 80 percent of the inventory? The Pareto analysis (80/20 rule) will validate which SKUs have the volume and inventory. This helps you ensure the right type of inventory receives the right storage depth.
  • 4. How many unit loads enter and exit the operation per hour? Observing the throughput will help you determine the number of storage/retrieval machines (S/RMs) you need. Throughputs less than 20 to 30 pallets per hour, however, are often more difficult to justify.
  • 5. How many hours or shifts is your warehouse active? The number of working hours will indicate whether the asset will be used for more than one shift. But justifying automated systems used in single-shift operations is often a challenge.

Once you've answered these questions, it is time to look at your inventory data in more detail to determine whether to use single, double, or multiple-deep storage. You can use these breakdown groups as a guideline:
  • Single-deep storage: Inventory levels per SKU of less than seven pallets.
  • Double-deep storage: Inventory levels per SKU of 8 - 14 pallets.
  • Multiple-deep storage: Inventory levels per SKU of 15+ pallets.
If multiple-deep storage is right for you, you can pinpoint exactly how deep (storage lane depth) to store your inventory. This, once again, depends on the inventory levels per SKU – assign high inventory item SKUs (items with 30+ pallets per SKU) to a storage block between 7 and 12 pallets deep. Assign the remaining items to another storage block, which is between two to six pallets deep.

By now you may be convinced to take a closer look at an AS/RS for your warehouse. But you'll have to justify the cost. This is a fairly simple task. Consider the following:
  • What are your existing site conditions? If your site is landlocked, retrofitting the existing facility with high-density AS/RS can boost your warehouse's storage capacity without expanding the facility itself. You'll reduce both your real estate and carbon footprint and eliminate the need for costly, new construction. In fact, with an AS/RS you may achieve 30 percent to 50 percent greater capacity and minimize your overall building footprint by 50 percent.
  • How much labor does your facility require? Automation technology naturally reduces the amount of manual labor required to operate your facility. Therefore, with an AS/RS, you'll uncover additional profits due to increased productivity, fewer errors, and less product damage.
  • How much accuracy and control do you need to manage your inventory? To ensure accurate inventory levels, how much control do you actually need? Do workers requiring inventory management information know which products are on hand and where they are located at all times? An automated system enables real-time, accurate inventory control so that you can better serve your customers.
  • How many shifts is your equipment running? Determine the number of shifts per day that your equipment is running. Automated systems typically require a two-shift operating period. Obviously, you must properly utilize any machinery in order to justify it. Plus, optimizing the use of your machinery can lead to significant energy savings.
Without a doubt, automating your warehouse leads to numerous benefits not found with conventional systems. You'll better utilize your cube space and reduce your overall building footprint. You'll increase productivity, enhance inventory accuracy and control, and reduce energy costs. When compared to conventional systems, AS/RS has a lifespan of more than 25 years and often yields ROI in five years or less, so you'll be poised for profit potential and cost savings for many years to come.


Dan Labell is president of Westfalia Technologies, Inc., a warehouse automation solutions provider.
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