21st Century Automation And What It Means

For the first time in history, we have an economic recovery without corresponding rehiring because corporate automation and other factors are allowing companies to function leaner. It’s a frightening change for some, but it also opens opportunities for IT professionals who are gifted in analytics, workflow re-engineering, vendor management and integration. One case in point is warehousing and what has happened there to allow companies to respond rapidly to market conditions while keeping costs down with IT.

It begins with a sea change in how companies think about warehouses. In the 20th century, warehouses were perceived as a "necessary evil," packed with processes that were largely manual and inventory that frequently had to be expedited at the last minute because the warehouse wasn’t integrated with marketing and planning. ERP (enterprise resource planning) systems came on the scene to address this, but still the warehouse lagged.

Twenty-first century warehouse system thinking is different. Suddenly, warehousing is in nearly every company’s strategic goals. It is being viewed as an area of competitive advantage. Some of the pressures for change are due to increased global competition for customer wallet share, but equally important is the continuing growth of e-commerce, which thus far in the 21st century is seeing an annual growth rate of 12% to 14%. From an IT standpoint, this requires an integration of multiple shipping channels in real time with the warehouse.

But perhaps the largest warehouse sea change is philosophical. Companies are systematically moving their warehouses to the "front lines" of the customer experience, recognizing that instantaneous order fulfillment (and customer gratification) are crucial (and difficult to achieve) in e-commerce, and are only attainable with 21st century warehouse technologies. "Investing in your warehouse is not just about cost reduction anymore," says Mitch Rosenberg, VP of marketing at Kiva Systems, a supplier of automated material handling order fulfillment systems. "Twenty-first century consumers are different than their 20th century predecessors, so the warehouse must also be able to contribute to a beneficial customer experience."

Delivering the right goods on time to an expectant e-commerce customer often means that the warehouse distribution center becomes the "store," and the end customer experience becomes the experience that is happening within the warehouse. This transformation won’t happen overnight, as industry experts forecast that by the mid-21st century, brick-and-mortar retail transactions will still comprise 70% of all sales.

However, companies planning for the future are already funding and incorporating new warehouse technologies that improve efficiencies and responsiveness to market demand. "It’s all about customer gratification," says Rosenberg. "In the 20th century, companies worked on this by optimizing their stores so that customers could walk out of these stores with the items they had purchased. Now, people want this same kind of instant gratification by immediately obtaining their goods through e-commerce, but this is hard to get online. For e-commerce to compete with traditional brick and mortar retail in an area like instant customer order fulfillment, warehouse distribution centers must be optimized to deliver on that promise."

So what are the technologies and automation that can bring all of this to pass?

Batch-and-wait operations With this type of operation, orders are system-batched up during picking to improve process speed and then automatically separated into customer orders before leaving the warehouse for the customer. This reduces the latency factor that now exists when orders are separately picked for each customer, and it improves the overall performance of the distribution center in website-to-doorstep order fulfillment.Improved visibility of goods flows into and out of facilities This is achieved through integration of the warehouse with the systems of outside logistics partners. The integration allows companies to balance transportation and other costs with customer service levels.

Mobile robots and movable shelving units In this model, the shelves come to the workers instead of the workers to the shelves. This makes a big difference when you are talking about warehouses that are city blocks long, where workers walk 5 to 15 miles a day on concrete floors. In the automated system, robots the size of living room ottomans "walk" inventory over to the worker. The inventory identifies itself to the worker, and the worker picks and packs it. The end to end process is highly ergonomic, safer and faster.

New automation for forklifts and trucks "The forklift industry is an emerging field," says Joe LaFergola, manager of business and information solutions for Raymond Corp., which provides material handling solutions. "Over the years, people have tried to apply metrics to understand what’s going on in the warehouse. In the early days, they used analog measuring devices. Lately, the degree of forklift integration has produced vehicle management with onboard computers. This makes it easier to extract data from the forklift, which can be transported over the internal wireless infrastructure of the warehouse to a centralized system over an open API for ease of integration." The forklift vehicle manager sends a series of data codes that are actually hexadecimal data points. Each data point references a particular parameter in the truck, such as travel, lift, dead man hours, key hours and so on. The data flows though a warehouse gateway that is web-based, so all the warehouse manager needs to use it is a browser.

This combination of technologies and automation will redefine key performance indicators (KPIs) for warehouses, emphasizing labor elimination, automated and highly integrated systems, and accuracy. The business will be looking for:

Labor cost per order on shipment

If you can get four times the shipments out the door without having to hire more personnel, your labor costs are down 25%.

The cost of exceptions

If a conveyor belt breaks, what’s the mean time to repair (MTTR)? How much of your operation is affected? What’s the upstream and downstream impact?

Manned versus unmanned travel time on trucks

Manned travel time is $30 per hour. Unmanned travel time is $4 per hour. With robotics, 750 miles a day in manned travel time can be reduced to 250 miles a day.

All of this adds up to business driving technology adoption. Now, it is IT’s job to likewise transform its thinking into more of a process engineering approach that integrates people, facilities and automation with the traditional software, hardware and networks IT is accustomed to working with.

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