A fresh look at automation for Omni-channel Retail

 

You’ve made the decision to automate at least part of the handling and fulfillment operations to assist your company’s efforts to become a truly Omni-channel retailer. But what is the best way to proceed?

Omni-channel retail is more complex and less predictable than the old warehouse to store model. This makes flexibility very important.

Forecasting used to be easy in retail, but since the arrival of the internet, it’s all got a bit messy. Even one of the success stories gets it horribly wrong. When it built its first Magna Park DC (it was handed over in August 2007) John Lewis expected online sales of £100m by 2017. In fact it surpassed £1bn last year.

John Lewis is now building another huge shed beside the old one and expects £2bn in online sales by 2020. Operations director Dino Rocos concedes that figure is likely to prove wrong and is looking to build as much flexibility into the operation as possible.

"What we believe to be facts today will prove wrong in the future,” he says. "We take a modular approach to the physical supply chain. It is easy to be seduced by the bells and whistles when you see an automated DC, but keep in mind, its all there to serve the customer.”

But how well does a flexible approach to physical supply chain sit with the company having two massive, highly automated DCs?

"If we have different distribution needs, we can alter the layout,” he explains. "We want to avoid a white elephant but at the same time we must meet fulfillment needs. We will revise the strategic plan regularly, the last thing I want is for infrastructure to be lying idle. You only fully offset the cost just before you reach capacity.”

So, we have seen the importance of automation in meeting fulfillment needs from one of the leading players balanced with the need for a modular, flexible approach. So how might you do it?

One method from Swisslog uses its AutoStore product to allow retailers to minimise upfront investment but put in a framework that will allow rapid growth if needed.

Swisslog UK senior logistics consultant Brian Whale explains: "With the Autostore item picking system you can deliver a grid with stock locations that is larger than you immediately need. To utilise further capacity requires more robots and these can be ordered within 2-4 weeks. In contrast, miniload, pallet crane and shuttle systems typically take 16-24 weeks.”

Further enhancing flexibility, AutoStore can be used for store replenishment as well as item picking. The 74 litre tote gives you the opportunity to carry small case and each picking from same pickstation.

Standardisation also helps, according to Witron’s VP North West Europe Jack Kuypers, where even though installations are tailored to a customer’s needs, the components and software interfaces used are standardised and therefore modifications/extensions can be tested and implemented during running operation without any impact on the business.Stanardisation also helps, according to Witron’s VP North West Europe Jack Kuypers, where even though installations are tailored to a customer’s needs, the components, modules and software used are standardised and therefore can be combined without conflict.

Flexibility is important so the retailer can cope with unexpected success or failure in the unpredictable world of online sales. A more predictable form of chaos requiring fulfillment flexibility is seasonality. 

Knapp has an interesting solution here. The bedrock of many of its installations is the OSR Shuttle, but this can be supplemented with the Fastbox buffer tower. Knapp UK MD Craig Rollason says: "You can bolt this on to OSR, Fastbox sits in the middle and processes the fast moving SKUs, say if you are doing a campaign or launching a new product. You can feed workstations extremely quickly.”

To cope with peaks Witron has developed standard functionality in its controls to automatically shift volumes from fully automated to more manual areas in such periods. The aim being to optimise the utilisation of the MHE.

For smaller retailers the unpredictability brought by eCommerce is particularly challenging. A high degree of automation is unlikely to be appropriate but efficiencies can be gained by automating or mechanising aspects of the operation, for example, using conveyors to take products to workstations.

Jungheinrich UK systems and projects director Steve Richmond says: "It’s not one size fits all. A small Omni-channel retailer will need bulk storage as well as item picking. Look at the order profile, analyse SKUs per order and visits per bin. Full automation may not be the right option but multi tier shelving and mezzanines can help you flexibly adapt a warehouse to cope with eCommerce.”

Tied inextricably to the issue of flexibility is speed. After all, what flexes in a retail business but the pace of orders and activity? So, is it a simple case of faster is better?

"It’s not about speed for the sake of it,” says Dino Rocos. "Different customers have different priorities, some want speed, some want service, we need to be able to adapt. But speed is important, it reduces inventory and creates efficiency.”

Clearly speed should not go hand in hand with pick errors, sloppy delivery and slipshod presentation, but as Rocos says, it is important. Not least because it allows retailers to push back delivery cut-off times, lengthening the window of opportunity to make money and impress customers with swift deliveries.

That’s all very well, but the question remains, how do you achieve it? 

Anticipation is part of it. In the omni-channel environment work scheduling using ERP, involving advanced picking for retail orders can help.

Anticipating the stage beyond the warehouse and distribution centre helps too, according to Logistex solutions manager Martin Elliott. "The fulfillment operation needs to do some of the courier distribution preparation work. This also means couriers should integrate better with and supply better information to retailers via the retailer's WMS.”

Getting back to the automated handling process itself, a helpful exercise to consider when analysing a system is counting the number of times the product is touched door to door. 

As Swisslog’s Brian Whale says: "Unnecessary steps and touches cost time and money.”

Likewise, Witron insists you need to consider all processes from receiving until dispatch as one integrated system. Optimising certain warehouse areas can be useless if others fail or are slow. 

Gaining handling speed comes about using a balance of the right products and optimising processes. We see this in one crucial area - order consolidation. This is a potential bottleneck, as items may arrive from different storage locations at different times for the operator to consolidate into one package.

There are some ingenious solutions for speeding this up. One is the use of hanging pouches. This allows items to be placed in a pouch around a hanging garment, so if a customer wants a dress and a belt or shoes, they can quickly and conveniently be consolidated.

A recently released example is the MonaLisa from SDI Group (see box). SDI Group senior sales manager Winnie Ahrens says retailers came to the company asking for a solution.

"The challenge for retailers was they didn’t want to send products out in separate packages,” says Ahrens. "You need to quickly consolidate those items. This is especially true in the UK market, where there is greater demand for next day deliveries, leading to on-demand picking. You need to have items accessible within 45 mins to an hour at the latest.”

At the moment, there is largely no getting away from the pick and pack station. This adds time but for the majority of orders, the human eye is needed to ensure items are picked correctly and presented well. It isn’t always needed though. Machinery can be used to package non-fragile items straight from the belt with a despatch note into a poly bag.

We’ve seen that improving fulfillment speed is more about optimising process than about the speed of a particular piece of equipment, but that can help too. Staying with SDI Group, the company has updated its push tray sorter, which has been installed with Polish 3PL No Limit. It helped the firm carry out what was two weeks’ work in two and a half days.

Knapp is developing Pick It Easy robots which use imaging technology and a grabber to pick items from a conveyor belt at startling speeds. It is not best suited to online retail at the moment, but a variant of this technology could, in the future, help make fulfillment faster.

While automated systems drive efficiency in the distribution centre, the operator is still an important part of the equation, and here strong ergonomics can help drive productivity.

Online pioneer and $75bn behemoth Amazon is a business driven in large part by manual picking with huge numbers of employees taken on at seasonal peaks. This is unlikely to change any time soon, but the company has been coming under pressure from some quarters (notably a BBC Panaroma documentary last year) alleging that workers are pushed too fast and too hard in Amazon’s fulfillment centres.

While Amazon disagreed with Panaroma’s claims, the company is conscious of lessening strain on its employees.

Timothy Collins, director of operations in the EU for Amazon says the company is developing automated goods to person technology to reduce walking time for warehouse operatives.

Amazon bought the mobile robotic fulfillment company Kiva Systems for around half a billion pounds two years ago and Collins insists this technology would take the strain off its warehouse operatives.

"The key difference with Kiva is that in a facility without it, the picker walks to the ‘mod’, picks the item and takes it to the conveyor. With Kiva, the robot goes to the mod and brings the product to the picker, who then places it on the conveyor. We still use pickers but it lowers the amount of walking they have to do,” says Collins.

Automation is best suited to very repetitive tasks, especially if the repeated tasks involve lifting and moving heavy items. And of course, the automated system doesn’t take tea breaks, go on holiday, get sick, or get tired.

Safer handling legislation is becoming more stringent and companies are seeking to reduce their exposure to potential claims.

Knapp takes a number of measures when it is designing workstations, including using anti-fatigue mats, and examining how the operator interacts with the workstation. The company looks at how the products are presented, for example, are they in totes or cardboard boxes, they gauge the angle and height as well as the product being picked in order to identify the best way to pick it safely and securely.

To sum up Witron’s Kuypers says: "Ergonomics plays an important role in a daily working environment. The reduction of walking distances and the elimination of lifting and carrying heavier products is a key element in our design of an automated system involving a manual element.”

Finally, an important part of considering an automated system is to look at your business, and decide the scale of automated system you need and can justify, as well as choosing the right partner for what can be a very long term investment.

Scale is a key element in defining automation. But for omni-channel retail is greater scale simply a function of higher throughput? No, says LCP Consulting partner and technical director Emile Naus. "It is not just about overall throughput volumes, it is increasingly about the size of range that Omni-channel is driving as retailers aim to offer extended catalogues through online stores.”

Scale of operation is a function of product mix and numbers of SKUs. It is most important to approach this by analysing different product groups and their speed of movement and churn. There is no one size fits all when item picking for a broad (in some cases huge) range. Indeed Amazon’s enormous range is a key reason its operation still leans heavily on a manual picking element. 

SSI Schaefer business development & marketing manager Mike Alibone says analysis of different product types and their implications for automated handling and picking is an important consideration. 

"In an operation where there is a high number of products of varying weight and dimensions, there will be a combination of automation systems working simultaneously, each element catering for a range of products according to their physical characteristics and throughput. This could mean a fully integrated system combining manual shelf single item picking, case picking, pick-by-light and automatic (A-frame) picking and goods-to-man picking fed by a tote ASRS – all linked by a conveyor system.”

That said, traditional retailers can learn from pure-play success stories such as vente-privee.com in terms of coping with large throughputs. European senior VP supply chain Jean-Michel Guarneri says: "Automation is essential for us to absorb our volumes of daily activity, our peak loads, and the diversity of products we deal with. Our central DC prepare on average 80,000 orders per day with peaks of up to 150,000 orders per day. Across our warehouse portfolio we use large sorters, automated picking, mechanical packaging machines, voice picking solutions and very soon, goods to man systems.”

Indeed while the benefits of an automated system tend to skew towards the larger end, simply because of the cost involved, it is not the case that an installation has to be massive to be worthwhile.

Swisslog’s Brian Whale says: "A minimum investment for miniload cranes is a couple of million quid by the time you’ve got a WMS, and AutoStore is about £1m. We have spoken to some companies with turnover of around £10m, and they could be big enough one day but they would be better off with perhaps a lean loader installed.”

Rather than selling you a white elephant, a good company will tell you ‘this is what you need for now’ and re-visit when that reaches saturation point. Many companies want ROI within two or three years, and that is very challenging for a single shift operation. If you are operating two or three shifts then you are more likely to get close to three year payback. 

However Brian continues: "Automation can allow a retailer to sweat a shed a bit more than a traditional manual system. With more product per cubic meter, a retailer may save on re-location costs.”

Retailers have many wheels squeaking for attention and many priorities, such as marketing and front-end systems. But the omni-channel challenge is making supply chain more integral to business success, with retail boardrooms more likely than in the past to give the green light to logistics projects. Dino Rocos of John Lewis says supply chain costs as percentage of sales is rising at the retailer, with the figure at 11% in 2011 and projected to be 14% by 2020.

It’s not just about the technology, retailers should look hard at the credentials of their partners. Choosing an automation partner could be the beginning of a 20 year relationship, so it’s important to know who you are ‘getting married’ to.

Knapp’s Craig Rollason concludes: "It’s a journey, and retailers want a suppliers that will appreciate their business is growing and changing. They want a partner that is looking to solve problems before they become problems. Retailers are trying to preempt market forces and we have to help them, using our R&D to identify solutions that may be needed.”