Automated handling delivers future-proof retail solutions

"Being able to keep costs low and deliver competitive prices is as much about efficiencies throughout the ordering, picking, delivery and return process as it has ever been,” says Swisslog’s James Sharples, a leader in automation and one of the businesses helping retailers to meet ever-increasing customer demands.

"Into the mix has been a trend towards shorter delivery periods and extended deadlines for next day orders, driven by Amazon, who saw their ability to cut out sales taxes being diminished and shifted their emphasis onto improved delivery speeds. In the UK, John Lewis set the standard by designing their logistics system to be fully compliant with the new multichannel retail environment. They’re not the only one.”

The slowdown of 2008/9 prompted a change in the way logistics experts planned for the mid to long term. Plans for many large DCs were mothballed or in some cases cancelled completely; observers tracking the progress of those in the middle of the market – the discounters – have highlighted rapid growth as the cost of living began to bite and the relentless pursuit of a bargain continued. Online retail, e-commerce, is the only area where you will see year-on-year growth, as consumers look for the pricing offered by the discounters at a convenience they’ve grown accustomed to, something which doesn’t surprise James.

"As an automated intralogistics solutions provider, we are driven by our clients and they, in turn, by the requirements of their customers,” James explains.

 

 

"In recent times, our clients’ requirements changed to respond to the economic realities brought about by the recession. Funds are not always available for large-scale projects with longer term ROI and the changing requirements of consumers that now have many more ways to place an order, means they expect a wider choice of goods to be available for home delivery at relatively short notice.”

The expected levels of response today did not exist, even just four or five years ago. With everyone seemingly working harder, and consumers questioning whether they really want to spend their limited free time in a supermarket, the only way for retailers to turn was towards greater automation. Gone was the ‘five to ten years hence’ planning style and in came a greater desire to expand within 18 months, building flexibility and adaptability into a system that could be scaled up in years two, three and four, if need be. It’s led to a re-evaluation of automation, says James.

"The justification of automation was traditionally done on labour-saving costs, and while seasonal peaks in overtime and the associated costs of staff, illness, management etc. are self-evident, there are increasingly a host of other ways in which the technology can bring cost-savings to warehousing and distribution operations.”

"The precise figures vary from installation to installation, and are often hard to distinguish from additional changes in operations, product adjustments and other efficiencies. That said, we have customers that tell us they have planned for a three-year return on investment, only to see the benefits returned to them within 18 months. We’ve also approached other household names to look at individual projects, finding out a year later that the whole experience has transformed their outlook on future DC development.”

The medium-term return

When apetito in German invested 22.5m Euro in a new automated logistics centre, it was the largest single investment in the company’s history. Fifty percent of this amount was invested in construction and technology. It took two years in the planning and the resulting cold storage distribution centre is able to handle up to 730 load carriers per day in two shifts - roughly the equivalent of 1,000 customer deliveries.

"With a medium-term investment like this, a company could reasonably expect the whole development to be paid for within three to five years. In different parts of the world there is a similar story. Lower labour costs in some countries in Asia may result in longer ROI periods to make the business case for automation, but that itself is not quite as simple as it may seem. Increasing labour costs in the Far East have made these markets more open to automation. China’s wage costs have increased by around 10 percent in both 2013 and 2014.” 

In contrast, wages in the UK are not expected to increase by 10 percent until 2019, but are relatively much higher to start with. Here, start-ups are just as interested in the benefits an automated system has in pushing a brand forward. A more polished service offering, thanks to automation, gives additional caché and the capabilities to grow rapidly in a way that attracts additional investment from outside parties.

Moving forward without moving premises

Moving to larger premises can also be a costly and time consuming exercise. Being able to make use of an existing facility, with no loss of production, can be a huge incentive to look at getting more from what you already have. Again, Swisslog has seen a tendency for more widespread benefits analysis. "Space utilisation can be an important factor,” adds James, "Together with the associated costs for overheads, lighting, heating, fire prevention etc.

"There are also safety and product integrity considerations to take into account. Less mechanical and manual handling processes usually result in fewer opportunities for personal injury and a reduction in damage to goods. Meanwhile the associated benefits of a more accurate, faster and more complete order process, usually brings greater rewards in terms of brand identity and credibility.

"Swisslog has always been open with customers about the ability to look realistically at a wide range of products and solutions. We are not focused on pushing a particular concept or technology. That said, we’ve recognised which technologies offer real advantages to businesses trying to come to terms with a new omni-channel landscape.”

The result is solutions like AutoStore or CarryPick, which can utilise space far more efficiently, built up without any downtime and flexible enough to be up-scaled in a matter of days. We’ve recently provided additional AutoStore robots to a UK retailer within a two week period, resulting in a greater throughput for this goods-to-person system just in time for their peak Christmas period.

It’s always been possible to scale up, but previously that took time. With modular automation systems, lead times are short, and customers are able to take advantage of their online potential to maximise sales and convert customers in a way that was previously impossible. In a parallel of the changes on the high street, it’s bringing all the benefits of automation into sharp focus.

James concludes: "Much like our consumerist alter egos shopping for the right deal on the high street or online, expectations in the warehouse have been raised. Getting a faster return on investment; greater predictability and quicker adaptations; improved delivery times and being able to get what you want out of a system, when you need it, are now reasonable desires thanks to the successes already achieved in the automation business.”