Analysis

Warehouse process automation: Optimise existing resources without the capex

The term warehouse automation can denote anything from the installation of conveyor belts to the fully automated picking and packing processes of Ocado. Process automation may provide a middle ground for retailers that want to reap the productivity gains without huge investments.

An Aberdeen Standard Investments survey of supply chain executives at the end of 2018 in 29 European countries found that 25% had invested in warehouse automation and 43% planning to do so in the future. 10% had already invested in robotics specifically with 56% planning to in the future. Warehouse robotics technology is advancing rapidly, with Cambridge Consultants last week (16 May) announcing a robot with the dexterity to match a human worker.

This fully automated solution has the benefit of reducing labour costs, which are one of the most compelling business cases for automation – operations and fulfilment provider F.Curtis Barry & Company says labour can take 60% or more of total warehouse costs.

The capex requirements of automating to the degree of an Ocado are out of reach of many retailers, however. According to Ocado’s full-year results, published in February, the firm’s capital expenditure for 2018 was £214 million, up from £160 million in 2017, which contributed to its loss before tax widening.

There are also questions about how broadly this sort of automation can be applied. Mike Callender, executive chairman at REPL Group, which works with major third-party logistics providers and major retailers, notes that automated picking works well with light items but not with washing machines or sofas.

“Something that needs a high level of care, you can’t automate.”

There are other reasons why not all retailers are following Ocado’s example. Richard Davies, MD of Hattons Model Railways, lists a number of factors in the decision to stick with a “highly efficient, non-automated” warehouse.

“Most technology solutions we’ve evaluated, require a lot more space, than a ‘people-orientated’ solution. We have evaluated adding more conveyor belts and automated sorting solutions, but we don’t have space.”

Due to relatively low volumes, automation means only a marginal ROI, he adds. He says that people are more flexible than an automated solution and the cost of training and ownership is prohibitive.

However, the company might look at introducing more automation if existing WMS supplier Peoplevox or another company with a sound understanding of Hattons’ software were to offer it, says Davies.

 

Towards process automation

Luckily, garnering the benefits of automation doesn’t have to mean full robotisation. New solutions are allowing a shift from capex-heavy long-term warehouse leases to repeated, iterative improvements.

Callender claims using automation to optimise processes in a traditional warehouse setup can lead to a five to ten percent productivity increase.

REPL works with retailers including M&S, which made use of its technology to organise its workforce scheduling.

“Look at your warehouse efficiency and where it’s not as productive as it should be, then improve your warehouse in those specific areas.”

Alongside availability itself, another area that Callender highlights is differing employee competencies for different tasks. REPL’s software can analyse how good different employees are at packing different items. Its algorithms cluster different types of items according to the skills required and then assign them to the best person.

Retrieving these insights involves pooling information – products, employees, order numbers – in a “data lake” and leaving the algorithms to work out where the efficiencies are.

Another possibility is storing items together not according to category but according to order patterns. For example, Callender says, placing a battery next to an electronic device that requires it.

Wayne Snyder, VP of retail strategy EMEA for JDA, whose WMS is used by B&Q, says: “We’re finding most people are looking at automation but not at full automation except for online orders.”

Some areas Snyder highlights are looking for efficiencies in the way employees undertake certain tasks. This might include load optimisation to make the best use of transport assets when transferring orders to the fleet.

Most retailers, Snyder argues, will retain for the time being a mixture of robotic and manual labour, especially as they adapt to being able to service either stores or online customers from the same warehouse. These require different models, with stores being better served with bulk shipping on pallets and online orders requiring more precising picking.

As well as thinking of where automation can replace employees, retailers should look at where it can complement them. Zalando is one example of a retailer taking this mixed approach. The German fashion giant recently opened a new distribution centre in the Nordics featuring 50 GreyOrange ‘butlers’, autonomous mobile robots which can hand packages to the 500 employees at the site.

Jan Bartels, VP customer fulfilment and logistics at Zalando, said at the time: “Zalando believes in pairing cutting-edge automation solutions and passionate employees. We use automation technologies to ease the workload of our employees, by taking on monotonous and non-ergonomic tasks.”

With the proliferation of more “as-a-service” type automation solutions and as algorithms seek out the weak points in the warehouse, process automation allows retailers to find a middle ground between no automation and introducing incremental efficiencies to existing processes.

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