The Biggest Challenge in Logistics Projects

NotschalterWelcome to part 3 of our series on success factors, challenges and pitfalls in logistics projects. Today we are going to talk about probably the most difficult phase in a project to automate a product warehouse: handing the facility over from the supplier to the operator.

This SSI Schaefer blog post is going to explain why this phase can be troublesome and what could be done to improve the situation.

Simply said, there are usually two colliding points of view in this phase. The operator complains that “the facility is not ready and not faultless”. The supplier then accuses the operator that “the staff is not qualified and the requirements for the facility changed too shortly before the start-up phase”.

The trouble arising from changing requirements mid-way has already been addressed in part 2 of this series. Good objectives for a project come with a target corridor to provide enough flexibility. Of course, we are operating under dynamic economic circumstances. Over the 9 to 15 months the project usually takes to completion, one or more parameters might change. And, yes, for a highly dynamic goods-to-person system it makes a big difference whether we plan for 2 or 2.7 pieces in each order line. It could mean that we suddenly need 35% more performance than originally agreed upon!

In general, it’s the final stage of the project, just before the start-up, when current problems as well as unsolved ones from the past, tend to surface at the same time. And that’s the reason why you should prepare this stage with the utmost diligence and supervise it together with a qualified management team.

Often the effort necessary at this stage is underestimated and not included adequately in project planning and calculations. This is quite understandable, because higher costs in personnel and management in this phase have no directly measurable results to outweigh them. Why would a supplier at the tendering stage trip himself up by calculating more resources and thus a higher price? And why should an operator and his project team set aside more funds for this. How could they be presented to management in a verifiable cost-benefit analysis?

Neue AnlageTypical problems at the start-up stage

Maybe the following list can serve to back you up the next time you need to argue about a project. It has been compiled from the experience of hundreds of projects that differed in size and level of complexity and come from various industries. So here are typical challenges at the start-up stage of an automated distribution centre:

  • Above all, it’s the start-up phase in which the employees and their supervisors are not accustomed to working with the new facility and unable to make use of its full potential. For example, in many cases the control for resupplies hasn’t been optimized. This leads to an overflow at workstations for incomplete orders, and as a consequence keeps the performance of the entire facility down.
  • Also, understanding the interrelationships of order compilation with different order picking areas comes with a steep learning curve. Particularly when we have to deal with a combination of manual and semi- or fully-automated processes, there’s always the risk that throughputs and/or capacities are not matched. This leads to bottlenecks on one side and idling on the other.
  • No specification sheet – which has to be created and agreed upon at the beginning of a project – can really account for all sorts of additional processes. Not until the start-up phase is well underway is it possible to recognize all the exceptional situations and disturbances, for which there aren’t any defined and documented processes. Depending on the complexity of the issue, this might slow down the start-up considerably.
  • Often we have to deal with a situation in which the Warehouse Management System and the superior ERP-Software do not communicate correctly at the beginning. While it’s relatively easy to solve problems concerning protocols, it gets much more difficult when it comes to interpreting the transmitted data. Particularly in inventory management, WMS and ERP often don’t share the same opinions. From the point of view of the ERP, an item belongs to the inventory as soon as it passed the goods-in section, while the WMS wouldn’t recognize this item as inventory until it reached the storage or order picking area. This means that there’s always a small discrepancy between these two systems. It gets worse when exceptions occur, such as damaged goods or (temporarily) lost items. The WMS would usually just delete them from the files, which of course cannot be done by the ERP, because financial accounting needs to write them off properly.

This list could easily go on and on. But the special challenges of the start-up phase are already clear from the points mentioned here. So what should you do about them?

The start-up should be seen as a separate subproject, with its own working packages and qualified resources available to complete it. For example, it would be ideal to reinforce the project team temporarily with one or more experts who possess the experience necessary to handle the start-up phase of such a facility. They might be employees “borrowed” from another company site or independent outside experts.

But by far the biggest success factor is to be aware of this particular project phase and get prepared ahead of time!

About Dr. Max Winkler

Dr. Max Winkler is the VP Solutions & Technology of SSI SCHAEFER PEEM, the leading supplier for logistics equipment and automation, specialized in order picking applications. He received a PhD in Mechanical Engineering from the University in Hannover, Germany, and has more than 13 years of experience in material handling systems across various industries. He started in the material handling industry at Mannesmann Dematic in Germany. Gaining experience in areas such as product design, manufacturing, QM and strategic business planning then led to the position of Operations Manager at Dematic's main European site in Offenbach, Germany. In 2003 Mr. Winkler became the Project Director for the baggage handling system of the extension of Dubai airport, with over 70 km of conveyors still the world largest baggage handling system. In 2006 he joined SSI Schäfer in Graz, Austria to manage product design and manufacturing. Since 2010 he coordinates the solutions and R&D activities within the global SSI Schäfer Automation group.
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