Well, if you do it right, you can now start a phase in which you increase the profitability of the project far above your budget. We are talking about raising efficiency by 20 to 50%, compared to design specifications! By the way, these are not made-up numbers, but instead have been achieved in a variety of optimization projects with our customers.

A semi-automated distribution system has roughly 20 – 30 logistical parameters that you may adjust. This purposefully excludes the hundreds of technical adjustments, which are possible at the machines, even though they will indirectly influence the logistical functioning as well. This, by the way, is for an average, semi-automated installation, worth between 2 and 10 Million €. You could say this is still middle class, certainly not high-end, in terms of investment as well as in technical complexity.

And that’s not nearly all, because the logistical performance and efficiency of the distribution system is also significantly influenced by the organization of the business and the interaction with the ERP system and its associated processes.

Altogether, we are talking about a bunch of around 50 to 100 parameters that influence the profitability of your investment after the run-up of the system, and noteworthy so.

Now, how can you bring this treasure to the surface? The operating manager is already busy getting to know the new system, reducing the training deficit of his people and overcoming the typical disturbances a new facility tends to experience. The supplier’s experts have left and the maintenance mechanics are not seasoned logistics specialists.

With the experience from many successful optimization projects, we can give a crystal-clear recommendation here. What you need is an experienced logistics veteran who is deliberately not involved in the process organization. In the end, it doesn’t matter whether he or she comes from your own company, from the facility’s supplier or from a third party. A true expert with experience in logistics will leave no stone unturned when analyzing all the processes from goods-in to replenishments and order start all the way to personnel placement planning and the synchronization of functions, as well as control parameters of the installation. Particularly the analysis of error handling allows valuable insights about the process, the interfaces and the possible ways to optimize.

Such an overall optimization usually consists of a number of small adjustments and improvements. And now the good news: most of these steps require little or no additional investment. That’s because the lion share of the potential improvement can usually be realized from process or business organization.

Another finding from projects such as these is that it pays to involve the system supplier, especially when it was he who provided the material flow control or the warehouse management system as well. First, the supplier can give valuable data and detailed knowledge about the facility. Second, he will be needed when it comes to changing and adjusting parameters later. A good supplier will actively contribute to the success of this phase with his own constructive and pragmatic proposals.

Just like race car engines, storage and retrieval engines must be designed properly for optimum performance.

Car enthusiasts know that a vehicle’s performance is dependent on many variables. Engine horsepower, for example, is one important factor but means very little if that power does not get distributed efficiently to the wheels. Similarly, there are many storage and retrieval engines in the marketplace today, all with a wide range of potential throughput horsepower. But regardless of the potential power of your storage engine, the overall performance of a goods-to-person picking system may suffer greatly from poor design.

When deciding the power and performance you need from an automated storage & retrieval system (ASRS), you need to look at your company’s past and present data as well as your long term distribution goals.  You must consider your throughput capacity, SKU availability, and storage efficiency as well as the costs needed to implement your new ASRS system.  There are tradeoffs in choosing the amount of one versus one of the others to achieve your desired results.  To avoid pairing the wrong operation with the wrong system configuration, it is necessary to understand your operation and business fundamentals.

Selection Process

Technology is always driven by application.  The 3 critical steps for selecting the proper ASRS technology for your order fulfillment are: defining your operation; planning your picking process; and applying fulfillment partitioning.

Every operation is different, but each can be fairly well defined by considering certain information such as supply chain positioning, existing infrastructure, key data (inventory on hand, order fulfillment date and forecasted growth) and distributive analysis to name a few.

From this point, you must plan your picking process.  At the heart of order selection is getting specific inventory to its shipping container.  You must determine between discrete picking (one trip for every order line) and batch picking (one trip for every SKU).

For multiline order structures, the effectiveness of batch picking is constrained by the number of concurrent open orders.  Single line orders mixed in with multiline orders are a good opportunity for batch picking. Batch picking can be very effective to increase performance but has limiting factors such as order release times, single line order mix, trending changes in line orders and SKU touch recurrence. Sometimes a hybrid of discrete and batch picking is ideal.

The final step in the selection process is fulfillment partitioning.  For instance, products move at different velocities.   As the Pareto Principle states, usually 80% of your volume comes from 20% of your SKUs. So for optimal pick efficiency, you need to segment them accordingly.

Design factors

Total system throughput is determined by conditions that create a throttling effect on the ASRS.

Total system throughput is determined by conditions that create a throttling effect on the ASRS, such as the work rate of the operator which can be affected by ergonomics and general pick station design and  the number of open orders at the pick station that allow all machines to work unrestricted. If these factors are not properly considered, you will cause a major delay in order processing.  For example, if the sequencing of inventory to a work station has a limited number of put positions, then the inventory for subsequent orders cannot get released.  Or consider the SKU representation for a group of orders, if some aisles feeding the workstation lack inventory, then they will sit idle for a significant period of time.

The number of days of supply in your ASRS versus the reserve storage is important in determining how the inventory should flow.  Cost of storage as well as additional touches to the inventory are factors that are considered during this process.  You must determine if the goods in receiving should go to the storage reserve or into the ASRS engine.

In summary, to achieve a higher picking performance, always remember these four things:

1. Pair the technology to your operation. There are many good technologies, but you wouldn’t go to the Baja 1000 race with a Formula 1 car.  The things that have a high impact on your operation include order profile, inventory complexity and service level.
2. When planning your picking process, be aware of limiting factors such as order release times, order size, and SKU recurrence.
3. Don’t limit yourself to a single technology.  Use the Pareto Principle and treat fast movers different than slow movers, as long as it is cost effective to merge them.
4. Design with ergonomics and efficiency in mind to avoid conditions that choke the performance of your ASRS engine such as poor workstation design, limited put positions, and SKU availability.

Follow these parameters and the engine you choose to run your operation, will get your orders delivered across the finish line on time, every time.

Adherence to ergonomics verifiably improves the three dimensions that every industrial performance needs to concentrate on: cost, quality and time (or speed). Ergonomic workplaces lower costs, lead to higher quality and in most cases reduce the throughput time of stock orders. At SSI Schaefer, the result of this knowledge is merged under the brand name ergonomics@work!®.

As a matter of fact, setting up ergonomically designed workplaces is one of the investments that promise the highest ROI (Return on Investment). For instance, several applications all over the world have already proven that the ergonomically correct goods-in workplace by SSI Schaefer reduces costs by 15% on average. And this is a conservative figure, because it only accounts for increases in productivity of workers at this particular workplace.

Another example is the so-called Pick-to-Tote workplace for picking goods in a goods-to-person fashion. This thought-out and patent-protected design of processes and ergonomics is proven to enable performances of 600 to 1,000 picks per hour in continuous operation. Hundreds of these order picking workplaces are currently used in a variety of industries and demonstrate that ergonomics pays off greatly.

Let’s look at the second important objective – improving quality. In distribution logistics we define it quite simply: the customer receives the items he ordered, in the right amount, at the requested time and without damages. What might sound easy is actually an enormous task, considering that hundreds or thousands of parcels are send daily and a million or more single processes are required, which leads to an incredible amount of possible errors.

But what has ergonomics got to do with that? Good ergonomics is self-explanatory and simple. Ergonomics is certainly more than just going easy on joints and muscles. It is also about logic, easy to follow work steps and stress-free processes. In relation to a distribution centre, this means for example optimizing search and orientation tasks. Either there is just one removal position (which means there’s no need for orientation), as in a pick-to-tote workstation, or the error-prone study of picking lists is replaced by light pointers and pick-by-light displays. On top of that, a good workplace is also intelligent. It “knows” which step is possible next or which processes are not permitted at that particular moment. For instance, an order cannot be completed if the article is dropped into the wrong chute.

There are 3 principles of ergonomics@work!® that are combined here to improve the quality:

1. removing physical loads from the employee and thus reducing errors caused by fatigue
2. simple and clearly structured processes to reduce the number of possible errors right from the start
3. intelligent workplaces that recognize mistakes before the process is completed

Increasing productivity in combination with quality-supporting processes will almost automatically lead to an improvement in throughput time. When more can be done with less effort, and there are less error-related disturbances at the same time, it means that orders get filled more rapidly. Shorter throughput times are not an end in itself, but rather come with important advantages. The entire warehouse is not only becoming more flexible, but also emptier. Reduced throughput times mean that each order takes less time to process in the warehouse. Every order that gets filled faster therefore reduces the number of simultaneously processed orders and lowers the overall amount of open orders. This reduces complexity in the warehouse and brings hidden performance reserves clearly within reach.

This is what makes ergonomics such a central theme at SSI Schaefer. Ergonomics not only contributes to the wellbeing and relief of the staff, but also brings measurable and distinct advances in productivity. Beyond that, the improvement in quality results in less error-related expenses and thus also leads to higher customer satisfaction, which in turn is important for tomorrow’s business. Finally, ergonomics also increase flexibility inside the warehouse, reduces complexity and speeds up order processing.

Whenever you see the ergonomics@work!® logo, you may rest assured that the experts at SSI Schaefer put a lot of brainpower into finding creative solutions to improve cost structure, quality and throughput times in your warehouse. A lot of this originated in close dialogue with our customers. Therefore, we appreciate your suggestions and ideas on ergonomics in plant and distribution.

More information on ergonomic workplace systems:
Pick-to-Tote workstation
Goods-in workstation
pick@work

For a long time, we just accepted the worldwide material flow as a three-legged stool: 1. Shipping raw materials from all over the world to Asia, 2. Moving simple products and components from Asia to Europe and North America and finally, 3. Partially moving these products back to Asia in the form of high-value and complex items and facilities.  

Repercussions of the crisis in the US

Due to the rising prosperity in Asia and the lessons from the crisis in North America, the intralogistics industry will soon be facing new challenges. It will, for example, become necessary to build up intralogistics facilities in countries that have previously been mostly exporting their goods. So instead of just filling containers with factory output and shipping it overseas, there will be domestic demand for these very same goods. This means, that they’ll have to be stored and distributed domestically as well.

Asia will transform itself from being just a supplier to being a full-scale trading partner in both directions. For instance, would you believe that Germany achieved a positive net export with China in the first half of 2012? (data for the entire year is not yet available)

Even the US is starting to see a paradigm shift, which will affect the intralogistics sector. Not least through the financial crisis, it became obvious how vulnerable an economy with little value added can actually be. Over the long term, such a large economy cannot survive on services and financial transactions alone. The struggle to increase domestic production and value added will also lead to changes in the flow of goods.

E-Commerce remains trendy

What we can see all over the world: E-Commerce is one of the trends, which will certainly continue and affect more and more industries. Something that has been considered impossible for a long time has now become a reality: selling groceries over the internet. Considering the notoriously slim margins of retail grocers and the pressure from discount department stores, this can only work with the most modern intralogistics behind it. Thus, the internet will continue to drive innovation in warehouse equipment.

This certainly includes the subject of same-day-delivery. After E-Commerce experienced enormous growth rates since the turn of the century, a consolidation phase will be inevitable. Already, the competition between Amazon and its various rivals is carried out at least to a certain extent on the basis of delivery times. This trend is likely going to get stronger in 2013 and require new and more sophisticated concepts in warehouse logistics.

Most interestingly though, many of the big shots in E-Commerce are still unable to draw consistent profits. The most profitable E-Commerce companies are smaller, more specialized ones. Therefore, we are certain that we’ll see strategy changes in a lot of companies in the market in the coming year.

Innovations in intralogistics

Something similar is going on at the technology and solution providers in intralogistics. Renowned companies were seen changing their owner and in some cases their strategies as well. As of today, the dominance of European companies in the world market remains unbroken, which is due to their capacity to innovate.

We are beginning to see an interesting trend here as well. Providers expand their range of products and solutions at the upper and lower end. This means, that on the one hand, we see innovations in high-tech that enable completely new applications, or make existing applications significantly more effective. On the other hand, we see smaller, simplified solutions emerging that are easy to set up and impress with their low complexity.

This much can we say already: in 2013, SSI Schaefer will again be one of the leading innovators in the industry. You will be in for a surprise…

Please allow us one final remark, concerning a very special anniversary. In 2012, SSI Schaefer has been in business for 75 years. We hope you’ll agree with us that there has rarely been a 75-year old in such great shape. We owe this success to you, our customers. For 2013, we hope you’ll give the soon-to-be 76-year old the opportunity to support you in every intralogistical task you might face.

Having said this, we are looking forward to the coming year and many exiting topics. We wish you a healthy and successful year 2013!

But vertical lifts definitely have their place in modern warehouse technology. This is a strong hint that they have some very specific features making them valuable to warehouse operators. Let’s take a closer look at these characteristics.

Of course, there’s no point in comparing vertical lifts with every conceivable alternative, so we’ll focus on the most common and obvious one, which is storing small parts in conventional shelves.

Many companies used normal shelving systems for quite a while before switching to vertical lifts. Others among those opting for a vertical lift were unable to set up a static shelving system for lack of space. This brings us to the first and probably most noticeable aspect.

Saving space
Vertical lifts save a lot of space and therefore also energy costs, because warehouse space is expensive, especially if it’s not used efficiently. But how much of a difference does this actually make? Of course, we should be careful with generalizing these data, but under the condition, that the goods are fully suitable for vertical lifts, you can expect to save up to 90% of warehouse space. This is realistic, because this compact way of storing small parts uses the available floor space and the clearance height most efficiently.

Saving time
When you suspect your warehouse staff to spend too much time looking for and picking items from storage, a vertical lift might be the solution you are looking for. It’s important though not to confuse activity with productivity. A worker, who is walking through the warehouse, searching for an item, sure is active, but not productive.

A vertical lift uses the „goods-to-person“ principle, which is very comfortable. Compared to a conventional storage system, the worker gets the item much faster. Therefore, he or she saves time and is considerably more productive. Again, providing precise numbers is not that easy, because each warehouse is different. However, based on our experiences, it’s safe to say that a vertical lift reduces the travel times in your warehouse by 50-80%.

Ergonomics
Your workers won’t need to bend down or climb on ladders. The service windows of modern vertical lifts are within easy reach and quite comfortable. Various other options, such as tilting the table or adjusting the height of the service window to the worker, increase the ergonomics even further. This improves the operator’s safety and is most certainly going to prevent a lot of back pain over the life span of the vertical lift. If that argument doesn’t seem valid to you, then you’re one of those lucky fellows with unbreakable backs. Consider yourself blessed!

Protection against dirt and theft
If you have been working inside a conventional warehouse for any period of time, you already know that the stored items don’t remain clean for long. There’s always a fine layer of dust settling on the shelves and the products. Depending on what you are storing, this might become a nuisance. A vertical lift is comparable to a big drawer cabinet. The amount of dust entering and contaminating the inside of the lift is significantly lower, which means that your goods stay clean much longer.

Furthermore, a vertical lift protects your goods better against theft and any other unauthorized access than placing them openly into conventional shelves. Modern vertical lifts even offer additional features to protect the staff and the stored goods. Again, whether this is relevant for your company depends on the kind of products you store.

Maintenance
The amount of maintenance necessary to keep vertical lifts running is an important factor to consider. Instead of the commonly used chain or belt drives, the SSI Schaefer vertical lift LogiMat for example, comes with a low-maintenance pinion. The use of these pinions does not lead to alterations such as elongations of chains and belts, therefore it does not require adjustments. Don’t forget to ask for this before purchasing a particular model.

Investment
The device itself requires a larger investment compared to buying normal shelves for the same amount of items. But considering the savings that accrue as a result of increased efficiency, this investment should break-even quickly. But to be on the safe side, ask a competent logistics consultant for some real numbers, so that you can make a well-informed decision.

Because, as advanced as vertical lifts might be, there are still many conventional shelving systems being installed every year. This means that both systems have advantages and disadvantages. As in many cases, it depends on the situation. What kinds of items are you going to store (value, size, risk potential …), what does the product structure look like (fast-moving vs. slow-moving items) and how much floor space do you have available. If you know this data, then you’re well on your way to choosing the right storage system.

But what is a modular, autonomous agent? In the field of distribution logistics, this term stands for a vehicle with its own intelligent control. This distinguishes it from passively driven load units on conventional conveyor systems and also requires a control system able to handle complex and abstract tasks. So instead of “Go to x-position 657” the system could ask for complete, autonomous handling of a task such as “Remove the good from shelve 4711 and carry it to transfer location 0815”.

At this point, we have to dispel a widespread myth. Even a comparatively ‘dumb’ vehicle is able to behave like an agent. This means that the intelligence doesn’t necessarily have to sit on the vehicle physically. In the end, it’s irrelevant whether the CPU for the agent’s software is attached to the vehicle or to a central computer, which processes the commands and guides the vehicles remotely. In many cases, the common use of a central computer by several agents is a more economic and better solution.

Advantages of a modular facility design

This leads us to another important aspect: modularity, which is designing a facility using compatible modules. That’s basically what it’s all about. The vehicles’ autonomy and intelligence are nothing but technology components to archive the goal of modularity.

Why is this so important? A system comprising modular elements promises less complexity and shorter construction and implementation periods. Also, these advantages should become noticeable by improving flexibility in day-to-day operation. Something that can be assembled like Lego bricks will surely by adjustable to changed requirements without too much hassle.

The good news first: most of the time, this is true. Modularity leads to more flexibility and faster implementation of a facility. Because the individual elements are either not physically connected at all or they are using a standardized interface (like the knops on Lego bricks) and may be combined in different ways. The same holds true for the connection of modules on the control level. This not only increases flexibility, it also reduces the amount of planning necessary to adjust the individual connections between elements of the facility.

Like busses and cars

So where’s the catch? The required technology is available and largely mature. Why is there no general switch towards modular, autonomous agents for conveying and storage, or at least a combination of both systems?

Even the new, cost-effective technology does not change one fact: flexibility and modularity come with a price. And in many cases, this price is simply too high.

Just like a bus trip is cheaper per person than a car trip (as long as there are enough travel companions going in the same direction), modular conveyor technology with autonomous agents does not measure up to conventional conveyor systems in terms of cost/performance ratio. Contrariwise, when there are not enough passengers with the same destination, then cars are much cheaper than busses. Consider for example the connection from the goods-in section to the high bay warehouse. Because all goods take the same way, a conventional conveyor system will always be cheaper than a large number of autonomous vehicles.

Only when routes tend to change often or handle throughput infrequently, an autonomous vehicle might be the more economical solution. The same is true for autonomous vehicles entering the warehouse or even carrying the warehouse around (so to speak). With increasing throughput, not only will the organization of a large number of agents and the coordination among them become ever more complex, but the costs will simply take off. The higher the throughput, the more attractive are conventional designs.

But what modular, autonomous agents will never lose is the advantage of greater flexibility. In the end, you have to calculate: how much are you willing to pay for flexibility?

However, this doesn’t necessarily have to be an either-or-decision. Hybrid facility designs allow you to combine both worlds. And we still haven’t reached the end of the line with regards to modular concepts in conventional conveyor systems and storage devices. I am confident that we will see a number of interesting developments in the future.

The experts brought together by Ebay agree that there will be significant changes concerning retail stores. According to them, conventional stores will almost disappear entirely, giving way to showrooms. These showrooms will allow customers to get their hands on the products and try them out, but not take them home. Instead, customers will be able to order the products they want by using QR-codes or order terminals and have them delivered directly to their homes.

Assuming that these visions would become reality, how would it affect the intralogistics of the companies involved? Here are three points that intralogistics insiders might find most relevant:

1. No more stock-keeping in retail stores

Retail stores that get turned into showrooms won’t need a conventional warehouse anymore. Producers would deliver new products to the showroom, set them up for the customers to see, and also remove phased-out models and take them back. In case a customer orders something, the product would get shipped from the producer’s distribution centre directly to the customer. The stores would then benefit from lower costs, but the producers will most likely insist on getting a larger profit margin, because they are contributing more than before.

This poses the question of how to implement this concept. In order to get their commission, showroom operators would need to prove, that the order did in fact originate from their store and make it traceable. However, the privacy of the customer must not be compromised. This is a point where more careful consideration will be necessary to make the concept work.

It is going to be interesting to see how those retailers, which now only sell over the internet, will react to this development. Are they going to continue focusing on online and try to defend their market shares with cost advantages? Or will they open their own showrooms, attempting to leave the territory they’re used to, the internet? After all, internet retailers already have the infrastructure in place, necessary to deliver directly to customers. By setting up their own showrooms, they might be able to poach in the preserve of the offline-retailer (turned showroom operator).

2. Single-piece order picking instead of pallet order picking

All the products that producers and intermediaries are sending to retail stores by the pallet or carton these days, would need to get shipped directly to the consumers’ households in the future. This requires a large change in intralogistics. Producers and intermediaries would need to retrofit their distribution centres to work efficiently in single-piece order picking.

The future laid out in the study is not going to turn into reality overnight; and certainly not everywhere at the same time. There will be a transition period of several years, in which the distribution centres will most likely adopt multi-channel distribution solutions. This would enable them to deliver to conventional retail stores as well as handling orders coming in from the newly established showrooms.

3. Further increase in returned goods

Many internet retailers are already struggling daily with truckloads full of returned items. In the future this will also include products that customers today are still returning in shops. The logistics to handle the returns will have to keep pace with that increase, so producers and retailers will have to look for more efficient methods and technologies.

However, retailers do have reason to be optimistic in this regard. Customers, who ordered from a showroom, after trying out the product and talking to salespeople, will be less likely to return the item than pure online shoppers. Nevertheless, returned items will continue to lower the retailers’ profits significantly.

Are we really going to shop this way in a couple of years or were the Ebay experts just stabbing around in the dark? One thing is for sure: the customers are going to decide which retail concepts will prevail in the future. Technological progress has no respect whatsoever for big names in the industry and customers’ loyalty is as low as never before. Companies need to be prepared to question their business model and if necessary adjust it to a changed environment.

For people working in the intralogistics of the affected companies, it is important to recognize these trends before it’s too late. Then they will be able to make the right decisions. Those however, who don’t plan for the future, won’t be able to participate in it.

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?

Typical 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!

Probably the number one accusation is that our partially and fully automated facilities would replace human workers, rendering them obsolete. So we would be at least to a certain extent responsible when people lose their jobs. But is this really the case?

This view on the world of intralogistics is of course overly simplified and doesn’t do justice to the real-world circumstances. Every company decides on its own to which degree it is going to automate processes in its warehouse. These decisions are backed by business-management considerations, which are made when the company is struggling.

In such a situation it would be a big mistake to wait for the situation to improve by itself. That would only play into the hands of the competition and jeopardize the existence of the company. Once the calculations tell them that automation would save money, they have to do something.

What is behind all the automation?

Critics might interpret this as yet another example of greedy behaviour to the detriment of others. These people see the world only as black and white, good and evil, rich and poor. But that’s not the way the world works.

Is it greedy, to offer the customers cheaper products? Is it greedy to resist the competition, when customers are going over to them? Is it greedy to ensure the survival of one’s company (which has a workforce as well)?

The truth is: if a company makes the decision to automate under the pressure of the market, it is actually saving jobs. However, not the ones inside the warehouse, because these are lost either way, but those attached to other tasks within the company.

The explanation for this is almost too simple. If a business is suffering from high costs, it has to offer its products and services at a higher price, to cover these costs. If the customers are unwilling to pay these prices, they go elsewhere and the company loses money, until it’s insolvent and gets broken up. This doesn’t just put the jobs of the warehouse staff in jeopardy, but of all employees in the company.

But when a business is able to recognize the market’s signals and reduces its costs – for instance through an automatic distribution centre – it can escape this fate. So, in essence, a small number of jobs in the warehouse need to be sacrificed in order to make the other peoples’ jobs more secure. Is this fair?

Clearly, it’s not. But it would be even less fair to drag the rest of the company into insolvency, just to preserve the warehouse jobs for a little bit longer. It’s therefore rational to automate in good time. Whether this is done in a just way, is the responsibility of the managers in charge.

Planning personnel for the long term

Companies are well advised to plan their personnel requirements for the long run. This helps to cushion some of the extreme fluctuation that might arise from automating the warehouse. It is still the case though that most tasks in distribution centres are done by low-skilled workers. That’s just a result of the kind of work that needs to be done there.

But that certainly doesn’t mean that these people wouldn’t qualify for other tasks within the company. A man called Joe Girard for instance, a school drop-out without professional education, was underestimated for quite a while. But that didn’t stop him from selling more than 13,000 cars over the course of 15 years and becoming the best car salesman of all times. Maybe you’ve got someone like him among your staff without even knowing.

I daresay that many of those people employed in warehouses could upgrade their skills, if they would get notified and motivated early enough. If then comes the time when jobs in the warehouse (need to) get cut, it is possible to move people who know the company and have already proven their motivation and their commitment to its goals, to new assignments.

It is never the objective of automation, to get rid of reliable and committed employees. But automation is necessary to save the company’s future and prevent it from being displaced by the competition. If automation makes economic sense, holding it off would only move the organization in the wrong direction.

Making intralogistics providers responsible for the loss of jobs in distribution centres misses the heart of the matter completely. We, as those people working in this industry, are thus hoping for a more thorough understanding of causal economic relationships in our society, so that we don’t have to deal with such accusations anymore.

In the second part of this series, we are looking into the assertion that we would speed-up global warming.

From the perspective of companies, returns are a two-edged sword: on the one hand, it is important for customers to have the right to return products they are not happy with. This was a prerequisite in establishing distance selling as an alternative to brick-and-mortar retailers. On the other hand, dealing with returned items is costly and also more complicated then shipping them to the customer in the first place.

The reason for this is that handling returns is a task that can hardly be automated, at least not today. Incoming packages vary greatly in shape and size, need to be opened and unpacked by hand. Employees have to check the products for damages and then either discard them or feed them back into the system for reselling. Some items are as good as new; others have to be cleaned first or can only be sold as second quality.

Overall, this is a personnel-intensive process with many potential sources of error and a high need for monitoring and control. High costs are then a result of the large number of returns. In German online retail, for example, unbelievable 40% of the ordered goods get returned to the shop!

It’s only natural to assume that many of these returns would be avoidable – and indeed they are. And it’s not about complicated strategies, but rather about simple steps that most online retailers are already familiar with. Yet when we do research on the internet, we still dig up plenty of shops that don’t follow even the most basic advice.

What can online retailers do to limit the amount of returned goods?

1. The most common reason for returning items is „un-met expectations about the product“. That’s why it’s so important to describe products online or in catalogues as accurately as possible. Not surprisingly, three-dimensional views of products are becoming more and more popular. Items without any picture or with just a category image (“product image serves as example only”) don’t have much of a future in modern online retail. In case you run such a shop, make sure to use accurate pictures that show the colours as they really are. Besides, it makes sense to set up a hotline so that customers can get their product-related questions answered quickly.

2. The second-most common reason for returns is damaged goods. This could be caused by inappropriate storage, poor packaging or careless handling in the transport chain to the customer. This already provides some ideas about the starting point in reducing the number of returns. Now you only need to know where exactly the products get damaged.

One idea is to send a shock data logger (also called acceleration logger, see picture) through your distribution centre. It is able to tell you how strong the outside forces are, that the package has to cope with. Then you’ll find out, where the technology or the staff treat the merchandise particularly roughly. Armed with this knowledge, you’ll be able to take countermeasures.

3. The third reason for returning an item is one on which retailers have little influence at first glance: poor product quality. However, it’s the retailers that advertise the product and communicate its characteristics to the customer. If the retailer overstates the product’s features, he shouldn’t be surprised if customers are disappointed. There’s a fine line of course, and no one likes to downplay the product’s quality and thereby crush the incentive to buy. Also, retailers often get their product information directly from the producers and have little or no possibilities of verifying it all.

4. Delayed shipping and/or incomplete shipments are another reason why many online shoppers return the goods they ordered. By now, the customers are used to getting their orders delivered in 2 or 3 days, because the market leaders (Amazon etc.) have set the bar pretty high. So if you already know or expect that your deliveries are going to take longer, give the customer a heads up. He can then make up his own mind about whether he accepts the delay or goes somewhere else.

Cutting delivery times by investing in more sophisticated intralogistics solutions might or might not be a workable alternative. When in doubt, consult with experienced logistics planners, who are going to tell you, what is possible and what isn’t.

5. Aside from all the justified returns, there are unfortunately a number of people misusing this option, to the detriment of retailers and honest customers. Particularly clothes that are meant for certain occasions are devalued in this way. The customer orders a suit or a cocktail dress, wears it to an event and then returns the item the next day for a full refund.

Online retailers should therefore feel free to put these customers on a blacklist. This list simply keeps track of those customers that misuse the right to return merchandise. Businesses using such a list will usually not communicate this externally, but instead try to get rid of respective customers on the quiet. Remember the 80-20 rule: it might be that 80% (or more) of returned items come from just 20% (or less) of your customers.

Despite all these measures, there will still be returns to deal with. What a business can do to keep the costs of handling these returns low, is the subject of an article coming soon.