<$MTBlogName$

Expecting the Unexpected on Warehouse Automation Projects

By Ian Hobkirk | 09/17/2019 | 7:09 AM

Most companies that have attempted to implement automated material handling equipment have discovered that these projects can be particularly vulnerable to Murphy’s Law, the principal that, “anything that can go wrong, will go wrong.” This blog is fourth in an ongoing series on “Beating Murphy’s Law in Warehouse Automation Projects.”

 

Blog 4 DC 350A key tactic to avoid disappointing project results is to explain the concept of Murphy’s Curve to the executive team and financially account for the inevitable drop in productivity during implementation. Plan for Murphy’s Curve. Build it into the project ROI model through a solid risk mitigation plan.

Some key cost increases which often occur during the Murphy’s Curve period at project startup include:

  • Temporary labor costs: Often more labor will be required in the weeks (or months) following the technology deployment. Workers must become acclimated to the new processes and technology, and productivity rates will almost certainly suffer at first. Additionally, managers must get used to different ways of releasing work into the new system to be able to balance labor and workflow across the operation. It is rare to get this right the first time, even with sophisticated warehouse control software (WCS) systems. Additional labor and supervisors will likely be required, and perhaps even an additional shift will be needed on a short-term basis.
  • Expedited shipping costs: Even with additional labor, it may not be possible to keep up with outbound order volumes in the first few days or weeks after go-live. It may be necessary to subsidize the cost of expedited shipping on some orders to maintain customer service levels.
  • Additional inventory carrying costs: If the project involves relocating the distribution center from one site to another, then it may be necessary to purchase additional inventory in order to allow the facilities to operate in parallel for a brief period.
  • Unknown costs – contingency factors: Additional costs for labor, shipping, and inventory represent only the “known” areas where overruns can be expected. Each project inevitably contains unexpected, “unknown” costs that present themselves once the project begins. These unknown events are what often come to mind when the phrase “Murphy’s Law” is used – anything that can go wrong often does go wrong. A few real-life examples of unplanned-for events plaguing warehouse automation projects include:
    • A company that was expanding its distribution center discovered that the incorrect sprinkler heads were used when the building was constructed many years before and was forced by the local fire marshal to upgrade the entire sprinkler system in both the existing and new portions of the building.
    • A company that was constructing a new distribution center encountered a period of unseasonably bad weather which severely delayed the foundation work and set the entire project behind.
    • A company that was installing new pallet racking in California was unable to find a certified slab drawing of the building they had moved into and was forced to have core samples taken for the seismic analysis after weeks of searching for the drawings.

In each of the above (true) examples, the problems which befell the project were difficult to anticipate but resulted in both time and cost overruns. Adding a certain percentage of contingency time and cost to the project budget is the only way to ensure that the budget can withstand some of these unexpected manifestations of Murphy’s Law.

The above costs should be estimated as accurately as possible and included as project costs in the accounting model. While doing so will almost certainly increase the payback period for the technology, failing to account for these factors will result in a return-on-investment projection that is incorrect. If the project will not meet the corporate ROI guidelines once the additional costs from Murphy’s Curve have been factored in, then perhaps the rationale for the doing the project in the first place should be reconsidered. Don’t fall prey to thinking that the current project will be the exception to the rule. Remember, the productivity drop from Murphy’s Curve occurs even if everything goes according to plan. There is an inevitable adjustment period as operators and managers get used to using new technology, which will result in loss of efficiency even in the best of deployments.

 

Assessing Risk on Warehouse Automation Projects

By Ian Hobkirk | 09/10/2019 | 5:04 AM

Most companies that have attempted to implement automated material handling equipment have discovered that these projects can be particularly vulnerable to Murphy’s Law, the principal that, “anything that can go wrong, will go wrong.” This blog is third in an ongoing series on “Beating Murphy’s Law in Warehouse Automation Projects.”

Blog 3 DC350
A good first step towards accounting for Murphy’s Curve is to perform a risk assessment on each of the potential solution scenarios being considered. Often, the technology that holds the greatest promise of cost savings can also involve the greatest risk of failure. Certain forms of warehouse automation may be very unforgiving of minor design flaws or changing business conditions, while other technologies may be more flexible and adaptable to these forms of change. Other technologies may seem promising but may be relatively new and untested in the marketplace. Companies seeking aggressive cost savings can often be blind to the risks inherent in some technologies. A thorough risk assessment can be an effective way to highlight these risks and impact the choice of design and technology early in the project.

To perform a risk assessment, start by identifying the specific risks which are present on the project. Examples of risks to account for include:

Risk bullet@2x

Next, assign each risk a weight factor based upon your company’s tolerance for risk in this area. For example, the company may be relatively unconcerned with the risk of cost overruns compared to the risk of the project not going live on time prior to a peak demand period. These two risks should be weighted differently.

Lastly, give each potential solution scenario a numeric rating for each of the risk areas (a low score represents low risk, a high score represents high risk). Multiply this rating by the weighting factor to achieve a weighted risk score for each solution scenario. It may be discovered that certain solutions that offer the highest potential for labor savings may also have the highest risk of cost or schedule overruns. As a result, the company may choose a solution that is less automated, but less risky, or may choose to proceed with the riskier technology and build in contingency factors for cost and time overruns. 

 

 

Don't Ask the Barber for a Haircut

By Ian Hobkirk | 09/04/2019 | 5:03 AM

Most companies that have attempted to implement automated material handling equipment have discovered that these projects can be particularly vulnerable to Murphy’s Law, the principal that, “anything that can go wrong, will go wrong.” This blog is second in an ongoing series on “Beating Murphy’s Law in Warehouse Automation Projects.”

Blog Template 2 DC 350
One key tactic for beating Murphy’s Law is the need for objective advice during the project concepting phase, the adage of “don’t ask the barber if you need a haircut.”

Why is Murphy’s Curve such a surprise to so many companies? In other words, why do organizations embark on projects with such unrealistic expectations for achieving rapid performance gains? The reasons likely differ in each case but being “over-sold” on a return-on-investment (ROI) projection by less-than-objective sources is often at the heart of the matter. Executives reviewing a business case for a capital project would do well to ask themselves whether those preparing the figures have any incentives to present an overly optimistic picture, either intentionally or unintentionally. It may be that the underlying business case was developed by an equipment provider who stands to benefit if the technology is adopted and who may chose to ignore the potential Murphy’s Curve of temporary productivity losses.

In another scenario, the business case may have been developed by company employees who may be desperate for the relief they believe the technology will provide, but too inexperienced to understand the trough of productivity that will inevitably occur before the benefits are realized. In either case, very few companies appear to account for “Murphy’s Curve” in any meaningful way during the project concepting phase. While some may acknowledge that there may be a learning curve associated with new technology, most seem to believe that the curve will be short and performance will never be worse than the present (pre-go-live) levels. Very few companies actually build-in an increase in operating expenses to the project budget to account for Murphy’s Curve. As a result, executives embark on the initiative with an inaccurate view of what could unfold.

What is Murphy's Curve?

By Ian Hobkirk | 08/26/2019 | 7:07 AM

Murphy's Curve 350 DC

Most companies that have attempted to implement automated materials handling equipment have discovered that these projects can be particularly vulnerable to Murphy’s Law, the principal that, “anything that can go wrong, will go wrong.” This blog is one in an ongoing series on “Beating Murphy’s Law in Warehouse Automation Projects.”

Ensuring a project survives Murphy’s Law begins with understanding “Murphy’s Curve”, a key concept. In 1991, a seminal work was published in MIT’s Sloane Management Review called “Beating Murphy’s Law,” authored by W. Bruce Chew, Dorothy Leonard-Barton and Roger E. Bohn. The article described a principal that the authors termed “Murphy’s Curve” (figure x), which illustrates the gap that often exists between expected results and actual results on projects. Murphy’s Curve highlights a key observation:

Unrealistic expectations doom many projects to failure before they begin.

The reality is that even with successful projects, there is almost always a period of decreased performance which begins before the go-live. It can last for an extended period while the operations staff adjusts to the new processes and technology and while bugs are worked out of the system. With a well-planned and well-run project, this adjustment period is short, and performance begins to improve over time, eventually surpassing the pre-deployment levels and achieving the gains that were the rationale for the project. However, many companies gloss over this reality and expect that after deploying new technology they will see an immediate and sustained performance improvement. The variation between expected and actual results can be significant, as figure x indicates.

 

Figure x: Murphy’s Curve

 

Beating Murphy’s Law begins with an acknowledgement that Murphy’s Curve can, and will, be present in every operations improvement project to some degree.

How to to Minimize Your Distribution Center Storage Footprint for Slower-Moving, Low-Cube SKUs

By Ian Hobkirk | 10/15/2018 | 9:29 AM

Six Ways to Postpone DC Expansion Part VI - Slow Moving SKUS -DCVThis blog is the sixth and last in a series on distribution center capacity and space utilization.  So far, I’ve covered the concepts of slottingoptimizing storage depthsreducing aisle widthshow to take advantage of overhead dock space, and automated storage and retrieval systems (AS/RS). This last post will focus on two types of storage systems that can condense the storage footprint for slower-moving, low-cube SKUs.

 

If your company’s budget cannot bear the cost of an automated storage and retrieval system, there are some pragmatic alternatives that may be worth considering for storage of slower moving, low-cube SKUs: SpeedCell® storage systems and mobile storage rack. Let’s explore:

 

SPEEDCELL® STORAGE SYSTEMS

SpeedCell® storage systems can be retrofitted into standard pallet rack and can significantly increase the number of SKUs which can be stored in that space. This technology functions somewhat like a hanging closet organizer: three rows of hanging shelving store product in a very dense configuration, and the front rows can be pushed to the side to access the rear rows. Pick speeds with SpeedCell® systems are relatively slow, so fast-moving product should not be placed here. (Image Source: SpeedCell®)

 

MOBILE STORAGE RACK

 

Another form of storage that is gaining in popularity is mobile storage rack. Each section of the rack is mounted on a track system in the floor, and when not in use the rack system actually collapses its footprint so that there is no aisle space at all between rack sections. When a bin location needs to be accessed, the rack sections roll open and create an aisle for a lift truck driver to travel down. As one might imagine, these systems do not move quickly, and should only be used to store slower moving product. Despite their unorthodox design, these systems actually offer very high storage density at a relatively low cost for slow-moving SKUs. (Image Source: Spacesaver®)

 

 

This post concludes the Blog Series: Six Ways to Postpone – Or Eliminate – Your Distribution Center Expansion.  Companies faced with expansion decisions have a variety of options to consider before deciding on how to proceed. However, one fundamental strategy any such company should consider – which is not addressed in this series – is an inventory reduction strategy. Some companies have experienced success by employing tactics such as improved order management, postponement, and in-transit visibility programs to safely reduce inventory levels and delay a costly build-out.  Inventory reduction in conjunction with the six concepts discussed can often work together to open up less costly solutions for companies that need to expand operations but minimize operating cost increases.

 

Did you like this post? Read the Whitepaper: Six Ways to Postpone -Or Avoid- DC Expansion or watch the recorded webinar.

Automated Storage and Retrieval Systems: When to Consider the Investment

By Ian Hobkirk | 10/04/2018 | 9:31 AM

Six Ways to Postpone DC Expansion Part V - ASRS DCVThis blog is the fifth in a series on distribution center capacity and space utilization.  So far, we’ve covered the concepts of slotting, optimizing storage depths, reducing aisle widths, and how to take advantage of overhead dock space.  While these four tactics can be used to postpone an eventual facility expansion, using automated storage and retrieval systems (AS/RS) is often a way to prevent an expansion entirely. AS/RS systems come in many flavors, and include equipment like:

  • Horizontal and vertical carousels
  • Vertical lift modules
  • Pallet-handling AS/RS
  • Mini-load systems
  • Shuttle systems

These systems have several common attributes:

  • They often take full advantage of building height
  • They usually minimize or reduce aisle space
  • They seek to minimize labor requirements by bringing product (either cases or pallets) to the workers rather than the other way around

Due to these factors, AS/RS systems are among the most space efficient solutions available and offer the added benefit of labor cost reductions. However, these systems are expensive and typically not easy to change or reconfigure as business needs evolve. AS/RS systems should be carefully designed and planned to ensure that they meet expectations.

 

Next up in the series: A blog on pragmatic alternatives to AS/RS systems that may be worth considering for storage of slower moving, low-cube SKUs. Can’t wait? Read the Whitepaper: Six Ways to Postpone -Or Avoid- DC Expansion or watch the recorded webinar.

Could You Park a Blimp in the Unused Space Above Your Dock Area? How to Take Advantage of Overhead Space in Your Distribution Center.

By Ian Hobkirk | 10/02/2018 | 1:41 PM

Six Ways to Postpone DC Expansion Part IV - Overhead Space DCV

This blog is the fourth in a series on distribution center capacity and space utilization.  So far, I’ve covered the concepts of slotting, optimizing storage depths and reducing aisle widths. In this post, I’ll look at how to take advantage of overhead dock space.

Even in highly-optimized distribution centers, overhead space in the dock area is often completely un-utilized. Since this is a high-traffic area, using overhead space requires creative thinking. Some ways that companies have found to take advantage of this space include:

  • Storing empty pallets or consumable supplies over dock doors. Pallet racking can be used to bridge over dock doors and create single-deep storage areas. While only a small percentage of the dock area can be reclaimed in this way, valuable space in the main pallet rack area can be freed up for storage of inventoried SKUs.
  • Build a mezzanine but be careful how it’s used. Mezzanines are poor places to store pallets – it can be hard to transport loads onto and off of the mezzanine, and lift trucks are generally impractical on a second level. Companies should focus on storing smaller parts here or performing labor intense manual operations in these areas. Good uses for mezzanines include:
    • Small parts storage on shelves or carousels
    • Packing and shipping areas for small parts (work benches, case sealers, etc.)
    • Value-added service centers for small parts (kitting, ticketing, labeling, etc.)

When designing a mezzanine, be sure to position the support columns in areas where they are less likely to cause lift truck collisions, and be sure to allow an easy means of transporting goods up and down from the mezzanine.

The next blog in the series will dive into the advanced topic of AS/RS systems. I’ll lay out an objective perspective on their benefits, costs and risks. Can’t wait? Read the Whitepaper: Six Ways to Postpone -Or Avoid- DC Expansion or watch the recorded webinar.

Narrow Aisles and Very-Narrow Aisles in the Distribution Center: Space Saving Benefits and Equipment Requirements

By Ian Hobkirk | 09/19/2018 | 8:16 AM

Six Ways to Postpone DC Expansion Part III - Narrow Aisle - DCVThis blog is the third in a series on ways to optimize space in your distribution center to extend its ability to support growth and postpone a capital expansion project. So far, the blogs in this series have covered the concepts of slotting and optimizing storage depths. In this post, We’ll explore aisle widths and the pros and cons associated with the lift trucks that go along with a move to narrow (and narrower) aisles.

 

When expanding the footprint of the warehouse is not an option, companies often employ creative techniques such as using narrower aisles to improve space utilization. Given the potential for space savings, it can be tempting to redesign a distribution center to utilize this equipment, however, careful thought must go into the design to ensure an effective operation. Often the vehicle requirements are a deciding factor for companies evaluating a footprint that incorporates narrow or very-narrow aisles.

 

Narrow-aisle lift trucks have been in use since the 1950’s, but are still not used in some distribution centers that would benefit from their space-saving features. Conventional sit-down style lift trucks require aisle widths of 11 to 14 feet. Reach-style lift trucks only require 8.5 to 9.5-foot aisle widths and cost only slightly more than sit-down units. However, reach trucks cannot drive in and out of trailers. So, if true dock-to-stock operation is required, then companies should consider a compromise vehicle: the stand-up counterbalanced truck, which requires 10’ aisles. All of these lift truck types cost within approximately 15% of each other.

 

Very-narrow-aisle lift trucks are in a category of their own. These trucks can cost three to four times as much as a conventional lift truck, but they can operate in 5.5’ aisles and offer tremendous space savings. Of the two major categories of very-narrow-aisle trucks, “turret trucks” are generally regarded as the fastest. They can also double as a case picking vehicle for multi-level picking, as the operator rides up with the load. Conversely, swing mast trucks keep the driver on the ground, but are often better suited for maneuvering in tight areas. Since there are only a few inches of clearance between the lift truck and the pallet rack, very-narrow-aisle vehicles usually require rail guidance or wire guidance systems to prevent collisions.

 

The next blog in the series will describe ways you can get creative with unused space above your distribution center dock area to increase capacity. Can’t wait? Read the Whitepaper: Six Ways to Postpone -Or Avoid- DC Expansion or watch the recorded webinar.

How to Optimize Storage Depth to Create Space in Your Distribution Center

By Ian Hobkirk | 09/14/2018 | 4:40 AM

How to Optimize Storage Depth DCV Blog

This blog is the second in a series I’m writing on ways to optimize space in your distribution center to extend its ability to support growth and postpone a capital expansion project. I covered the concept of slotting as a space-saving strategy in the last post. In this blog, optimizing storage depth is the focus.

One of the largest areas of opportunity for many of companies lies in optimizing storage depth in the distribution center. Warehouses that have a significant number of SKUs where two-to-three pallets are regularly kept on hand should consider storing this product in a medium other than Single-Deep pallet rack.

Single-Deep rack sacrifices too much space to aisles to store large quantities of the same SKU in this medium. Instead, companies should consider allocating a certain percentage of their distribution center space, twenty percent for instance, to deep-lane storage mediums such as those listed below:

 

Push-Back Rack

Push-Back rack can be used to store pallets just two positions deep, or up to five positions, without sacrificing additional space to aisles. Pallets are loaded into the same side of the system from which they are picked. The company’s existing lift trucks can be used to access the rack, and each vertical level of storage can be used to store a different SKU. Drawbacks to Push-Back rack include its cost as well as the fact that FIFO (first-in/first-out) storage is not accommodated.  Image Source: Interlake Mecalux

 

Pallet-Flow Rack

Pallet-Flow rack, on the other hand, does allow FIFO storage. Pallets are fed into the back of the system and retrieved from the front, so more aisle space is required than for Push-Back rack. Storage depths can be much greater than with Push-Back rack (10-deep in some cases), and there is still no special lift truck requirement. Pallet-Flow rack is generally regarded as one of the most expensive ways to store pallets, however. Image Source: Interlake Mecalux

 

 

 

Double-Deep Rack

Double-Deep rack is much less expensive than Push-Back or Pallet-Flow rack, but special “deep-reach” lift trucks are required to access it, which can cost 10% to 20% more than normal reach-style lift trucks. Although pallets can only be stored two positions deep, Double-Deep rack is highly flexible. If designed with this idea in mind, Double-Deep rack can often be reconfigured as Single-Deep rack if requirements change in the future. Image Source: Aceally International

 

 

Drive-In Rack

Though relatively inexpensive, Drive-In rack is much more limiting than the three previous storage mediums.
Drive-In rack is often configured in depths of four to five pallets, but ALL of the vertical levels in a Drive-In system must contain the same SKU. Companies with frequent occurrences of ten or more pallets of the same product should consider this form of storage.  Image Source: Interlake Mecalux

 

 

 

 

In the next blog in this series, “Narrow Aisles and Very-Narrow Aisles in the Distribution Center: Space Saving Benefits and Equipment Requirements,” we’ll explore aisle widths and the pros on cons associated with the move to narrow (and narrower) aisles. Can’t wait? Read the Whitepaper: Six Ways to Postpone -Or Avoid- DC Expansion or watch the recorded webinar.

How to Reclaim Unused Distribution Center Space with Better Slotting

By Ian Hobkirk | 08/31/2018 | 1:10 PM

Six Ways to Postpone DC Expansion Part I - Slotting - DCV

This blog is the first in a series I’m writing on ways to optimize space in your distribution center to extend its ability to support growth and potentially postpone a capital expansion project. Each blog in the series will be dedicated to one of six key space-saving strategies and techniques. Today the topic is slotting.

In the context of logistics, slotting can be defined as ensuring that each SKU is in its proper location to maximize space and labor efficiency. The concept of slotting is simple. A quantity of product the size of a bowling ball, placed in a bin location big enough to fit an entire pallet, takes up a lot of space unnecessarily. If this practice is repeated across hundreds or thousands of SKUs, the inefficiency propagates and becomes a major problem.

A proper slotting initiative generally involves a one-time, large scale “re-set” of inventory locations, followed by regular incremental re-slots as product demand changes due to seasonality, new product introductions, and obsolescence.

Industries with high demand volatility such as apparel or consumer electronics have a harder time slotting product, as the “fast-moving” SKUs in the warehouse change from month to month, or even week to week. These companies often require sophisticated slotting software programs to manage all of the complex variables at play. Conversely, other businesses may have a much more stable demand pattern and can perform slotting with more rudimentary tools, such as spreadsheets.

If the prospect of re-slotting the entire distribution center seems a daunting one, companies should keep in mind that a slotting project with the goal of reclaiming unused space can often be executed more easily than one that is driven by other factors, such as improving pick efficiency.

A space-driven slotting initiative seeks to store every product in the ideal storage medium, and does not necessarily need to place each product in the perfect location relative to the shipping dock (though this should certainly be considered). Space-driven slotting looks at cube and demand. It seeks to place a SKU in the smallest possible bin to accommodate a unit load of the product, and to move that product to an even smaller bin when product is depleted to the point where there is excess empty space in the bin. This form of slotting can often be accomplished with a spreadsheet.

The results of a slotting study may often reveal the need for different storage mediums in the distribution center. Full height pallet positions can often be cut down to half-height positions. Companies that are in a position to dictate the height of incoming pallets may find that a few inches higher or lower on average pallet height can make a big difference in terms of the number of pallets stored. In addition to single-deep pallet rack, it may be advisable to store product in carton flow rack, shelving, or even forms of deep lane storage, as discussed in the next section.

After re-assigning product to its optimal storage medium, much diligence is required to ensure that “honeycombing” does not slowly reclaim the gains made. Honeycombing occurs when product is slowly picked from a bin location, causing it to become under-utilized over time. A process must be put in place to consolidate product that has been honeycombed into smaller bins, to continue maximizing cube utilization at all times.

Now that we’ve covered the basics of slotting, stay tuned for the next blog in this series: Optimizing Storage Depth in the Distribution Center. Can’t wait? Read the Whitepaper: Six Ways to Postpone -Or Avoid- DC Expansion, or watch the recorded webinar.

The opinions expressed herein are those solely of the participants, and do not necessarily represent the views of Agile Business Media, LLC., its properties or its employees.

About Ian Hobkirk

Ian Hobkirk

Ian Hobkirk is the founder and Managing Director of Commonwealth Supply Chain Advisors. Over his 20-year career, he has helped hundreds of companies reduce their distribution labor costs, improve space utilization, and meet their customer service objectives. He has formed supply chain consulting organizations for two different systems integration firms, and managed the supply chain execution practice at The AberdeenGroup, a leading technology analyst firm.



Categories

Popular Tags

Subscribe to DC Velocity

Subscribe to DC Velocity Start your FREE subscription to DC Velocity!

Subscribe to DC Velocity
Renew
Go digital
International