Warehouses fulfil a wide range of functions and in many industries are the heart of the internal material flow. The increasing variety of articles, ever faster retrieval times, and high growth dynamics mean warehouses have to meet more requirements than ever to be efficient. On the other hand, the spotlight is more often shifting to warehouse operation and handling expenses: Rising personnel costs accompanied by high rents in metropolitan and urban areas make cost efficient warehousing increasingly difficult. Yet another challenge: the shortage of skilled workers. The “Warehouse Vision Study 2024” revealed that 60% of the 1,403 respondents from industry, services, and retail consider human resources one of the greatest challenges. What answers do new automation concepts offer?
ALTERNATIVES TO MANUAL WAREHOUSE OPERATION
The market for automated warehouse systems is growing steadily. Considering the experiences from the coronavirus pandemic, this trend is expected to develop even more dynamically. However, the increasingly widespread use of automation solutions has until now been confined to almost only what is referred to as greenfield projects. These are newly developed warehouses, including the associated properties, building technology, and infrastructure. The alternative usage of driverless forklifts is limited due to various restrictions. With high handling volumes, as well as strict requirements on energy efficiency and sustainability, for example when disposing battery cells, these systems are often not satisfying. With LOGI-KIT, DAMBACH Lagersysteme offers a new approach for retrofitting pallet warehouses with automation technology and streamlining existing processes. This solution is convincing in terms of technology and efficiency, as evidenced by the following cost-benefit analysis.
To illustrate the economic implications of an automated solution, the following example compares the warehousing costs for a manually operated warehouse with the costs of an automatic warehouse system. Additionally the main economic drivers are identified. The model warehouse considered here assumes the following:
- 4,000 hours of operation a year (2-shift operation, 250 days in operation, 8h/shift)
- 420,000 pallets handled per year, i.e. 1,680 per day
- Use of eight forklifts in manual operation with one forklift operator per shift
- Four storage and retrieval machines in automatic operation, including materials handling technology
The following graphic shows the resulting running warehousing costs for manual and automatic operation. The costs for both solutions mainly differ as follows:
Taking the different life cycles into consideration, the investment required for automatic ware-house technology is about twice as much as for a manual solution with forklift operation.
The personnel costs saved equate to sixteen full-time employees (FTE). Personnel costs per full-time employee include gross wages, the employer contribution to social security, vacation and sick leave, as well as indirect costs such as administration, infrastructure, training, work equipment. With automatic solutions, warehouse energy consumption is reduced by up to two-thirds.
As expected, the number of shifts and the personnel costs are the main drivers of the return on investment (ROI). On the one hand, it is generally advantageous to utilize capital goods to their full capacity, but on the other hand, cumulated personnel costs increase at least linearly with the number of shifts if other allowances for shift operation are disregarded. With automated systems, increasing operating costs in multishift operation are virtually negligible. The following table presents a scenario analysis for the two parameters – number of shifts and personnel costs.
The example calculation above is a good indicator for illustrating the potential of an automated solution. However, additional factors have to be considered in specific cases:
- The internal material flow and building geometry have an influence on the required materials handling technology
- A low handling volume reduces the potential savings. In such cases, the use of aisle-changing storage and retrieval machines are advantageous
- Detailed planning and simulation are required depending on the complexity of the material flow in the apron (e.g. picking, tugger train loading, etc.)
The aspects named above can influence the procurement costs and efficiency of an automation solu-tion. On the other hand, there are further advantages of automation that have a monetary effect but were not considered in the example calculation, such as:
- Less damages, fewer accidents and mistakes due to the human factor
- Goods protected against dirt, damage, and theft, as they are stored in an access-protected system
- Improved traceability, data quality, and transparency thanks to a digitalized storage process (e.g. on-going inventory in real-time)
- Optimized warehouse utilization thanks to intelligent storage strategies
With potential annual savings in the six to seven digit range, the evaluation of an automation solution should be part of every efficiency enhancement program for intralogistics processes. In practice, investments that are calculated with short amortization times of less than four or even three years are considered beyond dispute. However, these short amortization requirements are not appropriate for investment goods with a life cycle of 15 years or longer. After all, the possibility of saving a high single or even double-digit figure in the millions over the entire life cycle of the warehouse automation system is not taken into account in an amortization calculation. Additional revenues owing to increased handling volumes or storage capacities are not taken into account. Isolated improvements with the help of fast amortizing “quick fixes” and “low hanging fruits” will not improve the cost structure signifi-cantly and over the long term, in contrast to a holistic solution like LOGI-KIT.
Author: Adrian Klöpfer