Reaping the ROI

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While some sectors of the economy have wobbled in recent months, there is still an air of confidence in the European automation market with strong performances and healthy order books.

Vanderlande, for example, has just reported a 28 per cent increase in annual profits while sales were up 23 per cent. President and chief executive Peter Gerretse says: “Once again we can look back at our best year ever.”

The company said the market for distribution systems in Europe remained stable at the high level of last year and this was reflected in an increased order intake with orders from companies such as Kaufland, Amazon, van den Ban and

“With orders received from FedEx, UPS, DHL, TNT, Bartolini and many others we clearly improved our position in the express parcel segment, although this year investments in this industry were at a lower level,” says Gerretse.

Vanderlande is expecting net sales to increase significantly despite uncertainty as to how the worldwide economy will develop in financial year 2009.

There are a number of major developments in the pipeline in the UK. Dematic has just completed a major project for TK Maxx, and Knapp is currently working on an automated warehouse for John Lewis at Milton Keynes. Knapp has also reported a successful year with sales rising by 11.2 per cent, from 196.1m euros and EBITDA increasing by 37.9 per cent to 18.2m euros. Knapp has just acquired Moving AB, a Scandinavian warehouse logistics company.

While John Lewis is developing a new automated warehouse GlaxoSmithKline is extending one. FKI Logistex has just won the contract to extend the pharmaceutical company’s northern distribution base at Middlewich which is operated by Wincanton.

The original automated storage and retrieval system was completed by FKI Logistex in 2005 as part of a ten-year third-party logistics contract awarded to Wincanton by GlaxoSmithKline. The latest contract is to extend the original installation of nine cranes, and a significant number of pallet conveyors, with two additional automated cranes. Martin Sealy, Wincanton’s business unit director – manufacturing, says: “The new contract recognises the contribution made by FKI Logistex to the efficient operation of the existing site which serves the Midlands, Northern England, Scotland and Ireland.”

Wincanton has just had its contract extended at Britvic’s automated warehouse at Magna Park. This rapidly became the “must-see” site in the UK when it opened in 1994 as it was a showcase for state of the art automation technology. Wincanton will continue to operate the national distribution centre at Magna Park as well as handling the manufacturer’s primary transport requirements for another two years.

Wincanton manages more than 180 million case movements a year and last year, it broke the record for This is the most obvious area of benefit in an automated scheme. The calculation of the labour required, and thereby the saving against the status quo, is of critical importance.dispatch cases from the distribution centre – exceeding 80 million cases for the first time.

Dave Eslick, director of logistics at Britvic, says: “We have worked extremely closely with Wincanton for many years now to ensure that our supply chain is seamlessly integrated into the rest of our operations. Wincanton understands our business and has consistently demonstrated its ability to improve efficiencies and reduce costs on our behalf.”

Savoye has just completed installation of a stand alone order preparation system for Bookpoint’s Abingdon facility using its PAC600 packaging technology and conveyors.

The 500,000 euro system was designed to enable Bookpoint to service a recently acquired contract without affecting its existing clients. The PAC600 packaging technology provides automated carton erection, product security and sealing, while allowing orders to be picked directly into the dispatch carton. Combined with Savoye conveyors, zone picking and automated label applicators, it gives Bookpoint flexibility for now and the future.

Elsewhere, Vanderlande Industries has sold the first new ergonomic [email protected] workstations to TVH Forklift Parts in Belgium. The workstation was unveiled at CeMAT in May. The units are part of a system upgrade at TVH’s facility in Waregem to accommodate the company’s growth.

The existing system, built by Vanderlande Industries in 2002, will be expanded so TVH can double the amount of order lines handled from 2,000 to 4,000 order lines per hour. The expansion will be implemented while the existing system is fully operational. The expansion is planned to be operational in 2010. The project scope includes 1,500m conveyor system, nine miniloads and three [email protected] order picking workstations. Another five existing miniloads will be retrofitted with new masts.

Swisslog has also picked up a significant contract in Norway. Asko, the wholesaler part of the retailer NorgesGruppen, has commissioned Swisslog to design and implement a new central distribution centre in a deal worth some £26 million (53m Swiss francs).

The aim is to create a distribution centre with a high degree of automation to reduce tasks in the 12 existing regional distribution centres, resulting in lower total logistics costs. “We are pleased to implement this distribution centre for Asko after having already been chosen for the realisation of Asko’s regional distribution centre in Rogaland,” says Swisslog chief executive Remo Brunschwiler.

Swisslog will be responsible for the design and realisation of the central distribution centre which will be united with the existing regional distribution centre in Vestby, south east of Oslo. The facility, which is planned to be operational by the end of 2010, will have a high-bay warehouse accommodating over 20,000 pallet locations and seven stacker cranes as well as a miniload warehouse with some 120,000 locations and 40 miniload cranes.

The warehouse management and co-ordination of the goods flows is provided for by Swisslog’s warehouse management and material flow control systems which are interfaced with Asko’s existing ERP solution.

Within the overall project, a picking solution for tobacco and pharmaceuticals will be implemented in the first phase, followed by a picking solution for dry goods and alcoholic beverages in the second phase.


While the market for automated systems is proving to be relatively resilient at the moment, the high level investment inevitably raises questions in the minds of potential buyers. The point was made last year by David Hibbett, business development manager at SSI Schaefer, when he said: “Automation in distribution has matured in the past three years with new concepts, better technology and system integration compatibility. However, there are still many companies who consider automation to be non-beneficial but for all the wrong reasons.

“Time and time again SSI Schaefer is faced with the same responses ‘it’s not economical’, ‘we’ve no resources or time’, or quite simply ‘we don’t need it’.

He was urging companies to think outside the box and to look at the range of proven concepts that are available and search for opportunities to handle today’s supply chain challenges.

Project requirements are paramount when considering switching from manual to automated with many pointers to consider, including; economic justification, reviewing overall business processes and validating cost implications, including manpower and cost per unit.

“But ultimately when benchmarked, automation solutions are more cost beneficial than traditional solutions. Automation is proven to optimise the supply chain beyond the walls of the warehouse itself. New supply chain concepts require new technologies with different management skills,” said Hibbert.

Jeremy Clouston Jones of Savoye Logistics argues that: “Reduction of operational labour will be the key driver in the majority of automation projects, as such the calculation of this figure is of critical importance to the project.

Most obvious

“This is the most obvious area of benefit
in an automated scheme. The calculation of the labour required, and thereby the saving against the status quo, is of critical importance.”

The verification of picking rates through benchmarking similar operations, and the simulation of differing volume throughputs across the system will be highly valuable at this stage.

Clouston Jones says: “If the operation is able to move to one where picking is undertaken directly to dispatch case, this will remove the requirement for unnecessary handling of the products. As checking and validation of picking is managed through a set of tools a secondary end of line check is not required. The labour cost associated to the removal of this operation, as well as consumables costs for the packaging should be included in any calculation.

“One of the benefits of automation is the improvement of picking accuracy. Any labour costs that can be associated to checking, and rectifying mistakes made at the slotting, picking and inventory stage should be included in the ROI calculation providing the system can demonstrably negate these errors.”

Andy Smith, managing director of TGW, points out that while highly automated picking systems are linked to relatively high investment costs this needs to be balanced against the enormous advantages line operators can reap. “An eight to ten times increase in picking performance compared to simple man-to-goods systems is the first point to consider here.

“Every picker’s working performance is optimised through a permanent supply of goods for picking, while the amount of tiresome walking is reduced; workstations designed around ergonomic principles can also provide an immense performance advantage. For many applications, investment in automatic picking processes is the only way a company can achieve required growth in capacities.”

Paul Bradley of MLOG Logistics points out that a two to three year payback requirement has not been uncommon in the UK, which has worked against the adoption of large-scale automation in favour of more manual techniques, when an element of automation could have achieved considerable longer-term productivity and efficiency gains. An eight to ten times increase

in picking performance compared to simple man-to-goods systems is the first point to consider here.

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