Natural selection

The case for capital investment is hard to make when business is tumbling. But picking systems are a core part of operational success and will playa key role in survival. Quick wins will be the priority for operators, but short-sighted decisions may lead to competitive disadvantage in the future,

Tony Beales, supply chain director of Business Computer Projects, says: “Those with a steady nerve can reap dividends by investing in the right technology. Tying capital up especially borrowed capital – just isn’t an option. The right choice will not only allow a company to survive, but thrive, in the current downturn and boost long-term performance when the economy becomes more stable again.”

In terms of fast payback voice technology is champion, with an average ROI of under a year.

Dave Bull, business development manager at Dematic, advises upgrading from paper or RDT to voice picking as one of the best ways to cut costs while improving fulfilment. “Dematic finds that customers upgrading from RDT to voice picking are seeing 20 to 30 per cent productivity improvements.”

Dematic has upgraded the zone-routeing picking system for an Australian electronics retailer, Dick Smith Electronics, from RDTs to voice picking. The result has been a 22 per cent productivity increase and an ROI of less than 12 months.

Morrisons has just signed a £6 million contract with Zetes for one of the biggest voice-directed picking installations in the UK. The system, which is based on Zetes’ 3N voice software and 2,000 Vocollect Talkman voice terminals, will voice-enable thousands of Morrisons’ warehouse operators based at all the retailer’s distribution centres, who are currently working from a paper-based system.

Gary Glessner, managing director and vice president, ?EMEA, of Vocollect, says voice can reduce picking errors to between one and two per thousand, compared to paper’s ten to 20 per thousand, and hand-held scanners’ four to six.

He points to research reports which suggest that during downturns WMS software is the most popular investment. “This validates how cognisant companies are about where their costs are, and voice is all but an extension of a WMS.”

Glessner says Vocollect employs an ROI calculator which ens LUes companies “don’t have to make a leap of faith” with a new system. Savoye has a similar offering – it calculates a potential ROl by analysing an operation’s order data ro determine staffing requirements and operational costs for the new system, then compares it to the existing one.

Savoye managing director Russell Davies says companies are increasingly requiring simulation and analysis to be carried out prior to order placement. “Our experience is that typically staff are able to pick ten to 20 per cent faster using voice tools. Add in real-time stock updates – a must for any ebusiness – and the ease of use for new users, and the advantages become compelling.”

Even if a business can justify investment over time, upfront funding may still be a blocker. Redesigning the pick layouts is a good way to improve pick rates at minimal cost. Allen Scott, UK managing director of Manhattan Associates, says that one of the best ways to reduce costs is to free up inventory held in the warehouse.

“This can be done via cross-dock, flow-through processes.

The warehouse receives product, which is then shunted straight to the exit, rather than being held in storage. This simplifies operations and cuts out the entire picking process, which slashes costs.”

Traditional

The UK has traditionally taken a much shorter-term view of investment appraisal for logistics solutions than in continental Europe, and so has typically more manual systems than countries like Germany, points out Brian Turner, development controller at Gist. “Given both the scarcity and cost of capital at the moment, this is likely to be even more of a driver than in the recent past.”

This strikes a chord with Mark Coxton, UK managing director for Aldata, who agrees that this year a lot of focus will be on manual methods. He says the market has been carved in two. “It’s become a matter of cost of labour versus capital. Some companies may choose to take advantage of the cheaper labour costs now that there’s fresh avallability.”

Aldata’s PDA-based voice picking system was brought out last year as a cheaper alternative to dedicated systems. Despite initial doubts over its robustness, this has now been refined, and take-up is gathering pace. “It’s half the price and provides the same level of benefit,” says Coxton,

Dave Bull points to goods-to-man systems as having the highest productivity and accuracy, saying, “they have the potential to increase picker productivity by 300 to 400 per cent over conventional pick face systems, and streamline the replenishment task.”

Automated systems are generally perceived to be less flexible than manual. Yet Bull argues that they deliver “a considerable business advantage”. He says the latest systems can deliver better productivity, accuracy, and flexibility than even manual systems.

“For example, manual solutions are inefficient in delivering to multiple formats or handling SKU proliferation,” he says. “The latest high rate goods-ro-man systems are more effective than manual solutions in delivering to multiple formats such as stores and direct orders from the one system, handling increasing numbers of SKUs, and matching operator numbers to volumes.”

Online retail or “etail’ is what Paul Westmoreland, managing director of Psion Teklogix, describes as the retail sector’s “brightest ray of hope.” Verdict Research reports show that, while retail expenditure will be slower over the next five years than the previous five, it still expects a £45.7 billion increase in this period.

Westmoreland says it’s not uncommon for online retailers to experience growth rates of around 40 to 50 per cent – a sharp contrast to the typical ten per cent increase seen by traditional supply chains. “Order picking operations are fundamental to achieving the high service levels demanded by online retail and therefore needs the right technology to deliver the required accuracy, productivity and flexibility.

“Automated MIlEs, while appropriate for standard size, high-volume items being sold online such as books and CDs, will not be relevant for the retailers that have a larger number of SKUs and smaller volumes.” He points to voice-directed picking systems as the best method for these retailers to achieve high service levels.

However, TGW’s Phil Steeds argues that automated and mechanised handling systems are becoming increasingly attractive for e-fulfilment operations. “Systems are being developed that are more tolerant to handling cardboard, cutting out the need to decant products to a tote bin.” Also, he argues that while online orders go out as singles it remains more efficient to replenish stocks by pallet and case loads.

“Increasingly, multi-channel retail strategies are enabling online orders to be delivered to a store for the customer to pick up,” he says. This is proving popular with customers and also reduces the retailer’s delivery costs and creates more foot-fall in the store. TGW has installed a conveyor-based system which does just this for Boots.corn, run by iForce at The fort in Birmingham.

Steeds says: “While delivering online orders to a store takes away the last-mile problem uf delivery, there can also be a ’50 metre’ conundnun for retailers in terms of finding the product in the store.” He reckons automated systems can help keep track of product corning through the door.

“Having a mechanical portal behind the counter holding 1,000 parcels accessed by a PIN, rather than having staff find a product on the shelf, could help reduce distribution costs by 50 per cent,” he says.

Bull reckons the growth in etail, “is putting pressure on logistics operations to deliver different types of orders from the one system”. In the past some companies have built ?separate logistics systems for their etail streams; however, running two operations may increase logistics costs, he says pointing out that Dematic has received an order from a major book wholesaler to consolidate separate logistics operations delivering direct to customers and stores, into one system.

Retail discounters will also be experiencing growth. David Hibbett, business development manager, SSI Schaefer, reckons many of them will be looking for fast deliveries of practical systems to support new demands. “The role of automation in providing significant value-added services and order-dispatch sequences that reduce a company’s whole cost base will become more prevalent in 2009 as the focus shifts towards reduced supply chain costs.”

For those looking to upgrade an existing automated picking system, Hibbett advises taking a “modular approach”, which will enable a company to adapt, change, and invest in stages over time.

“This could start with replacing conventional shelving with deeper, carton-live storage or flow racking, which boosts storage capacity and requires a lower rate of replenishment. Then a paperless picking radio frequency system couid be added, with conveyors at either ends of storage aisles to take picked goods away from the storage area.

“This could then be converted to a pick-to-light system, introducing automatic picking, before adding in conveyors and an automatic storage and retrieval system to build up to a goods-ro-man system. Finally, a full high-end automation system could be installed that provides automatic case picking, pallet building, and product sequencing.”