Fix or fling?

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As business picks up, companies are facing a dilemma when it comes to automation – whether to install a new system or extend the life expectancy of an existing installation. Lucy Tesseras considers the pros and cons.

The economic situation is beginning to settle and with it has come a new air of confidence. Even so, most companies are still a little wary of making huge capital investments, so the decision to upgrade, revamp and rejuvenate existing systems – particularly when it comes to automation – has become increasingly popular.

Ian Channing, head of customer support at    Swisslog, says: “While businesses are slowly regaining commercial confidence, we still find that many are not yet ready to make the big jump and invest in new automation. This reluctance, coupled with increasing volumes, has lead to companies reviewing the life expectancy of existing equipment. We typically find that companies are looking to extend the operational effectiveness of their current equipment by three to five years beyond their original plans.”

Clive Fearn of The Barcode Warehouse agrees. “Where there is no compelling business reason to replace we always advocate extending the life of existing systems,” he says. “Equipment bought in the last ten years, from fork trucks to mobile computers, can be as robust and reliable as ever. There is nothing to gain from a major capital investment unless business sense and the case for investment can be made.”

To keep on top of changing market conditions, when it comes to automation Mark Westacott, head of customer services, UK and Eire at Dematic, says good customer service is vital.

“By continuing to work in partnership with its client, a systems integrator, through the account manager, can anticipate and meet its client’s ongoing system and training needs and support client requests for upgrades and modernisation. This may mean updating software or controls, it could see individual components or modules being replaced or upgraded, or it may require new solutions – for example, if a client needs to put a further 1,000 pallets through its warehouse or wishes to reduce the number of staff required for picking.”

However, despite money being tight, the importance of automation and its relevance in today’s market has increased, according to Jungheinrich’s Steve Richmond. “In the past within the UK there has been some reluctance to invest heavily for high degrees of automation within the warehousing and distribution sector of the supply chain. More recently, changes in the dynamics of the market, the industry and in environmental conditions have forced organisations to review this situation, and we are experiencing an increasing trend towards automation.”

He reckons that a reduction in the availability of labour and suitable warehouse locations has also influenced the situation. “In recent years,” he says, “the conditions in the labour market have changed significantly. Unemployment in many areas is now relatively low, so the availability and flexibility of the workforce is declining. This is particularly evident in the most central and attractive locations to major retailers and distribution companies, further compounding the problems.”

He adds that land and building costs are also an issue as the availability of prime locations for warehousing and distribution is declining. “In addition,” he says, “the cost of the land, building and rates are all on the increase. Automated solutions, and particularly high bay crane solutions offer the opportunity to optimise the available footprint of a building, reducing costs significantly.”

To help companies assess the long-term financial viability of an automated logistics system, Logistex has developed an Excel-based program which compares various investment scenarios over a ten-year period and calculates the respective return on investment.

It takes into account capital investment and utilisation, stocks, revenue and cash flow, operational costs, staffing levels, property implications, interest rates and inflation before providing a year-by-year evaluation of all the key factors.

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