Making Your Automation Strategy a Success
By Gary Forger
A General Motors material handling team was asked to improve management of work-in-process. They proposed a multi-million dollar automated storage and retrieval system (AS/RS) that met the tough return on investment (ROI) criteria. The cap ex review board listened to the presentation but spent even less time responding. Why not just add some rack and a few lift trucks in some empty space in the plant? Quite simply, major capital expenditures were not part of GM’s strategy at the time. Worse yet, the counter solution was more cost effective.
Clearly, automation is not always the better answer. But how do you know before you make the wrong proposal? Quite simply, start with the company strategy and match any automation solution to that strategy, says Troy VanWormer, Director of Warehouse Automation at OPEX. “You’ve got to think up not just sideways,” he adds. VanWormer knows because he has worked all the angles in automation as a consultant, operations manager and equipment supplier. “You have to accept up front that automation is not just a project,” he says.
Automation, whatever the scale, has strategic importance regardless of where it is used. Optimizing performance in a single functional area is nice but not the whole story. Furthermore, automation is so powerful that it typically has impact far beyond the floor space it occupies.
“Automation is a big picture discussion. It is not an island. Automation has a broad reach and has to fit into the company’s long-term objectives and priorities,” says VanWormer.
Once you’ve established that automation is in play, VanWormer has some suggestions how to determine what automation is a strategic cap ex that fits your needs.
Start by tuning into the company’s objectives for output levels.
Required throughput capacity will frame material handling automation decisions including specific equipment, breadth of use and level of complexity. It will also affect allocation of floor space for the automation and determine how it fits into existing equipment and processes.
Next to evaluate is order processing speed, uptime, headcount and ultimately labor cost per unit shipped. Clearly, automation has impact beyond the equipment itself. Then it’s a matter of moving on to ROI. “To justify automation, you have to truly meet the ROI criteria. You can’t back into it. CFOs will smoke that out and the discussion will end pretty quickly,” says VanWormer. He has one final tip on making your automation strategy a success.
“Always keep in mind that automation is a 10-year play,” he says.
Too many people think in terms of three to five years. “Talk in those shorter terms and you’re underselling automation,” VanWormer adds. By the way, at least one member of the GM team carried that lesson with him for the rest of his career. He never again proposed automation because he or his team fell in love with it.
Quite simply, if automation doesn’t fit strategically on all levels, it is ill advised. Next week we’ll cover how to work with the automation decision makers at your facility.
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Gary Forger is the former editor of Modern Materials Handling magazine and the Material Handling & Logistics U.S. Roadmap to 2030.