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Turning automation investment into operational excellence

Automation investment

Prological’s Peter Jones shares the key parameters and considerations for businesses looking to automate logistics and supply chain operations.

While automation has played a role in supply chains for some time, the technology is more accessible and affordable than ever before.

Shifting consumer habits have forced many a business’s hand – a higher level of urgency in e-commerce retail has lent itself to the adoption of lower price point technology, especially Automated Mobile Robots (AMRs).

A recent report by research and consulting firm Gartner highlighted ‘hyper-automation’ as its top trend of last year.

The combination of technologies such as machine learning, artificial intelligence and robotic process automation is being used in place of human judgement, with businesses delegating more and more decision-making authority to intelligent applications.

Peter Jones, Managing Director of Prological, says lessons can be learnt from the mistakes made by some early adopters of automation.

“When we start to explore what went wrong, it’s never the automation that doesn’t work,” he says.

“It’s always that a business didn’t fully understand what they actually needed when they started out on their journey, so they didn’t end up with what was best for the task at hand.”

In order to prepare for a change to automation, Peter says it’s crucial to not skip the groundwork on fully understanding the requirements of a business for the present and future.

This includes a factor which is often overlooked: adapting the culture of an organisation to fit automated operations.

Working with computers and intelligent software means many old business disciplines will become redundant.

When an entire warehouse becomes more IT-heavy – automating the issuing and control of orders and inventory and the operational and functional tasks – the staff need to reflect this change.

“The skills and type of people required for a manual picking environment or more traditional environment are very different to the optimum employees in an automated warehouse environment,” Peter adds.

“There’s a lot more people interaction in a traditional warehouse, so for people who need that human interaction to maintain high productivity rates, an automation environment is going to be more difficult. People who are happy to spend a day with themselves and work at high cadence, doing reasonably repetitive tasks, will thrive.”

Peter believes there’s a greater pool of workers for an automated environment than a high productivity, manual environment, but businesses moving to automation need to embed the mindset into operations while preparing for the changes in tasks for those transitions, and for the changes in personnel for those who find the transition too challenging.

ACCESSING THE RIGHT DATA

When dealing with advanced technology, data should be robust, accurate and easily accessible.

Sometimes having access to mountains of data means the numbers contain errors and inaccuracies.

Another problem faced is the amount of time and resources being consumed in collating and reporting data all the while failing to convert this data into the information required for evidence-based decision making and tangible actions.

“So, you’ve got to have that product information, master data file, really tight and accurate before you start and there’s time efficient and cost efficient ways of doing that,” says Peter.

Data on every Stock Keeping Unit (SKU) must be correct, that means the history, sales, forecast, and dimensional data need to be considered before the automation investigation and investment journey begins.

“If you’re dealing with tens of thousands of SKUs, estimations can end up happening, running averages against family groups, which compromises outcomes,” he notes.

“Trying to do that within the project when dealing with deadlines and suppliers is sub-optimal. Knowing the dimensional data of the product is crucial because you need to know how big your automation system is volumetrically by unit. You also must have a really good understanding of your sales profile at an SKU level in order to work out the hit rates and frequencies of the pick against all of your SKUs.”

BENCHMARKING OPERATIONS

The vendor space continues to grow, offering advanced technological expertise, but no vendor will ever be able to understand the ins and outs of every individual business.

By being completely prepared for automation, vendors will be able to provide solutions customised for your specific operations and goals.

“We’ve seen businesses fall into the trap of thinking automation will be a silver bullet for business transformation,” Peter says.

“There’s no silver bullet in supply chain operations, which is why it’s important to benchmark against their own business case rather than listen solely to the vendors.”

For businesses looking to ramp up their already-automated operations, Peter notes that benchmarking is difficult.

Prological’s recent work with a large B2C client has shown that because automation is new and rapidly changing, external benchmarking is not only difficult due to a lack of case studies, but can also quickly become irrelevant and outdated because the technology is evolving so fast.

“Most of the early adopters have already recognised that if they’d done more work, had better data, engaged in some external third-party input rather than just listening to sales teams on the systems, they would have had a better outcome than what they have,” he says.

“This isn’t to say the technology investment hasn’t been worth it for these companies, but the solution could have been very different were it designed to an optimised baseline. Many have ended up with a good outcome when a great one was available. We advise businesses to know and understand what can be achieved by optimising what is already available, before starting to build business cases and ROIs based on where you are now.”

A BUSINESS PLAN FOR THE FUTURE

Any organisation thinking of investing in automation needs a strong, robust business plan. Prological has found that automation investments require 10–15- year life cycles to ensure a solid ROI, but planning for this needs long term forecasts and justifiable projections into the medium- to long-term.

“The reduction in operation expenditure is what makes automation really attractive,” Peter says.

“But because the project is so capital expenditure-heavy, you actually have to plan your automation on a much longer horizon than what businesses are typically prepared to forecast to.”

No one has a crystal ball into the future, but if businesses fail to cater for growth and change, fail to build in dexterity and agility, the fruits of their investment get left behind.

“Once you’ve installed most automation systems, it costs 60 or 70 per cent of the value of the equipment to move it somewhere else. AMRs are the exception and one of their features is their ability to move,” Peter notes.

“So, if you have actually underspecified what you want, and the business continues to grow, you can’t easily pick up automated systems and move them and add them onto a bigger facility.”

Further, most systems are difficult to expand within an existing facility, particularly Auto-Store and Goods To Person (GTP) systems. If you think you may need to expand later, you need to design that in at the start.

“A whole facility plan and building plan has to be completed for now and for 10 years into the future, so that you can design in expansion and flexibility going forward.

“Relying on internal expertise is extremely challenging to avoid any mistakes and find the best direction in a rapidly developing industry,” he says. “My hope is that in ten years’ time I’m no longer walking into businesses which have spent tens of millions of dollars and failed to get it right.”

As a consulting firm, Prological would much rather be working with clients at the start to get the design and dexterity right, rather than working out how to get the best out of a sub-optimal situation a few years down the track.

To read Prological’s new white paper, ‘A guide to operational excellence: Five steps to explore before making your automation investment’, click here

For more information on Prological Consulting, click here

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