While the global economic downturn over the past few years has put the squeeze on business expansion, several success stories have managed to take shape. One in particular, the strong growth in warehouse automation, continues to flourish due to a convergence of factors that are creating a near perfect environment for both equipment and software providers and their customers.
Setting the stage for expansion
The current interest in warehouse automation is being propelled by several overarching drivers, according to Mike Kotecki, senior vice president at Dematic, and they are generating nothing short of a “revival” in the industry, he says.
For starters, the economy is coming back, albeit in spurts, and companies are spending again. However, unlike previous turnarounds in the food and beverage industries that were characterized by a rehiring bonanza, companies are not interested in bringing back excessive headcount.
“There’s a clear trend to apply technology where possible and reduce manual labor,” says Kotecki. In addition, the warehouse automation technology that’s available on the market today allows companies to “leapfrog competitors and improve flexibility,” he says. “If I implement a system that allows me to work with fewer headcount, then I’ll be more flexible as the economy changes and I’ll be more recession proof the next time around.”
Intelligrated’s executive vice president, Greg Cronin, looks at labor from another aspect, primarily from a cost standpoint.
“Baby boomers are retiring, and many of the younger generation aren’t interested in manual labor jobs,” he says. Moreover, an aging workforce coupled with the physical demands associated with warehouse jobs means the medical coverage for staff is also very high. “Many companies are willing to make capital expenditures today that they weren’t willing to make before to try and offset the labor situation,” says Cronin.
Other trends are at work, continues Dematic’s Kotecki. “There’s a good deal of consolidation going on; merger and acquisition activity is up. There is also a move to more regionally-based retail outlets and a surge in small format, neighborhood stores.” This includes smaller stores that are geared to appeal to a specific demographic, he notes. The result is “less on-site storage and a need for more deliveries, all of which cranks up the number of SKUs.”
Intelligrated’s Cronin adds e-commerce to the list of external factors that are fueling growth in warehouse automation. “E-commerce is definitely starting to make a play in the food and beverage industry. And, what it brings is so different. You’re not just shipping pallets and cases anymore, you’re opening up the cases and picking individual pieces.”
This requires an entirely new level of sophistication. “It requires different software and different automation equipment,” says Cronin. For instance, “A lot of the [older generation] WMS systems out there today don’t work well with automation and they don’t really work well in the e-commerce and each-picking world.”
Intelligrated’s response, therefore, “is not only to bring in new physical automation solutions, but increase our capabilities on the software side to be able to handle all of these new requirements on the automation side and the each-picking side.”
In a related development, home delivery is also experiencing a comeback, explains Dematic’s Kotecki.
“There were a number of false starts some years ago,” he says, referring to the Internet-based grocer Webvan. “But, home delivery is growing in popularity, especially in high population areas,” he says, which “presents a whole new set of challenges for the material handling group, including many sub-categories of product and so forth that each need to be available and stored for a long period of time, in some cases, but then must be available in a moment’s notice. Inventory levels are a little higher; visibility is a little lower because it’s instantaneous; and you also need a transportation network that’s phenomenal.”