…, speeds up the throughput of shipments, and reduces costs mid-term, claims cargo veteran and intralogistics expert, Olaf Oczkos (OO). The concept, exclusively presented to CargoForwarder Global, guides the reader through the confusing jungle of multiple offers marketed by warehouse automation solution providers, and illustrates which criteria best fit a buyer’s specific needs. The term ‘automation solution providers’ used in the interview, is better known in the industry as ‘systems integrators’.
CFG: You just released the Buyer’s Guide to Warehouse Automation. Please explain the concept and how it differs from the current landscape of warehouse operations.
OO: As neutral intralogistics experts, we compare a typical manual warehouse with numerous automation solutions available in Germany, other European countries and the USA. The solutions we offer are for bins not pallets.
The concept is very simple: we want to help buyers to focus on solutions that make sense for the customer. We’ve noticed that customers are lost or uncertain when it comes to shopping for warehouse automation. Automation solution providers all praise their own solutions. When customers talk to 10 of them, each company claims the same thing: “buy my stuff”. Thanks to the Buyer’s Guide we just released, our customers can get an individual report tailored to their needs within 10 days. The report contains an approximate cost of the warehouse automation, the suggested solutions, and the payback time.
CFG: How do you manage to generate customer centric propositions?
OO: Automation solution providers have a self-interest to sell their automation, no matter what. Because we are not on the payroll of any of the automation solutions providers, we can objectively determine the right solutions by entering a few key numbers. Numbers don’t lie. Warehouse automation is not an art, it’s a science. In the end, it’s math – done very quickly because we have a special comparison tool. This is more affordable than hiring a warehouse planner who needs more time in figuring out a fitting solution compared to our approach.
Prequalification tool
At the recent Logimat Expo in Stuttgart, we met warehouse planners who need at least 6 to 9 months to tell the customer what automation they might need. I must underline that we do not want to eliminate the warehouse planner from the warehouse automation landscape. On the contrary, we want them to focus on 2 to 3 solutions which we identified, not the 10 or 12 that they usually analyze. The Buyer’s Guide for Warehouse Automation is a prequalifying tool. This concept enables the customers to speed up the decision-making process and presents viable solutions.
CFG: It needs a lot of money to automate warehouse operations. And the payback time is lengthy. It is therefore understandable, is it not, that companies are cautious about the topic and prefer to carry on doing their job as before, shying away from expenditure?
OO: That depends on each individual customer. The overall trend in Germany or other high wage countries, is to automate warehouse operations. Automation is key to master growing volumes. Each company should ask the Hamletian question: ‘to automate or not to automate?’ This is where our Buyer’s Guide can be of help in figuring out how to automate.
Picking errors in air freight are costly
Many 3PL contract logistics providers serve the air freight industry. These Logistics Service Providers usually work on 3-to-5-year contracts, so they are reluctant to invest in warehouse automation. Instead they ‘solve’ their problems with volume growth by adding more staff. However, warehousers are scarce and those who are available make mistakes when it comes to picking. A picking mistake in the air freight industry probably costs 100x more than in land transport, where the product can be returned the next day. We exemplify three real-life scenarios with a payback time of 3, 2, and 1.1 years. We try to break free from the mythology that warehouse automation is expensive. A commonly repeated argument used is that companies need to wait 5 to 8 years to see a return on investment. That is why it is so important to educate the customer on today’s options when it comes to the warehouse automation industry.
CFG: Your approach is based on data availability. How do you obtain the information and identify areas of improvement in daily ops?
OO: Nobody knows the business better than the customer. We interview the customer using our self-developed SALT Method, asking him what he wants to improve: Space, Accuracy, Labor, Throughput. In addition to the first letters making up the acronym, we ask the customer about some hard data such as: building size, bin sizes and weights, needed storage locations, and desired systems performance. We need up to 10 pieces of data to perform our task.
Preventing buyer’s remorse
We also ask about growth prospects. Customers who don’t account for volume growth end up buying the wrong automation technology. We are there to prevent buyer’s remorse. For example, when we help companies in the USA, which has different labor markets, we adjust the cost of a manual warehouse with local wages for warehousers and supervisory staff. Someone in Southern California will demand higher pay than a worker somewhere in the Midwest or in Texas. Same rule applies to building rents or warehouse buying pricing. We are offering a customer individual reports, so we can use our standard values or take the values from the customer, who knows better what the local prices are for labor or building rent.
Providing transparency
CFG: Which main processes forming the basis of a warehouse’s performance do you target with your approach?
OO: The warehouse automation is called ASRS in the industry, which means ‘automated storage and retrieval systems’. As the name suggests, we provide transparency in storing the goods and retrieving them for shipping. We cover the orders for goods in and goods out processes. If a customer has a warehouse with electronics or fashion products, we first need to receive the goods, store them, and wait until an order appears that needs to be picked. In a manual warehouse, the person walks over to the goods and picks from the shelf. In an automated warehouse, the system is called goods to person. The machine brings the goods for picking to the warehouser. The intralogistics industry uses different performance terms for this: order lines per hour or bins per hour. An order is not always comparable because each industry is different. For example, in a grocery shopping e-commerce setting, one order can contain 25 items (juice, cereal, eggs, etc.), which is very time consuming. An order for a fashion e-commerce retailer can have 10 items, such as socks, pants, or shirts. Another one can be an order for electronics with 2 items: one HDMI cable and one headphone set. Each customer has a special set of challenges, where we can help identify the bottlenecks.
CFG: Is missing or intransparent information the biggest obstacle to further optimizing intralogistics processes? Or is it human inertia? How can these hurdles be overcome to lift the performance of a freight terminal to a higher level?
OO: This is a very good question because today’s customers spend millions on sophisticated warehouse management software and yet are blind when it comes to complete and full data. I’ve never met a customer who had perfect data, so we always had to make assumptions that the customer then had to sign off on. I also met customers who had warehousers who needed 6 months before they were familiar with the facility. During that time, these workers were underperforming or making mistakes in the storage and retrieval processes.
Human labor is still not replaceable
As a rule of thumb, manual warehouses have low productivity because the worker spends a great deal of time travelling to pick the goods. Switching a manual warehouse to a so-called goods-to-person system (GTP), reduces the labor and increases warehouse performance because the machine transports the bins with the product. Let’s not forget: for each forklift driver we replace with a machine – either a shuttle or a robot – we gain additional productivity. We still need people for picking the goods from the bin, because the human hand is still not replaceable. Some piece-picking robots claim to be better than a human picker. However, most customers are not ready to be lab rats because such high-end robots cost up to 4 yearly salaries of a typical warehouse worker and have limited weight-lifting capabilities.
CFG: Under certain parameters, customers achieve payback within a year. What are the prerequisites for this and to what degree does the automation of logistics processes help to achieve this aim?
OO: In our Buyer’s Guide, we show a customer with 400 bins per hour as a base. In subsequent scenarios, we show automation solutions and their respective payback times when the volume doubles to 800 bins per hour and quadruples to 1600 bins per hour. In consequence, these three scenarios demonstrate that, at the slowest performance, automation pays itself back after 3 years. In the middle scenario this happens after 2 years, and in the high performance, it is within a year. This groundbreaking epiphany reveals how wrong most customers were about warehouse automation. The common locker room talk told us that automation is expensive and only interesting when a 3PL has a 10-year contract. Numbers don’t lie, so we open new avenues for all who want to stop window shopping.
Automation reduces errors
CFG: Is your Warehouse Automation Guide also a contribution to error prevention and, if practiced correctly, does it eliminate safety weak spots in air cargo ops?
OO: In our Buyer’s Guide, we are not automatically preventing errors. We are saying how much the system will cost, how much space it will require, and how long it takes to see a decent return on investment. Compared to manual warehouses, automated warehouses have less errors due to higher accuracy improvements. This is an area we would like to research with the air freight industry. Let me explain: when a picker makes a mistake by selecting the wrong item, this package will trigger a return to the warehouse. Shipping and handling costs are doubled, making a big impact on the company’s image. Items that are air lifted overseas have enormous freight costs. Implementing a smart warehouse automation system can help reduce human error. Maybe we can agree that your readers give us feedback on how much a single package sent costs them when it comes to reversing a mistake. We could use this data to improve the overall SALT method we’ve mentioned in one of the answers above.
Time plays against manual solutions
CFG: Where will customers have an operational and monetary advantage when organizing their warehouse processes according to your recommendations? Please illustrate.
OO: Each customer can have a before and after comparison, with or without warehouse automation, using our report. Each automation is lucrative in comparison to a manual warehouse. Some automation solutions need 1 year, some need 6 years. In the end, time plays against manual warehouse operations because they are labor intensive and prone to errors. A car parts distributor will need a different warehouse automation system with way more storage locations than a customer from the fashion industry. Why? Because car parts are stored longer than t-shirts, trousers, or jackets. In short, our report offers investment cost analysis, total cost of ownership analysis and a comparative systems analysis for customers from all industries where bin storage is needed. We provide insights for each CEO or VP to make a sound decision based on their individual business needs. We highly encourage readers to review the Guide slide by slide, and reach out to me over Linkedin: https://www.linkedin.com/in/olaf-oczkos-4b1a8382/
CFG: Olaf, thanks for your time and these explanations.
Link to the guide: https://logistiknachrichten.de/wp-content/uploads/2024/03/Master-EN-WarehouseAutomation-2024-OO.pdf
Testimonials:
Gernot Nestler, Owner GEARELLI GmbH, Austria
The ‘Warehouse Automation Buyer’s Guide’ with its SALT approach is not just a tool, but a turning point for intralogistics: It makes the first step towards automation clearer than ever before, but the real value lies in the hands of the experts, that turn this direction into reality.
It’s impressive how it transforms complex intralogistics operations into simple, manageable decisions, a step the industry has long desired. However, as promising as this method may be, we must not forget that it relies on the quality of the underlying data and is ultimately only a first guide. The irreplaceability of personal contacts and detailed analyzes remains, because behind every data point lie human needs and specific challenges. This tool guides us, but our critical thinking and expertise light the way.
