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Körber Supply Chain Blog

01.10.2020

A close look at warehouse automation and cold storage

Valued at nearly $168 billion in 2018, the global cold chain is expected to grow at a rate of 15.1 percent over the next several years.

Due in part to the COVID-19 pandemic, cold storage is evolving along with the rise of e-commerce and online grocery delivery. Today, efficient operations in temperature controlled warehouses ensure that consumers receive their dairy, meat, fish, and other perishable goods on time and in top condition.

In order to ensure food safety and quality, as well as keep overhead costs as low as possible, many supply chain leaders are turning to automation solutions such as palletizers, automated storage and retrieval systems (ASRS), conveyors, automated picking solutions, and more. Though the benefits of warehouse automation are numerous, it’s essential to consider the right strategy and unique business requirements of cold storage operations before investing.

In this piece, we examine how automation can help address labor challenges in cold storage, as well as the logistical considerations that come into play when evaluating an automation solution. We offer guidelines on how to determine if automation is the right fit for your operation, and finally, how to set your business up for future success.

For our full whitepaper on the topic, take a look at our Master Class Series - How does automation drive cold storage efficiencies?. The full whitepaper is available for free in the downloads section.

Addressing Labor Challenges

It can be difficult to fill positions in an ambient warehouse, but the harsh environment of a freezing cold or refrigerated warehouse means it’s even more challenging to find and keep quality talent. Further, governmental regulations often place limits on how long employees can work before they need to take a break and warm up. This means productivity is lower in a cold environment than in an ambient warehouse — which often leads to hiring more workers to fill the gap.

While bulking up the workforce with hard-to-find labor is both inefficient and, in many cases, impractical, augmenting human employees with warehouse technology is an effective way to increase throughput. Automation and robotics in supply chain boost productivity by taking over tasks that warehouse associates generally don’t want to do, while creating new jobs in more desirable areas.

Automation often, depending on the type of technology, requires a larger upfront investment, but reducing labor costs allows for considerable savings over time. Businesses need to consider what planning horizon they can use as the investment has to show a positive ROI on that horizon and that defines the type of technology to use. Typical payback periods are between 3 to 5 years.

Warehouse Design — What’s Best for Automation?

What type of warehouse is ideally suited for automation? In order to save on space — key for cutting costs in areas like Europe, where real estate is limited — many warehouses are built with vertical height in mind. Building up instead of out is efficient for crowded urban areas, and also helps keep perishable products cool with less energy expenditure. In fact, up to 70 percent of heat gain in low temperature warehouses comes from the roof, so a smaller roof makes it easier to keep the building cold.[1] Fortunately, this vertical design is optimal for automation, as warehouses taller than 15 m (or 50 ft.) aren’t able to function properly with manual operations.

Typically, it’s best to implement new technology in a greenfield site, where systems can be built from the ground up. Yet retrofitting automation is possible for an existing warehouse whose infrastructure and productivity are lagging behind competitors. Retrofitting also makes sense if your warehouse is experiencing a rapid increase in volume or is undergoing an expansion.

When it comes to retrofitting, it’s critical to ensure that automation integrates well with existing systems and can be implemented without creating new challenges. Warehouse managers should consider key logistical questions such as how much downtime their operation can afford. With a detailed strategy in place, an experienced automation partner should be able to minimize disruptions to warehouse activity while technology is being updated.

Building an Automation Strategy

Generally speaking, investing in automation takes some years to achieve a ROI. The advantage here is in securing a long-term strategy for success. Businesses planning in three, 5, or 10-year windows will likely be able to see the benefits as labor costs and energy costs go down and accuracy and productivity go up. Plus, as palletizers, conveyors, and other automated systems last for years if not decades, maintenance costs are also likely to be low.

When considering automation solutions, it’s important for businesses to ask the following questions in order to effectively plan for the future:

  • Which type of material handling equipment (MHE) is the right fit?
  • Which approach makes the most sense for your operation: a semi-automated or fully-automated warehouse?
  • How will automation fit in with existing warehouse technology? What kind of integration is needed?
  • How will you support your automation systems? Do you need dedicated resources to manage the new technology?

Further, as the COVID-19 pandemic has shown, unexpected challenges can arise at any moment, impacting all levels of the global cold chain. In this case, the coronavirus has increased reliance on online shopping and e-commerce, a trend that is not likely to slow down in the coming years. However, businesses should be careful to prepare as much as possible for any disruptions in service — and that includes considering automation in case dependency on human labor needs to be reduced.

The Benefits of Automation

When implemented strategically, automation is an effective way to increase throughput, boost productivity, improve accuracy, and reduce costs in a temperature controlled warehouse. It is designed for speed and volume, meaning that MHE can move large amounts of inventory and process a large number of order picks in a short period of time. Automation can also help your business scale and effectively manage peaks in volume.

When it comes to traceability in cold storage, the more visibility into all operations the better. An automated warehouse provides a high level of transparency, meaning that it’s easier to comply with governmental regulations. Further, should anything go wrong during storage or transport, traceability allows you to identify flaws in the cold chain and rapidly recall any spoiled or damaged product. While transparency can be maintained in a manually-operated warehouse, errors and blind spots are more likely to occur.

Plus, as labor can account for up to 70 percent of expenditure for any operation, automation’s potential to substantially reduce labor costs can set a business up for years of savings.[2] Choosing an upfront investment in warehouse technology over hiring new workers in a competitive market allows supply chain managers to reduce the costs of recruitment, training, insurance, and other labor expenses. In this way, automation can help businesses solve labor challenges for years to come.

Choosing the Right Partner

The right automation partner is key to ensuring warehouse automation is designed to meet your business needs. Your vendor should have extensive experience and be willing to devote the time and resources to developing a personalized solution.

Find out more about how Körber can help optimize your cold storage operations by downloading our whitepaper.

 

 

[1]stellarfoodforthought.net/cold-storage-warehouse-automation-6-money-saving-benefits-beyond-labor-costs/

[2]www.paycor.com/resource-center/a-closer-look-at-labor-costs

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