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  • Roy Strauss

Supply Chain Profitability – Automation, Why and When

The decision to automate manufacturing and/or distribution operations will have a major impact on the company’s bottom line and competitive position for many years to come. Automating an operation should provide the speed to achieve manufacturing and/or distribution rates not attainable by any other methods. Automating an operation therefore should be done when verifiable growth projections show that the speed required to provide for present and future requirements will not be achieved otherwise and could lead to failed customer service. Not automating when it should have been done can result in not being able to provide customers the product they need on time. Automating when it should not have been done can result in tying up valuable financial resources that could have been spent better for example to improve company sales, marketing, advertising, IT support, office operations, etc. So how does one decide what to do?

1. Assess current capabilities

1.1. Define each process and steps key production rates so you will know the capabilities of present systems

1.2. Determine the current maximum continuous production rate so you will know the capabilities of present systems

1.3. For manufacturing

1.3.1. For each system or subsystem what path must be followed through which workstations and equipment to go from raw materials to finished product

1.3.2. What is the production rate at each workstation type (are they the same for multiple workstations doing the same thing?)

1.3.3. The function with the slowest speed will define the critical path or the most that can be produced per/hour for the whole production line

1.4. For distribution operations one must do the same for each step in the process from release of customer orders to shipping them

1.4.1. Determine maximum achievable rates for order picking, checking, packing, transportation to dock, and staging and loading

1.4.2. What is the production rate at each pick zone throughout (e.g.: if cases are picked in different pallet rack zones are they all producing at the same rate?)

1.4.3. One may have different rates for picking in pallet, case, or unit picking zones and different order movement rates based on the location of the work zone in relation to the dock

1.4.4. The work function with the slowest speed - picking, packing, etc. will define the critical path or the most volume that can be shipped per/hour for each of the order types (case, only, case & unit, etc.)

1.5. Determine future required production rates based on projected growth so you will know the future requirements of each of the present systems

2. Assess future volume requirements based on growth plans and over what period of time e.g.:

2.1. Your present production volume is 1,000 units per day for a given production line (one must calculate for all production lines)

2.2. Your present shipping volume is 1,000 orders per day (one must calculate volume for each order type (pallet, case, unit, etc.)

2.3. So if your growth plan is 10% per year (growth rate may be different for different products or order types shipped) you will need to achieve 1,100 year one, 1,210 year two, 1,330 year three, 1,460 year 4, and 1,610 year five (note also growth may not be linear, this is an example)

2.4. Now if you look at your critical paths (maximum capabilities for the given function) you will be able to determine at what point in time or growth percentage rate you will fail to meet customer requirements in the future using current systems

3. It may still not be the time to automate, one can:

3.1. Determine which part of the operation only is slowing the whole operation, e.g. the shrink wrap machine slows production or the case picking with lift trucks slows picking and add a second shrink wrap machine or add another fork lift therefore improving maximum times to delay or eliminate not meeting customer requirements

3.2. One can perform efficiency studies and change processes and/or systems to improve productivity, some examples:

3.2.1. Get a new piece of production equipment to improve the speed of the slowest part of the production operation

3.2.2. Modify the layout to reduce travel times

3.2.3. Check how each job is being done and retrain all workers based on “best practice”

3.2.4. Install new software with tools to better monitor and or manage operations and communication

3.3. The key is to calculate how to improve the speed of the critical path and determine how that can delay or eliminate the need for expensive changes associated with automation

4. Finally if all else fails and one must spend the money to automate:

4.1. See if the automation can be installed modularly with additional pieces added later to achieve desired results and delaying some of the costs

4.2. Lease vs. buy the new equipment

4.3. Be sure to have the installation completed and operational ahead of time before you fail to meet customer requirements to grow seamlessly

4.4. Beta test all new systems with duplicate data before going live


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