February 10, 2012

Broader look needed in DC automation decisions, study says

Research indicates companies should look beyond labor and consider impact on overall supply chain.

By James A. Cooke

When it comes to evaluating distribution center (DC) automation, companies should go beyond mere labor cost calculations and take into account the benefits of expanded supply chain capabilities.

That's the view of Dr. Raj Veeramani and Dr. Ananth Krishnamurthy, who recently conducted a study on the impact of DC automation. The two University of Wisconsin professors spoke at a recent supply chain conference in Orlando, Fla.

Although justification of automation projects generally revolves around labor cost reductions in the warehouse, that's just part of the picture, Veeramani said. To get a more accurate assessment, companies should broaden their focus to include automation's impact on their overall supply chain operations.

"It's a simplistic view to just look at labor costs," said Veeramani. "You need to take a comprehensive look at the costs versus the benefits."

For example, automation sometimes can lead to higher warehouse throughput with the additional benefit of enabling the facility to handle a wider variety of products. "DC automation will impact your upstream and downstream supply chain," said Veeramani. "DC automation should be viewed in the context of a supply chain strategy."

The two professors noted that DC automation has been around since the 1970s. However, recent technological advancements, coupled with demographic trends such as an aging workforce, could make it advisable for companies to take another look at the potential benefits of automation.

About the Author

James A. Cooke
James Cooke is a principal analyst with Nucleus Research in Boston, covering supply chain planning software. He was previously the editor of CSCMP’s Supply Chain Quarterly and a staff writer for DC Velocity.

More articles by James A. Cooke

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