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
Editor at Large
James Cooke has more than two decades' experience as a journalist covering logistics and transportation as well as supply chain strategy and technology. A former editor at Logistics Management magazine, he has earned numerous awards for his well-written, in-depth articles spotlighting developments in distribution. During his tenure at that publication, he served in such roles as news editor, international editor, feature writer, technology editor, and, finally, executive editor. He conceived and led the launch of the publication, Supply Chain Management Review. He is the author of the book Protean Supply Chains published by Wiley. He has presented at such conferences as CSCMP, MHIA, and WERC.

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