Materials handling: Affordable innovation
With the economy in the tank and end users reluctant to spend, the materials handling and supply chain software industries are coming up with new ways to put innovation and automation within everyone's reach.
By Bob Trebilcock, Executive Editor -- Modern Materials Handling, 8/1/2009
All talk and no action!
That best sums up the market for materials handling and supply chain software solutions in 2009. The industry's customers — that's you, our readers — know they need to invest in innovation if they're going to continue to beat the competition and meet the expectations of customers. But given the only thing that most users know about the near future is that they don't know anything, few companies are willing to pull the trigger on a new system, solution or piece of equipment.
"We're getting more requests for quotations than last year," says Scot Aitcheson, director of fleet management for Yale Materials Handling Corp. (800-233-9253, northamerica.yale.com) "But even if we can prove the return on investment, there is a hesitancy to take on any level of risk."
It's not justlift truck customers who are holding tight to their purse strings. Talk to systems suppliers or the technology industry and the story is the same: Lots of talk, no action. The projects that do get approved are those that deliver a return on investment this year.
But let's not forget that innovation is one of the hallmarks of this industry. The best and the brightest are turning on their creative juices to put affordable innovation in reach of even the tightest fisted CFO. In the following pages, we look at how 15 companies representing automated systems, software and the lift truck industry are approaching the market with their customers' leaner wallets in mind.
Automated systems: Taking the cost out of automation
Time for a tune-up
"If you already have a system in place, you've probably invested a lot in that solution," says Ken Ruehrdanz, business development manager for Dematic (877-725-7500, www.dematic.us). "But when is the last time you had someone come in and tune up the system?" A Dematic team will perform an audit of your existing system, often at a very low cost, and then recommend affordable steps to get more productivity from the investment you've already made. Those recommendations may be as simple as modernizing the system with new controls and software; it may involve energy-saving measures that put the system in sleep mode when there's no activity; or the addition of variable frequency drives that allow you to speed up or slow down the system according to the level of activity. If the audit calls for a more expansive solution, Dematic can create a modular design to the system. That may involve installing one-aisle of an automated storage and retrieval system to begin automating a slow-moving pick area, with more aisles added later.
Automate the conventional warehouse
An automated storage and retrieval system (AS/RS) can deliver significant space and labor savings in a full pallet warehouse. But it also represents a major upfront investment. HK Systems (262-860-7000, www.hksystems.com) is offering a more affordable approach for the warehouse with 30-foot racking and lift trucks for putaway and picking. "Instead of putting in an AS/RS or man-up lift trucks, we have a line of automatic guided vehicles (AGVs) with 30-foot plus reach capacity," says senior vice president Mike Kotecki. "This allows you to introduce automation in a facility with conventional push back or selective rack retrieval." HK refers to this approach as "automate the conventional." The best candidate is the warehouse using three or more lift trucks across more than one shift a day. The savings comes from the reduction in labor if you don't need a lift truck operator on more than one shift. And, instead of purchasing AGVs that may cost $80,000 each, an end user can pay a monthly lease and maintenance fee. A typical lease term would be eight years, says Kotecki.
Get a tax credit
Everyone likes to save money on taxes, says Ed Romaine, marketing manager for Remstar (800-639-5805, www.remstar.com). That includes users of materials handling systems and equipment. The American Recovery and Reinvestment Act extends to purchases made in 2009 a 50% bonus depreciation allowance for new machine tools and other equipment ordered and placed in service during 2009, as well as an increased Section 179 expensing for small business equipment purchases. In the right circumstances, these credits can result in tax deduction worth up to $119,000 on a 2009 equipment purchase of $400,000. You may not need to be a rocket scientist to figure out whether these tax credits apply to your organization—and they won't apply to everyone—but you may need to be an accountant. Remstar will work with your CFO or tax advisers to provide the information they need to see if your purchase would qualify for these savings.
Retrofit, rebuild and save
Doing more with less while getting the most out of what you already have is an absolute necessity when budgets are tight and cash is scarce. Rather than replace a conveyor and sortation system or palletizer, a user may be able to extend the life of the system and increase throughput with a rebuild or retrofit of an existing system, says Dennis Gates, vice president of customer support for Intelligrated (513-701-7300, www.intelligrated.com). "Over the years, we've developed expertise in rebuilding sorters, combiners and high-end conveyor systems that we provide as well as systems implemented by other equipment providers," says Gates. Intelligrated's offerings can be as simple as a thorough audit to report on the current state of the system, with information on the components that are wearing out, to a partial or complete rebuild of the system. Retrofits and rebuilds can be done at night or over a weekend when a system is out of service so that it's up and running for the next shift.
Get smart
Anyone who attended ProMat last January couldn't help but notice the proliferation of automatic guided carts (AGCs). In the right application, these carts are an affordable alternative to AGVs and lift trucks, with paybacks as short as three months. What's the right application? One with multiple shifts, loads under 6,000 pounds, and simpler processes. A cart, for instance, isn't sophisticated enough to load or unload trailers. In the last year, Jervis B. Webb (248-553-1000, www.jervisbwebb.com) has introduced fast-charging battery technology that allows a user to purchase fewer carts since they don't have to be taken out of service for a battery change, and has increased the number of models to handle heavier loads and more processes.
Supply chain software: Automating across the supply chain
WMS for the rest of us
"The traditional software model is fundamentally broken," says Jim Burleigh, chief executive officer of SmartTurn (888-667-4758, www.smartturn.com). "There are so many costs associated with implementing, operating and maintaining the system." SmartTurn provides a warehouse management system (WMS) in a software-as-a-service model (SaaS). The company's solution is loaded on its own servers and is accessed over the Internet by users who pay a monthly subscription fee as low as $500 a month for basic inventory management, $800 a month for what SmartTurn defines as a full-blown WMS. The company, in turn, is responsible for maintenance and upgrades. SmartTurn isn't right for everyone. For instance, the company doesn't offer labor management, companies with sophisticated picking strategies will find it lacking, and it isn't designed to work with automated materials handling systems. "Our sweet spot is warehouses of less than 150,000 square feet, which is the majority of the facilities out there," says Burleigh. "For the most part, they don't need that functionality."
WMS as a 3PL
In warehousing, third party logistics providers, or 3PLs, make their money by turning the capital investment of creating and operating a transportation department or distribution center into a managed service provided by the 3PL. RedPrairie (877-733-7724, www.redprairie.com) is doing something similar for the WMS and transportation management system (TMS) user with the kind of sophisticated warehousing and transportation requirements that can't be handled by an entry-level WMS, says RedPrairie's Chris Hickey, executive vice president of sales. RedPrairie is taking several different approaches to this market. One is to take a component of the company's package, like labor management, that can be delivered as a standalone application. A second is for RedPrairie to implement and manage the system on a dedicated server at its hosting center, much like a 3PL managing order fulfillment services for a company. The customer gets the benefit and security of having its own system, while paying a subscription fee.
Slotting software as a service
Slotting software helps customers save money by relocating products in the DC to reduce the travel time for picking. Rather than purchase the software, SI Systems (800-523-9464, www.siingenuity.com) offers it as a service that users can access over the Internet. A customer provides SI Systems with a layout of its facility, the type of conventional and automated picking systems it uses, the location of products within that layout and the orders that are processed at any given period of time. With that information, the system creates a baseline, determining for instance how much travel it takes to fill those orders and replenish locations. Once the baseline is created, the system can create alternative plans for slotting and picking, and compare them to see if the savings associated with the new strategy is enough to off-set the cost associated with reslotting. "Typically, we can show a customer a payback of less than a year, including the cost of using the service," says chief operating officer William Casey.
Flexible supply chain collaboration
Supply chain collaboration platforms allow companies pursuing an outsourced manufacturing or distribution strategy to collaborate with all of its trading partners. While other collaboration providers offer their software over the Internet as a service, Amitive (650-212-1415, www.amitive.com) is taking it one step further, by offering a solution that automatically scales to a company's computing needs, says chief executive officer Amar Singh. "Traditionally, a company plans its hardware structure for peak capacity," says Singh. "But that means that most of your servers are idle 80% of the time." Instead, Amitive has developed a load-balancing technology that monitors the load on a customer's database servers. If the system senses that a customer is using a lot of computing resources and maxing out a server, it will add another one to pick up the slack. If the usage goes down, it will remove a server. "If you have a business that runs on 10 servers all day long, you won't see much of a savings," says Singh. "But if you have a business with seasonal demand and peaks, we think you'll see significant savings because you're only paying for capacity as you use it."
Get your programming software for (almost) free
Programmable logic controllers (PLCs) are the brains behind an automated materials handling system. These processors receive orders from a warehouse management or warehouse control system and make sure that the wheels, gears and motors on the equipment do what they're supposed to do, when they're supposed to do it. Rockwell Automation is taking steps to reduce the cost of the software used to program its MicroLogix line of micro- and mid-sized PLCs, says Rick Sykora, product marketing manager for component software for Rockwell Automation (414-382-2000, www.ra.rockwell.com). "We've designed the program to ease the cost of acquisition for these processors, which are used in applications like a conveyor system or a palletizer," Sykora says. "If you want to experiment with a processor and see what it's like, you can download the software for free. If you decide you need a larger PLC, we've created two packages at $129 and $500." A similar package used to list for $1,200, Sykora says.
Lift trucks: Affordable materials handling
Lowering the cost of ownership for pre-owned lift trucks
Crown (419-629-2311, www.crown.com) is working closely with dealers to help customers understand that Crown pre-owned lift trucks offer more than simply a new set of tires and paint job. Crown's Encore series assures each pre-owned lift truck undergoes an extensive rebuild process including original parts. A comprehensive warranty includes 90 days on all wearable items and 180 days on all major components. On average, 85% of the components on Crown lift trucks are engineered and manufactured by Crown. This enables the company to take a number of steps during the manufacturing process to ensure the trucks can provide the same level of performance in a second life. The Crown Encore series features exclusive use of Crown Integrity Parts, which have been designed selected, built and tested to meet specific performance goals. Crown says its Integrity Parts typically last two to three times longer than aftermarket alternatives.
Right-sizing your fleet
One of the first places to save money on lift trucks is to analyze your fleet to ensure that you have the right number of trucks in the first place. "The majority of customers I talk to with fleets of 100 or more trucks have about 15% more equipment than they need," says Scot Aitcheson, director of fleet management for Yale Materials Handling Corp. (800-233-9253, northamerica.yale.com). "As a fleet management service, we will spend time with those customers to analyze how they're using their equipment by model and location to make sure they have the right number of trucks at each location." The result: Instead of replacing 20 trucks, a customer may find that they only need to replace five and that they can reassign the other 15 from one location to another. That not only frees up money in the budget for other purposes, the customer also saves on labor, parts and maintenance that would have been spent on those trucks. "The larger the fleet, the more opportunity there is to save through right-sizing," says Aitcheson.
Optimizing lift truck maintenance
The greatest opportunity to save money on the total cost of operating a lift truck is after the sale. "When you drill down, you'll find that the purchase price is about 11% of the cost of a truck over five years," says Joe LaFergola, marketing manager of business and information solutions for the Raymond Corporation (607-656-2311, www.raymondcorp.com). "The other 89% is the labor, maintenance and energy costs associated with operating the truck." Raymond has developed its iWarehouse program (it stands for intelligent warehouse) to help customers reduce total operating costs. This is a wireless device that plugs into the central computer onboard a lift truck to collect key metrics about how many hours a truck is being used and how it's being used. One module can look at the repairs being made to a truck and at root causes to see if there are any systemic issues driving up maintenance costs. For instance, if one warehouse has higher costs compared to other warehouses, Raymond can drill down into the models and serial numbers driving up costs. It could mean a truck that needs to be replaced or overhauled, or it could mean the driver on that truck needs training. By capturing the actual number of hours the truck is in operation, a company can perform maintenance based on an interval of hours rather than a calendar date, which could result in significant savings over the year.
Smarter financing
Companies focused on conserving cash and credit lines can finance their Toyota lift trucks (800-226-0009, www.toyotaforklift.com) through the company's captive finance company, Toyota Financial Services (TFS). "By funding through TFS (800-541-2315, www.toyotafinancial.com), a company will have the ability to leverage its relationship with Toyota Material Handling and its dealer network to remarket their used lift truck equipment," says Richard Pipenhagen, national sales and marketing manager for TFS. "This option may have special financing linked to the equipment, providing the customer a more competitive pricing structure." For small businesses, TFS offers subvented rates with Toyota Material Handling, U.S.A. (TMHU), and a myriad rates, based on the customer's financing goals and the amount of the loan. In addition to leasing, Toyota's long-term rental business has grown. This is especially important for businesses that need a forklift to move their product and can carry the cost of a monthly rental, but can't get capital expenses approved right now for a purchase or lease.
Flexible fleet management
Maintenance agreements typically involve a fixed payment over the life of a contract, typically five years. But in a difficult economic climate, it's more difficult for companies to predict their lift truck usage. For that reason, Hyster (888-358-7827, www.hyster.com) is offering maintenance by the hour. "Instead of a fixed monthly payment, it's variable and based on the actual run time hours on a truck," says John Russian, manager of Hyster fleet marketing. "This allows our customers to align their maintenance costs with their revenue stream." In some scenarios, Russian says, a customer can save 7% to 15% over the cost of a fixed maintenance agreement. Who is the ideal candidate? "It's the customer that has peaks and valleys in their usage." To make its full fleet management services more attractive, Hyster is providing performance guarantees with its fleet management agreements. "With some customers, we're delaying and/or reducing the monthly admininstrative fees to remove the upfront burden and demonstrate program savings, and with others we're proposing a monthly administrative fee for a fleet management program, with a guarantee to reduce their spending by a certain percentage over the year," says Pat DeSutter, director of Hyster Fleet Services. "At the end of the year, if we haven't delivered the on savings commitment, we'll refund the administrative fees they paid us."
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