Is automated materials handling ready to grow?

Are we seeing a resurgence of interest in automated materials handling systems, particularly in distribution?

That’s a question that has been on my mind, based on three points.

The first is rooted in some of the very highly-automated systems we’ve profiled in Modern over the last few months, including Office Depot and Del Monte. Both brought automated technologies more frequently associated with manufacturing, including robotics and automatic guided vehicles (AGVs), into the distribution center. When each of those stories ran, I received e-mails and telephone calls from other large end users who were interested in automating their facilities.

The second is a theory that many of the jobs that have been eliminated in the recent recession are not coming back, even if business comes back. My belief, for what it’s worth, is that companies have learned they can operate with smaller crews; instead of hiring as business picks up, they’d rather invest in automation that will allow them to grow their business without growing their workforce.

I don’t think that the second is necessarily related to the cost per hour of labor, which is usually the ROI associated with automation. Rather, I think a variety of factors from an aging workforce, high turnover rates in the distribution labor pool and complex order fulfillment strategies, has come together to make automation more attractive than in the past. That brings me to the third point: One of the presentations at HK Systems’ logistics conference this year was by Tim Hortons, Canada’s answer to Dunkin’ Donuts. Hortons had recently built a highly-automated distribution center in Guelph that was underperforming expectations. The reason wasn’t related to the automation already in place; the system worked fine. Rather it was an inability to recruit and retain enough workers for the manual picking processes in the facility. While Guelph was a perfect location based on Tim Hortons’ transportation strategy, it is a college town and home to several well-paying auto and auto-related manufacturing plants. College kids aren’t interested in working in a DC and the local blue collar workforce will take a higher-paying job in a manufacturing plant before going to work in a DC. As a result, Hortons explained that they are going to add more automation to the Guelph DC to compensate for the shortage of reliable employees.

It’s always a little dangerous to base conclusions on a few anecdotes like those above, but I’m having more conversations around the inability to recruit and retain employees in the DC than ever. Meanwhile, as I learned in my August story on robotics, the price of automation is increasingly in line with the cost of labor.

I’ll write more about some of the trends in automation industry experts identified during my interviews on Friday.