It’s no time to take stock
October 14th 2008

With the credit crunch now a reality in the medium term for the global economy, Graham Watts, Secretary of the Automated Material Handling Systems Association (AMHSA), argues that many firms will look to automation – particularly its ability to reduce stockholding – to secure their future success.

In times of economic boom, companies don’t focus on their costs. They are simply too busy fulfilling orders and getting their products to market. When the bubble bursts, however, businesses are forced bring their costs into sharp focus. This means looking for opportunities to trim expenditure in procurement, manufacturing, warehousing and transportation. The global squeeze on the economy initiated by the subprime crisis means that firms are increasingly seeking to do more with less. And that’s where automation comes in.

One of the least recognised benefits of automation is its effect on stockholding. Few companies realise the true cost of holding inventory, which can be between 15%, for slow-moving products, and 45%, for fast-moving lines. Add into this mix the more obvious savings in labour costs, and the opportunities for dramatic cost reductions through automated logistics become startlingly clear.

Having money tied up in stock is a real handicap for any business. It is not just the cost of the capital, but also the loss of the opportunity to use this capital in other ways, such as investing in more production capacity. Capital costs are not the only problem, however. It might be obvious, but the more stock you have, the more handling is involved. For a non-automated site, this means additional labour, fuel and wear for the forklift fleet. Higher stockholding also means greater risk of product losses through chaotic storage. Firms may end up producing an order twice because the first consignment cannot be found at the time it is required. Then there’s stock damage; the more stock there is, the greater the risks of damage. Finally, there’s the problem of obsolete stock, the cost of which is usually much higher than most companies dare admit. Automating your handling Automated Materials Handling Systems Association operations, of course, means that the Warehouse Management System (WMS) will optimise the inventory at all times, minimising all these costs.

But it’s not just inventory costs that automation can reduce. Of course, automated handling significantly reduces labour costs. More efficient transport and handling lowers the cost per unit handled. Land costs can be slashed by high-bay warehouses that minimise footprint, and even by smaller car park requirements for fewer workers. Vehicle loading and route planning software can optimise use of transport space and minimise fuel costs. Energy costs can be reduced by intelligent use of light and heat only when required (automated storage and retrieval systems don’t need to see!). The ability of automation to streamline a business is vast.

There are now hundreds of automated handling systems operating successfully the length and breadth of the UK, some having clocked up 15 years or more of service. Among them are plenty of examples of blue-chip manufacturers, retailers and thirdparty distributors that have invested in a whole series of automated systems – clear evidence that technology has delivered the desired results for them.

In Europe, it’s not only cost-consciousness, I believe, that will boost the trend to automate. The growth of manufacturing in the former Easter Bloc countries of central and Eastern Europe is a significant factor that will drive automation there, in order to fulfil the burgeoning demand in that region for consumer goods.

Automatic for the people

AMHSA – which was formed back in 1986 – represents 29 of the leading companies that between them supply some 80 per cent of the automated handling equipment purchased in the UK. The mission statement of the organisation is “to provide a forum for members to discuss matters of mutual interest and promote, through the combined strength of the membership, ever-improving standards of quality and safety for the benefit of the users of automated material handling systems.” AMHSA therefore plays a significant role in the drafting of the CEN and ISO safety standards which directly affect the automated materials handling industry. The association maintains a close working relationship with the relevant government agencies such as the DTI and the HSE, maintaining effective lobbying channels at both national and international levels.

The membership consists of two groups: conveyor companies and system integrators. The current members of AMHSA are Bizerba (UK), Caljan Rite Hite, CI Logistics, Conveyor Units, CSI Industries BV, Daifuku Europe, Dematic, Dynamic Systems, European Conveyors, E&K Automation Indumat Systems, FKI Logistex, Jervis B Webb Company, Jungheinrich (UK), Keymas Control & Automation, Knapp UK, Midland Handling Equipment, Newland Engineering Company, Nuwave Systems, Pepperl + Fuchs Ltd, Savoye, SDI Group UK, Sovex, Stocklin, Swisslog (UK), TGW, Trackfit Engineering Services, Vanderlande Industries UK, Vitronic Dr-Ing Stein and Witron Engineering

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