As automation and robotic procedures continue to disrupt a number of industries, the manufacturing and wholesale sectors are actively investigating ways to keep up with the competition and improve the speed and quality of their products.
Many manufacturers and wholesale distributors are now implementing sophisticated Automated Material Handling (AMH) systems (AMHS). These systems are designed to help optimize supply chain management through the introduction of robotics and automation into a business’ production lifecycle.
For example, instead of having humans sort products and materials along the assembly line, a company can adopt AMHS to streamline the process, drastically improving the overall efficiency, quality and accuracy of the end-product. This leads to both cost savings for the manufacturer or wholesale and a higher level of satisfaction among its customers.
Many manufacturers and wholesalers are now embracing AMHS to bring their supply chains into the 21st century. According to a report from Research and Markets, the automated material handling equipment market in North America will grow at a CAGR of 8.24 percent from 2017 to 2021. This rate of growth should only accelerate as more companies are able to take full advantage of the benefits that automation offers.
However, implementing an AMHS is a major endeavor for companies of all sizes. While the initial investment for the technology can be substantial AMHS also represents a fundamental shift in the way these businesses operate, requiring a top-down change in how employees interact with machines.
Here are four steps businesses should take when deciding to add automated material handling systems:
No. 1 - Selecting a Vendor
Manufacturers and wholesalers should start by looking at vendors. Vendors can vary widely in their costs and offerings, so it’s important for businesses to do their research.
There are a number of questions that companies should ask as they evaluate a potential vendor, including:
- What comes with the technology? Does it include software updates, real-time consulting, on-site support, etc.?
- What are the real estate needs? Can the current building support AMHS, or is a new warehouse needed?
- What’s the overall cost, and how long will it take to recover the initial investment? (vendors can usually provide an estimate)
This last question may be the most important for a management team, especially one that is sensitive about making large capital expenditures. That’s why it’s always helpful to consult a banker to determine how to finance AMHS and what its impact will be on a company’s P&L.
No. 2 - Research
The management and logistics team, in partnership with the chosen vendor, should then review the company’s current supply chain processes and evaluate where change may be needed. This process requires a thorough analysis of every aspect of the supply chain, from sourcing the raw materials to inspection and delivery of the final product.
For instance, if certain parts of the supply chain have a tendency for cost overruns, workplace accidents and poor productivity, then that should be highlighted as potential test cases for AMHS. Likewise, if other parts of the business are already running smoothly, then automation may be more disruptive than helpful, at least in the short-term.
No. 3 - Interaction
A company's supply chain is about more than just numbers on a spreadsheet; it involves hundreds and sometimes thousands of employees often spread across the globe. Employees that are directly involved in the supply chain are responsible for ensuring that the chain is operating up to company standards. This experience gives them unique insight into the specific opportunities and challenges within the supply chain. It's important to engage with these employees, and particularly shift or floor managers, and get an idea of what parts of their daily jobs are most labor-intensive and could benefit the most from automation. This feedback will help ensure that AMHS is troubleshooting for existing problems instead of creating new ones.
No. 4 - Implementation
Implementing an AMHS can be a complex process for any manufacturer or wholesaler. While the exact approach will vary based on a company’s business goals, the wide scope and scale of the technology requires a proactive mindset that takes into account potential roadblocks in advance. For instance, many companies may be concerned that a wholesale change could be disruptive to the current business model and lead to widespread confusion among employees, customers and vendors.
That’s why companies should think about implementing AMHS in terms of building a roadmap with multiple stages. Instead of trying to apply automation to every facet of the supply chain, start with one or two specific functions that are either the easiest to automate or the most labor-intensive. If successful, then consider expanding AMHS to all or most of a single factory. If the technology again passes this test, then it may be time to roll it out throughout the entire company.
Even with the best technology, bugs are common and fixes can be cost- and time-intensive. By laying out a roadmap in advance, businesses will ensure that any potential conflicts or problems can be efficiently identified and handled, and not significantly delay the overall implementation process.
To support this critical transition in the evolution of their business, manufacturers and wholesalers should look to a financial partner with experience in the sector and an ability to guide them through each step of the implementation process.
Automation is the unquestioned future of the manufacturing and wholesale distribution industries, and it should be welcomed as a way to increase cost savings, boost productivity and improve the customer experience. It’s only a matter of time before AMHS becomes the norm, not just in these industries but in every labor-intensive industry. Companies hoping to gain a competitive advantage should act now to talk to a financial partner and determine how automation can revolutionize their business.
Tom Schied is Head of Asset Management for TD Equipment Finance.