Executive Briefings

The Next Tidal Wave of Distribution Automation Innovation

Analyst Insight: There has been an explosive and exciting level of growth and innovation in the development of new automation solutions for distribution operations, particularly in the areas of full-case and less-than-case automation. It is inevitable that companies in North America and other developing nations will increasingly adopt these solutions as labor markets contract due to the aging population in the decades ahead. - Marc Wulfraat, president, MWPVL International Inc.

All developed countries are facing  a serious common demographic issue. Over the next 30 years, the number of elderly people will more than double, yet the number of people left behind to pay their government-guaranteed pension and health care benefits will rise by only 10 percent.  Economists predict major tax hikes will be required to finance this demographic shift and this ultimately will result in higher rates of labor cost inflation to protect real wage rates.  High-cost labor in distribution centers is already a stark reality in Western Europe, particularly in socialist countries, where fully loaded blue collar wage rates often exceed $35 per hour.  This is the reason that Europe is home to so many automated material handling equipment companies.

Manufacturing firms have traditionally been the target market for automation vendors, particularly in Fast Moving Consumer Goods (FMCG) industries such as food and beverage.  To accelerate throughput capacity at large-scale production plants, an incredible assortment of solutions has been developed. Today, pallets can be moved in pairs automatically from the point of production to the point of truck loading.  Material handling solutions include automated storage and retrieval systems, pallet shuttle systems, overhead and inverted monorail systems, horizontal and vertical laser-guided vehicles, and automated truck loading systems.  It is now realistically feasible to produce hundreds of pallets per hour of merchandise within a completely automated distribution environment.

The next era of automation belongs to distribution environments that handle full-case and split-case merchandise.  Take for example the North American grocery industry where companies like Kroger, Supervalu, Sobey's, Target, and C&S Wholesale have all committed significant capital investments to deploy automation technologies to minimize labor needs for all distribution operations except receiving and loading.  These companies are reducing direct labor head count by as much as 70 percent and at the same time improving service levels to the stores.

There is also a new array of solutions emerging to semi-automate split-case order picking through the use of goods to man robotic and shuttle technologies.   There are robotic solutions specifically designed to optimize the space and labor requirements to distribute tens of thousands of slow moving products.  There are fast-paced shuttle systems designed to maximize throughput capacity, order accuracy and labor efficiency for fast moving split-case products. These solutions are already in high demand by companies in industries such as internet order fulfillment, apparel, health care, pharmaceuticals, consumer goods, electronics, office supplies, etc.  Looking ahead, any distribution environment that is labor intensive, has high labor costs, and handles a large variety of split-case merchandise should be paying very close attention to the developments currently taking place within the automation industry.

                                   The Outlook

Retailers and distributors operate some of the most labor-intensive distribution facilities in the world. The adoption of semi-automated material handling solutions is inevitable given the forthcoming change in population demographics. This tidal wave of innovation is already upon us and it is exciting and unprecedented. It also makes perfect sense since automation technology can uniquely enable significant game-changing competitive advantage.


Keywords: warehouse management, warehouse management systems, WMS, logistics services, logistics & supply chain, inventory control, inventory management, logistics management

All developed countries are facing  a serious common demographic issue. Over the next 30 years, the number of elderly people will more than double, yet the number of people left behind to pay their government-guaranteed pension and health care benefits will rise by only 10 percent.  Economists predict major tax hikes will be required to finance this demographic shift and this ultimately will result in higher rates of labor cost inflation to protect real wage rates.  High-cost labor in distribution centers is already a stark reality in Western Europe, particularly in socialist countries, where fully loaded blue collar wage rates often exceed $35 per hour.  This is the reason that Europe is home to so many automated material handling equipment companies.

Manufacturing firms have traditionally been the target market for automation vendors, particularly in Fast Moving Consumer Goods (FMCG) industries such as food and beverage.  To accelerate throughput capacity at large-scale production plants, an incredible assortment of solutions has been developed. Today, pallets can be moved in pairs automatically from the point of production to the point of truck loading.  Material handling solutions include automated storage and retrieval systems, pallet shuttle systems, overhead and inverted monorail systems, horizontal and vertical laser-guided vehicles, and automated truck loading systems.  It is now realistically feasible to produce hundreds of pallets per hour of merchandise within a completely automated distribution environment.

The next era of automation belongs to distribution environments that handle full-case and split-case merchandise.  Take for example the North American grocery industry where companies like Kroger, Supervalu, Sobey's, Target, and C&S Wholesale have all committed significant capital investments to deploy automation technologies to minimize labor needs for all distribution operations except receiving and loading.  These companies are reducing direct labor head count by as much as 70 percent and at the same time improving service levels to the stores.

There is also a new array of solutions emerging to semi-automate split-case order picking through the use of goods to man robotic and shuttle technologies.   There are robotic solutions specifically designed to optimize the space and labor requirements to distribute tens of thousands of slow moving products.  There are fast-paced shuttle systems designed to maximize throughput capacity, order accuracy and labor efficiency for fast moving split-case products. These solutions are already in high demand by companies in industries such as internet order fulfillment, apparel, health care, pharmaceuticals, consumer goods, electronics, office supplies, etc.  Looking ahead, any distribution environment that is labor intensive, has high labor costs, and handles a large variety of split-case merchandise should be paying very close attention to the developments currently taking place within the automation industry.

                                   The Outlook

Retailers and distributors operate some of the most labor-intensive distribution facilities in the world. The adoption of semi-automated material handling solutions is inevitable given the forthcoming change in population demographics. This tidal wave of innovation is already upon us and it is exciting and unprecedented. It also makes perfect sense since automation technology can uniquely enable significant game-changing competitive advantage.


Keywords: warehouse management, warehouse management systems, WMS, logistics services, logistics & supply chain, inventory control, inventory management, logistics management