Automation boost for distribution logistics

Two large distribution companies in the automotive industry consolidated their distribution networks after a merger. The central challenge was to reunite three spare parts distribution centers in an existing fourth. A task with enormous dimensions, because the turnover of approx. 1.5 million outbound items per year will increase to around 7 million - an increase of approx. 300 percent in the outbound sector! Based on a bottleneck analysis on the functional level, ROI-EFESO developed a suitable solution concept within only eight weeks, including the layouts and an evaluation of the costs.

Distribution networks in the automotive industry have often grown historically and are partly characterized by outdated or obsolete business models and strategies. However, inefficient locations lead to increased costs and inadequately exploited distribution potential. If companies with their own distribution logistics merge, this represents an opportunity for realignment in the face of such inefficiencies. In the case study described, three spare parts warehouses were to be dissolved and integrated into a fourth, already existing spare parts warehouse. The task was to develop a coherent concept including the concrete spatial design and layout of the warehouse as well as the processes. This concept ultimately made it possible to consolidate a total of four spare parts distribution centers in one location.

At the beginning, the main question was whether the integration of four sites could be achieved at all, both technically and in terms of processes, without interrupting operations - and, if possible, in a "minimum investment solution". In addition, the level of automation had to be defined in order to gradually optimize operations beyond 2023. Two special circumstances made these tasks considerably more difficult: Firstly, the capacity of the fourth warehouse was exhausted, and secondly, the project had to be implemented during Covid-19, i.e. remotely and without being able to inspect the situation on site.

Of the five solutions proposed by the project team, variants 3 to 5 differed in their degree of automation. Whereas in variant 3 only the inbound and outbound areas, i.e. goods receipt and shipping, were to be automated, variant 4 already provides for partial automation of the warehouses. In variant 5, the warehouses are completely automated.

As the degree of automation increases, so does the corresponding investment volume, from just under 3.5 to up to 17 million euros. The ROI for all solutions is around two years. This is because increasing investment is accompanied by a corresponding reduction in the FTE (Full Time Equivalent; time value that a full-time employee provides) and the costs are thus balanced.

The company ultimately opted for variant 4 with a relatively high degree of automation. One of the reasons for this was that the consolidated warehouse was already limited to 250 FTEs in terms of space, but a lower level of automation would have involved disproportionately more manual processes. With variant 4, an FTE reduction of about 40% (-173 FTE) was ultimately achieved. The central elements of the ROI-EFESO solution are: 

Automated goods receipt process

The layout of the chosen variant provided for a completely automated goods receiving process. The delivered pallets are either directly stored by conveyor technology or repacked into containers on breakdown tables or distributed on half pallets, separated into smaller sales units and transported to the respective container warehouse. Fully automated conveyor vehicles connect the goods receiving area with the breakdown tables or the warehouses. Employees remain at their workstations and everything is delivered automatically. Disposal is also automated. Whereas employees used to have to take their packaging waste to disposal containers by hand, this is now done automatically overhead.

Automated warehouse

In this variant, the warehouses are already automated, i.e. the pallet warehouses (retrofit), which were previously operated manually, can in future be controlled via storage and retrieval machines. Transport systems will then operate in the existing shelf warehouses.

Fully automatic small parts warehouse

While employees today still walk through the warehouse and collect the desired parts, in the future they will work permanently at a picking workstation. Small storage and retrieval machines (shuttles) travel fully automatically through the rack storage area, fetching the appropriate bins from which the employees remove the parts. The shuttle returns the totes to the warehouse. This is also of great advantage for the ergonomics and the strain on the employees.

Improved outgoing goods

As end customers order more and more components directly via the company's web store, outgoing goods are becoming increasingly small-scale. This is why automatic packaging and labeling are taking on greater importance. An automatic packaging system cuts and folds the cartons individually so that no further packaging material is required. The cartons are automatically closed, labeled and transported directly to the shipping department.