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Finding Your Preferred Logistics Concept

Automated logistics solutions look impressive

If you read the trade news, you will see the development of new, highly automated, technical logistics solutions going on all around us. Many innovative logistics equipment providers are continuously developing new technical solutions for warehouses. Site managers can become enamored with the new logistics solutions, especially the ones who are interested in innovative technical solutions.  They dream that the solutions shown will solve many of their daily operational problems.

In reality, however, new automated logistics solutions are not always bringing the expected logistics result and can also create limitations in the daily operations, even though there has been invested sometimes millions in the automated logistics solutions.

Flexibility in logistics design

Logistics managers who are responsible for highly automated logistics solutions are regularly stating that they are missing the flexibility of a more manual operation. When highly automated warehouses are being extended, the expansions are often much less automated or are even completely manual solutions. This is done to create more flexibility in the logistics process. The flexibility in the logistics design is mostly required because the number of SKUs is growing faster as expected, the dimensions of the products are changing, the order profile is shifting, or because the peak-to-average ratio is increasing.

Limitations in flexibility due to budget constraints

During the design of the logistics solution, the potential for design criteria to shift in the future is often discussed and assumptions are made. However, when taking the need for flexibility into account, the size and/or complexity of the automated logistics solution and the total budget for the implementation of the solution is increased. Due to the increased payback time and budgetary restrictions, the solution is downsized again as a result of this, and the resulting flexibility is taken back out. At this point, the total project team is excited by the automated logistics solution, doesn’t want to let it go, and agrees to reducing the need for flexibility. The team decides that the assortment must be rationalized, agreements must be made with marketing to increase the number of days for a promotion and thus smoothing the peaks etc. The supplier of the automated logistics solution and the team spend time looking for the right arguments to be able to continue with the project.


During the further detailed design and implementation, the team will be focused on getting the system up and running, under time pressure, and doing the implementation alongside their daily job. Small modifications are agreed to prevent delay in the implementation, however those “small” modifications might reduce the flexibility or peak capacity of the system further. The focus is fully on the implementation of the technical solution and other topics “will be solved after the implementation”. But then it might be too late.

Going live

After going live, running the daily logistics operation takes up all of the team’s attention again and the limitations of the new logistics solution start to become visible, especially when the assortment keeps on growing or when, for example, a small competitor is taken over or absorbed, which then needs to be incorporated into the warehouse. The operational limitations of the technical solution start to hurt.  At those moments, logistics management starts looking for more flexibility in the logistics solution, which is not always possible anymore. Over time, the limitations of the highly automated solutions start degrading the logistics processes more and more.

First the logistics concept.

Although the new automated logistics solutions look impressive and the picking rates of those solutions can be high, the design should be based on all the current and foreseen future logistics needs and requirements. The preferred method of storing, picking, packing and shipping of the products should be defined, taking the potential growth, and potential changes of the assortment and order profiles into account. An honest and thorough sensitivity and “What-If analyses” should be part of the design process. The risks of not being able to adjust the logistics processes in the future should be taken into account as well.

A proper design discussion is only really feasible when there are several alternatives available, ranging from a basic, (semi) manual process, up to fully automated solutions.  Combinations of highly automated and manual solutions can become an alternative, resulting in the cost benefits of the automated solution along with the flexibility of the manual solution. Only when there are multiple alternative solutions available can a true comparison be made between the alternatives; not only on productivity rates and storage capacity, but also on their ability to support potential logistics changes in the future.  Don’t limit yourself to having only one solution from one supplier.  Ensure that you have sufficient alternatives to find the alternative that scores best on a total solution comparison. How important is flexibility for the future logistics concept?
—Eric Hereijgers, St. Onge Company

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