Tight margins and short-term contracts can make investment in hi-tech warehousing solutions problematic for 3PL providers, which means the search is always on for low-tech alternatives, says Claire Umney, managing director of Alwayse Engineering.
The 3PL industry remains at a crossroads. There is, at the same time, both an extraordinary opportunity with the growth of online shopping and serious challenges in investment that the industry must overcome if it is to continue to be both profitable and provide the levels of customer service demanded by its customers.
The industry is already operating with tight margins with customers always looking for further cost savings as they seek to maintain their own profits.
As has been said many times before, the key to increased margins and profitability in 3PL lies in optimising processes, managing costs effectively, and providing high-quality service to customers.
However, there are significant barriers in the way of investment.
Contracts with their customers are short, 3-5 years typically, which often deters investment in the growing assortment of hi-tech solutions that are being increasingly brought to market. Automation, such as robots, Ai and digital warehousing can certainly provide a solution, but the payback is often multi-year and often outside the normal investment criteria for many 3PLs.
Ideally, 3PLs are looking for a 12-month return on investment (ROI) at the outside, with ideally circa six-months for a project to get the green light.
The second major barrier is seasonality and coping with peak periods. All-too-often, 3PLs are forced to make a choice, do they invest to cope with peak, but then potentially have that equipment sat idle or do they accept that it will be utilised sub-optimally for the majority of the year? Both have significant implications for ROI.
The third barrier is IT. When I speak to 3PLs one of the major issues standing in the way of productivity improvements is their over-loaded IT department, due to the number of projects already in the pipeline.
An IT project will typically take 12 to 24 months to complete, due to design, development, testing, deployment and commissioning work that needs to be undertaken – this has a big impact on time to realising value.
3PLs have always been masters in seeking out the alternatives and continue to look for low-cost, low-tech options that meet the strict ROI criteria and their own IT departments – with the ultimate objective of driving cost out of their business and improving profit margins.
One of the key areas of focus is making more efficient use of people and the spotlight has inevitably fallen on a few labour-intensive processes, one example being the post pack sort which for many is still partially automated by way of conveyors but still requires labour for sorting and palletising.
Once a box has been packed and labelled, the packers typically place it onto a takeaway conveyor. As the boxes move down the conveyor, multiple people are required to identify boxes for different couriers and sort to pallets.
The question many 3PLs are asking themselves is: how can we reduce the number of people without huge investments in automation?
The work Alwayse Engineering has recently undertaken fora major 3PL provider has identified that one of the key productivity blockages is the unidirectional nature of the conveyor. Without scanners and diverts, the packages need to be physically picked up off the conveyor and placed in their final sort destination. This is slow and inefficient, often leading to more people performing the function than necessary.
What if, we asked ourselves, we could have the efficiency of an automated divert without the investment? A system in which one individual could sort packages down specific courier-designated conveyor lines? The answer, we believe, lies with an omnidirectional ball transfer table that allows an individual to quickly push a box down a specific gravity conveyor line.
Once the boxes are queued, a second operator, who is manning multiple conveyor lines, quickly loads the pallet – that is itself placed on a ball transfer deck – until full. There is no need for this second operator to look at the label or be concerned about its final destination. They just pick it up and put it on the pallet and, once full, gently push it away without the need for a forklift.
The health and safety advantages are clear with no forklifts working in close proximity to people, but we believe the real advantage lies in the productivity improvements.
In our studies with a four-person sort, we were able to reduce down by 50% during non-peak periods and 25% during peak period giving an ROI of around 4-6 months.
Of course, every warehousing, conveyor system and sorting configuration is different, which is why design capability and the quality of the ball-bearings in the ball transfer unit is important. But we believe that this sort of low-cost, low-tech solution proves that innovation does not have to be costly and that not just 3PLs but any warehouse operator can drive productivity and profitability in their sorting operations.
For further information, please visit: www.alwayse.co.uk.
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