By Bob Trebilcock, Editor at Large -- 2/1/2006

With each new year, it's time to re-evaluate. And from where Dick Ward, executive vice president of professional development for the Material Handling Industry of America (704-676- 1190), sits, automated materials handling is in the middle of a resurgence.

"Industry in general has come out of a period of recession," says Ward. "Businesses have accumulated cash and are now looking at where they can invest that money to get better returns."

And for more and more companies, that investment is going into automation.

That sentiment is echoed by suppliers of automated materials handling systems. "I recently had the vice president of distribution for a major retailer say to me, 'We're finally spending money,'" says Susan Rider, senior vice president of sales and marketing for Intelligrated (513-701-7300). "What many companies are realizing is that by not doing anything, they're losing ground to their competitors."

Although the books have not yet closed on 2005, MHIA is predicting that overall materials handling bookings for last year were up by double digits. Better yet, the association expects that growth to continue in 2006.

Within those numbers, certain types of automation have been especially strong. For example, after four years of selling just 25 to 30 systems per year, 51 automated storage and retrieval systems (AS/RS) were sold in 2004. Last year was another strong year, according to suppliers. Likewise, 120 automatic guided vehicle systems (AGVs) were booked in 2004, up from 84 systems the prior year. Not only were there more systems sold, they were also larger: end users bought 605 new AGVs in 2004 compared to 360 vehicles in 2003. The trend continued in 2005.

"The number of systems was down through the first six months of last year," says Mark Longacre, marketing manager of the automated systems group for FMC Technologies (215- 822-4489). "But the number of vehicles sold was up, which means that some large systems were going in."

Productivity, productivity, productivity

Three words explain the renewed interest in automation, according to Ward: productivity, productivity, productivity. "There are so many ways by which materials handling technologies and processes serve that need," says Ward.

The need for productivity is enhanced by a tight labor market. "I just talked to a customer who said he knows that if he builds a conventional distribution center, he won't be able to staff it," says Richard Rodgers, director of solution design, HK Systems (800-457-9783). "The folks who are skilled and ready to work are already working."

However, other factors are weighing on the market in addition to productivity. One is the emphasis on supply chain visibility as manufacturers wrestle with more complex and extended supply chains. Web-based software solutions track inventory between nodes in the supply chain. Now, automated materials handling systems have the ability to collect and share information about the processes inside facilities.

"If you have coordination everywhere but in the warehouse or factory, you haven't achieved very much," says Ward.

Still other end users are turning to automation to cope with evolving business conditions or the demand for new processes.

Change is constant

The only constant in business today is change. The variability in the volumes of business and product mix is a key reason many companies are investing in automation now.

Industry leaders, for instance, see automation as a way to leap further ahead of the competition. "Companies are realizing that their supply chain can be a competitive advantage," says Ken Ruehrdanz, business development manager for Siemens Logistics & Assembly Systems (877- 725-7500). "Automation is one strategy that can help a company improve its service quality and provide faster order fulfillment times."

New customer requirements are behind the adoption of some technologies, like robotics for palletizing. "It used to be that traditional palletizing was the norm and robotics was where you turned when you were stuck," says Joe Campbell, director of strategic alliances for KUKA Robotics (866-873-5858). "Now robotics is a starting point."

For instance, big box retailers may require loads delivered to their stores with a specific pack or pallet pattern for an end-of-aisle display. Often, those also require building pallets with multiple stock keeping units (SKUs) or products on a single pallet. Rather than use manual labor, robots are being used to depalletize pallets received from a manufacturer and then rebuild them to the retailer's specifications.

Lower cost robotics and controls are also allowing users to introduce automation into operations where automated materials handling was previously too expensive. "We're able to automate slower-speed, lower-volume lines that don't run seven days a week," says Ken Thouvenot, vice president of project management and engineering for FKI Logistex (877-935-4564). "You can combine three or four manufacturing lines to one palletizing cell."

The cost and availability of labor is also important for the adoption of technologies like AGVs. "The number one factor driving the AGV industry is the cost of personnel," says Dwight Williams, vice president of business development for Egemin Automation (616-393-0101). "They're not necessarily replacing existing workers. They're doing some tasks that people used to do so a company can expand without adding staff."

The trend is not just limited to North America. "We're seeing a number of projects in Mexico," says Bill Hawthorne, vice president of marketing for Hytrol Conveyor Company (870-935-3700). "To compete with lower-cost providers in South America, India and China, they can no longer just simply add labor to expand their businesses and remain competitive."

Finally, the wave of company mergers and consolidations is also leading to more automation. "When companies merge, they may find they have two distribution centers within 30 miles of one another," says Gary Cash, vice president of product management and marketing for FKI Logistex. "They'll close one and then install automation in the other to handle the volume of two DCs without adding personnel."

That may explain why many vendors say many projects are being installed in existing facilities, not new facilities. "A good portion of our sortation systems are going into existing facilities," says John Sarinick, division manager for Beumer Corp. (732-560-8222). "The driving force is the need for more throughput. They've been doing things manually and just can't throw any more manual labor at the problem."

Enabling new processes

Along with new business conditions, new business processes are also pointing users to automation.

Take visibility. Automated systems can indeed enable visibility into the movement of goods across the supply chain. They can also provide much more granular visibility into manufacturing processes. Food, beverage and pharmaceutical manufacturers, for instance, are required to provide detailed information about the materials, processes and people involved in producing a product. Capturing that information by hand is labor intensive, error-prone and expensive. "Automated systems can capture an electronic recording of every product movement thereby creating an electronic chain of custody," says Ruehrdanz of Siemens.

Automation is also moving into new areas. Having optimized distribution centers, some retailers are now implementing systems that sequence containers to replenish the aisles in their stores, says Rob Schmit, vice president of automation and systems for Schaefer Systems International (704-944-4500). "If chewing gum goes on the left side of an aisle and hair products on the right side, the system can direct you to load and stack totes in the order they'll be put away on shelves," says Schmit. "If you can take a few hours out of that process and do it over 500 stores in your chain, that's a huge savings."

The key to enabling these new processes, and those in the future, are better control systems and software. "Controls and software are making it possible to do things we've been talking about for some time," says John King, vice president of sales and marketing for Daifuku America (801-359-9900). "IT capability continues to get better and better. That means more and more people are prepared to make a change in their business models. As long as we have good data, we can take almost any level of equipment, integrate it and give a great ROI."