Automation: An Effective Labor Strategy in Cold Chain Warehousing and Distribution - WHITE PAPER
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WHITE PAPER Automation: An Effective Labor Strategy in Cold Chain Warehousing and Distribution
Introduction: The Cold Chain Labor Challenge
It’s not news that labor is a top challenge for all warehousing and distribution operations.
Indeed, the most recent MHI Annual Industry Report1 — which surveys 1,000 supply chain
leaders every year — has again found that the top challenge among respondents remains
hiring and retaining qualified workers. Add the unique environmental challenges of a
temperature-controlled, cold or frozen storage facility, to associates’ general dislike of
working in the cold, and it can be even more difficult to find and keep employees in those
operations.
Also contributing to the workforce challenge: the unemployment rate has been steadily falling
since the end of the last recession. Prior to the emergence of the global COVID-19 pandemic,
U.S. unemployment had fallen to 3.6%. Labor was scarce, and the prognosis for finding
additional workers was grim due to a variety of reasons, including:
Network optimization strategies that positioned warehouses and distribution centers
in key geographic regions. While this supported more accessible and affordable
transportation and delivery to population centers, it also resulted in multiple facilities
located in close proximity to each other. This increased demand for a finite number of
available warehouse workers.
Baby Boomers continue to retire, with 75 million of them leaving the workplace and
taking their skillsets with them. Following behind them are 53 million Generation
X workers and 56 million Millennials who lack the skills and interest in working in
warehousing and distribution.
The image of warehousing and distribution jobs remains unappealing to younger
generations considering careers.
Post-pandemic, economists and analysts hold varying opinions about the length of time it will
take for both the economy and employment levels to stabilize and return to pre-pandemic
levels. While there was a significant jump in unemployment due to COVID-19, most of those
who lost jobs were employed in the travel, hospitality, tourism, and food service industries.
Those persons might take jobs in supply chain as a means to pay their bills short-term, but
many of them are likely to return to their (preferred) previous fields as the post-COVID world
adjusts to the “new normal.”
Likewise, more organizations have sought to safeguard against future supply chain
disruptions like those experienced in 2020 due to global shutdowns and overtaxed shipping
lanes. Their new approach is to re-shore some (or all) of their manufacturing and supply
sources. Bolstering this trend are ongoing trade and tariff disagreements between the U.S. and
countries seeking to stabilize their own economies, which further makes re-shoring that much
more appealing. However, this too will increase demand for labor in the U.S. over the next 24-
36 months.
1
https://www.mhi.org/publications/report
2
Additionally, the pandemic countermeasures many operations implemented to safeguard
the health and wellbeing of their employees — such as mandatory mask wearing, social
distancing, adjusted shifts, one-way aisle traffic, and limited face-to-face contact — are likely
to continue the new normal. That’s because, as every warehouse manager knows, those nearly
impossible to hire and retain employees are also the costliest, least reliable, least dependable,
least predictable, most unsafe (and yet, most valuable) asset in their facility. But protecting
workers by assigning fewer of them to the same areas to handle the same amount of work
yields a significant cost: decreased productivity.
To compensate, a manual operation can expand its facility footprint to ensure enough social
distancing space for the additional number of people it needs hire in order to maintain
productivity rates. Conversely, that same facility could automate some parts of the manual
handling process (including the temperature-controlled areas) and reallocate existing
employees to other areas in order to achieve pre-pandemic productivity levels. Or, as a third
option, an operation could elect to automate its entire process in a smaller facility footprint,
lowering overall operating costs and increasing productivity with significantly less reliance on
labor.
This white paper, therefore, explores both the partial and the comprehensive application
of automation as an effective labor strategy in cold storage applications. It also details the
benefits of doing so, including the ability for an operation to achieve higher standards of
productivity, dependability, sustainability, accuracy and safety.
Automation Prioritization: What Process(es) Should Be
Automated First?
While it’s certainly possible to automate every process within a distribution center, from
a budget perspective that approach is typically not feasible for the majority of operations.
Therefore, it’s important to first determine how much a company would benefit from an
investment in automation that increases its labor force’s productivity across a variety of
areas. Then, through a comparison of the anticipated gains, a company can prioritize which
automation projects will deliver the optimal returns.
In the case of a manual (or conventional) temperature-controlled facility, labor is directly
involved in no fewer than a dozen handling processes. These include:
Yard management Layer picking
Unloading Case picking
Receiving and inspection Palletizing
Put-away into storage Stretchwrapping
Retrieval Staging for dispatch
Replenishment of pick zones Loading
3
Automated solutions exist for each of these key process areas. To determine the optimal
area for an automation investment, however, look first at the areas in which an operation is
experiencing the most challenges. These tend to be the portions of the process that require
the most labor in terms of both associates and time.
Possible examples include bottlenecks in receiving or dispatch, as additional processes such
as pallet breakdown might be occurring in those locations. Personnel might frequently find
themselves in aisles crowded with other associates attempting to pick for order fulfillment
or replenish empty pick faces. Transporting product from one location to another in a large
facility can take a tremendous amount of time. All of these activities might benefit from an
investment in automation.
Conversely, an operation could be facing issues associated with a lack of ability to scale up
or flexibly adapt existing resources to meet peak
volumes; product waste caused by an inability Manual-Conventional Facility
to track or locate the oldest product in storage NEW FACILITY Fresh Frozen
for shipment ahead of newer lots (FE/FO, or first Receiving (unload & checkin)
expiration/first out); picking errors such as mis- Cases/Day 43,869 139,688
Pallets/Day - Average 627 1,996
picks of the wrong items or the wrong quantities; Pallets/Hr/FTE 30 30
or challenges meeting customer service level Average Hours/Day 20.9 66.5
agreements (SLAs). Automation can likewise address Receiving to Conventional Rack (Putaway)
all of these areas. Pallets/Day - Average 627 1,996
Pallets/Hr/FTE 18 18
Average Hours/Day 34.8 110.9
21%
Calculating and Comparing Labor Full Pallet Pick & Stage / Replen ASRS
Pallets/Day - Average 402 1,712
Costs by Process Pallets/Hr/FTE 20 20
Average Hours/Day 20.1 85.6
As noted in the previous section, the processes
Case Pick & Stage
65% 15%
within a cold storage operation that require the most Pallets/Day - Average 11,789 34,999
labor hours are often the ones in which automation Pallets/Hr/FTE 250 250
will deliver the greatest benefits. One way to Average Hours/Day 47.2 140.0
29%
Case Picking Replenishment
determine which processes are the most labor
Pallets/Day - Average 168 500
intensive is to compare the average amount of time Pallets/Hr/FTE 18 18
workers are required to spend in each area to handle Average Hours/Day 9.4 27.8
pallets or cases on a daily basis. Wrapping & Delivery to Dock Stage
Pallets/Day - Average 148 572
Pallets/Hr/FTE 20 20
In the example shown in Figure 1, during the average
Average Hours/Day 7.4 28.6
day this facility sees approximately 184,000 cases
Loading
and 2,600 pallets received in both fresh and frozen Pallets/Day - Average 550 2,284
categories. Of those, slightly fewer than 47,000 cases Pallets/Hr/FTE 32 32
are picked for outbound shipment, along with roughly Average Hours/Day 17.2 71.4
2,800 pallets. Figure 1 shows that, in this scenario, Figure 1: The amount of labor required in each area daily to handle
the three most labor-intensive processes are: pallets and cases in a temperature-controlled facility.
4Case picking at 29% of the average total labor hours per day,
Pallet putaway to storage at 21% of the average total labor hours per day, and
Pallet retrieval and replenishment at 15% of the average total labor hours per day.
Together, these three functions require 65% of warehouse labor’s time and effort. If, as shown
in Figure 2, this same facility’s total annual payroll hours are 275,057 at a cost of $9,494,857,
these manual processes equate to an annual direct labor cost of
nearly $6,172,000. STAFFING & LABOR COSTS
Customer: Frozen Food Corp
Those three areas, therefore, are the ones that should be
Project: New Facility
targeted for the implementation of automation as an effective Date: 2-Jun-20
labor strategy in a cold chain facility. By: viastore
Labor Information
Incidentally, by implementing automation within these areas to Labor Rate (Fully burden) $25.00 Per Hour
Overtime factor 10%
increase the productivity of existing labor resources, the costs of Overall Labor Rate (Fully burden) $27.50 Per Hour
indirect labor required to support the facility’s overall operations Payroll Utilization (%) 90%
will decrease. These areas include: Manual - Conventional Facility
LABOR (New Facility
Fresh Frozen
Security and safety equipment and personnel for the Total Hours/Day 156.88 530.76
operation Productive Hours/Year 56,479 191,072
Human resources staff and training time Payroll Hours/Year (% utilization) 62,754 212,303
Maintenance services for the building, refrigeration Total Payroll Hours 275,057
equipment, and material handling equipment Percent Labor Reduction n/a
Housekeeping and cleaning services Annual Labor Costs ($) $1,725,734 5,838,324
Information technology (IT) support staff Annual Maintenance Labor Costs ($) 1,160,640
Client and customer service and support Annual Supervision Costs ($) $175,711 594,448
Facility, operations, and shift management Annual Payroll Costs (- $) 9,494,857
Annual Payroll Savings ($) & (%) n/a
Figure 2: Staffing and Labor Costs for a Temperature-Controlled
Evaluating the Automation Option Manual Warehouse Scenario
Once the most optimal process areas for an automation
implementation have been identified, it is then time to compare the different automated
solution options.
Whether the solution is to add conveyor to transport cases or pallets into and out of the
refrigerated or frozen area, or automated storage and retrieval systems (ASRS) that
automatically handles pallets or cases and stores them multiple levels high to minimize
a facility’s footprint while boosting storage density, these systems can be deployed either
partially or completely.
As shown in Figure 3, the existing manual facility scenario explored above currently requires
550,000 square feet. By automating some or all of the process with an ASRS, the overall
degree of labor and payroll savings increase by 51.8% or 61.6% respectively.
5Manual-Conventional Facility 60% ASRS and 40% Conventional Fully Automated ASRS Solution
LABOR (New Facility)
Fresh Frozen Fresh Frozen Fresh Frozen
Total Hours/Day 156.88 530.76 105.22 159.54 52.56 133.03
Productive Hours/Year 56,479 191,072 37,878 57,433 18,921 47,889
Payroll Hours/Year (% utilization) 62,754 212,303 42,087 63,814 21,023 53,210
Total Payroll Hours 275,057 105,901 74,234
Percent Labor Reduction n/a 61% 73%
Annual Labor Costs ($) $1,725,734 $5,838,324 $1,157,387 $1,754,886 $578,144 $1,463,285
Annual Maintenance Labor Costs ($) $1,160,640 $1,364,480 $1,397,760
Annual Supervision Costs ($) $175,711 $594,448 $117,843 $178,679 $58,866 $148,989
Annual Payroll Costs (- $) $9,494,857 $4,573,275 $3,674,043
Annual Payroll Savings ($) & (%) n/a 51.8% $4,921,582 61.6% $5,847,814
550,000 sq ft 271,000 sq ft 201,000 sq ft
Figure 3: Labor Opportunities with Different Degrees of Automation
Automation as a Cold Storage Labor Strategy: The Benefits
Those who elect to implement automation as a labor strategy for their temperature-controlled
warehouses and distribution centers will realize numerous benefits in a variety of areas,
particularly cost, labor safety and retention, and customer satisfaction.
It can also make a facility more efficient and sustainable. Cost benefits will be found through:
Lower operating costs that translate to a faster return on investment (ROI)
Increased productivity and efficiency
Reduced environmental footprint and lower energy consumption and costs
Optimal utilization of floor space
Reduced need for temporary labor to manage peak volumes
Easy integration of new resources to standard processes, such as systems and devices
that enhance personnel tracking and verification of adequate social distancing
Less reliance on labor, which is increasingly hard to find and retain
Additional ROI based upon rising labor costs and low availability of labor
While many workers fear their jobs will be lost to automation, the reality is that automated
solutions enable operations to increase productivity without increasing their headcount. Because
automation supports workers in their tasks by taking over the monotonous, non-productive,
6repetitive tasks that associates find boring or tiring. In a temperature-controlled operation,
adding automation can minimize the amount of time personnel need to spend in cold or frozen
environments — as well as the frequent breaks they must take to warm up — freeing them to
perform more productive tasks elsewhere.
With automation in temperature-controlled areas, worker safety is also greatly enhanced as
fewer employees are required to work in the cold. In an era of social distancing, the automation
allows fewer employees to be assigned to the same area and ensures adequate space around
each worker. This reduces their risk of exposure to COVID-19 and other airborne pathogens.
Once they’ve become familiar with the automated equipment, many workers find their new
assignments to be less physically taxing and more ergonomic than before. Processes become
more standardized with automated systems in place, making training easier and faster as
well as increasing overall consistency and accuracy in tasks. Additionally, with automation in
place, a company can offer more competitive wages, making it easier to recruit and retain the
employees they need.
Finally, with automation, management’s focus can be redirected from guiding and overseeing
people to ensuring overall systems and processes are running as they should. This ensures
greater consistency, higher productivity, increased accuracy, faster throughput and reduced
lead times — all of which support a higher degree of customer service and satisfaction.
Ready to increase the productivity, dependability, sustainability, accuracy and safety to your cold storage
application by leveraging automation as a labor strategy?
Every single day, viastore supplied solutions support the shipment of Millions of Pounds of frozen food. From
direct support of food producers, to food wholesalers, to public refrigerated warehouses, we leverage our deep
expertise to help customers save energy, increase productivity, reduce cycle times, improve workforce safety
and satisfaction, all while reducing the footprint needed to fulfill orders. Whether optimizing or modernizing an
existing process, or designing a greenfield location, viastore is an invaluable partner. We are experts in frozen
foods warehousing and provide solutions that exceed expectations - guaranteed!
For more information about how we can help you implement automation as an effective labor strategy for your
cold storage warehousing or distribution operation, visit us at https://www.viastore.com/systems/en-us or
contact us at info.us@viastore.com or 616-977-3950.
About viastore
With over 50 years of experience in intralogistics, viastore SYSTEMS helps its customers increase
systems efficiency and performance while simplifying complex tasks. The company designs,
manufacturers, integrates and installs intelligent solutions for managing, controlling and optimizing
the entire logistics process. It specializes in automated intralogistics systems, warehouse management
systems (WMS), material flow and process controls, shuttle systems, and automated storage and
retrieval systems. Whether new systems, or modernization and retrofits of aging systems, they have one
goal – to guarantee success for their customers.
7viastore SYSTEMS, Inc.
4890 Kendrick St. SE
Grand Rapids, MI 49512
616-977-3950
info.us@viastore.com
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