MHI Presentation October 5, 2015€¦ · MWPVL International Supply Chain | Experience Trends in...

MWPVL International

Supply Chain | Experience

Trends in Distribution

Center Automation

Marc Wulfraat

(514) 482-3572 x 100

[email protected]

October 5, 2015

All Rights Reserved.MWPVL International Inc., 2015

www.mwpvl.com

Page 2MWPVL

International®


Abstract

Changing demographics are no longer a future problem for the next generation to worry about. North American companies are already having a tough time attracting and retaining people to work in their logistics and distribution operations. Shortages in logistics/trucking labor have become a real issue but now the labor shortage issue is starting to impact distribution operations. The growth in e-commerce is adding fuel to the fire. North Americans are starting to understand what the Europeans have been living with for the past several decades.

This presentation talks to why there will be major growth in the North American automated material handling industry and what technologies will be in demand going forward.


www.mwpvl.com

Page 3MWPVL

International®


Background Information on MWPVL International

Global Demographics and Supply Chain Trends

Agenda

Why Automation is Poised to Take Off

Automation Systems – Pallet, Case, Each


www.mwpvl.com

Page 4MWPVL

International®


About MWPVL International

We are consultants in Supply Chain and Logistics

Founded in 2006

Privately-held Partnership

HQ Montreal, Canada; Sister company in Paramus, NJ

200+ projects completed

Consulting Services:

₋ Supply Chain / Logistics Strategy and Flow Path Strategy

₋ Distribution Center Design & Engineering

₋ Supply Chain Technology and Automation

₋ Operational Assessments

₋ Insourcing & Outsourcing

₋ Purchasing


www.mwpvl.com

Page 5MWPVL

International®


MWPVL.com Knowledge Center

MWPVL.com is now the leading web site in the supply chain consulting industry

Knowledge center - hard hitting content with substance

70+ White Papers & Articles₋ Distribution network strategies of

leading companies

₋ Automation technologies under the microscope

₋ Leaders - Who is doing what?

WMS/TMS/YMS Industry Directories

Free - No registration required


www.mwpvl.com

Page 6MWPVL

International®


Qualifying Statements

MWPVL is strictly unbiased in its views and opinions towards the companies discussed in this presentation

Any errors or omissions are unintended and we have made every effort to report accurate information

We have not received payment of any kind to prepare and present these materials


www.mwpvl.com

Page 7MWPVL

International®


Background Information on MWPVL International

Global Demographics and Supply Chain Trends

Agenda

Why Automation is Poised to Take Off

Automation Systems – Pallet, Case, Each


www.mwpvl.com

Page 8MWPVL

International®


Age Dependency Ratio (ADR)

Age Dependency Ratio (ADR)

Proportion of Dependents (<15 yrs or >64 yrs) per 100 Working Age People (15 – 64 yrs)

A small ADR is good because this means that there are less dependent people to be supported by the working population

Conversely a large ADR is bad for the opposite reason

ADR =


www.mwpvl.com

Page 9MWPVL

International®


Age Dependency Ratio (% of Dependent Population) Forecast by Country (Source: World Bank)

Country 2010 2015 2020 2025 2030 2035 2040 2045 2050 Trend

AUSTRALIA 48.0 51.3 55.2 58.6 60.8 61.4 62.7 63.4 66.1 ↑

BRAZIL 48.0 44.9 42.9 43.7 45.4 46.9 48.7 51.8 56.3 ↑

CANADA 43.9 47.3 52.7 58.5 63.2 64.0 63.3 63.4 65.1 ↑

CHINA (excluding

TAIWAN)

38.2 37.4 40.1 41.8 44.5 50.9 57.3 59.1 61.8 ↑

DENMARK 52.6 56.1 58.0 60.2 63.8 67.5 69.2 68.8 67.1 ↑

FRANCE 54.2 58.1 61.6 64.2 66.6 68.5 70.2 70.2 70.6 ↑

GERMANY 51.2 52.2 55.6 61.4 70.2 77.7 78.0 77.7 78.3 ↑

INDIA 55.1 51.8 50.1 48.4 47.1 46.2 45.9 46.4 47.4 ↓

JAPAN 56.4 63.1 67.1 68.4 69.7 73.3 81.2 86.5 89.3 ↑

MEXICO 54.9 51.6 49.3 48.0 48.0 48.9 51.0 52.6 53.9 ↓

RUSSIAN FEDERATION38.6 42.5 47.7 51.6 53.2 51.9 53.8 58.2 65.5 ↑

SPAIN 46.9 50.2 52.0 53.5 56.6 61.9 69.5 78.1 82.1 ↑

UNITED KINGDOM51.4 54.7 57.2 59.1 62.0 64.7 65.8 66.1 67.9 ↑

UNITED STATES 49.6 52.5 56.0 59.8 62.8 63.2 62.9 62.5 63.8 ↑

This data shows the proportion of dependents per 100 working-age population by country.


www.mwpvl.com

Page 10MWPVL

International®


Ageing Populations > 65 Years for 10 Industrialized Countries

Country

Population 65+

(Millions)

Total

Population

(Millions)

% of

Population

Population 65+

(Millions

Total

Population

(Millions)

% of

Population

Population 65+

(Millions

Total

Population

(Millions)

% of

Population

Japan 32.9 127.2 25.9% 37.5 116.6 32.2% 4.6 -10.6 6.3%

Germany 17.0 80.6 21.1% 21.8 79.8 27.3% 4.8 -0.8 6.2%

Italy 13.1 62.4 21.0% 15.9 62.3 25.5% 2.8 -0.1 4.5%

France 12.0 65.6 18.3% 15.9 67.9 23.4% 3.9 2.3 5.1%

Spain 8.4 47.7 17.6% 9.7 44.3 22.0% 1.3 -3.4 4.4%

United Kingdom 11.0 62.9 17.5% 15.2 71.4 21.3% 4.2 8.5 3.8%

Canada 6.0 34.7 17.3% 9.6 38.6 24.9% 3.6 3.9 7.6%

Ukraine 7.0 44.0 15.9% 9.3 42.2 22.0% 2.3 -1.8 6.1%

Poland 5.7 38.0 15.0% 8.7 37.7 23.1% 3.0 -0.3 8.1%

United States 46.0 317.2 14.5% 73.6 362.6 20.3% 27.6 45.4 5.8%

10 Countries 159.1 880.3 18.1% 217.3 923.4 23.5% 58.1 43.1 5.5%

2014 2030 Difference


www.mwpvl.com

Page 11MWPVL

International®


The Shrinking Labor Pool in North America

Today 52.5 Americans who do not work are dependent on the 100 Americans who do work.

By 2030, this figure will be 62.8

This of course is because aging baby boomers are moving out of the workforce

The US Census data below expresses this another way and indicates a 5.4% shrinkage of the labor pool is forthcoming

Percentage of the U.S. Population

Age 2010 2020 2030 2040 2050

Under 20 27.1 26.6 26.2 25.8 25.7

65 Years+ 13.0 16.0 19.3 20.0 20.2

SubTotal Dep. 40.1 42.6 45.5 45.8 45.9

Age 21-64 59.9 57.4 54.5 54.2 54.1


www.mwpvl.com

Page 12MWPVL

International®


2010 Versus 2030 U.S. Labor Force Projections

310.2 m

2010

185.8 m

373.5 m

223.7 m

2030

203.7 m

Total US Population (Millions)

Projected Potential Labor Pool: Population Aged 21 – 64 (Millions)

Labor Pool (Millions) proportional to 2010 demographics


www.mwpvl.com

Page 13MWPVL

International®


What the Impact of Demographics Means for America

By 2030 we will experience a 5.4% labor pool reduction of approximately 20 million people

In other words, relative to today’s workforce, have 20 million less people to get the jobs done - a 5.4% reduction

It is highly likely that much of this labor reduction will come from blue collar logistics jobs as the forthcoming generation is more technology-literate

Further, we can expect these shortages to be pronounced in logistics centroids where blue collar labor is concentrated.

This has massive implications on the workforce of tomorrow and provides a strong indicator that strong growth in distribution automation is inevitable.


www.mwpvl.com

Page 14MWPVL

International®


The Migration of Automation from Europe to North America

Over the past 20 years, automation has been slowly migrating from Europe to North America

Western and Eastern European Fast Moving Consumer Goods (FMCG) companies have for many years viewed automation as a critical requirement to maintaining competitive advantage due to the high cost of labor and land.

We now are witnessing the same trend starting to take place in North America


www.mwpvl.com

Page 15MWPVL

International®


North American Grocery Industry

Our firm tracks the top 75 Grocery companies in North America and we have a developed a detailed database of all distribution centers for these companies that represent $1 Trillion of sales.


www.mwpvl.com

Page 16MWPVL

International®


North American Grocery Industry

The North American grocery industry has traditionally been slow to embrace automated material handling systems due to the industry’s slim net margins that are typically in the range of 2.0% or less.

In the 1980s, the top 75 North American grocery companies were almost exclusive running with conventional distribution centers. Attempts at automation and mechanization were largely being dismantled because the costs to operate equipment were higher than using labor.

Fast forward to 2015 and we see a noticeable change in adaptation rate taking place in an industry that has traditionally been conservative.


www.mwpvl.com

Page 17MWPVL

International®


Use of DC Automation: Top 75 Grocery Firms in North America

DC Type No. of DCs % of TotalDCs

Sq Ft(Millions)

% of TotalSq Ft

Conventional 590 92.0% 282.5 87.7%

Semi-Automated 28 4.4% 19.7 6.1%

Fully Automated 23 3.6% 19.9 6.2%

Total Top 75 641 100% 322.1 100%

The retail / wholesale grocery industry is historically the most labor-intensive sector in the distribution industry because food is the product that we consume the most of. Over the past two decades the industry has gone from being completely conventional to the point where 8.0% of the North American grocery distribution centers (12.3% of the sq. ft.) have some type of automation being used.

We fully expect this trend to increase sharply over the next decade as companies are finding it increasingly difficult to attract and retail labor resources.


www.mwpvl.com

Page 18MWPVL

International®


The Rise of E-Commerce

$167.3 $194.3

$225.3

$263.3

$304.1

$347.3

$392.5

$440.4

$491.5

4.4%4.7%

5.2%

5.9%

6.4%7.0%

7.6%8.2%

8.9%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

$-

$100.0

$200.0

$300.0

$400.0

$500.0

$600.0

2010 2011 2012 2013 2014 2015 2016 2017 2018

$ B

illio

ns

U.S. E-Commerce Retail Sales Forecast 2010 - 2018

U.S. Retail E-Commerce Sales $Billions E-Commerce as a % of Total Retail Sales"


www.mwpvl.com

Page 19MWPVL

International®


Amazon Fulfillment & Sortation Center Facilities in North America

2 2 6 7 7 5 6 6 10 11 16

20 22 24

35

43

55

63

70 76

12

18 19

-

10

20

30

40

50

60

70

80

90

100

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

Amazon Fulfilment & Sortation Centers in North America

Amazon Fulfilment Centers Amazon Sortation Centers


www.mwpvl.com

Page 20MWPVL

International®


Big Retailers, Delivery Firms Face Struggle to Find Holiday WorkersE-Commerce Boom, Low Unemployment Expected to Force Increases in Starting Pay

2015 Seasonal Hiring Estimates: Amazon 80,000 Walmart 60,000 Target 70,000 Kohls 69,000 Macys 85,000 Toys R Us 40,000 FedEx 55,000 UPS 90,000 Subtotal 549,000

2015 Q4 Estimate for total retail hiring is 755,000 workers

In some areas unemployment is as low as 3.0% – 3.5%

Wage rates increasing by up to 10% as companies compete for resources. Source: The Wall Street Journal, Sep. 15, 2015


www.mwpvl.com

Page 21MWPVL

International®


Growth in E-Commerce is Driving Growth in Automation

Amazon is the driving force behind growth in the e-commerce sector

At least 47 of Amazon’s fulfillment centers around the world have 1,000+ people working inside the building

Handling of retail units is extremely labor intensive so as e-commerce grows the demand for more warehouse and trucking labor will increase disproportionately faster

This trend will further increase the demand for automation technologies


www.mwpvl.com

Page 22MWPVL

International®


Amazon Rolling Out KIVA Automation in their 8th / 9th Generation FCs

Paid $775 Million for KIVA

Recently rebranded as Amazon Robotics

Amazon now has 15,000 KIVA robots deployed at 10 FCs as at YE14

Online orders now being processed in as little as 15 minutes with Kiva robots

These machines cannot be applied to every FC due to facility constraints


www.mwpvl.com

Page 23MWPVL

International®


Efficiency Gain from Kiva Automation at a Small Sortable FC

Manual

Environment

Direct Labor

Job FunctionLow High Average

Base

Wage RateFB%

Full

Loaded

Wage

Rate

Labor Cost

per

Item

Shipped

Receiving 250 500 375 11.50$ 30% 14.95$ 0.040$

Putaway 80 100 90 11.50$ 30% 14.95$ 0.166$

Picking 75 150 113 11.50$ 30% 14.95$ 0.133$

Packing 120 240 180 11.50$ 30% 14.95$ 0.083$

Shipping 500 640 570 11.50$ 30% 14.95$ 0.026$

0.448$

KIVA

Automation

Direct Labor

Job FunctionLow High Average

Base

Wage RateFB%

Full

Loaded

Wage

Rate

Labor Cost

per

Item

Shipped

Receiving 250 500 375 11.50$ 30% 14.95$ 0.040$

Putaway 320 400 360 11.50$ 30% 14.95$ 0.042$

Picking 225 450 338 11.50$ 30% 14.95$ 0.044$

Packing 120 240 180 11.50$ 30% 14.95$ 0.083$

Shipping 500 640 570 11.50$ 30% 14.95$ 0.026$

0.235$

0.213$

47.6%

Total Labor Cost per Unit Using GTP Automation

Projected Labor Savings per Item Shipped

Projected Labor Savings as a % of Total Direct Labor

Estimated Units per Hour

(UPH)

Labor Cost

Total Labor Cost per Unit Using Manual Labor

Estimated Units per Hour

(UPH)

Labor Cost

This is a responsible attempt to deconstruct and reconstruct the expected productivity rates at a typical Amazon small sortable fulfillment center using a manual versus automated GTP KIVA system.

These results indicate a 47.6% reduction in labor cost per unit for each unit moved through the automation system.


www.mwpvl.com

Page 24MWPVL

International®


Automation – Pallet/Case/Unit Handling Systems

Pallet Systems Case/Tote Systems Unit Systems

ASRS Miniload ASRS A-Frames

Pallet Shuttle Systems Automated Pallet Delayering Systems

Automated Dispensers

Overhead Monorails Automated Layer Picking Systems

Goods to Person Shuttle Systems

Inverted Monorails Automated Full Case Selection Systems

Autostore System

AGVs / LGVs Gantry Case Palletizers Automated Unit Picking Robots

Horizontal Pallet Conveyors& Vertical Elevators

Mixed Case Palletizers Automated Sortation Systems

Automatic Stretch Wrappers Goods to Person Shuttle Systems

Automated Packaging Systems

Automated Truck Loading Systems


www.mwpvl.com

Page 25MWPVL

International®


Conclusions

North American companies are already having a tough time attracting and retaining people to work for their logistics and distribution operations.

The North American labor shortage issue is starting to impact distributors and retailers.

Growth in e-commerce is adding fuel to the fire.

North America is starting to look like Europe 20 years ago when automation started to become the ‘norm’

Changing demographics will drive major growth in the North American automated material handling industry and the automation of unit/piece handling will be in significant demand due as companies look for ways to reduce their reliance on labor, particularly in the retail e-commerce sector.

MWPVL International


Trends in Distribution

Center Automation

Marc Wulfraat

(514) 482-3572 x 100

[email protected]

October 5, 2015

Date post:	21-Aug-2020
Category:	Documents
Upload:	others
View:	0 times
Download:	0 times

MHI Presentation October 5, 2015€¦ · MWPVL International Supply Chain | Experience Trends in...

Documents