Faster, cheaper, smarter. Feeling the squeeze from international competition, a growing number of Australian businesses are investing in warehouse automation to gain an edge.
Retail giant Coles is the latest to announce it’s bringing in the robots. In a bid to lower supply chain costs and increase competitiveness, it will pour almost $1 billion into two automated distribution centres in Queensland and NSW.
It’s jumping on a bandwagon that its main rival, Woolworths, got rolling last year. Woolies’ $562 million investment in a fully automated, 40-metre-high warehouse – the largest in the country – is expected to go live within weeks.
Both businesses are under pressure. Australian sales have tripled in six years at US giant Costco, which is now in the best financial position it’s been in since arriving on our shores more than a decade ago. German grocery retailer Kaufland is expected to further shake up the market by opening up to six sites starting this year. Amazon is also making inroads into the Australian market.
“The shift to automation is all about reducing costs and time to market in a highly competitive industry. But poorly understood and managed risks threaten to send these advantages up in smoke.”
Reducing costs and time-to-market are the order of the day. Coles CEO Steve Cain cited “lower supply chain costs” and enhanced “overall business competitiveness” as the driving forces behind Coles’ big spending.
It’s not alone. Warehouse and supply chain consultancy TM Insight predicts that automation will be the buzzword for the Australian industrial property market in 2019 as manufacturers, wholesalers and retailers look for more efficient ways to deliver goods quickly to customers. The consultancy has recently designed and delivered new hi-tech warehouses for the likes of Woolworths, The Reject Shop, Bunnings and Kmart.
Amazon’s entrance into Australian retail is already credited with encouraging Coles and Woolworths to move to a same-day delivery model for those who spend more than $150 and $300 respectively. In China, the country’s leading online marketplace, Alibaba opened a warehouse late last year staffed with more than 800 ‘automated guided vehicles’. It’s been designed to deal with China’s annual ‘Singles Day’ shopping festival.
New risk profile
Those managing automated facilities must balance their business interest in greater efficiency, increased profitability and fewer human errors with minimising new risks. The scale, speed and increased use of automation inside a modern warehouse alters the risk profile. Traditional warehouse fire protection strategies including using ceiling-only sprinkler systems must be revisited.
Large numbers of expensive robots in densely stacked warehouses pose a greater fire risk and increase the likelihood of it spreading faster. The use of open-top plastic containers, rather than traditional closed-top cardboard or wooden containers, is another trend that ramps up risk. These open-top containers capture sprinkler water that’s being used to fight fires and prevents it from flowing down through to the lower levels of the warehouse.
Risk managers must strike a balance that delivers effective mitigation without unnecessarily increasing costs or limiting storage potential, as this would negate the purpose of shifting to automation in the first place.
The human element
Working with a specialist partner significantly reduces risk. For example, FM Global data shows the difference between an adequate sprinkler system and an inadequate one – either non-existent or with insufficient design – is massive. The difference over a 10-year period can be as much as fivefold, with average losses rising to almost $AU6 million within inadequately protected facilities.
In a robotic warehouse, the cost of equipment alone is enormous. The gadgetry that now goes into a modern logistics facility can be worth three times the value of the real estate, according to TM Insight.
FM Global has invested heavily in developing warehouse fire protection guidelines. Based on five years of research, these guidelines are intended to help risk managers and warehouse managers minimise the fire risk associated with automatic storage and retrieval systems (ASRS).
In designing the Protection for Automatic Storage and Retrieval Systems (ASRS) data sheet, we’ve discovered that it’s possible to:
- Optimise fire protection through careful storage design choices.
- Reduce the cost of fire protection systems including piping, pumps and water tanks.
- Improve environmental sustainability by using less water.
- Develop fire protection strategies which are based on evidence (full-scale fire testing) rather than guesswork.
Simple steps, such as having reasonable gaps between boxes, can make it so much easier and less costly to protect a facility from massive fire damage. Such gaps reduce the ability for a fire to spread horizontally and also allow sprinkler water to penetrate down to the seat of the fire.
The shift to automation is all about reducing costs and time to market in a highly competitive industry. But poorly understood and managed risks threaten to send these advantages up in smoke. As traditional distribution models are overturned by automation, it’s imperative that businesses also take a second look at how they are addressing risk.
Paul May is the operations engineering manager at FM Global. For more information visit www.fmglobal.com.