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5 Ways to Combat Demographic Change

By: Dennis Ramers, JBT Germany

Dennis is a Sales Manager with JBT. He manages all sales within the DACH region of Europe. 

The shortage of skilled workers is on everyone’s lips in the logistics sector. Throughout the last ten years, the boom in exports and e-commerce has led to an economic upswing and a sharp increase in the demand for logistics workers. Plus, the baby boomers are slowly but surely retiring. These retirements have accelerated, at least in Germany, as a result of the pension at 63. Now, shortages of truck drivers, forklift drivers, and order pickers have taken a toll on the labor market. In addition, the demand for age-appropriate jobs continues to rise as the average working age rises. Market responses to this change include things like more ergonomic forklift trucks. Nevertheless, labor demographics still represent a great strain on the economy in Germany and in Europe.

To stay competitive and curb the impact of these demographic changes, companies need to develop a plan of attack. Let’s explore 5 possible strategies.

1. Changing Geography

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One possible approach, hiring employees from abroad or even relocating processes can help to mitigate the impact of these changing demographics. While moving operations can help ease the burden, it often proves too costly to undertake, especially when considered in the context of fewer available truck drivers. Meanwhile, the hiring of employees from abroad has been successfully practiced for many years. Logistics centres line the German-Polish border, and other facilities have dedicated bus routes to their eastern neighbours.

With the increased economic power of eastern European countries, it has become more and more difficult to solve the demand for labor this way. Salaries are rising disproportionately; more attractive local jobs are being created; and unemployment is already very low. The will to go to Germany is dwindling. For example, the Czech Republic had an unemployment rate of only 1.9% in February 2019.

2. Stocking up on Labor

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Some companies have also decided to higher more employees than necessary to prepare for future challenges. With the wave of refugees entering countries like Germany, more logistics workers have entered the labor pool. This has helped expand the market and has curbed the impact of the demographic changes. Even though hiring refugees presents other challenges, specifically a lack of language skills and of qualifications, organizations see this as a short-term problem that can be overcome with enough time.

However, the cost-effectiveness and sustainability of the approach can cause serious problems. Keeping a lot of people employed isn’t cheap, especially when not all of them are actually contributing to your company’s bottom-line. I would argue that more organizations cannot afford to do this. Plus, there are no guarantees that employees will remain with the company in the long-term.

3. Automation as a Savior

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Although there are multiple solutions to the demographic issue, most experts agree that automation and digitization is the best route to take. This has already proven true in logistics.  Automatic container and/or pallet storage has deeply penetrated this sector and continues to inform the way that new processes develop.

With that said, automating existing facilities and complex picking processes can be complicated and difficult. These challenges can raise the barrier of entry into automation. However, in response to these difficulties, suppliers within the market have – and continue to –  develop new, simpler and more cost-effective solutions. For example, Magazino has launched a complex order picking robot designed for e-commerce and manufacturing. Driverless transport systems like this “pick” from the shelf like humans and are easily deployed in existing facilities. But the development of this technology is an ongoing process, and most don’t believe robotics will completely replace human labor – at least not for another 10 years. Despite this projection, robotic picking still represents the future of automation within logistics.

4. Automated guided vehicle (AGV) systems

Though driverless systems are the future, this doesn’t mean that they’re new. They’ve been inside facilities for over 50 years and have automated long transport routes and the delivery of goods to lineside. Systems like this have already enabled employees to exercise their strengths – like picking smaller parts or reacting to unexpected situations.

And even though driverless systems are proven technology, they’re still improving. Powerful computers, better software, and massive improvements in sensor technology enable vehicles to do more than horizontal transport.

In fact, companies specializing in AGV systems have helped manage entire warehouses – even block stacking – completely autonomously. Advancements in the last 10 years include:

The price-point on these systems is an advantage as well. They work around the clock, prevent damage to your products, and do not take holidays. As a result, labor costs drop, and calculated over a six-year period, the vehicles cost less than 5€ (~$5.50) per hour. The systems also operate for at least 10 years, and often longer, because of their controlled, consistent movement. The longer a system lasts, the lower the hourly wage drops. Plus, these wages are fixed and don’t rise with inflation.

5. More Complex Fields of Work

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Another advantage of driverless systems? They meet the demands of the new generation of workers. Fewer and fewer people entering the workforce want to become forklift drivers. In part, the increase in the number of college graduates has driven this change. Think about it: the youngest generation tends to be more education than their fathers or mothers – and a lot of employees who are now retiring.

Monitoring, repairing, optimizing or “managing” a fleet of automatic driverless transport systems appeals more to young employees. Plus, this work justifies the higher wages that this generation demands, given their educational qualifications. The number of academics is also on the rise, and they can be better attracted and retained with employment of this nature.

Gradual Change – Starting Today

Driverless systems thus allow a step-by-step transition to fully-automated logistics processes. This technology helps address the current and growing shortage of skilled workers. These scalable systems, which are evolving with the times, allow us to absorb demographic change and give the next generation of employees a perspective.

3 Key Drivers to Automation

Lately, automation has become the hottest trend in manufacturing and warehousing – for good reason. Ever since the Digital Revolution, automation has proven its many benefits; although, up until recently, these benefits have been constricted by technological limitations. Now, everything is connected, and computers are a mainstay of work in all of its forms.

We know that automation isn’t necessarily a new phenomenon. However, it is more impactful than it has been before. Why? Interconnectivity. The principle of the internet of things (IoT) means that devices now communicate and interact with one other. This translates into more powerful automation at a more affordable price.

Think about this for a second. In 2016, 180 million devices were connected to the internet.

ConnectedDevices

Source: Statista

Projections place this number at approximately 260 million by 2020, a 45% growth rate over 5 years. Clearly, IoT translates into increased use of devices and a greater dependence on the internet and the interconnectivity it provides.

One place that IoT is having a significant, manufacturing is “transforming traditional, linear … supply chains into dynamic, interconnected systems,” and automation, in conjunction with IoT principles, is driving this.

So, why should you implement automation in your facility?

1. Reallocate Human Capital

In the digital age, human beings, with all of their creativity and brain power, are an important commodity. Why waste them on performing repetitive, boring tasks? According to WorkMarket’s 2020 In(Sight) Report, 53% of employees believe they can save 2 hours a day with automation, and 78% of leaders think automation can free 3 hours a day, or 360 hours in a year. What can that free time do for your business?

Aside from that free time, think about what this means in real dollars. According to Forbes,

Let’s suppose the average department at this Fortune 500 company has 500 employees, with an average of 3 business leaders for each respective department. Those employees make an average of $77,000 per year (or $38.50/hr), while the business leaders earn $155,395 per year (or $77/hr). The magic of math reveals that employees who save 240 hours/year offer their employers $9,240 in savings annually, while business leaders who save 360 hours per year generate $27,720 in savings. Total savings for the average department: $4,620,000 (employees) + $83,160 (business leaders) = $4,700,000.00. In one year.

All of that without cutting jobs.

2. Improve Quality

Automation facilitates smoother transfer of products, especially within manufacturing industries. Think about how an automated guided vehicle (AGV) moves compared to how a forklift moves. Controlled stops and starts versus human-directed movement that resembles your daily morning commute.

What does this amount to? Fewer dropped loads, more efficient transport, and more predictable output.

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3. Reduce Costs

Perhaps the biggest driver of automation, reduced costs amount to a persuasive argument for automating. These costs come from lower human capital costs, which we examined earlier, from decreased liability, and from eliminated damage.

Decreased Liability

Forklifts are involved in numerous accidents over the course of the year. These accidents subsequently involve workers’ compensation claims and company exposure because 80% of them involve a human being. In such cases, direct costs can amount to $38,000, and indirect costs to $150,000. Aside from this, OSHA fines may apply. These can range from $12,675 to $126,749 per violation.

The benefit of moving to automation lies in its ability to virtually eliminate these accidents. This means that you and your company get to avoid unnecessary costs and potential damage to your brand reputation.

Eliminated Damage

Similarly, damage to product and to infrastructure often results from forklift accidents. This means unnecessary cost.

It’s estimated that forklift damage can add as much as 5% to the cost of a standard truck lease.

Source: CertifyMe

The National Institute of Standards and Technology states that forklift accidents cause $135 million in immediate cost. Can your company afford this?

Other drivers certainly impact the implementation of automation within manufacturing and warehousing. Your company’s overall profitability often plays a pivotal role, especially within the Fortune 500. Even if you have a smaller organization, you can quickly gain a leg up on the competition by automating. Frankly, the advantages of automating are endless. It’s the way of the future. Don’t get left behind.

Is Automation Right for You?

By: Alex Escovar, JBT Araraquara

Alex is a Sales Manager with JBT. He serves the South American market and is based in Araraquara, Brazil.

Consumers are changing the way they used to do things. The globalized economy allows people to have access to different products from almost every corner of the world. While many may fret the consequences of the empowered consumer, the truth is that these changes result in greater competition, which benefits companies as much as consumers. Organizations need to stay alive in this competitive environment. This is where automation comes in.

According to McKinsey & Company, automation has a few key drivers:

“to free human workers from dirty, dull, or dangerous jobs; to improve quality by eliminating errors and reducing variability; and to cut manufacturing costs by replacing increasingly expensive people with ever-cheaper machines.”

Automation also standardizes processes, making them repeatable and controllable from a technical and economic standpoint.

Organizations need to invest time into examining what really matters for their core business. Any non-value-added operation is a candidate for automation, and even complex and very delicate jobs can now be automated because of technology’s constant advance. More and more often, we see robots performing very precise operations which were impossible to think about even as little as five years ago. Plus, collaborative robots are breaking paradigms by sharing work space with humans.

To put this in perspective, the increasing global demand for automated guided vehicles (AGVs) demonstrates that automation has become a strategic decision implemented in order to achieve far-reaching, financially-driven goals. These vehicles, which can improve efficiency in a logistics operation by automating mundane material handling, features different guidance technologies such as laser triangulation, natural-feature, optical guidance, and wire. Most often, a host computer supports the system by using a pre-programmable management system to control the fleet and by integrating into the customer´s production system. This host manages all the requests according to priorities previously established by the customer. This is where the system’s intelligence resides – it can process several complex jobs simultaneously. As production changes, the entire system has to be flexible enough to support it, so choosing the right technology makes all the difference.

By adding automation into your production, you can expect significant savings and a variety of benefits.

Labor

Not surprisingly, labor threatens any operation, not only because the associated cost which is constantly increasing, but also because it is becoming increasingly difficult to find reliable and qualified labor. Automation solves both issues. The cost of labor comes down over time, and automation offers a form of reliable, qualified labor.

Productivity

Productivity is a buzzword within many organizations. Everyone is looking to produce more while keeping costs down. Automation, and AGVs in particular, can help companies achieve this, as operational efficiency can reach as high as 99% utilization. Systems rarely stop and can work non-stop 24 hours a day, 7 days a week.

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Overtime

Inevitably, higher uptime creates the need for working additional hours. What if organizations had the option to add or to extend a third shift without raising operational costs? As seen above, automation works continuously for exactly the same cost. In most of the cases, a three-shift operation can barely work 20-21 hours a day due to stops for lunch, unpredictable maintenance, bathroom breaks, and workplace exercises, resulting in three to four hours of waste. Think about this: if automation enables operation during additional hours, say something between 1500-2500 across a single year, does that make a difference in your operation? How much money does your company make for every additional working hour?

Safety

Safety should probably lead this list. We all know what happens when an accident occurs. No matter how big it is, a simple near-miss can cause huge problems for the company, an unions are there to remind us all the time. Automation is much safer than manual operation, and AGVs are much safer than forklifts.

Damage-related Costs

Automation means no more damage to your equipment, product, and/or facility. Even skilled operators are exposed to errors, and this can be a small issue to a significant accident, where hundreds or even thousands of pallets are effected.

Inventory Tracking

Accurate inventory is essential for the traceability of your products. The last thing you want is for things to get lost. With automated material handling, your products are delivered to the right place at the right time. Is this important for you? How much time – and therefore money – could this save you?

Increased Efficiency

Automation improves your process and eliminated unnecessary movements. AGVs, in particular, are more efficient than manual vehicles and can combine different operations into one. When you eliminate redundant operations, you reap the real benefit. How much does it cost you every time you need to touch a pallet?

Are the above items beneficial for your business? If so, automating your process will result in some real savings. Obviously, results vary from application to application, but if enterprise organizations, which have common operations between their multiple sites, decide to invest in automation like AGVs, then their savings are significantly boosted. Their ROI becomes very attractive, very quickly.