Can Britain afford a world power navy?

In the eyes of Britain's top military brass the legacy of imperial greatness still seems to colour their judgement about the need to maintain a first division world power punch, despite one Ministry of Defence (MOD) remark that Britain was punching above its weight. The fact is that Britain is no longer economically great, in the sense that it can put forth a 1914-style Grand Fleet to keep the world's sea lanes open and play the world's policeman. Two world wars have seen to that.

This crucial issue, affordability, seems to have been deliberately ignored by Britain's First Sea Lord, Sir George Zambellos, in his opening salvo to argue the case for more funds at the 2015 Defence Review, following the 2010 Strategic Defence and Security Review which froze for at last a decade the navy's ability to operate aircraft carriers armed with fighter jets.

It is not, however, just about affordability. It also brings into question whether costly, vulnerable aircraft carriers and nuclear-powered and armed submarines are still essential in an age when the changing nature of naval warfare and geo-politics suggests they are not.

The nuclear-armed nations, including China, now realise that trade is the handmaiden of prosperity and that prosperity is the surest guarantor of peace. The likelihood, therefore, of going to nuclear war is much less and the arms race has been a salutary lesson of how its burdensome cost can change the coarse of economic and political history -- an example, perhaps, of the law of unintended consequences. When America proposed its 'Star Wars' defence shield Russian realized it could not afford the huge expense of keeping up and so was ushered in detente, the breakup of the Soviet Union and the dissolution of the Comecon countries. Russia had ignored the first law of marketing -- give the people what the people want, not what you think is best for them. The people wanted butter, the Russian government gave them guns. China is now in that situation. The Chinese Government knows it has nothing to fear abroad, militarily speaking, but very much to fear at home from Nature's fury and popular unrest within from ethnic revolts and protests against corruption and environmental disasters, a scenario that helped bring down many a Chinese dynasty in the past.

What this says, therefore, for Britain's nuclear-armed Trident replacement plans is that such a costly programme running into £80-100 billion over its 40-year life span, is overkill, cost-wise, and that much cheaper alternatives are still enough to deter potential aggressors.

The First Sea Lord said the Royal Navy needed a "sensible and credible level of scale" but what is sensible and credible, and perhaps more importantly what is affordable? "Make the Royal Navy 'un-credible' and we cease to be a first division player," he said. His mindset, however, seems to be stuck in imperial times, when the British Empire had many colonies to defend and therefore a more plausible case for maintaining a Grand Fleet. While it is still essential to provide adequately a navy to help keep the sea lanes open, by far the most crucial role it has today, the changing nature of the socio-economic environment no longer warrants aircraft carriers, which are state-on-state warships.

Here is what some of Britain's defence chiefs said back in 2010. The then outgoing Chief of the Defence Staff, Sir Jock Stirrup, argued that pressing ahead with two carriers would skew Britain's defences because of the huge expense, which over 10 years, with running costs and aircraft, would reach about £35 billion, about the size of the black hole already in the incompetent MOD's budget, whose ideas on inventory control were clearly not its forte. Sir Jock added that "the carrier programme is worrying most of all because of its impact on the rest of the Royal Navy, which could see the number of surface ships fall. Another MOD official opined: "Almost everybody in the navy sees the calamity of this, except the people in the top half of the service." Another senior military figure added: "We should never have bought them in the first place. We've got better ways of spreading our money. We could have bought more frigates, more money for cyber, more special forces. It's £5 billion of lost opportunities."

To the point that aircraft carriers look set to follow the battleship into oblivion owing to the changing nature of naval warfare must be added the high risk/high cost ratio of carriers. These capital ships are significantly vulnerable to just a single, long-range missile from China, for example. Just as at the battle of Midway in 1942, which took only 12 bombs to sink four front line carriers, a battle that changed the course of the war in the Pacific, so today it would take only one missile to sink a £3 billion carrier, all its 'planes and the loss of over 1,000 sailors.

Britain can still be a credible nation with a credible navy but it does not have to be, and should not be, at an incredible cost. Just as naval developments change the navy's raison d'etre so, too, do economic developments impact the service and it is the latter that must be given greater heed. Britain's economic condition, while apparently improving, is still weak and its people's simmering discontent is rising. Millions of hard-working people have seen their savings and pensions enfeebled by casino-style economics fuelled by rapacious, irresponsible banks, whom Thomas Jefferson presciently described as "more dangerous than standing armies." Charity run food banks are sprouting up nationwide as social security cutbacks begin to bite. Government under-investment at home is being exposed by the recent flooding, which some sources estimate will cost over £1 billion, while it has been suggested that the Environment Agency is short of £0.5 billion a year to do essential flood defence work. The National Health Service, that most prized asset in a civilized society, is in danger of financial collapse.

These and many other pressing social issues show the great care needed to balance the Government's call on its public purse to deliver best value for money. The armed forces cannot reasonably plead for special case ring-fencing. Even less can it convince the people to buy sustainable navy notions based on outdated ideas that hark back to imperial times.
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JIT shipping costs face price hike threat

Shipping insurers will have good cause to feel weak-kneed if a Tokyo court case against Mitsubishi Heavy Industries, brought by Mitsui OSK Lines, succeeds and which by extension could force a rethink of just-in-time (JIT) shipping issues. The case concerns the loss of the MOL Comfort container ship in the Arabian sea last July on a voyage from Asia to Europe, the biggest loss in container shipping history. The reason for concern is that a successful claim would far exceed the loss of a ship and its cargo because it could open the floodgates to thousands of other claims related to the 2008-built ship which was loaded with 4,382 containers.

The MOL Comfort was built to a new design , along with six other sister ships in the Mitsui fleet, and Class NK inspection of these found "buckling type deformations" on the bottom shell plates. These ships were the first classified by the Class NK to utilise ultra high strength steel with a yield of 470 MPa (the unit of stress pressure) in the hull structures to reduce the steel weight of the ship by avoiding extreme plate thickness. The sister ships' hulls have now been reinforced to twice the level required by Class NK.

Included in the claim will not only be the cost of strengthening six sister ships made by the same shipbuilder, it will also include all the consequential losses of action having to be taken to fulfil the JIT contracts related to the lost containers. Ordinarily, the loss of even a large cargo ship would not raise eyebrows much but the MOL Comfort loss could prove a huge exception with ramifications far beyond the shipping insurance circles. For a start, Misui will be claiming compensation for the cost of strengthening its six sister ships. On a much greater scale will be the claim for all consequential losses involving action having to be taken to fulfil JIT contracts owing to the lost containers. One Japanese electronics giant, who reportedly lost six containers, had to upgrade its factory output to airfreight the entire replacement stock to Europe at considerable cost or otherwise fail to fulfil its contract. This company would not be alone in doing whatever it took to ensure its supply chain commitment was not broken owing to the MOL Comfort's loss.

Insurers could be in for another shock. Cargo insurance underwriters normally work on the value of a container's contents of around US$50,000 but many of the Comfort's containers would have been packed with high value consumer goods and these would normally be valued at selling price rather than cost price. The Japanese company which lost six containers reportedly valued the contents of each of its containers at $450,000. The cargo losses, therefore, will far exceed the $66 million hull and machinery policy, and the latest estimate for claims points to well over $500 million.

The loss of the Comfort is a warning shot across the bows, for insurers, the shipping lines and their customers. Depending on any future shipping loss claims, it could also force the trend to re-shore outsourced manufacturing to the Far East back to Europe, a trend that is already underway for a host of reasons. The insurance risks will rise, and consequently premiums, because container ships are becoming ever larger, the latest now able to carry over 18,000 TEU 20 ft boxes. There are, of course, economies of scale from growing bigger that would bring down unit shipping costs but the downside would be the crippling losses stemming from sunken leviathans filled with high-value consumer goods which could ultimately run into many billions of pounds in payouts per ship lost.

It would be wrong to finger the causes of Comfort's loss, which in all likelihood may never be known, but as in so many losses at sea there is usually a combination of factors. The weather the Comfort contended with was rough, but not so bad that it should have broken the back of a modern container ship built by a reputable shipping yard. On possible causes the smart money is on the longitudinal stresses  induced by deliberately under-declared container payloads, a practice which shippers routinely refuse to take seriously. Compounding this shame is the very common sloppy container packing practices. Without accurate container payload data and responsible container packing it is impossible for dock cranes to load ships so that they have a safe, loaded profile In this respect the IMO may have cause to regret its decision to water down amendments to SOLAS regulations which would have made container weighing at all ports mandatory. It was a great missed opportunity and, perhaps, a glaring case that when money and safety issues clash it is money that prevails.
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Britain's trawler fishing shame intensifies

Fishing remains the most dangerous occupation but the financial rewards can be high. It reflects badly on the industry, therefore, when exploitation of migrant workers on board, many of them Filipinos, is so bad that it equates with modern day slavery. Back in September 2010 this blog site commented on the scandal of Irish fishing vessels using migrant labour, often without pay, and subject to intimidation, including beatings.* Then, on October 2013, I highlighted slavery in Britain's food supply chain, again involving vulnerable foreign labour cowed by threats and beatings from their gangmasters.

Since then the plight of migrant fishermen has worsened, if reports in Britain's Sunday Times are any guide, and there is no reason to suspect otherwise. There is now a wide-scale police investigation into the alleged systematic abuse of migrant fishermen on board Britain's trawlers, many of them scallopers. A probe begun in 2012, involving over 150 police officers scouring the English and Scottish coasts, led to at least 50 suspected victims, mostly Filipinos, being discovered, according to the Serious Organised Crime Agency, and the policeman heading the investigation described that figure as "the tip of the iceberg."

Ten years have passed since the shame of 23 Chinese cockle pickers drowned in Morecambe Bay but the problem of exploited migrant labour has only worsened. Matters may improve when the Modern Slavery Bill is enacted to address the problem but there are no guarantees. It is essential, therefore, that the public should monitor the issue and if little changes then they should consider invoking the ultimate weapon that all boardrooms fear most of all -- concerted, sustained consumer boycott, and the first target should be the scallopers.

It would be a tragedy for all honest fishermen if such action was needed. They have wives and children to support and mortgages to pay and arguably Britain's fishing industry has suffered enough contraction dating back as far as the Icelandic cod wars of the 1970s. But they should remember that it takes only one rotten apple to sour the whole barrel so it is in their best interests to report any suspicious activity involving foreign, migrant fishermen.

Retailers could also help, including top restaurants who sell scallops at huge mark ups. So far, according to the Sunday Times, they have not been cooperative in revealing the names of their dredged scallop suppliers and details of what checks they carried out to ensure workers for those firms are not exploited. Certain TV celebrity chefs with fish restaurants were also uncooperative.

The Filipino authorities could also make a useful contribution to rid the seas of slave-like conditions. The Philippines are by far the largest overseas supplier of merchant seafarers but often the local recruiting agencies trick the potential seamen with adverts for 10-month contracts on container ships paying seven times the average Filipino's monthly income of £126. Job applicants have to pay a £600 deposit and cover their own air fares of about £300. In many cases they would have to borrow the money from the recruiter, with interest, but there would often be no intention of providing work on merchant ships. Instead, migrants would be diverted to work on trawlers once in Britain, where the risks are much higher and life-preserving clothing and equipment not provided. Such a cavalier attitude by skippers would be a blatant breach of Britain's health and safety law.

These local recruiting agencies should be put under 'heavy manners' as Jamaicans would say, including heavy fines and a ban on trading. The same harsh treatment should be meted out to trawler skippers and their owners found guilty of labour abuse, including custodial sentences and forfeiture of vessels.

The problem of migrant labour exploitation on trawlers is a recent one and perhaps would not have arisen so easily, if at all, had their never been the system of no catch, no pay for the fishermen. This has helped to diminish the pool of British trawlermen, even though when catches are good the pay is high. Foreign migrant fishermen, however, would expect a regular, fixed monthly income whether or not there were any worthwhile catches. When catches are poor this could only encourage skippers to refuse pay, a common enough accusation levelled against them, along with beatings and 22 hours work a day. Migrants' passports would also be kept from them, a common ploy used by land-based human traffickers, to prevent escapes and engaging help from the authorities.

The level of deprivation migrant fishermen suffer is painfully long, even stretching to denial of medical help on shore. It beggars belief that pursuit of greed among trawler skippers and owners in a developed, civilized country could exist and thrive through lack of condign punishment. Consumers, especially of scallops, should put the industry under notice to clean out their Augean stables of loathsome practices before there are any more Morecambe Bay tragedies.

* Google my blog: "Ireland's shameful role in migrant fishermen exposed."

Helpful organizations.
www.fishermensmission.org.uk
www.missiontoseafarers.org
www.apostleshipofthesea.org.uk
www.itfglobal.org
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China's migrant sorrows must be addressed

Parting is such sweet sorrow, the saying goes, but it also could be very much more and all of it potentially harmful. Nowhere, perhaps, is this more evident than in China where rapid industrialisation is undermining family bonds with incalculable consequences. It could even encompass retrograde logistics, leading to more environmental degradation and serious health issues.

China is a big country, with most of its industrial regions clustered around coastal cities. Logistically that makes good sense for an export-oriented economy that is also heavily dependent on imports. But the success of that logistics model depends on 262 million migrant workers toiling long hours hundreds of miles away from their family homes and children, left behind for relatives to look after. The primal longing of those parents forced to seek work far from home is beginning to threaten China's socio-economic fabric on an unprecedented scale.

It is estimated that about 157 million mothers and fathers are separated from their children, whom they typically see only once a year for 10 days during the Chinese New Year. Some 80% of those migrants, it seems, feel inadequate, guilt and anxiety. This reflects on their work through lack of commitment to their employers, while nearly 40% report making frequent mistakes on the job. Poor product quality is one of the main reasons cited by foreign customers driving them to re-shore their outsourced manufacturing from the Far East back to their own or nearby countries. Such a trend could have serious repercussions for China.

To the product quality issue, however, must now be added a logistics problem. Parental anxiety over their separation from their children accounts for half of the typical 15% annual labour turnover rates in factories, which adds to product quality issues. When surveyed, these parents cited the wish to take better care of their children. The result is that factories are now struggling to keep them adequately staffed and so many factories are relocating to the interior to be closer to their migrant labourers' home towns and therefore an adequate labour pool. That is socially understandable but it means more transport, often over long distances, for finished and semi-fabricated components to ports, either for further manufacturing or export. That has implications for more air pollution in a country where an estimated 500,000 die prematurely from breathing problems.

Such air pollution also seriously hits national output. In Beijing and its environs alone the economy loses between US$19 billion and $39 billion a year owing to the effects of PM 2.5 pollutants. This is not to argue that all production deep inland is logistically harmful in an environmental way. The new rail route from Chongquing that passes through Kazakhstan and Poland to Germany will help companies like HP to slash costs and air pollution. The fact remains, however, that 90% of all foreign trade is sea-borne, the cheapest of all transport modes and least polluting per container moved. There is also still plenty more to go for in cleaning up shipping's foul emissions, particularly sulphur, something now being rectified.

Neglect the children, risk the future

If China's migrant anxieties are not properly addressed then the outlook for their children's future, and ultimately China's social stability, looks grim. Already the estimated 61 million children growing up separated from their parents, making up 20% of China's youth, are dropping out of school in record numbers at very young ages, despite being required to stay in school until 15. A study also shows that sexual abuse by teachers and relatives is also a problem, exacerbated by drug addiction and other criminal behaviour.

These left-behind children usually suffer from trauma and don't do so well ate school. Many parents worry that their children will spend too much time in internet bars exposed to the dark side of the Net. China's greatest asset is its industrious, intelligent people and the people's greatest tool is education. The State, of course, realises this but is some if its actions stymieing its efforts? Many migrants would like to take their children to where the work is but feel there are limits on what kind of life they can give them in the cities. The main culprit is Lukou, the restrictive residency system that means if parents don't have urban residency cards rural children cannot attend city schools without paying exorbitant fees. These fees could be seven times what they would be back in the migrants' inland home towns.

Abolishing lukou could help thwart the build-up of serious social issues. Another is much more direct state investment in education. If money is perceived to be the problem there are solutions. Not least would be the savings that could be made by slashing China's soaring defence bill. Since 2003 China's military budget has soared from $30 billion a year to $120 billion. China has nothing to fear abroad, militarily speaking. The world is too interconnected by trade and finance to make war a feasible hand maiden of foreign policy. This is not to argue that China should not have a military force befitting its size and overseas interests, mindful as it must be of past humiliating defeats over 200 years caused by an ineffective, cohesive defence force. But China should recall the words of one of its illustrious sages, Sun Tzu, 2,400 years ago: "Where the army is prices are high, when prices are high the wealth of the people is exhausted."

If China ever needed an object lesson on how eschewing militarism makes great sense it need look no further than across the China Sea to Japan. Utterly ruined by war in 1945, Japan vowed to abandon militarism for pursuit of trade and succeeded spectacularly at giving the people what they yearned for. China's greatest fears are all internal, neglect of which will only lead to bigger problems. Money spent wisely now on social issues and preparing for inevitable natural disasters, rather than military spending, will likewise satisfy the people's yearnings which they most assuredly deserve. There can be no more potent and truer sign of a great nation in the waiting.
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Warehouses risk energy crisis without changes

Rising energy costs are now so worrying that according to research by Energy Works 98% of those in the UK industrial sector, including warehousing, will not meet their growth targets, while 8% are now considering staff cuts to save money. Just as concerning is that 88% of UK businesses are worried about the security of their energy supply. This follows recent warnings by OFGEM that the UK generating capacity is nearly at full stretch. Given the planned closure of some coal and nuclear power stations, OFGEM is warning that spare capacity could fall from today's 14% level to just 4% in three years, with a risk of 'brown outs' and 'black outs' starting in the winter of 2015-2016. The threat of energy inflation to UK competitiveness is another big worry seen by 90% of UK businesses.

The paradox is that the means are available to cut the energy bill sharply through modest and often financially incentivized investment and while 51% are aware of energy-efficient LEDs, for example, 87% have yet to make the transition. This is all the more curious because, as the research shows, 72% of industrial firms were loath to install clean technology because they believed the initial outlay was too costly and that lighting suppliers were viewed with suspicion when it came to their claims on energy savings, according to findings by the Britain's Carbon Trust.* The facts, however, belie these sentiments, so what are the facts on warehouse energy-saving investments?

Before looking at energy-saving means, however, a look at how big the cost is should concentrate minds to consider action now, rather than, as in Britain, wait until the Energy Act, 2011, enforces warehouses by 2018 to comply or risk closure because their energy proficiency certificates are at or below F or G ratings.

According to US power outfit, Madison Gas and Electric, energy costs can account for as much as 15% of a warehouse's operating budget. A report by Touchstone Energy estimates this can reach as high as 10% of total revenue. In cold stores the energy bill is typically between 25% and 30%. These estimates, of course, will vary from country to country because energy costs vary widely and not all users will need lots of heating throughout the year.

LED lights show the way

If there is one area of warehouse energy costs that almost invariably causes greatest concern it is lighting, which typically accounts for 70% of total energy consumption. For many years lighting devices like dimmers and sensors activated by personnel movement and daylight changes have helped cut costs but now advances in lighting technology, particularly LEDs, are not only drastically cutting energy costs but also maintenance and repairs, as well as improving light quality and cutting accidents. Poorly distributed light and excessive glare from certain lamps can affect 60-year old forklift drivers far more than 20-year olds because they need six times as much light to discern objects clearly.

So what kind of returns on lighting investment can be expected and what investment incentives are available? A programme of site energy surveys commissioned by the Carbon Trust confirmed that quick returns on no and low-cost actions can often provide cost savings of 10% to 20% with a further 10% to 55% per year savings achievable with simple payback periods ranging from one to six years. This could translate to an annual saving of over £200 million for Britain's warehouse sector. To ease the pain of investment in energy- saving lights, the Carbon Trust offers zero per cent interest loans of up to £100,000 for up to four years and will conduct free site surveys to highlight where savings can be made. Other UK government incentives include the Enhanced Capital Allowances which enable businesses to buy energy-efficient equipment using a 100% rate of tax allowance in the year of purchase, provided the equipment is on the Energy Technology list.

There is, however, an alternative that does not involve any cash investment in LEDs. Energy Works, for example, says any industrial firm can take advantage of their free LED retrofit in return for a percentage of the energy savings made over a typical period of five years.

Given the importance of lighting to warehouse energy costs, any stores lit by 250W or 400W SON or metal halide lighting should be considered for a change, and most warehouses appear to use this form of lighting. If such fittings are replaced with fluorescent T5 luminaires they will not only give a better light output and consume less energy they are also amenable to automated controls, such as PIR motion detectors or daylight controls, without any re-strike concerns. If installed with automated controls, T5 consumption costs could reduce SON energy costs, based on 10 hours a day, five days a week, from £1,120 worth of electricity per year to just £220.

The moral imperative

In ambient warehouses the second highest energy cost after lighting is space heating and the worst place for heat loss is usually the loading bay. This is so because frequent traffic movements by lorries and forklifts encourage an open door policy in all weathers. A simple solution that has been available for several decades is the rapid roll PVC door, to which have recently been added insulated slatted versions moving at up to 3 mt/sec and secure enough as an external security door. Another heat loss area is the loading dock where the air gap between docked lorry and open door is excessive. Inflatable dock shelters would solve that problem. Most leading loading bay equipment suppliers will offer a free energy audit when quoting for equipment, which in many cases would show a door payback period of a year or less.

Quite apart from improving warehouse profitability through energy reduction programmes  there is another, incalculable benefit for all mankind. Britain's warehouse sector is responsible for about 10.2 million tonnes of CO2, or 3% of total UK emissions. Research shows that the sector could potentially achieve a 16% cut in emissions mostly form lighting and heating. All around the world asthma rates are soaring among non-smokers and air pollution is top of the list of usual suspects. Where there is no suspicion, however, is that air pollution is now a leading cause of lung cancer. London's air quality is often much poorer than EU-set safety limits while in China at least 500,00 people die prematurely from air pollution every year. In northern Europe alone an estimated 50,000 a year die from cargo ships' sulphur emissions. There is, therefore, a moral imperative for all to be more energy conscious.

*www.Carbontrust.co.uk
LED manufacturers:
www.ecolightinguk.com
www.ecotroniclighting.com
www.tamlight.co.uk
www.HarvardEng.com (wireless controls)
www.MHAlighting.co.uk
www.energyworks.com
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Poor racking choice harms warehouse economics

It has been said that it is the supply chain that competes, not companies, and while that is a truncated version of the truth it stresses the pivotal role of logistics. Within the supply chain it is also true to say that the warehouse role is paramount, far more so than global transport costs, and therefore the racking/shelving function should receive the respect it deserves.

No longer a static, boring part of warehouses on which goods are stored and retrieved, today's racking comes in many dynamic forms with varying levels of 'intelligence' to deliver accurate throughput rates unheard of 40 years ago. But with so many choices comes complexity and therefore higher risks of making the wrong choice of racking equipment and layouts.

Fortunately, many leading racking and forklift companies have software packages to help prospective clients examine various storage scenarios under all operating conditions. Their 'what if' facility will quickly test specification changes and so hasten the decision process and highlight potential bottlenecks but they are only as good as the information fed into them. But while simulation packages should be seriously considered for large, complex warehouse layouts, a word of caution. Some 'what if' software packages have limited scope. They may not deal with floor factors, for example, which are so important for very narrow aisle (VNA) high bay stores. If a package is offered by a forklift company there is also the temptation to promote their own product range, even though they know that there is a more suitable product on the market outside their own portfolio. Warehouse operators, therefore, need to be aware of all the various truck types on offer or they could be foisted with aisles that are too wide and with too many forklifts. Reach trucks, for example, need aisles at least 2.6 mt wide but there are now articulating forklifts which can work in aisles only 1.6 mt wide and so store 30% more pallets in the same cube. For these reasons it is probably wiser to consult an independent, pure simulation software house with a long service record like Cirrus Logistics.*

Success depends on research

To ensure a successful installation, operators must adequately research the product dynamics of their stored goods. This will look at volume flows by stock keeping unit (SKU), sizes, weights, time sensitivity, seasonal demand variations and packaging (particularly crucial for automated stores). Hazardous goods will also affect racking arrangements. The choice of racking will set the permanent warehouse running costs, which can vary widely depending on the nature of the stored goods' dynamics. Where fast-moving pallet loads need 100% instant accessibility then adjustable pallet racking (APR) will be the usual choice. It is the most commonly used racking form, one of the cheapest and gives good stock rotation. It is, however, space hungry. A variation of APR is double-deep storage accessed by forklifts with pantographs or telescopic forks for loads two pallets deep. This improves storage density by 40% but at the expense of 100% instant selectivity.

Cheaper still than APR is block stacking, based on post or cage pallets. These can be stacked four or five pallet loads high, albeit in a relatively tricky operation, and the storage medium can be hired. Suited to homogeneous loads, this method offers one of the highest storage densities but the poorest, instant stock selectivity.

If 100% instant selectivity is not essential then drive-in and drive-through racking might be the answer. This is where a forklift can drive right down a racking lane because pallets are supported only on rails at the side of the lane. There are no obstructing beams. Cold stores favour them because of the high storage density achievable in what is a high energy cost environment, where energy can account for 20-30% of total warehouse running costs. Instant stock selectivity, however, is only about 30%, which means poor picking rates and stock rotation. This racking type is also notorious for damage from forklift collisions.

Why interface costs matter

A safer racking choice for cold stores is mobile racking, also valued for its high storage density. Unlike drive-in, it allows 100% instant selectivity, albeit at a slower rate than APR because time is spent while selected racking aisles are being powered open. Even so, surprisingly high pallet handling rates of 35 an hour are achievable. On the downside, mobile racking costs about three times as much as APR and is unsuitable for fast-moving goods. As with any equipment buying decision for warehouses, however, it should be the interface costs that matter most of all. Mobile racking, for example, achieves 50% more storage capacity than APR which not only cuts energy costs but also high construction costs when considering a new-build project. Bolted racking rather than welded should be preferred in cold stores because the latter is subject to weld failures.

Racking also becomes dynamic, in part, when live or dynamic storage is chosen. Various live storage forms use gravity or powered systems to index loads forward to the picking faces. Pallets or totes are fed in at the back and roll forwards on wheels or full-width rollers. Storage density is high and stock rotation good because it is a FIFO system. A variation of gravity-based live racking is push-back racking, which has storage lanes four or five pallets deep. Unlike conventional live storage, which is fed from the rear, replenishment and picking are at the same place and so it saves space at the racking's rear end.

The last 10 years have seen many advances in dynamic racking through the application of robotics from companies like Swisslog,* SSI Schaefer,* Knapp* and Redirack.* Their purpose is to maximise storage density while dispensing with slower and more inaccurate methods using labour. A good example is Redirack's recent, automated pallet storage, retrieval and sequencing solution. Unlike any other system, it combines pallet buffer and sequencing system with automated storage and retrieval system (ASRS) technology which can increase the storage density of existing warehouses by 80% when compared with very narrow aisle APR. Pallet throughput is much higher because the system delivers the retrieved pallets to the operator in the order they are required to floor level. One buyer of the system, Fredericks Dairies in north-west England, achieved a 30% cut in the total construction costs for its cold store against creating a building to house a conventional racking system, to say nothing of high energy running costs. Fredericks Dairies confirmed that they achieved 13,500 pallet storage slots with the Redirack solution compared with only 9,500 pallets from its nearest competitor.

There can be no doubt that time compression techniques will come to dominate many warehouse operations as they adjust to multi-channel routes to consumers galvanised by on-line shopping that threatens swathes of high street shops. A key weapon in the adjustment is the right mix of dynamic 'intelligent' racking. To be quick is better than to be dead.

*Redirack: www.redirack.co.uk
*Swisslog: www.Swisslog.com
*SSI Schaefer: www.SSI-shaefer.co.uk
*Knapp: www.knapp.com
*Cirrus: www.Cirruslogistics.com
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How to avoid automated warehouse failures

Lest there be any initial thoughts that automated warehousing is only for the brave, there are now many such centres in the developed world running successfully and fulfilling their payback criteria. However, although now much more reliable than automated warehouses of the 1980s, examples of spectacular failure still occur and the consequences so devastating as to risk bankruptcy.

The reasons for failure are many and can be of an incredibly crass nature, like when a British middle ranking retailer using a third party logistics (3PL) provider as its turnkey partner refused to invest in simulation to expose potential bottlenecks. Both parties agreed on the need for simulation but neither would pay for it. The result was plenty of warehouse bottlenecks leading to empty shop shelves, a fired 3PL and a badly mauled share price. Spoiling the ship for a ha'porth of tar in this way is a potent reason why, despite such very costly investments, price should not be the prime consideration in deciding which scheme to buy and should never be at the expense of flexibility. So what are the main reasons why automated warehouses fail to meet expectations and when should they be considered for investment?

Most "automated" warehouses in Britain are a mixture of automation and manual/mechanical handling and so the payback criteria for such centres will obviously depend on the level of each. These hybrids may even involve only the automation of information technology, as with Amazon, who rely on it for their order picking functions only. Their operation is highly labour intensive, typically involving order pickers walking 7-10 miles per shift, a process some might imagine is highly time-wasting. Yet, Amazon conducts round-the-clock, effective e-fulfilment centres where delivery times to consumer are critical. This shows how careful one must be before going down the warehouse automation route.

Generally speaking, a fully automated warehouse dealing only with full pallet loads is unlikely to achieve a payback in less than five years but payback criteria can be misleading or incomplete. In such exercises, for example, accountants are unlikely to factor in the beneficial impact of warehouse automation on customers, like prompt, damage-free, and correctly picked orders. It's true that figures cannot be placed on that but it has significant value nevertheless. There is also an environmental dividend because 'dark' warehouses need much less heating and lighting.

Points favouring automation

Generally, the case for warehouse automation is strengthened as the scale and demand for speed and efficiency increase. Favouring factors include:

•  24-hr, seven-day week operations
• When repetitive tasks are regularly performed
• When long travel distances are involved
• When lift height rises above 12 mts
• When high land values dictate the need for very high bay warehouses to exploit height
• When a hazardous environment precludes human operations
• When tight inventory control is essential along with security and almost negligible damage levels. 
• When the use of very high storage heights and densities could close scattered distribution centres

The factor most likely to drive businesses to invest more in automation is the need for more speed and efficiency to cope with the seismic change in consumer shopping evinced by the remorseless rise of online shopping (e-tailing). This trend, which some estimates suggest will wipe out 40% of Britain's shops in five years, will place far more importance on single item picking, leading to demand for automated goods to pickers, be they mini load cranes, robots, carousels/paternosters, or whatever. But is automation inventiveness keeping up with these momentous changes?

Yes, they are, and good examples are some of SSI Schaefer's unique solutions. They have, for example, developed a picking and sortation system which offers the additional dimension of sequencing of order items so that different elements, or lines, of an order can be picked over a period in different areas of the warehouse, then held and delivered together to one packing station. This has the obvious advantage of being able to consolidate all items into one package as well as being able to prioritise packing of picked order items. It is based on overhead conveyor system technology, called the Fulfilment Factory, and it was devised primarily for e-commerce operations.

Truly fully automated systems are increasingly using a 'teach in' system which captures physical appearance, weights, dimensions and other statistical product data upon goods receipt and before put-away. This enables pallet delayering and put-away on trays, subsequently allowing automatic picking and multiple case selection, sequenced in order to build mixed SKU pallets using a robotic palletiser and wrapper.

Avoiding the tender traps  

The business of avoiding costly project failures starts with the selection process of a suitable project provider. For the more complex projects, taking the turnkey route makes the best sense when starting with a green-field site but even here great care is needed. At one time in Britain a significant number of projects relied on the builder acting as the turnkey main contractor. Fortunately, that has waned following some bad experiences. The fact is, a builder does not have the expertise on the special problems that can arise with warehouse automation. All automated MHE suppliers agree that an automated warehouse must be designed from the inside outwards and so it is the working equipment that is paramount. The building, after all, is only there to keep the rain off.

Another route to take is the appointment of a 3PL provider to build and run the project. This may be reasonably safe provided the 3PL has plenty of experience building, integrating and running automated stores. A third route is to appoint a systems integrator as the project manager but the downside outweighs the upside of this choice. The safest turnkey choice would be to make the main handling equipment supplier as the turnkey operator for they should have a good track record for successful projects, helped by their own software expertise. They will also have the substance and after-sales technical service support as a comfort if things go wrong.

Once satisfied with the choice of turnkey partner, the client must then watch out for the warning signs at the tender stage. These include:

• Exaggerated claims
• Lack of well-defined quotation for equipment, with too many qualifications and exceptions
• Lack of information on commissioning trials and acceptance tests and how the system will achieve the throughputs
• Sensitivity of the system to single point failure in mechanical, electrical and control areas
• Design life of equipment at specified duty
• Lack of established support services for equipment and software
• Enough potential throughput capability to cope with sudden unexpected peaks

Watch that packaging

Packaging may seem of little consequence but automated warehouse operators cannot afford to ignore it. If there are two lessons that can be learned about the hazards of packaging for automation they are: consult your handling designer as early as possible, and that the automation solution should come before cost. Packaging should heavily influence the design process. Compared with manual handling, warehouse automation requires better quality packaging and pallets, more consistency and more care over palletising and labelling. Poor quality timber pallets are probably the greatest problem for warehouse automation. Pallet damage is a big factor, with broken boards and protruding nails jamming conveyors, especially the roller type. Some operators prefer plastic to timber pallets because of their greater dimensional accuracy and other advantages, though good quality timber pallets like those from pallet pool operators Chep and LPR would be acceptable. Belt conveyors pose fewer problems than roller conveyors when meeting with loose stretchwrap or banding owing to less snagging. Loose wrapping materials can also give incorrect signals to sensors and cause inefficient accumulation or machinery stoppages. 

Finally, the client must examine its role in making the venture a success even more rigorously because it is here that the seeds of failure flourish. Most MHE suppliers would agree that most of the many reasons behind disappointment lie at the clients' doors and topping the list is poor planning with not enough attention paid to functional specification. There is too little effort put in at the front end to the cost of the back end. Clients must realise that their own attitudes can seriously impair efficient working. A system supplier must have accurate information on the business issues underlying the new system. When the project is handed over, the client's operators and system managers must have been adequately trained on how to run the operation before start up, not after. If not, the new system may be unjustly criticised for providing lower than expected performance. In a fast-changing world dominated by multi-channel distribution, future growth prospects should allow for expandability and flexibility through modularity to be designed in for both the mechanical layout and control systems.

If all the preparatory homework has been done diligently the automated warehouse should  deliver all that is expected of it, with one potential exception -- the vicissitudes of future demand that could change so much, for whatever reasons, as to reduce throughput levels to uneconomic rates. Perhaps one day Big Data will reduce that risk.  

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