How to manage overcapacity in automated parcel distribution

So, you’re a distribution hub with a finely tuned, modern sortation system that can cope with your peak periods? That’s one problem solved! But what about the downtime, those periods in between the peak surges? How can your distribution centre get the best return on your system investment and make the most of the time when your systems are idle?

By Volker Sadowsky


Let’s explore the ways in which your hub can better manage excess capacity and optimise your in-between periods.

The problem with excess capacity

A problem common to most distribution centres and hubs today is that they’re geared to deal with peak periods. As these fall within certain times of the year – especially October to December – and certain times of the day, it means many operate with 20-40% excess capacity during most of the year. A costly and inefficient outcome for any distribution centre.

Fortunately, there are a number of manageable solutions for this familiar problem.

Change your speeds

One way to minimise future excess capacity is to think about implementing sorters capable of operating at different speeds. Many loop sorters can run at full speed (approximately 2.5 metres per second) and be adjusted to also run at any number of slower speeds (at 70% or 80% of maximum speed, for example).

This solution offers flexibility and reduces both the wear and tear on your investment and the energy costs associated with its operation. While a sorter with varying speed capabilities can be an effective start to managing excess capacity, it’s not always that simple. Operating at different speeds requires your system to be optimised for sorting to the right destination at each speed.

Learn more about why automation is the best way to optimise your distribution centre.

In order to determine your required speeds, you need to determine your capacity levels. With the higher speed reserved for peak season capacity, the slower speed for regular operations needs to cover a proportion of that. Your regular capacity might be 90% of peak load – or 70% if you spread the sortation of items over different times of the the day.

The crucial key here is to conduct real-life testing. It’s impossible to determine and set the speed without testing your system at both speeds during the commissioning stage at the site. This means testing the speeds for all your destination chutes and making necessary adjustments. For example, a high-speed sorter may accurately place an item in a chute but a reduced speed may not, unless certain adjustments are made. The flexibility of the system would then be rendered useless because the sortation of each parcel will be inaccurate. This is something we want to avoid!

Plan for phased implementation

Another way to reduce overcapacity is to plan for a staged installation. Your system can grow as your throughput grows, making staged implementation more financially sound than an implement-once design. It’s a flexible approach in which knowledge and experience gathered along the way can assist determinations of capacity.

An implementation phase in sortation systems typically covers a 5 year period. However, there’s nothing stopping a hub from revisiting the period as required. A hub’s better-than-expected growth rate may, for example, require an installation that was planned over three phases to be fast-forwarded to two phases.

Read more: “Automated parcel sorting – an introductory guide.”

Take, for example, a courier, express, parcel (CEP) operator who forecasts a 20-30% increase in throughput over the next 5-10 years. This operator could be looking to install a sortation system that can handle 40,000 items per hour to deal with this projected growth. But at the time of installation, the operator’s peak period is limited to 1-2 months of the year. Operating a system capable of handling that volume would see just 30% of the capacity utilised for the rest of the year, making this substantial investment risky. An alternative and agile option is to install a system that handles half that volume during its first phase. Review phase one, implement phase two and so on; the ‘stretch and grow’ approach.

Redesign your system

If you already have an installation in place, there are other solutions that can help you mitigate overcapacity. Through the redesign and optimisation of your processes you can reduce your CEP distribution centre’s downtime.

Try limiting your induction areas, for example. You can rearrange your operations during slower periods by concentrating the inbound goods to a smaller number of your doors or gates. Then you can handle the inbound parcels on just one or a limited number of induction areas. This not only reduces the need for more operators but also provides an opportunity to carry out maintenance.

Or consider deploying buffer chutes. These can buffer the number of parcels dedicated to one route which will reduce the need for manual separation of parcels at the end of each chute.

Ask the experts

Importantly, ask the expert system designers. An expert can advise, for example, whether installing a sorter at full capacity is even worth your while. Applying extensive experience to design, delivery and support, an expert system designer can help you determine the best business case for your installation, pulling together various technologies in an integrated solution.

Add a new business model

Perhaps the leading solution for optimising the in-between times is found by implementing new business cases. Hub managers should be asking themselves which services they can offer to existing and other clients during idle time. This means thinking outside the box and challenging assumptions.

In looking into new products and services your distribution centre or hub could develop, consider the following:

  • Your customers: What are the experiences and requirements of your customers and how can your hub meet those requirements? Find out by asking your customers; discover potential for added value you can bring to their businesses.
  • Local businesses: Can your hub help local businesses bring their products to people, whether it’s vegetable boxes from neighbourhood farms, meat platters from the butcher or fresh supplies from the brewery – your downtime can be used effectively here where you take care of the delivery.
  • Collaborations: Search for fresh ideas in a targeted manner, seeking young talent and entrepreneurs. Collaborate with startups, established companies, city authorities, and universities who want to capture the market with new business ideas. Perhaps your hub could provide start-up funding for the best ideas.
  • Your staff: Your most important asset. Harness the innovation potential of your employees and motivate them to come up with ideas and suggestions. Run a business idea competition and incentivise them by rewarding the best ideas.

A great example is Swiss Post who has become a successful logistics provider in the healthcare sector. It delivers artificial joints and associated instruments to operating theatres, collects the instruments after they have been used and sterilizes them for the next use. How can you optimise your business capability to provide a different type of service such as this?

It’s important that distribution centres start seeing the opportunities that lie in the in-between times. There are a myriad of options a hub can explore to turn a loss of system utilisation (and therefore ROI) into revenue-generating initiatives.

Think like a startup

To discover ways to make your business smarter, start thinking like a startup. Adopt the startup mentality, no matter how established your business is.

This means creating an innovation-friendly environment in your hub, one that fosters creative thinking, idea generation and feedback. Adopt a collaborative ethos, invite ideas from all employees and provide a forum for teamwork. Ask questions of all your employees, such as:

  • How can we or how might we make processes leaner and smarter?
  • What other problems do our customers face that aren’t getting solved right now? Can we solve them for them?
  • What business(es) are we in, should we be in and must we be in within the next five years?
  • Where’s the one place our competition would never go?
  • What other options (especially beyond the obvious) meet similar customer needs?
  • What other markets have similar needs that we could serve (but aren’t serving)?
  • Who could we partner with to enter new markets?
  • Who could we partner with to provide new solutions in existing markets?
  • How has someone outside our industry solved the same problem?

Finally, remember, to take a cross-functional approach – the most valuable solutions come from teams with different backgrounds and perspectives.

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