Food and beverage (F&B) companies across Australia and New Zealand are facing increasing challenges in a hyper-competitive environment, including cost pressures and the squeeze on margins, reduced availability of labour, and the need to maximise customer service levels, improve occupational health & safety, and increase visibility and traceability across operations.
More and more local companies are replacing manual forklifts with Automated Guided
Vehicles (AGVs) to address these specific challenges and improve productivity,
efficiency, and flexibility in their manufacturing and warehousing facilities.
F&B companies – and 3PLs that support them - that have implemented AGVs
include alcohol manufacturers and distributors, soft drink manufacturers, dairy
companies, meat producers, confectionery manufacturers, dry goods, and pet food
This white paper specifically looks at the challenges faced by F&B companies and
how AGVs address these challenges and the benefits they provide.
Click here to download Addressing Food & Beverage Industry Challenges with AGVs
Cost pressures: the need to reduce costs and maximise productivity
The imperative to optimise productivity and reduce costs in supply chains has never been greater for F&B manufacturers. While labour costs continue to rise and drive the need to increase productivity, these cost pressures are being compounded like never before by the increasing concentration of the grocery retail market, and increasingly price conscious consumers.
Grocery retailers putting pressure on manufacturer margins
Grocery retailers are in a unique position of strength and this has major implications for F&B manufacturers. In Australia, the market share of the two top grocers stood at 68% in 2017-18 according to IBISWorld, one of the most concentrated grocery retail markets in the world. The New Zealand the concentration is even higher, with the top two grocery holding 79% market share.
Major grocers are also consolidating market share in liquor retail. Australia’s two major grocers – with their big box liquor outlets and aggressive pricing – now control 67% of the alcohol retail market.
The grocers have leveraged their position to drive strong agreements with suppliers, eroding suppliers’ margins and enabling them to offer low store prices that smaller outlets find difficult to compete with. They are also using their position to drive their own private label ranges at the expense of branded products, further cutting manufacturer’s margins.
Labour: rising costs, decreasing availability
The challenge to reduce costs is compounded by increasing labour costs. Furthermore, operators who want to work in warehouses and distribution centres are becoming hard to find and retain. Nowhere is this more acute than in cold storage facilities.
Customer service pressures
In a highly competitive, consumer-driven market it is imperative for F&B manufacturers to get the right product in the right quantity at the right time to customers, more so than in any other industry. Grocers are less tolerant of missed delivery windows or incorrect products that lead to out of stock store shelves, imposing penalties for late or incomplete deliveries.
Manufacturers need to ensure there are no bottlenecks to operations – such as an operator leaving a pallet at the end of a palletising line – which can lead to production lines being stopped. In turn they need to ensure they have the correct product in the required stock quantity, and that orders are complete and accurately despatched in a timely manner.
The Key Benefits of AGVs
Increasing Productivity to Reduce Operational Costs, Reliance on Labour
F&B companies are investing in AGVs to drive productivity gains in their warehouses and distribution systems, switching from manual forklifts to automated operations with AGVs to reduce operational costs and reduce reliance on scarce labour.
In a typical two-shift operation, companies can expect a return on investment in two years. These savings increase with the number of AGVs on site due to scale.
If an operation runs three shifts a day, five days per week, the annual cost per forklift is approximately $240,000. This cost includes the wages of three drivers, capital expenditure or leasing for the vehicle, and running costs. Over ten years the cost of a forklift equates to approximately $2.4 million per forklift.
Over a ten-year period, businesses can potentially save nearly $2.1 million per forklift by investing in an AGV system. Businesses that run their warehouse for over eight hours per day can achieve substantial cost savings by switching to AGVs. And the more shifts there are, the more money businesses can save because AGVs can run 24-hours per day without any additional staffing costs or the need to pay any overtime or holiday rates.
Further costs savings and reduced warehouse operation disruptions are also gained because unlike a forklift operator, AGVs don’t take breaks, claim sick days or make mistakes.
Improve Occupational Health and Safety
Occupational Health and Safety (OH&S) is regularly cited as the number one priority for many F&B manufacturers. The movement and storage of heavy pallet loads, potential breakages and spills, all pose dangers to operators. Apart from the human factor, Lost Time Injuries are becoming increasingly costly to operations. And an aging workforce only increases the imperative to address OH&S challenges.
According to SafeWork NSW, the main reasons why people are killed or seriously
injured by a forklift include:
- Hit by a forklift because of driver error, working too close to the forklift or
inadequate traffic management
- Hit by a load a forklift was moving because the driver did not use an attachment
when one was needed, or assisting to adjust or steady the load
- Not wearing a seat belt in a tip-over. The forklifts mostly tipped because
operators were turning on uneven or sloping ground.
Thanks to their safety and accuracy features, AGVs create a safer working
environment, with no accidental collisions and zero damage to loads. AGVs strictly
comply with, and exceed, the demands of international safety standards.
AGV systems are suitable for materials handling applications in harsh applications
including cold stores. AGVs can also operate around the clock and run at night with
the lights out in the freezer warehouse, which has a temperature of minus 25 degrees
Celsius. The addition of AGVs in the warehouse provides a reduction in occupational
health and safety concerns as well as eliminating human error.
It is worth reiterating with regards to safety, with their multiple sensors AGVs are able
to work safely alongside operators and other material handling equipment such as
Increased Visibility and Traceability
Food Standards Australia New Zealand (FSANZ) requires food to be tracked through all stages of production, processing and distribution (also known as farm to fork). The aim is to enable quick and effective corrective action in the event of something going wrong, such as a product recall, and prevent contaminated product from reaching consumers.
Supply chain management systems need to capture sources of raw materials, additives and other ingredients and all other inputs, and provide product batch or lot identification, production and expiry dates. In addition to meeting Food Standards Code requirements, F&B companies recognise that product traceability systems help protect their brands by enabling a rapid and effective response to any incident. Apart from batch and lot tracking, Warehouse Management Systems (WMS) need to effectively manage inventory and First In First Out (FIFO) rules; in many cases, major grocers will only accept consecutively numbered batches and expiry dates.
By fully automating transport and storage tasks, and fully tracking all movements, AGVs provide full visibility of operations and complete traceability of product from production through to warehousing and despatch.
AGVs are very reliable and significantly transform the efficiency of manufacturing logistics operations. When an AGV transports and puts a pallet somewhere, it constantly updates the WMS, so all materials handling is conducted in real time.
Flexibility and Scalability
F&B companies’ operations change, and they need the flexibility to be able adjust any systems accordingly. AGVs are a flexible automation solution and can scale or flex as required. Adding new machines or reallocating AGVs from one area of a facility to another is quick and easy. AGVs are able to communicate with each other and the control system for the AGVs is also very smart, so if one AGV is closer to a task than another, they’ll swap tasks.
The AGV management software is shared so that changes can easily be made to one machine and replicated to all. New machines can be operational in minutes after arriving at a facility, minimising any disruption to operations.
Because today’s AGVs use laser and vision-based navigation, modifying or changing a guide path is an easy operation. Simple software changes to the fleet management software can allow guide paths to easily be changed or modified. Changing the guide path only needs to be done once, and all the machines in the system get the change.
Redeploying AGVs to different locations is equally easy. This allows AGVs to be shared among multiple facilities or areas within a facility to alleviate seasonal demands.
F&B companies have always faced challenges due to being part of a fast-paced and demanding grocery environment, and as technology advances and consumer expectations around product availability increase, the challenges facing F&B companies have also increased.
With growing cost pressures and customer service pressures, F&B companies need to improve productivity, increase visibility and ensure that their warehouse operations have the flexibility and scalability to keep up with future demands.
In order for F&B companies to accommodate and also capitalise on the changing demands of the market, they will need to think carefully about how supply chain processes can be optimised to better suit the needs of the F&B market.
Investing in technology allows F&B companies to improve warehouse operations and address a number of these key challenges, and many F&B companies are already choosing to implement AGVs in the supply chain. AGVs increase productivity, reliability and improve OH&S through minimising the need for human workers in the warehouse, which also allows companies to bypass labour shortages and run operations 24/7 without incurring added wage costs. AGVs provide better visibility of warehouse operations by automating processes that were previously manual, as well as providing the flexibility needed to support any future growth of a company.
The significant benefits that AGVs provide to F&B companies enable businesses to remain competitive in an increasingly challenging environment, and ensure they are well positioned to address any future changes to the industry.
Click here to download Addressing Food & Beverage Industry Challenges with AGVs
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