AUTOMATION & TECHNOLOGY
INCORPORATING COLD CHAIN
Capex versus Opex when considering intra-logistics and storage By Fred Albrecht , chief executive officer of Logistics Systems Engineering
Over recent years rapid progress in technology has enabled the design of warehouse facilities that for as little as a 20 % increase in capital expenditure ( capex ), vastly reduce and in some cases almost eliminate lifecycle costs . Top of that list of technologies is automation .
Operational expenditure ( opex ) reduces by means of a higher upfront investment in technology – and this applies not just with an automated system , but through the entire design of the warehouse facility . For example , if you design a warehouse with a better fire sprinkler system or new specialised insulation panels which might cost 20 % more upfront , your insurance costs will drop and this will reflect in lower opex .
Any single poor design choice for a warehouse can drive up opex by 5 %, and aggregating these mistakes may make a facility no longer competitive . For instance , there are few good refrigeration engineering firms around , and a company which chooses the wrong one may lose money in the blink of an eye . If a consulting firm cannot tell you in advance what your monthly opex will be on the facility or its full lifecycle cost , then you should walk away . That is what will determine your competitiveness and your bottom line – which after all is why you are in business . While the capex may be more – it can pay for itself within 17 months and thereafter add to the bottom line return . Some technologies like solar panel energy previously had a payback of 20 years and still represented a solid business case . Today they cost a fraction of the price , magnifying its business case with a three to four year payback – and are projected to reduce further to one year within about 12 months ’ time . Not only does this represent an excellent business case just in terms of payback , but creates a competitive edge . No business owner should ever look solely to have the most leading edge design , as it all too often results in an over-designed facility . Each case must be appropriate to its need with a design benchmarked against competitors – not just for the capex but even more so for the opex . Benchmarking is rarely done at the moment but should be part of the strategic decision-making process with an entire lifecycle cost estimate for the entire warehouse – in order to be more competitive than your competitors . Using a professional team is how to avoid costly mistakes .
Nor should one have just a single design on the table , but a number of ‘ what-if ’ scenarios offering varied options . At this engineering stage , it is an old but true adage that the cheaper option is usually the more expensive one ultimately .
The optimal investment will cater not just to today ’ s bottom line , but the long term return on investment and longevity of the system , for instance achieving lower long term opex through choices such as a 40-year lifespan panel with a 25-year guarantee .
One facility I ’ ve seen had a refrigeration plant design boasting enormous longevity potential , but massively expensive to maintain – a typical mistake when one fails to consider the full lifecycle cost . If a competitor can run their facility for half your variable cost – customers will choose a supplier by looking primarily at how much
All photos by Logistics Systems Engineering they are going to pay rather than how solid the structure is .
AUTOMATION IN THE COLD CHAIN Globally , automation is seen as the only way to go because of its efficiencies especially as regards the use of people in a frozen environment . Among other things , people have to be allocated ‘ thaw ’ periods – notwithstanding all the PPE available , bodies still freeze . It ’ s highly inefficient – not by choice , but by the harsh conditions which people ’ s bodies have to endure .
The cold environment is extremely hostile to life and equipment . It drains phone batteries just as it drains stamina from a person . Glasses mist up and staff have to wear thick gloves adding to an inefficient clumsiness . People work slower and the smallest toe stub is incredibly painful .
Something similar applies to equipment such as forklifts which also freeze .
Notwithstanding tremendous improvements in technology , the manner of working in a cold environment in the absence of automation hasn ’ t fundamentally changed for the last 100 years : it ’ s still about people , loads and handling equipment . The overall efficiency drive brought about by technology is constrained by the continued reliance on meat-body people , who are also any company ’ s biggest cost .
That ' s what automation can address . Skilled workers in the cold chain remain as irreplaceable as ever , but automation would lower the head count and create the potential to upskill those semi-skilled workers who do the physical work and to redeploy them elsewhere . This simultaneously improves the bottom line and the individual ’ s career expectations . With automation , a company is still as reliant on its people , but with fewer staff they now rely on the intelligence of their
8 www . coldlinkafrica . co . za COLD LINK AFRICA • January / February 2023