AMHS – ROI AMHS – ROI 2009 Update2009 Update

Automated Materials Handling SystemsReturn on Investment Study in Massachusetts

Presented at American Library Association - 2009 – Chicago

Greg Pronevitz, Northeast Massachusetts Regional Library System

Copy of Presentation and Copy of Presentation and Related InformationRelated Information

www.nmrls.org/greg/ala2009

Special ThanksSpecial ThanksMassachusetts Regional Administrators

Lori Ayer, Galecia GroupMelissa Stockton, QuipuGroup

These consultants did statewide analysis of delivery workflow and sorting and they contributed many suggestions regarding options for automation.

Why We Looked at Why We Looked at AutomationAutomationVolume Increase

◦Patron-Placed HoldsDissatisfaction with service

◦High costs◦Delays◦Missorts

Impressed with tours◦King County Library System◦ http://www.youtube.com/watch?v=4fq3CWsyde4

◦Seattle Public Library

Our Second LookOur Second LookLabor Savings at Libraries

◦Efficiency◦Ergonomics

Specifications - Specifications - UnchangedUnchanged2008 & 2009Hybrid – Barcode + RFIDOvernight TurnaroundCompatible Containers

Specification ChangesSpecification Changes

2008 – 3 Regions

2009 - Statewide

Sort Site Proximity

One Statewide Sort Site

285 Libraries 646 Libraries and Branches

6 ILS’s 9 ILS’s31,000 items per day

50,000 items per day

Benefits of AutomationBenefits of AutomationLabor Savings at Libraries

◦End to Labeling outgoing items Presorting Packaging/Bundling

◦Reduce mis-sorts◦Potential for

Live tracking data Tote level check in Improved containers Gentler treatment Sorted by return/hold/branch

Benefits of AutomationBenefits of Automation◦Regional System Benefits

Centralized management Lower costs?

Risks of AutomationRisks of AutomationOwnership

◦Cost◦Maintenance◦Power outages

Need back up process

◦Centralized management All eggs in one basket

Costs and Requirements of Costs and Requirements of AutomationAutomationSystem costMaintenance costsLabor costsManagement costsExternal barcode/RFIDContainer standardsSystem connections (CIP2)

Return on Investment - Return on Investment - ROIROISystem cost + Operating cost

compared to optimal Manual sorting operation costs

Current Costs in Current Costs in MassachusettsMassachusettsAbout $14 per hour for sortersSorting Rate of about 400-500

items/houror 3.5 cents per item.035 x 13 million = $455,000Outsourced to various courier

companiesBundled with

◦ Transportation◦ Facilities◦ Vendor profit

ROI Case Study for 3 ROI Case Study for 3 RegionsRegionsAMHS with 4,000 and 8,000

items per hour throughput

Manpower RequirementsFacilities RequirementsOther Considerations

Labor SavingsLabor SavingsOptimal Sorting Costs $285,0008,000 per hour AMHS $226,000Difference $59,000Difference will increase with cost

of laborWhat is the cost of the system,

facilities and other variables?

System, Facilities, Set Up System, Facilities, Set Up Costs Costs 2008 Estimates – 2008 Estimates – Over $300,000 Over $300,000 per yearper year

Needs Start-Up One Time Costs

Ongoing Year One Year Two

System Costs        Purchase/Lease/Loan        

Loan $1 million for 5 years at 8% 0 245,000 245,000 245,000Installation, Shipping, Training 7,000   7,000  Maintenance Agreement at 5% 5,000     5,000         ILS Work        CIP Licensing or advanced RFID $1,000 x 6 systems   6,000 6,000 6,000Misc. tbd   tbd tbd         Facilities Costs 10,000 sq ft x $8        Purchase/lease   80,000 80,000 80,000Utilities/Upkeep/Taxes   9,000 9,000 9,500         Facilities Preparation        Build Out tbd   tbd   Power Installation 5,000   5,000  Networking 3,000   3,000  Computer Equipment 4,000   4,000  Furniture tba   tbd           Totals     $359,000 $345,500

Labor Costs for AMHS at 4,000 and Labor Costs for AMHS at 4,000 and 8,000 items per hour Throughput 8,000 items per hour Throughput (estimate)(estimate)

   Items per Hour

Cost per Day

Items per Hour

Cost per Day

  Staffing 4,000   8,000  

Salary/Benefits Hourly

Operating Hours - 40,000 items/day 10.00   5.00  

    No. Staff   No. Staff    

$12Loaders 1,000 per hour per person 4.00 $480 8.00 $480

$12

Staging 40 item totes at 50 per hour per person 2.00 $240 4.00 $240

$30Mangement/Minor Maintenance 1.00 $300 1.00 $150

  Labor Cost per Day   $1,020   $870

 Labor Cost per Year 260 days   $265,200   $226,200

Current Labor Cost Current Labor Cost (estimates)(estimates)

   

Current Items per Hour

Cost per Day

Optimal Items per Hour

Cost per Day

  Staffing 450   550 

Salary/Benefits Hourly       6.66 

$14

Sorting & Staging at 450 per hour per person 88.88 $1,244 72.72 $1,018

$40Mangement/Minor Maintenance 2.00 $80 2.00 $80

 Labor Cost per Day   $1,324  $1,098

 Labor Cost per Year 260 days   $344,323  $285,501

Other CostsOther CostsBar Codes/RFIDEquipment (Barcode Printers)Supplies Library NeedsRFID readersBar Code PrintersSupplies ContainersVehicle upgrades

Does this ROI work?Does this ROI work?

Labor $265,000+ System/Facilities $345,000=$610,000 per yearvs.Optimal Labor Costs$265,000 per year and vendor

provides facilitiesHowever, there are other savings

Per Transaction Savings in Per Transaction Savings in LibrariesLibraries5 seconds X 13 million items per

year = 65 million seconds =1,083,333 minutes =18,055 hours X $16 =$288,888 labor savings in libraries

per year on delivery transactionsDon’t forget non-ILL circ transactionsRFID might save more

AMHS VariablesAMHS VariablesAMHS benefits increase with cost

of laborVendor facilities costs are buried

and could changeAMHS technology improvements

could require less manpower

New DirectionNew DirectionDecision to seek long-term

Public/Private Partnership(s)Avoid purchase/lease of AMHSRequest for Information (RFI)

issued July 7, 2009 Responses due August 17, 2009

Contact:Greg Pronevitz, Northeast

Massachusetts Regional Library System (NMRLS)

978-762-4433 greg@nmrls.org

Copy of presentation:

www.nmrls.org/greg/ala2009

Thank youThank you