Automatic identification technologies have certainly found a home in logistics, from first mile to last mile, and in the warehouse. There, such technology is much more than an aid to pulling and picking. Auto-ID tech now makes everything in such facilities much smarter.
To get a better understanding of it all, SupplyChainBrain recently met with Jay Steinmetz, CEO of Barcoding Inc., a Baltimore-based integrator that provides a full array of such technology solutions.
Other participants in the discussion included Larry Mahan, general manager of Sky-Trax; Ralph Lieberthal, principal, transportation & logistics, Motorola Solutions Inc.; Mike Lee, CEO of Airclic; Chris Sweeney, senior vice president of Lucas Systems; and Chris Schenk, vice president of product marketing at Xata Corp.
Separate interviews with each participant can be accessed at www.SupplyChainBrain.com.
Q: Jay, you've seen quite a few large-scale implementations in the last 14 years. What makes them succeed or fail?
Steinmetz: A lot of the failures don't have top-level buy-in or you have competing resources. Sometimes, these guys don't really want to see people succeed because it's not their department. Unfortunately, sometimes you can't stop that even with good project management.
Q: What kind of preparatory work should precede big implementations like these?
Steinmetz: You have to make sure that the people who are to use the technology have some sort of commitment to the system. But you must also make sure the stuff will literally change the process flow. A lot of times people implement these systems but just take their existing processes instead of really understanding the core of why these systems are being implemented to begin with.
Q: Buy-in, prep work - what else is needed to succeed?
Steinmetz: Project management is critical. You need a system deployment that's staged, that's configured, that has proper device management. We want to look into the devices, see who's using them effectively, who's not, who's entering the information correctly. And you want to create an automation factor, which means you prevent the ability for the customer to make mistakes to begin with.
Q: It's clear that this kind of technology empowers users. So where does it go from here? What trends do you see?
Steinmetz: It will be convergence like we've never seen before. A lot of RFID and barcoding, readers with built-in knowledge capability, built-in databases, built-in GPS - built-in GPRS, so I can magnetically attach a device to a truck and know the moment an asset is deployed.
With convergence we're finding new avenues and new opportunities in businesses that never thought they would utilize automatic identification technology.
Q: Larry, does Sky-Trax see this kind of technology making forklift drivers dinosaurs, soon to be extinct?
Mahan: No. Our "smart truck" is any traditional fork truck or industrial vehicle that our customers use in their facilities. We add technology to it to track whether it's carrying a load - a pallet, for example - and exactly what that pallet is. With this solution we can then track inventory automatically. So the smart truck eliminates the fork truck driver from having to be involved in the task of collecting data and tracking inventory around the facility.
Q: Elaborate on the uses of this technology in the supply chain, if you will.
Mahan: Logistics is really just about moving stuff around from location to location in the most cost-effective and efficient way. And that really depends a lot on the information system being able to track accurately at the right time and in real time. Optical real-time location systems, as well as barcoding and RFID pallet identification technologies, all help us track things as they are being moved around the warehouse.
Q: Do these technologies increase one's control of the operation?
Mahan: One of the things everyone knows from controls theory is that you really can't control what you can't measure, and today's warehouse and DC managers have a pretty tough job because the basic part of their asset base is these fork trucks and drivers. And right now there's really no way of knowing what they're doing, where they are or what their work practices are. The new automated technology gives you that information and doesn't require any human labor. It gives managers the visibility into really what's happening. So they now have the ability to control what's going on in their facility.
Q: Can you put a figure on improvement in productivity?
Mahan: It's really pretty stunning. It's a game changer. Our customers are seeing almost always somewhere between 10 percent up to 50 percent productivity improvement.
Q: How? What are we talking about?
Mahan: We're really talking about hours of labor for the amount of work that gets done. So if we think about tracking inventory - right now that's a fork truck driver's job. He's got a clipboard, he's punching data into an onboard computer, he's doing barcode scanning. With the new smart truck solution, he does none of that. So immediately you can see where his productivity is going to go up because he's now just looking at a screen that's telling him what his next job is and where to go. It's tracking him as he's doing it. If he's going to the wrong location, if he picks up the wrong product, he's immediately notified.
Typically, driving involves stopping the vehicle, pulling the item, scanning it - so we eliminate all of that stop-and-start motion from the truck. Imagine 100 percent real-time accuracy now. We're eliminating all the time he might be spending looking for lost products, trying to locate a label.
Beyond the truck driver, this accuracy also results in more productivity for all of the site: less cycle counting, less inventory management because the warehouse manager can now see from his office exactly what's going on at all times in the facility.
Q: Ralph, we've heard about convergence and everyone benefiting from accuracy gains, not just in one department. Is there a similar comprehensive, industry-wide view at Motorola Solutions Inc.?
Lieberthal: Motorola concentrates on six industries: government, retail, manufacturing, transportation, logistics, and healthcare. Three of those - manufacturing, retail, and transportation/logistics - are part of the execution supply chain. So we don't look at those industries individually but as across the supply chain. With our partners, we work hard to develop products and solutions that will meet needs of those customers.
Q: How do you do that?
Lieberthal: The important aspect of that is to truly understand what those needs are. Before we can build solutions or manufacture technology devices, we need to fully understand and invest our time and resources into understanding those customers. We've been very successful at that.
Q: Let's narrow the focus to the transportation industry. What are the issues you see challenging it today?
Lieberthal: Let's settle on three to begin with. The first one would be what's on top of everyone's mind: the price of fuel. It's not just the cost of fuel that is important but the volatility of the price of fuel. Customers can plan their business if the price is what they expect it to be. It's the volatility that really drives them crazy. What we need to do is to look at that because companies will end up charging customers and end user surcharges based on the price of fuel.
The second issue we're facing more and more is compliance with regulations. This has to do with driver regulations, more specifically the hours of service. If drivers are only allowed to be out delivering for a certain number of hours a day that will lead to lower productivity because a driver can't be out as long. That adds a higher cost to the system. We need to look at ways to increase the ability of drivers to take better advantage of their asset and of the time they are allowed to be out there.
The third issue is service of the customer. Transportation is all about service whether for private fleet or for hire. It's all about getting product to the right place at the right time. We have to be able to provide customers visibility to what they are expecting. The best way to do that, obviously, is to be able to provide real-time solutions and having devices and technology in the hands of that critical person who's doing the actual delivery at that time.
Q: More specifically, what solutions?
Lieberthal: What we've seen over the last couple of years is development of solutions that were siloed. We have been driven to work with our partner community to provide integrated solutions to these problems. If they aren't siloed, they can leverage the use of equipment, the applications and the communications technology into one solution.
Q: What technology trends are gaining momentum in this area?
Lieberthal: Well, the first one, and we've heard lot about it over the years, is RFID technology. In the transportation industry, we see most of it in closed-loop operations, meaning that there's some pallets or cases or something that I own that I want to keep track of, and that will continue to be a very valuable use of RFID. Another one is in yard management, knowing when trucks are going in and out of the yard.
The real key, I believe, to RFID is when we get to what I refer to as machine to machine, meaning that the information that is collected at the RFID level or at the case level moves to the next location without human intervention. A person doesn't have to barcode it, doesn't have to image it, doesn't have to say anything. All it does is automatically move. Obviously we will need people to take care of situations where information doesn't flow correctly, but in that 99-percent opportunity where we can use RFID to have machines talk to each other, we get information and visibility to the supply chain.
Q: Anything else?
Lieberthal: I'd like to see data and voice convergence. There's a big opportunity to have voice and data work together not only in cellular handheld devices or in Wi-Fi but through the PBX. Customers don't want to know how they have connectivity. They don't care. All they know is they want to be able to have that ubiquitous connectivity.
And number three is GPS and location. It did a lot to change our industry visibility-wise when customers got information about where their product is and when they're receiving it. But the next big leap in GPS is knowing where products are when GPS is not available. We're talking about being inside a building like a mall, and knowing where I am inside that mall and where I'm supposed to be. So if I'm a delivery person and I'm delivering a package to Abercrombie and I'm really supposed to be delivering it to Victoria's Secret, the system will know that and tell me. We're not there yet, but I see it as the future.
Q: Mike, at Airclic you're concerned with delivery as well.
Lee: We're involved in automating the last mile of the supply chain, which means we work with any company with logistics or distribution operations, from outside the warehouse all the way to the point of delivery or pickup so they can provide full visibility around the who, what, where and why of what's happening during the course of the day of their drivers.
Q: No doubt fuel is likewise a challenge for your customers.
Lee: That continues to be a big challenge because for our customers controlling costs is always important. But perhaps it's even more so now because lots of companies are outsourcing their distribution operations. So there's a lot more competition in and around transportation and distribution. We also see competition around actually being able to find and retain drivers. Another important aspect is being able to provide full visibility for our customers' customers. So that's the way we see the world and the challenges that our customers face.
Q: You've identified the hurdles. So what can be done about them?
Lee: I think one of the most important things that companies need to look at is using the technology available today. If you look back five or 10 years ago, you'll see that technology was only really available in this area for the really big players, where they were able to custom-develop something for their use. But now with the advent of software as a service products - that's making it very accessible for companies, from the very large ones on into the middle-market companies, being able to address those issues.
Q: Specifically, what can be achieved in the last mile?
Lee: Having the ability to automate and drive significant cost out as it relates to things like paper and paper processing, and having full visibility of what's going on with the assets that are either being delivered or picked up during the day, can result in significant cost savings.
In addition, they can dramatically reduce what's called overage, shortage and damages - OS&D.
Q: Give us some examples of cost being driven.
Lee: Let's take Staples. They're the largest office supplies distributor in the U.S. Staples was able to drive out a significant amount of cost from their business by taking all the paper out that they would provide to all of their employees that were driving around. About 2,500 employees are driving around for them during the day, so if you think of all the paper and the processing with that, it resulted in significant cost savings for them.
The same thing is true with the losses during the course of the day of items that would go missing, whether misplaced, delivered to the wrong location, whatever the problem may be, but this OSD cost, which runs on average about 3 percent in the industry, they were able to cut that more than in half for their business.
Q: Are there other advantages beyond OSD?
Lee: Giving the customer's customer visibility about what's happening with delivery. What's important about that is that in a day and age of heavy competition, being able to provide visibility around when somebody can expect a delivery to be made, or when the delivery is made that it's done correctly, and if any adjustments need to be made that they are made right there at the point of delivery - that really does create a much better customer experience.
Q: You mentioned software as a service. Why is that important?
Lee: I think the days of buying seat licenses or custom-building applications for this type of thing are really in the past. What companies are demanding now is that they want the product that is available to them to be specific to their verticals and in a productized way, and that they don't have to put it on their own servers.
Q: Chris, Lucas Systems' voice-recognition system is used in warehouse applications, essentially to manage a two-way conversation between a warehouse management or host system and associates on the floor. Do you ever run into skepticism about voice technology?
Sweeney: One of our biggest challenges is positioning voice as a core technology in the warehouse, not one of many alternatives that could be used.
I think the other thing, having been in the technology business for over 25 years, is that so many companies make claims about the value of their technology and so many customers have been disappointed with the return on investment. So there's a level of skepticism out there. We have to overcome a lot of "noise" in the marketplace.
Sweeney: We're frustrated because we know this is a technology that's been proven time and time again to deliver very tangible, measurable gains.
Q: We're no longer in the first generation of this technology. What's different now?
Sweeney: When we first got into the marketplace, you had to use a fairly expensive special-purpose piece of hardware that was dedicated to the voice tasks. So I might have pickers in the warehouse, and this device was exclusively for their use.
Since then companies like Motorola, LXE and others have come out with more versatile devices that I can use for any number of standard RF applications and voice.
We're seeing that in the hardware marketplace, where prices are coming down, versatility is increasing, and I can now deliver a solution much more cost-effectively, either giving my large customer a more rapid ROI or bringing voice technology into smaller organizations that maybe six, seven years ago, they couldn't quite get the ROI to work.
Q: Is the new generation more productive?
Sweeney: With first-generation devices, I'm automating what you already had. But voice gives me a benefit - maybe I get an 8 to 10 percent productivity gain. In the second- or third- generation, I'm still going to get that inherent benefit, but I'm going to optimize processes. We're going to do some things more intelligently around how you batch your orders, how you group the work, how that work is allocated to the associates on the floor. And with each one of those enhancements, maybe I get you another couple of percentage points of productivity gain.
Q: What examples can you give?
Sweeney: Take a workflow called two-stage picking. A lot of times what we find is the customer's inventory management or warehouse management system doesn't have the sophistication to assign groups of orders based on velocity or location in the warehouse, so we have people in that region going into the remote corners of the warehouse picking fairly slow-moving items, and they're mixing that in with faster-moving items. We can separate those, put all slow-moving items into one batch of assignments, all the fast-moving items into a second group of assignments, and merge them together at the end to assemble essentially the order that goes to the customer. The benefit is that I dramatically reduce the travel time of the associate going out into the slow-moving area just to pick a couple of items.
Q: Chris, Xata is concerned with compliance issues, among other things, and there are some major ones in transportation right now.
Schenk: There are a number of them, with the biggest one right now being the changes in hours of service. The proposal is to reduce the amount of hours that a driver can drive from 11 hours to 10 hours. If you ask any fleet what impact that would have on an organization, it's pretty significant. It has huge implications for how many customers they can visit in a day, how much product they can move to market. It certainly has a significant downstream effect.
In addition to changes in hours of service, just this past year the FMSCA and the DOT launched the new CSA portal, which gives significant visibility across the entire community to safety scores and the regulatory history of any fleet.
Q: How do you see mandates on electronic on-board readers affecting hours of service.
Schenk: It's a direct descendant of it. When we look at it, we think how can a fleet get up and become operational as quickly as possible and get compliant? A mandate pushes that forward, so today it's only the fleets that have remedial attention, the fleet that has perhaps done something wrong and has received the alert from the FMCSA. The mandate pushes that requirement out to every fleet, to any trucker that travels on interstates or operates out of a 100-mile radius from their domiciled location. So it certainly impacts everybody, from people manufacturing shampoo to the company that's moving car parts.
Q: With CSA scores so visible now, how do you feel shippers need to choose their carriers?
Schenk: Very carefully. Companies need to take extra due diligence in ensuring they have a safe carrier. Liability is much further-reaching that it ever was in the past. I often recommend that they look at hiring consultants, somebody who's been in the space and understands what the proper profile of a carrier looks like because often now it is a significant burden on a company to acquire the appropriate resources to handle their supply chain, and it's about to get a lot worse.
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