Companies look far and wide for ways to make their extended supply chains more efficient. But sometimes the best solutions lie close to home.
In the case of one consumer products company, a customer of Oakland, Calif.-based APL Logistics (APLL), there were $1m in savings to be gained simply by reconfiguring a few warehouses.
The customer was one of many targeted by APLL in its effort to apply classic "lean" techniques to warehouse operations. In this particular case, the focus was on space utilization. Using lean tools such as value stream mapping, process metrics and waste elimination, APLL was able to free up a substantial amount of space on behalf of the company.
One change arose from the realization that the facility had more dock doors than it needed, according to Charlie Jacobs, senior product manager with APLL. So the operator "buried" some of those doors with products for storage. In addition, it adopted a new strategy for replenishing the pick line. Before, the picking system had been geared entirely to demand. By taking a more proactive approach to replenishment, APLL reduced the amount of "honeycombing" it had to do within the racks to fill orders on the fly. In the process, it made room for more bulk storage.
Other actions taken by APLL included reassessing the best candidates for upper-rack storage, to make better use of double-stacking, and converting some special-project areas into basic storage. Taken together, the changes freed up so much space that the company didn't need to utilize an APLL overflow facility. That meant less potential revenue for APLL, notes Jacobs, but the program ended up saving the customer more than $1m a year when it was replicated at multiple facilities.
If there's any one trend that best characterizes how warehouses are changing today, it's increased speed. Buyers want product faster, but they don't want to keep a lot of inventory close at hand to ensure its availability. And that puts more pressure on warehouses to ramp up efficiency. The alternative is boosting safety stock, which raises overhead to unacceptable levels and heightens the risk of product obsolescence.
Cost control is a never-ending concern. Soaring oil prices are eating into the already-thin margins of logistics providers throughout the supply chain. "Fuel costs are becoming an increasing percentage of total inventory-carrying costs," says Wilson Rothschild, senior product marketing manager with Infor in Atlanta. Vendors and buyers are responding by postponing the receipt of inventory until the last possible moment. In the process, Rothschild says, "the warehouse becomes less of a traditional distributor and more of a value-added service provider."
With leaner inventories comes a need for greater visibility. Jacobs says companies are demanding more information about the location and nature of their products. In the food business, there's a critical need for product code dates, so that suppliers can identify the precise source of contaminated goods in the event of a recall. Responsibility for keeping track of that information falls squarely on the warehouse, he says.
Warehouses also must deal with the ever-changing nature of today's consumer goods. San Francisco-based Method Products Inc. is a fast-growing maker of environmentally friendly cleaning supplies. Founded in 2001, the company is constantly changing its product mix and experimenting with new items. Picking strategies at its four U.S. distribution centers must change accordingly.
"We're constantly reinventing ourselves," says senior director of operations Paul Tasner. "We don't get a chance to settle into a relationship with a third-party logistics provider and work out the kinks that one encounters over a matter of years with a mature product, and predictable turns and volumes."
At three of its four DCs, the company's 3PL is Ozburn-Hessey Logistics. It must reevaluate pick fronts and putaway locations on a quarterly basis at the minimum, says logistics director Jason Bowman. Complicating matters is the growing use of just-in-time fulfillment strategies within the consumer products industry, as suppliers struggle to improve service while minimizing inventory levels.
"We have to understand the velocity of their product, and slot it appropriately to reduce travel distance [within the warehouse]," says Mike Honious, vice president of customer solutions and implementation with Brentwood, Tenn.-based OH Logistics.
OH Logistics also must deal with varying labeling requirements, depending on the product's ultimate destination. Target Stores carries Method's entire product line, notes Tasner, but the company sells to many other big retailers, including Costco, Whole Foods, Safeway and Canada's Shoppers Drug Mart. Each has its own set of labels that must accompany all shipments.
Still a small company, Method relies on the OH Logistics warehouse management system known as Accuplus, a low-end application with basic functionality. The tool uses the internet to supply customers with crucial inventory data. Picking is optimized mostly by way of calculations on Excel spreadsheets. Bowman says Method hopes eventually to graduate to a more sophisticated WMS, such as OH Logistics' Synapse.
Focus on the Workforce
Information systems and picking techniques aren't the only things under scrutiny in modern-day warehouses. Improved labor-management strategies are playing a key role in boosting efficiency. OH Logistics has initiated a program called Operational Excellence for more than 30 of its accounts nationwide. The effort involves the measurement of work tied to productivity standards, based on time studies conducted by industrial engineers. Management works closely with labor to ensure maximum performance and find new ways of enhancing productivity. "It's not just a reporting tool," says Honious. "It's a whole cultural change."
Labor management is at the heart of the application acquired by DSC Logistics from RedPrairie Corp. Headquartered in Des Plaines, Ill., DSC provides a variety of supply chain services to major customers around the country, including Wal-Mart Stores. It already had an internally developed WMS but needed a labor management component, says Jim Chamberlain, director of industrial engineering.
Following an intensive look into all aspects of its warehouse operations, DSC acquired the RedPrairie DLx application. "We had a lot of good, bad and ugly going on," says Chamberlain, adding that the company developed a detailed series of best practices for labor performance before installing the applicable software.
Waukesha, Wis.-based RedPrairie helped out from the start. "They worked with us to determine what the best practices would be," says Chamberlain. "We gained 500 installations' worth of experience that they came to the table with."
DSC ended up with discrete standards for each function in the warehouse. Previously, it could only measure a worker's performance on the basis of pallets or cases processed per hour. Now DSC knows the quantity, weight and cube of each item, the distance traveled by the worker to reach it, and the amount of horizontal versus vertical storage. "Everything that makes an order simpler or more complex is factored in," says Chamberlain.
DSC tweaks its best practices in line with actual experience. They are reviewed with managers and workers on the floor, Chamberlain says, "to get their feedback on whether there is a better mousetrap." The company has gone live with the DLx software at 18 of its 30 facilities. The result has been an increase of around 15 percent in variable labor performance.
Jim Le Tart, director of marketing with RedPrairie, says software alone won't solve warehouse productivity problems. "The technology really only records what's going on," he says. "It's the process improvement that is the focus." The use of engineered labor standards, he adds, can improve the productivity of many warehouse operations by 20 to 30 percent.
Even so, many warehouses have been slow to adopt engineered standards. One reason, Le Tart suggests, is the extensive up-front work that is required to define best practices and standards. Another is the fear that employees will rebel against the strict performance measures that are part of such systems.
"Actually, the opposite is the case," says Le Tart. "Employees want to be treated fairly, and that's what standards do. You always have a few individuals who will rebel, but the vast majority embrace it."
A full set of engineered labor standards is necessary in order to gain worker confidence, says Ian Hobkirk, director of supply chain consulting with Forte Industries in Cincinnati. Systems that deploy historical averages don't account for such elements as travel distance and the type of picking involved, he says. "When you just use historical standards, you get a lot of pushback."
The Travel Factor
Reducing travel time between locations within the warehouse is another major strategy for boosting productivity. Operations can be sped up by placing fast-moving items closer to the pick line, Le Tart says. The practice known as task interleaving yields further savings. A forklift driver, after putting pallets away, is given another task by the system instead of returning empty for the next assignment. Multiple jobs can also be given to workers on foot. The idea isn't a new one-RedPrairie has offered the functionality for a decade-but more warehouses are showing interest in task interleaving as they combat rising costs and a limited labor pool, Le Tart says.
Brad Wyland, senior research analyst of supply chain management with Aberdeen Group in Boston, Mass., says warehouses are becoming much more sophisticated in the criteria they deploy for laying out storage racks and product. They are also engaging in more batch picking, multi-container picks, grouping of orders by product and density, and other techniques that make better use of the existing workforce.
"They are looking at utilizing labor as best they can," Wyland says. "You don't want people deadheading-going up and down aisles without doing something." In addition, replenishment schemes reflect the popularity of various items, as managers work to ensure that they don't run out of product at the pick face. Some warehouses are turning away from traditional wave picking in favor of grouping orders by product and density. Such plans are subject to constant revision, based on seasonal peaks and actual customer demand.
Changes can occur on a monthly or even weekly basis. "You don't have four seasons anymore," says Wyland, adding that retailers are under pressure to have new product on the shelves year-round. When an item isn't selling, they are quick to offer a replacement.
Warehouses are being more careful about the technology they acquire to support new business processes, Wyland says. "The buying of technology without understanding the right place for it is not as popular as it used to be." Certain systems can yield benefits, provided they are installed in the proper environment. Pick-to-light technology, for example, is best deployed in warehouses with high volumes and many small pieces. Case-picking operations could benefit from a combination of robotics and the reassignment of workers to more sophisticated tasks.
Many of the changes taking place in the warehouse today are a response to soaring labor costs and the decreasing reliability of the workforce, according to Hobkirk. Warehouses, he says, "are paying more and getting less for it." The dilemma has sparked a search for processes that are easier for new employees to learn. At the same time, the application of lean techniques and the removal of waste has narrowed the margin of error. Extra inventory is no longer on hand to cover up mistakes, and speed is of the essence. "There is no longer the luxury of time to pick and ship, or even to put product away when it comes in," says Hobkirk. The result in many cases is an impromptu cross-dock operation, where inbound product spends little or no time in storage before being shipped out.
New systems and processes alert warehouse operators more quickly when something goes wrong. They also extend vital information about inventory status beyond the facility itself. Gone are the days when the warehouse was merely a "black box," responsible only for getting product out the door."External customers are expecting to know a lot more about what's going on within those four walls," says Daryl Grove, vice president of systems engineering with Denver-based Cadre Technologies Inc.
In the old days, product might sit on the dock for a day or two without customer service knowing about it. That's not the case anymore, says Grove. Electronic commerce offers visibility of shipment status at every step of the way, from supplier to end customer. What goes on within the warehouse is equally transparent.
The newest applications allow companies to do a better job of managing inventory across multiple distribution facilities. The Cadre Technologies system known as LogiView sits atop the WMS systems of various warehouses and provides a single point of visibility via the internet, says vice president of sales Mike Markham.
Greater visibility of shipments across the entire supply chain allows suppliers to allocate product while it's still in transit. "Instead of creating a back order or turning an order away, you can begin to make the order-build plan for when those goods are landed," says Hobkirk.
The Receiving End
A successful warehouse operation begins with proper receiving. "You put your best people in the receiving area because any mistake there is exponential, and compounded throughout the picking process," Grove says. "The big shift in warehousing has been that you don't go cheap on the receiving side anymore."
New technology can accelerate the movement of product from the moment it enters the warehouse. Among the most promising developments is the maturation of voice-directed systems. The insurance carrier Aflac, a customer of Cadre, has reduced from five days to just one or two the turnaround time for distribution of supplies and promotional materials to its agents. Voice technology played a big part in the improvement, says Grove.
In just five years, voice has advanced "from a cutting-edge technology to one that's tried and true," says Hobkirk. The price of systems has come down, while applications have become suitable for handheld, multi-function devices. Workers can switch between voice and more traditional barcode scanning according to the needs of the particular product. "Voice is a good fit 60 to 70 percent of the time," Hobkirk says.
The technology is poised to break out into additional areas within the warehouse or DC. Jennifer Sherman, senior director of logistics strategy with Oracle Corp. in Redwood Shores, Calif., sees voice moving out of traditional picking and low-temperature environments into such tasks as cycle counting, receiving and inspection. "We're starting to see customers excited by that ability," she says.
Pick-to-light is another mature technology that has helped distribution centers process more orders with greater accuracy. Light-directed systems work best in high-volume, "each-pick" operations, says Honious. Of more recent vintage are radio frequency applications employing two-dimensional barcodes. The symbols can capture multiple serial numbers off a product and greatly speed up the scanning process, he says.
The latest WMS suites can be deployed effectively in non-DC environments, according to Sherman. As companies bypass traditional DCs to save time and money, manufacturing centers take on order-fulfillment responsibilities. Or they might seek greater control over stockrooms feeding the assembly line. Work orders can be handled as picking waves, Sherman says, ensuring that components don't arrive at the line too early or too late. Traditional WMS can even be deployed in non-manufacturing areas such as customer maintenance shops, repair depots and spare-parts centers.
"Whether you're doing light assembly or packaging as part of a postponement strategy, or [running a] manufacturing center that does some order fulfillment, you're going to see the lines between those two types of facilities blur," Sherman says.
Warehouses needn't acquire the most sophisticated WMS software to reap the benefits of new technology. Cincinnati-based QC Software Inc. is a vendor of warehouse control system (WCS) applications, which tend to manage smaller facilities that don't require a tier-one WMS. WCS is best suited for piece-pick environments, interfacing directly with material handling systems, says vice president Jerry List.
WCS can be combined with pick-to-light and even voice, although QC hasn't worked with the latter technology. "Voice is more well-suited for product that's a bit larger, or for less densely populated picking areas," List says.
A number of smaller companies have had success with pick-to-light. QC customer Lia Sophia, a direct-to-consumer seller of fashion jewelry, uses the technology along with an A-frame picking system to speed up the processing of orders. The company previously relied on a manual picking operation that couldn't accommodate growth, List says.
As with any technology, companies must strike a balance between need and cost. That's why many providers offer several tiers of WMS, pegged to the sophistication of a given operation. Says Honious: "Every customer has its own identity and its own personality."
APL Logistics, www.apllogistics.com
Cadre Technologies, www.cadretech.com
DSC Logistics, www.dsclogistics.com
Forte Industries, www.forte-industries.com
Ozburn-Hessey Logistics, www.ohlogistics.com
QC Software, www.qcsoftware.com
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