Getting what you need

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by Emily Atkins

MM&D recently brought together a group of warehouse and DC equipment experts to discuss the trends and changes in the business environment that are affecting the choices of warehouse equipment being made.

Participants on the panel were: Bruce Buscher, vice-president, Jervis B Webb, in the factory automation/distribution automation group; Stan Dunton, international sales manager, Buckhorn Inc; John Ferrari, senior vice-president, engineering, Konstant; Albert Goodhue, partner, GCL; Owen Moore, principal, BeWhere; and, Lisa Vegso, general manager, Canada, PECO Pallet.

We asked them to identify the problems and challenges DC and warehouse managers must handle in their operations. What are the demands they are facing, created by both internal and external factors?

The group identified several areas that are affecting the way warehousing gets done. These included:

  • The growth and evolution of e-commerce;
  • New requirements in customer service levels;
  • The pressure to reduce costs and gain efficiencies;
  • Growing need for order fulfillment and the cost of labour to do that; and,
  • The role of technology in optimizing operations.

The growth of e-commerce is seen by all to be a huge influencer on DC operations. And this is making for some big operational changes.

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But behind it all, said Albert Goodhue from GCL, is the amount of information available now. “Information is the biggest transformation that the industry is facing today. Basically, a distribution centre exists in order to service the customers. What technology can bring, definitely, is behaviour of customers, the big data.”

Forecasting has always been key for DC management. But with so much more data being collected about customers, demand, peaks and troughs, Goodhue asked: “What is the ability of the DC manager to make decisions using that information?”

It allows for better service time, because the product is the right quantity at the right place for the service. “The paradox of this is that we’re passing from managing pallets to a retail store where everybody goes to the store, to now breaking that pallet into units, then shipping that same pallet into 500 different orders,” Goodhue said.

The proliferation of orders, growing demand for high levels of customer service, order perfection, and increasing speed were all factors panelists noted.

“The biggest challenge is you’re handling more orders and smaller-sized orders, so you’re moving away from pallet picking and case picking into piece picking and managing a lot more orders in smaller quantities,” said Lisa Vegso from PECO Pallet. “I see that as the biggest challenge that warehouse managers are going to be facing with e-commerce. And what technology can assist with that?”

John Ferrari of Konstant believes the answer is in reducing the amount of time a picker has to travel to complete an order. One possible solution is “the introduction of a customized pick module system, designed for split-case and full-case picking. It integrates gravity pallet flow and carton flow by transporting product from your replenishment rack to the picker.”

An added benefit is flexibility. “If there’s a change in SKUs, if there’s an increase in product volume, they can handle that,” Ferrari said. “And they also integrate, for the most part, some degree of automation. The other thing with pick modules is that they truly reduce the amount of contention between replenishment and picking operations.”

For Jervis B Webb’s Bruce Buscher there’s a chicken-and-egg situation. “Technology can influence a lot of decisions you’re going to make,” he said. “But a lot of the issues we’ve identified actually will drive which technology’s best for you.”

For example, if your DC is located in a region with low labour availability, and “you can’t find anybody to operate your fork trucks, well, then, you better be looking at things like conveyors, or storage and retrieval systems,” he added.

Planning is key, the panelists agreed.

“One of the challenges I’m hearing comes down to the design and planning on the front end,” Vegso said. “When we look at e-commerce as a growing trend, that didn’t exist 10 years ago, how do you build a racking system to support the needs today, but then have the adaptability and flexibility to be able to evolve that system as needs change?”
Flexibility is paramount in planning, even when you know what you have to move and store now.

“One of the biggest mistakes any distribution or warehouse manager would make when he’s trying to figure out what kind of automation to put in, is—if he knows that he’s got all these different shapes and sizes and SKUs—if he tries to find some automation that’s going to solve all of his problems,” Buscher said. “And 99.9 percent of the time it doesn’t exist.”

One solution is to capture a reasonable percentage of the volume—Buscher suggested 80 percent as a possible number—that can be managed with standard conveyors and sortation equipment, storage and retrieval and perhaps guided vehicles. And the remainder—the “uglies” as Buscher called them—are dealt with as needed.

Ferrari looked at if from an efficiency perspective, starting with choosing the right storage system to meet your business needs. “Whether you’re handling small parts or palletized goods or large, bulky, odd items, you have to be methodical during the design process, and truly value the utilization of the building cube, that’s going to house the racking system,” he said. “Most warehouses and distribution centres are going to require a mix of different storage types. And that usually translates into the most effective storage system solution.”

Stan Dunton of Buckhorn Inc, points out that the planning process sometimes needs to go a little deeper. “It seems like the returnable packaging we do is the last thing that is thought of in the distribution centre,” he said.

The racking gets planned, the retrieval and picking systems get organized, “and then at the very end they say, ‘Hey, we need a plastic tote that’s 22 inches by 22 inches by 13 and a half inches. Go order 42,000 of those.’”

Unfortunately, sometimes that tote doesn’t exist. And DC planners don’t realize that it takes time to design and create a mould for a new container, Dunton added.
Vegso concurred: “When you’re looking at implementing any type of automation you’ve got to consider what is the container that’s going to be used, whether it’s a pallet or a plastic container. But certainly make  sure your automation is aligned with what packaging or what product is going to be moving through that automation.”

If you try sometimes
Assuming that you have the plan and know what you need, the next question for the DC manager is how to persuade senior management to make the investment.
“I think the big trade-off for everybody managing a DC is customer service versus cost,” said Goodhue. “The DC exists because there’s product inside and we have orders coming in. And then they have to fulfill the orders in order to serve the customers. Customer service is the reason why the DC exists, and we want to do it at the minimum cost.”

BeWhere’s Owen Moore turned the problem on its head. “Do good customer service and cost efficiencies need to be competing factors? Or can you implement some form of technology that allows you to improve your customer service without ramping up customer service personnel, and not have them directly competing?” he asked. “What are the major customer service issues and what are the technologies that help you resolve those issues? I always look to try and bring in technology that helps improve a company’s ROI.”

Ferrari also looked at the numbers: “I tell people, when you’re purchasing rack, consider the total cost of ownership.”

With racking this means knowing where the impact areas will be and making sure the cost of maintenance is built in. “If rack is not maintained properly the costs of repairs and replacement of components are going to be exponentially high.”

Buscher said the most important point is to know what problem you want to solve and how much you will save by going with a new system. But, he said, “it doesn’t necessarily mean you can justify it.” He points out a customer who is not “saving a dime in implementing this automation. What they are doing is they’re getting 44 percent more efficient with this new  automation and the same number of people.”

But it isn’t always as simple as identifying the problem and finding a solution, said Goodhue. Every DC and operations manager sees tons of opportunity in front of him because DCs come with limitations: the height, the building, the materials handling, the lift trucks, the racking, warehouse management systems. But even for something as simple as using bar-coding it’s hard to get the investment.

He went on to describe meeting with a company that wanted to increase its e-commerce fulfillment operation. “I said to the president of the company, ‘How much are you willing to invest and try to understand this?’ And he said, ‘You know what? My logistics and warehousing fulfillment cost is part of our marketing costs.’”
Because, Goodhue explained, if he wants to give free delivery, free delivery brings more orders, more customers, more revenue, and it costs a million dollars or $10 million for him to do.

“But I think, for us, as supply chain professionals, e-commerce is only shining a light on us—light that shows we’re a link to revenue.”