Materials Handling: Making the old new again [from the MM&D September 2012 print edition

by Dave Luton

Everywhere one looks today there is emphasis on green or ecologically responsible activities, including environmentally friendly warehousing. Yet, one wonders if we really are improving things from an environmental perspective.

Sometimes, I feel that too many of today’s publicity claims include a large component of green washing and the environment would be better served by concentrating more on doing a good job. One can argue that by taking well-tested practices and upgrading them through the use of some modern advancements in information technology, we can get the best of all worlds: green, efficient, and proven.

For an example of how this can work, let’s take a look at the interface between warehousing and transportation.

As one is trapped in a traffic jam entering a facility behind a long line of trucks—each puffing out engine fumes—it is pretty hard to argue that improving your warehouse interface with the transportation sector will not improve the environment. Certainly it helps reduce the all-important carbon footprint.

Transportation optimization needs to address two components: external transportation and internal warehouse transportation. A good place to start is to ensure your warehouse is optimally located to avoid excessive external transportation mileage. If you can make the right decision the first time when you’re deciding where to put your warehouse, the cost savings and environmental benefits can last years, if not decades.

Optimal warehouse location usually has two elements: a “macro” within a geographic area, and secondly a “micro” to select a specific site.

The advantage of modern technology is its power to harness and process large amounts of data quickly and cheaply. Thus the quality of information about warehouse network optimization is greatly improved from what was available in the past—both in relation to external transportation and internal warehouse layout perspectives. Simulation and modelling, in particular,prove to be very useful when trying to determine optimal layouts.

Environmentally friendly network design should also consider the impact of using outside resources. Again, many of the principles have been around for a long time, but they often have to be rediscovered and adapted to fit the changing business environment. An example of this situation is e-commerce, which, over the last 15 years, rediscovered some of the efficient, decades-old logistics practices of the mail-order business.

Initially e-commerce companies set up distribution networks with as few facilities as possible. They used large, automated central DCs. The nationwide scale provided efficiencies from an internal processing and order collection viewpoint. Also, by eliminating retail storefronts, business greatly speeds up and companies save costs associated with establishing an associated retail store network.

The disadvantage of this approach is the delivery to ultimate destinations with vertical elements such as multistorey offices or densely populated residential cores full of condo buildings and apartments. Conventional delivery systems can work well with ground-level deliveries but they run into problems with high-rise deliveries as many e-commerce grocery systems have found out to their peril. This is particularly true for residential deliveries when the majority of residents are at work during the day. And
it’s not just urban areas. Businesses also run into problems when delivering to sparsely populated rural areas.

It took a while, but eventually using the habits of the old mail order catalogue companies proved to be an effective solution. Using customer drop-off and pick-up locations (particularly for customer returns) provides an effective solution. The drop-off point is at ground level and the customer controls what I call the vertical or wide open delivery problem of moving the package to its final destination—the customer’s own home. The
drop-off locations have the added benefit of properly processing and packaging customer returns which can be a major problem for some types of business logistics systems.

Even the best-designed warehouse or distribution system does not help the environment if it is not operated efficiently with the associated logistics systems. Today, with modern information systems, we operate on a real-time basis much more effectively than in the past. This should allow for more effective exception management.

Internal and external systems should be harmonized to provide a seamless, efficient interface that minimizes resource usage. Sometimes this will require that one logistics element be operated at less than maximum efficiency to minimize overall system efficiency, but that is the exception.

At the risk of sounding like a heretic, I think a lot of the so-called green projects in modern DCs are little more than window dressing, and should be replaced by efforts focused on performing basic logistics tasks better. Certainly reducing gas bills by conserving heat by improving insulation or decreasing electrical energy usage by upgrading lighting fixtures (or even rediscovering natural lighting through skylights or windows) helps the environment.

Dave Luton is a consultant in the greater Toronto area.