Is your warehouse truly agile?
Tuesday, March 29, 2016
Two key words dominate the field of logistics: Lean and agile. Lean warehousing has been the subject of considerable study, but relatively little attention has been given to the equally important topic of agility.
Agility is nimbleness. It is the ability to make small deliveries on a "just in time" (JIT) basis. It is the reduction of order cycle time, as well as the optimization of inventory.
Agility can conflict with both lean and green. For example, frequent JIT deliveries will result in increased transportation and order-filling costs. They require intensive use of transportation, which leads to an increase in fuel consumption and pollution.
At the same time, JIT offers significant economies for the manufacturer or distributor receiving the shipments bringing about a reduction in total cost of supply chain management. The green issue must be addressed through technological advances, such as the development and use of hybrid-powered delivery trucks and cleaner fuel.
The transportation issue
Agility is the primary element in transport cost control.
It is no accident that Southwest Airlines, the most successful airline in the United States, offers the shortest turnaround time and the highest use of aircraft among all airlines. If the company utilized its transportation assets in the same fashion as its competition, a significant increase in airplanes and employees would be necessary.
In the process of developing its operating procedures, Southwest benchmarked pit crews at the Indianapolis 500 automobile race. The importance of quick turnaround at the airport gates is understood by all Southwest employees.
The same focus has been adapted for containerized shipping and should be utilized for all modes of transportation. We once inspected a marine terminal in Yokohama, Japan, that handled one marine container every minute. Turnaround time for the vessel at port now is measured in hours, not the days once spent in port as cargo was loaded and unloaded.
Unfortunately, rail and highway transportation lag in such improvements. Congestion, decaying infrastructure and a lack of management attention have resulted in poor utilization of trailer and railway car assets. Many shippers and receivers use trailers as temporary warehouses, wasting transportation assets and passing along the cost to all who use their services. Although trucking firms have a fee for detention of trailers, it is not applied rigorously.
Long-haul trucking has one of the highest employee turnover rates of any occupation, and the current shortage of truck drivers is widely recognized. Two factors frustrate truck drivers. Many are paid by the mile — in effect, a piecework compensation. When they are unreasonably delayed by the loading or unloading process, or stopped by a tangle of traffic on the highway, their pay is reduced by conditions that are beyond their control.
Warehouse operators have some ability to alleviate those conditions. Application of technology and improved practices can make your warehouse a "trucker friendly" destination. To avoid delays, the best warehouse operators keep a time clock to show when each driver enters and leaves. One distribution center maintains a maximum time limit of two hours for every truck driver who enters the property, with any delay beyond this time limit investigated by management.
Many warehouses with heavy truckload volume eliminate delay through the use of the "drop and hook" procedure, in which drivers drop the trailer in the yard, enabling them to be moved to the warehouse dock at a later time. While this procedure does not address equipment utilization, it does eliminate driver time loss. Technology is available to roll the cargo from truck bed to dock floor in just a few seconds, which virtually eliminates any delay at the warehouse.
Outsourcing and agility
Warehousing is one of many logistics functions that can be outsourced. Those who seek outsourced services appreciate the ability to enjoy one-stop shopping for a variety of logistics services.
Some warehousing service firms offer a broad array of value-added services, such as delivery, inbound transport, packaging, staffing and document management. The combination of packaging and warehousing has long been recognized as a way to save money, by moving bulk product close to destination and offering a variety of private label packages for delivery to customers.
The marriage of warehousing and transportation is even older, with execution of JIT requiring coordination of warehousing and precisely timed delivery. The relatively new offering of staffing enables the warehouse provider to become a low-tech source of skilled labor, as well as a high-tech provider of storage and handling.
Document management, or records storage, is a specialty that only occasionally is offered by traditional warehousing companies. It requires extreme agility, since the provider is expected to retrieve individual documents quickly and accurately.
In considering value-added services, remember a convergence is offered by the newest of information systems. For example, not long ago, a traveler would carry a computer, a music player, a camera and a cellphone. Today, a smartphone contains the features of all four.
Similarly, the warehouse operator can allow selected clients to look into the warehouse management system or to obtain real-time information on the status of shipments. The blending of technologies can take place in warehousing, just as in other products and services.
Warehouse operators can be buyers as well as sellers of outsourced services. A growing number of warehousing professionals are purchasing IT and customer service support in India, the Philippines and other overseas locations. A software problem arising Tuesday afternoon may be solved before morning by a provider who is 12 time zones away.
Keeping it simple
Complexity is the enemy of agility. How many SKUs on your inventory list are items that are long dead? How many more are barely alive, having had little or no activity during the past several years? Since product proliferation is one source of complexity, trimming the product line is an ongoing necessity.
How many published procedures either are obsolete or in need of revision? How many KPIs currently reported are irrelevant?
Complexity is an outgrowth of maturity. It is a sign the business is not green and growing, but ripe and rotting. Everything in the warehouse procedure should be related closely to current corporate goals.
Warehouse operators are in a good position to identify needless complexity and to recommend ways to promote simplicity, without alienating customers. The agile operator emphasizes quality, as well as responsiveness. Has the error rate been reduced? Is an out-of-stock condition able to be corrected quickly?
Since nearly every company promises good service and high quality, the critical question to ask is: "How do you know?" The agile warehouse operator knows exactly how clients perceive the service and gathers such information continuously and frequently.
While deterioration of service never should be a surprise, it often is. Warehousing is a relationship business, based on trust and candor. Lack of effective communication breeds mistrust. The goal of communication between warehouse provider and client is centered on the answers to this question: "How are we doing lately?"
The next frontier in logistics
During the 1893 Columbian Exposition in Chicago, an American historian delivered a widely circulated paper: "The Significance of the Frontier in American History."
He noted that two centuries of movement toward a western frontier had ended, and the very notion of a frontier would soon become obsolete. However, the frontier spirit did not disappear. It simply changed focus from a westward migration to the development of new technology.
While Americans have no monopoly on new frontiers, many of the breakthroughs in logistics technology have occurred close to home. They include high-tech devices, such as warehouse management systems, as well as low-tech progress, such as the standardization of pallet sizing. Robotics have migrated from the showcase to practical application in some warehouses. Voice-recognition systems not only have improved accuracy of order selection, but also have made it faster and easier than it was.
Agility has been accompanied by an entrepreneurial spirit that constantly is seeking the next frontier. The British scientist Charles Darwin provided us with the best testament to the power of agility: "It is not the strongest of the species that survive, nor the most intelligent, but the one most responsive to change."
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