Found in translation – Exporting the Australian logistics mindset

This article first appeared in the February/March 2017 issue of Logistics & Materials Handling.
Three Australian logistics veterans have been tasked with rethinking Japan’s supply chain strategy, mixing the traditional and the modern to achieve unprecedented growth.
Even when you’re the biggest name in your market, that’s no reason to rest on your laurels. While Coca-Cola is the market leader for beverages in Japan, there are five other major players vying for a share of the action. Market pricing has been declining steadily over the past 16 years, putting a squeeze on margins and forcing beverage suppliers to stay vigilant to remain relevant. According to Bruce Herbert, Chief Supply Chain Officer at Coca-Cola East Japan (CCEJ), consolidation and diversification have been key strategies for many in the industry. “Coke in Japan is not just carbonated drinks, over half our volume is sugar-free teas, coffee and water,” he says. “A very strong innovation and new product pipeline has to be filled every year from our own plants and a network of contract packers.”
Covering over half of Japan and serving a population of 60 million, Coca-Cola distributor CCEJ is in a constant state of metamorphosis, always looking for ways to increase efficiency and cut costs. The US$6 billion ($8.2 billion) bottler was originally formed in 2013 through the merging of four smaller bottlers and has since absorbed a fifth one. It will soon merge with Japan’s next biggest beverage distributor – Coca-Cola West – and cover some 90 per cent of the market. Set to take place in 2017, the merger will increase the company’s value to US$10 billion ($13.7 billion) and increase its assets from eight factories to 17, 250 sales warehouses from 150, and 800,000 vending machines from 400,000 and 3,500 daily semi-trailer loads shifted per day from 2,000.
CCEJ recruited supply chain experts from around the world, including Bruce, to come to Japan and lend their expertise and, as a result, has been hugely successful in cutting costs and increasing profit. Bruce is joined by two other Australian supply chain experts, cherry-picked for their knowledge of the beverage and retail industries with decades of experience working with supply chains in Australia, Asia and Africa – Edward Walters, now Senior Executive Officer, Planning, Logistics & Distribution at CCEJ; and Distribution Transformation Manager, David Sim.
The Japanese market has presented a challenge, thanks to the country’s complex traditional business etiquette, though Bruce found its workforce’s strong work ethic and customer service to be worthy of admiration. “In Australia we take for granted that change and improvement are part of working life,” he says. “Especially at [Coca-Cola’s Australian-based bottler, ed.] Amatil, where supply chain transformation has been progressing since the mid-90s and many world-leading initiatives were started. Coming to a business which was effectively five small Japanese businesses just three years ago, I have realised just how far ahead some of those things we were doing in Australia were.
“In one way we have a big advantage of having lived in what will be ‘the future state’ for the supply chain here. Of course, there are many things to be learnt from the Japan model as well, but knowing that changes needed here have worked elsewhere gives us a big head start.
“I respect the Japanese working style. My Japanese colleagues are extremely hardworking and focused on detail, in a way that most Australians would find very challenging. Workers regularly work very late in the office, never hesitate to stay back or work over weekends and don’t give up on a problem. So much so that Government and companies are focused on encouraging people to relax more and take more time off, take more holidays etc. – this is definitely not a problem in Australia.”
The Japanese approach to life in general, including even how seemingly ‘logical’ issues are approached is quite different to the West, according to Bruce. “Not better or worse, but different,” he adds. “Whilst basic human reactions and motivations are the same, the way they express themselves is different. Relationships are much more important and sensitive here, as is loyalty to the business or community. All of these things translate into business culture and relationships.”
In some aspects, Australia’s logistics sector could benefit from observing the Japanese workplace, says Bruce. In particular, he believes that the value placed on quality and customer service in Japan would do wonders for Australian business. “Japan is surely the most quality-focused country on earth, and customer service is seen as an extension of quality,” he says. “Near enough is not good enough, perfection is sought after and worked towards at every level. It is deeply ingrained into everyday life – I don’t think we would ever have to ‘train’ for customer service as it is intrinsically understood. This often leads to failures by multi-national companies who don’t understand what Japanese consumers and customers expect. Likewise: quality. Australian businesses may be more ‘lean’ but often do so at the cost of customer service and quality.”
CCEJ looked at successful logistics strategies in use around the developed world when searching for ideas to rejuvenate their own approach and, according to Bruce, flexibility and a laid-back Australian style have been instrumental in ‘cracking the code’ for the company’s logistics strategy. “I think openness to different ideas has been key,” he shares.
“I experienced some changes put in place here earlier by some of our colleagues from the US, but many of them did not work as they were simply ‘cut and pasted’ ideas from the US. Aussies may be proud of their country, but they usually don’t expect that they have all the answers.”
Edward likens the challenge of solving CCEJ’s issues to the task of unravelling a badly tangled set of Christmas lights – difficult to unravel without breaking a light and stopping the business. “We discovered that, over many years on the quest to providing high service and quality, network efficiency at CCEJ had been eroded severely,” Bruce adds. “This had happened steadily and high transport, warehouse and other costs had been accepted as ‘normal’. As there was little benchmarking of supply chain costs outside Japan, and since the costs were not easily ‘visible’, they had not been tackled by investment or progressive change either and a gap grew between global practice and Japan Coca-Cola practice.”
In order to ‘crack the code’, Bruce shares that two major changes needed to be introduced. “First was a painful implementation of a new SAP ERP system which replaced multiple legacy systems and gave central visibility to live data,” he says. “Second was more instinctive – we cut inventory by about 20 per cent – a very brave move in Japan – and thereby decongested the network, eliminating double handling, waiting times, extra transport and product write-off.”
A third big change, which is currently in progress, involves moving inventory upstream, closing small sales centres and cross-docking others, together with possible investment in new warehouses at plants and picking automation. CCEJ is already seeing positive results from the change, with over 25 billion JPY ($290 million) supply chain savings both from manufacturing and logistics/distribution improvement since its inception in 2013.“This year, heavy transport cost is down 20 per cent and write-offs are down 50 per cent,” Bruce shares. “So we are already almost halfway to the long-term cost reduction goal after just one year.” The 2017 merger of Coca-Cola East Japan and Coca-Cola West is expected to create opportunities for further savings.
Bruce attributes his team’s success to a combination of factors, from slow and cautious implementation of changes to constant re-evaluation of direction. “We didn’t approach this as a ‘project’,” he says. “We tackled this as a management challenge – to implement changes, monitor them closely and adjust as we went along. In that way the original ‘plans’ were gradually changed – with successes amplified and failures dropped quickly. Good real-time data access and manipulation was crucial here.
“Thanks to methodical and detailed execution of strategies by our team here, the changes we made to inventory levels, planning processes, truck routing, pallet configurations etc. were executed without impacting customers or quality. This meant that the costs we saved were not lost in upset customers or lost sales, but could flow directly to the bottom line.
“We discovered a clear and costly link between inventory levels and transport costs, which had never been uncovered before. I’d like to say we found this by a big analytical study, but actually it only became clear by trial and error – which is why an army of experts and analysts had failed to find it before.”
CCEJ now encourages its employees to make suggestions for improvement of processes, and implements over 100,000 small innovation ideas per year on ways to improve quality, safety, service and cost.
The notoriously rigid traditional Japanese business culture presented a particular challenge for the CCEJ supply chain team, Bruce explains, though they were still able to achieve “massive change and results” thanks to their measured approach. “Resistance to change remains a constant both within the business and with customers and some suppliers,” he says.
“This is largely due to the extremely high standards set by customers and consumers and fear of making big mistakes. We were able to overcome this by making many small progressive changes, and avoiding – for the most part – big bang or sudden, unplanned change.”
Bruce believes that if applied in Australia, his team’s strategy could result in similarly positive outcomes. “The approach we have taken here has been based on numerics and data combined with good management routines, not just ‘hardware’,” he shares. “It can therefore be applied anywhere, to any problems.”
The CCEJ supply chain team have developed their own version of the revered – though oft-misunderstood – ‘Kaizen’ (kai: change, zen: good) business philosophy whereby big changes can be achieved through small, continuous improvements in all aspects of business. They are confident this method could be applied with success in any business environment. Bruce adds, “All I know is that after 35 years in this game there has never been a change as big and fast as what this team has achieved here in Japan this year.”

SMC opens new VIC distribution centre

SMC in Victoria recently held an open day to mark the official launch of their South Australia Distribution Centre. The day was attended by about to 100 customers who came to view the upgraded facilities and attend the product and industry presentations.
SMC Pneumatics established its first subsidiary outside of Japan in Australia more than 50 years ago.
Today, the company has 10 branches and employs over 200 people in the region. With a sales staff of 88, the company has a philosophy of being “close to the customer to enable to them to develop customer centric solutions.
The Victoria branch of SMC was recently upgraded and re-purposed as a Central Distribution Warehouse for the region. The 7327m2 land together with the 3049m2 building is owned by SMC and has space for expansion. The local stockholding of this branch was tripled to enable SMC to supply same-day delivery of standard parts to customers in Victoria, and overnight delivery to South Australia and Tasmania.
The facility includes a warehouse with large local stock holding, training facility with up to date training models and an engineering and design department.
“We established a Central Warehousing Centre at our VIC facility, and the positive feedback from the market gave us the indication that customers were ready for such facility,” said Rodney Ryan, State Manager – Victoria, SMC. “The quicker turnaround time on orders and the availability of critical spares were welcomed by customers. Pneumatics are a critical component of the production line, and customer need quick support and turnaround when spare parts are needed. We are happy to be able to answer this call.
“We have always had a philosophy of being customer centric. Our business and products have evolved and developed around the feedback we receive from our customers. The feedback was, quicker delivery and more stock of critical parts, and SMC is glad to deliver.”
 
 

Linfox opens fulfilment facility

Linfox CEO Annette Carey has revealed that the logistics group is looking to venture into e-commerce packaging, having established a fulfilment business in Sydney to package and distribute online purchases.
Linfox has started providing packaging and distribution services for smaller businesses that sell online, including two consumer technology groups.
“Our research showed that Australian businesses have been under-investing in the fulfilment part of their commerce solutions,” Carey told The Australian Financial Review.
Linfox reportedly wants to “bridge the gap” between online retailers and customers. “This is a way for them to get direct access to their customers and control the whole experience,” Carey added.
She notes that the Sydney fulfilment project has started small, but it will in future expand to service several retail sectors. “We really think there is an opportunity in areas like consumer health, healthcare, tech care, consumer electronics and even defence logistics,” she said.
Carey said that Linfox has been in talks with Amazon with a view to the logistics group providing services and warehousing for the e-Commerce company when it arrives in Australia, but no agreements have been reached.

New $440 million logistics hub opens in VIC

On Tuesday 11 April Wade Noonan, Minister for Industry and Employment, officially opened Drystone Estate – a 95-hectare industrial precinct that supports the likes of Target, Woolworths, The Reject Shop, Laverton Cold Storage, Rand Transport and Couriers Please.
The site is located 20km from Melbourne’s CBD, and sits close to the Western Ring Road, the West Gate Freeway and the Princes Highway.
The Victorian supply chain and logistics sector is worth $21 billion to the state’s economy each year – or seven per cent of the state’s Gross State Product – and employs 260,000 people state wide. The industrial estate is expected to create jobs for 1,200 people.
“Melbourne is the city of choice for major logistics and supply chain companies to do business,” said Noonan.
“This massive precinct will accommodate some of the biggest names in retail, and create more than a thousand jobs – which is great news for the city’s west.”

Dematic announces Egemin Automation integration plan

Following its acquisition by the KION Group, Dematic has announced plans for integrating Egemin Automation into its organisation – Egemin Automation was purchased by the KION Group in 2015. The integration, targeted for completion by the end of 2017, will result in the world’s largest Automated Guided Vehicle (AGV) supplier, while supporting Dematic’s system integration capability in Europe.
In the first of two major integration moves, Dematic will be creating a ‘Mobile Automation Centre of Excellence’ which will combine the Dematic, Egemin Automation and NDC (a recent Dematic technology acquisition in Australia) AGV products into one global group. The Centre will also include Egemin’s in-floor chain conveyor (E’tow) offerings.
The Centre will be headquartered in Holland, Michigan in the US, the current home of Egemin’s North American operations, under the leadership of Tom Kaminski, former CEO of Egemin NA.
Jeff Moss, CEO, Dematic International stated, “As a member of the KION Group, Dematic and Egemin Automation will leverage KION’s leading market position and continued investment in forklift technology to offer an unprecedented level of expertise, techology and world-class manufacturing to customers. By combining three great brands, the Dematic Mobile Automation business is now effectively the world’s leading provider of innovative AGV and warehouse technologies that will optimise the supply chain.
“Together, we offer the marketplace a unique combination of automation and industrial software solutions that will maximise employee efficiency and minimise customer investment.”
In the second integration move, Egemin’s warehouse automation activities (E’wds) will continue to be located in Zwijndrecht, Belgium and will be integrated into the Dematic Central Europe organisation, reporting to Barbara Wladarz, Managing Director, Central Europe. The Benelux team will continue to serve all European regions in the design and delivery of warehouse and distribution solutions. The enhanced offerings will provide focused vertical market solutions including pallet warehouse systems and standard convey and sort solutions addressing the diversified requirements for markets, such as food & beverage, pharmaceuticals, distribution and logistics, production and manufacturing.
“Current customers of Egemin Automation will benefit as this new and empowered organisation will leverage the strengths of Dematic to offer even more comprehensive solutions and support,” said Jan Vercammen, Managing Director, Egemin Group.
Moving forward, Vercammen will serve as Vice President, Business Development, Dematic International. He will be responsible for business development activities and identifying and facilitating best practices throughout the Dematic International regions of Europe, China, and ANZA.

Amazon uses fulfilment centre rooftops to generate clean energy

Amazon has launched a solar energy initiative which will see the e-commerce company install solar systems on 50 fulfilment facility rooftops worldwide by 2020.
The initial 15 solar projects planned for completion by the end of 2017 will generate up to 41MW of power at Amazon facilities in California, New Jersey, Maryland, Nevada and Delaware. Depending on the specific project, time of year and other factors, the company reports that a solar installation could generate as much as 80 per cent of a single fulfilment facility’s annual energy needs. Solar panels installed on the rooftop of the fulfilment centre in Patterson, California, cover more than three-quarters of the 1.1 million square foot building’s rooftop and will power the hundreds of Amazon Robotics utilised by associates at ground-level.
“As our fulfilment network continues to expand, we want to help generate more renewable energy at both existing and new facilities around the world in partnership with community and business leaders,” said Dave Clark, Senior Vice President of Worldwide Operations, Amazon. “We are putting our scale and inventive culture to work on sustainability – this is good for the environment, our business and our customers. By diversifying our energy portfolio, we can keep business costs low and pass along further savings to customers. It’s a win-win.”

Global rebrand for IBS – now Iptor Supply Chain Systems

International Business Systems (IBS) has announced a global rebrand and will now be known as Iptor Supply Chain Systems.  The new name reflects the company’s strategic mission to help distribution-focused organisations solve their most complex order management and fulfilment challenges in a world where exceptions are the rule.
Recent research undertaken by Iptor Supply Chain Systems claims that for many distribution businesses, about 90 percent of processes and orders are routine. The other 10 percent — the exceptions, the one-offs, the special requirements — can wreak havoc on the business if not managed properly.
Iptor Supply Chain Systems calls this the ‘90/10 rule’ and it highlights the importance of being able to rule the exception in a distribution market that is ever-changing, increasingly complex, and highly competitive.
“This is more than just a rebrand – our name signals a fresh, refined approach to how we focus our experience and expertise to better serve our existing and future customers,” says Iptor CEO Jayne Archbold.
“The idea of ruling the exception was born out of customer research,” says Archbold. “Over 1,250 distribution businesses use our products and services to manage their operations. They operate in many sectors and in 40 countries yet they consistently tell us that a key challenge is handling the 10 percent of non-standard orders and added-value services that differentiate their offering.  Without good systems support, these exceptions can disrupt established workflows and eat into operating margins.  We partner with customers to help them not just manage, but rule the exceptions.  We help them reduce complexity, improve efficiency and accuracy and we give them real time visibility across all their operations.”

Shimano opens Australia's First compact multishuttle GTP Distribution Centre

Shimano, a world-leading manufacturer and distributor of high quality cycling and fishing equipment and accessories, has opened Australia's first compact Multishuttle Goods-to-Person (GTP) distribution centre (DC) in Sydney.

The new DC has brought together Shimano's cycling and fishing business under the one roof. The DC is designed to enhance the quality of Shinmano's service offering to customers and help the business benefit from economies of scale and reduce distribution costs.

Matthew Bazzano, Managing Director of Shimano Australia Cycling, said: "When Shimano decided to review its Australian supply chain, it was clear that both businesses would benefit by combining their distribution requirements."

"Bringing together not only our distribution requirements, but also the administration, purchasing, finance, human resources and management functions for both businesses made it financially viable for Shimano to invest in a new state-of-the-art DC," added Colin Tannahill, Managing Director, Shimano Australia Fishing.

Dematic's space-efficient double deep, single inventory storage buffer houses a total of 5,168 totes over 16 levels, with each level serviced by its own Dematic Multishuttle.

The system typically supplies around 600 totes/hour to GTP workstations. When stock is retrieved from the Multishuttle system, it is delivered to the GTP workstations as required for order assembly ensuring very high throughput rates.

"The Multishuttle system gives us a lot of flexibility. Each of the three GTP workstations is dual purpose, which means we can some for picking and others for replenishment, depending on what we need at the time," said Shimano's Logistics Manager, Maea Sio.

"The system was scoped to achieve between 220-350 picks per hour/workstation, but we are often achieving significantly higher throughput rates than that, with some operators achieving more than 600 picks per hour."

 

Honeywell transforms distribution centre operations with new wearable technology

A new hands-free
wearable solution from Honeywell Scanning & Mobility has been engineered to drive
efficiency, productivity and accuracy in distribution and warehousing
environments.

A hands-free,
wrist-mounted version of the Dolphin 70e Black mobile device, the new wearable
device is specifically designed for warehouse operations including picking,
packing and shipping.

Lynn Huang, APAC
Head of Marketing & Strategy at Honeywell Scanning & Mobility, explains
that distribution centre operators in Asia Pacific are seeking the most
flexible, application-expandable and future-proofed solutions that are aligned
with the changing needs of the industry. By engineering innovative technologies
such as wearable devices, Honeywell is able to deliver the solutions needed by
customers to remain competitive in a fast-changing environment.

The Honeywell
wearable solution is a cost-effective option that allows the use of a
general-purpose device for a wide variety of enterprise applications, making it
ideal for information technology leaders looking for the benefits of hands-free
operations without having to re-engineer their devices.

Key features of the
Honeywell wearable solution include comfortable and hygienic armband designed
to be worn for extended periods of time; easy sharing allowed between workers;
large display with flexible touchscreen keypads; Windows Embedded Handheld 6.5
operating system architecture; and support for tethered and BT ring scanners.

Ideally suited to
give workers the freedom of movement to maximise workflow productivity, the Honeywell
wearable solution is ergonomic and rugged in design, empowering workers with
hands-free convenience to handle more tasks with fewer disruptions to workflow.

The Honeywell wearable
solution will begin shipping in Asia Pacific in December. 

Aldi plans new $70m warehouse and distribution centre for SA

Aldi Australia has announced plans to build an eight hectare warehouse and distribution centre at Regency Park in South Australia, expected to cost approximately $70 million and creating around 150 jobs.

The company has submitted a development application to the City of Port Adelaide Enfield and executed a conditional contract for a 30,000sqm facility. Subject to approvals the new facility will support plans to build a network of up to 50 stores, generate 900 new jobs and secure $300 million in new investment for South Australia.

“We are eager to bring the Aldi difference to new markets like South Australia.  Having investigated the future store network and benefits of the location in varying degrees, the Regency Park site presented as the best fit for our needs,” said Viktor Jakupec, managing director Aldi South Australia.

Deputy Premier and Minister for Planning, John Rau said the Aldi expansion into South Australia is a welcomed addition to the state. “The benefits associated with Aldi’s decision to enter South Australia will be substantial. 

With a series of new permanent jobs and rollout of store openings, South Australia is looking forward to having the retailer enter the market.”

In October last year Aldi announced an aggressive rollout of store openings, including entering the new markets of South Australia and Western Austraila.

 

©2019 All Rights Reserved. MHD Magazine is a registered trademark of Prime Creative Media.