Speed up! – to find out how, read this MHD article

Dr John Gattorna

In 1998, Charles Fine published his ground-breaking book, Clockspeed. He based much of his research on the observation of fruit flies, which he called a ‘fast-clockspeed species’, evolving from eggs, through adulthood to death, all in under two weeks! Much of his research was concentrated on the industrial equivalents of these fast-evolving fruit flies.
One of the companies that he focused on was Intel, which in turn had fast-evolving customers such as Compaq and Dell, whose products inevitably had short life cycles in the marketplace. Clearly, then as now, the real pressure was coming from the customer end of the chain, and that pressure has increased significantly in the two decades since Fine wrote his book.
Fine studied whole industries, noting the different rates at which they evolved; he called these rates industry clockspeed, which he defined as resulting from a combination of product, process, and organisation clockspeeds, respectively.
Fine drew the conclusion that any differences in clockspeed between businesses is manifested in the size/length of the decision-making window, and I agree with that. When it comes down to basics, enterprises under pressure from their customer base and/or competitors must by definition find ways to make faster decisions if they are to survive. Indeed, given that competitive advantage is now regarded as only ‘temporary’, the enterprise must continually re-invent itself to stay ahead. The old concept of locking in a ‘sustainable advantage’ is not possible in fast-moving industries and markets.
Fine defines a company as “its chain of continually evolving capabilities”, and by that he includes its own capabilities and those along the entire supply chain. In our terminology, he is referring to the extended supply chain. Of course, the old maxim of the weakest link applies.
Clock-speed: fast
Fine cites Dell as a great example of a fast clockspeed company, mainly due to its early supply chain design that placed it in direct contact with consumers and users. This advantage receded in subsequent years as Dell was forced to engage in different distribution channels involving intermediaries.
Interestingly, with the coming of the e-commerce era, and the direct access that this affords suppliers to their consumers/end users, coupled with digitisation and the disintermediation effect of Blockchain, we are likely to see many more disruptions across industries that are dragging their feet on clockspeed.
Fine comments on the dynamics of extended enterprises, and in particular nominates two laws that he sees as pivotal: volatility amplification (or bullwhip effect by another name), which moves upstream in the chain; and clockspeed amplification, which moves downstream towards the final customer.
Fine introduces his notion of clockspeed analysis, which begins by mapping existing supply chain capabilities in order to identify potential weak links as well as potential opportunities.
So, in Fine’s thinking, clockspeed is defined as the summation of capabilities along the extended supply chain, to which I would add the time taken for each element, across the full breadth of the total lead time, from supplier(s) through to end user/consumer.
Further, he postulates that in order to improve the clockspeed in an enterprise or indeed an industry, products, processes, and capabilities have to be designed concurrently; he coined the phase for this as 3DCE, or 3D Concurrent Engineering.
Finally, Fine makes an initial attempt at measuring clockspeed, with the qualification that it is very complex, not dissimilar to costing in that there are many areas where judgement is required.
Today
Time has moved on and we now understand the dynamics of supply chains a lot better than in the 1990s. For instance, the idea of ‘one-size-fits-all’ has been banished forever, and we have a clear guiding principle that supply chains must by definition be designed from the ‘outside-in’. This is consistent with Design Thinking, and consistent with Fine’s stated view that ‘clockspeed amplification’ emanates from the customer end of the chain.
We also know that supply chains are not inanimate beasts, but are living ecosystems, propelled by people situated all along the chain, making decisions, for better or worse. Hence the need to incorporate the study of ‘culture’ and leadership style in our analysis of supply chain performance.
So when we talk about clockspeed, we are not suggesting that the enterprise has to suddenly accelerate to meet volatile conditions. Instead, we are convinced that the entire organisation has to lift its tempo and operate at that new higher level, ALL THE TIME. Once this is achieved, the internally generated clockspeed will hopefully match and indeed nullify the effect of volatile demand emanating from the customer end.
Because we are now talking about achieving faster split times in each element of the overall lead-time, the time buckets are shorter, and this has the effect of reducing the risk of forecasting errors. As in the case of Zara, they are never more than three weeks away from the next cycle of product launches to stores, so markdowns become much less of a problem, and stock-outs become something of a virtue. How the world has changed!
And if we couple this phenomenon with our proprietary Dynamic Alignment model, involving an array of up to five (5) supply chain types, each aligned with a particular customer buying behaviour segment, over- and under-servicing are virtually eliminated, as are the corresponding complexity and associated costs, both actual and opportunity-based.

Their challenge is to embrace the change and, in the process, raise themselves to new, higher levels of competitiveness.

In the end, it all comes down to developing and nurturing a defined range of capabilities, and then combining these in different recipes to underpin the engagement with customers (and suppliers) according to their preferred way of buying our product/service categories.
Time to transform
The important point here, especially for executives with a mandate to ‘transform’ the business, is that we are dealing with a ‘whole-of-enterprise’ phenomenon. In other words, in the process of transforming your enterprise supply chains, it is in fact necessary to transform the entire organisation in order to achieve the faster rhythms inherent in faster clockspeeds. What this means in fact is that defaulting to lean processes in our enterprise supply chains is no longer the correct option, because a new default has arisen in the form of speed and agility in order to cope with the faster, more volatile operating environment.
Companies operating in FMCG, Hi-tech, and Fast-Fashion markets are already experiencing this change in modus operandi, and similar conditions are heading in the direction of older, more established ‘bricks and mortar’ industrial companies – their challenge is to embrace the change and, in the process, raise themselves to new, higher levels of competitiveness.
The enterprise-wide capabilities required for success in the new faster clockspeed world are briefly described below:

  1. New organisation designs that promote speed of decision-making.
  2. Process mapping and re-engineering along all supply chain types.
  3. Adoption of appropriate KPI to measure performance, free of conflicting demands.
  4. Install IT systems that are genuine Decision Support Systems (DSS) in order to speed up decision-making.
  5. Install appropriate Sales & Operations Planning (S&OP) regimes to focus the entire organisation on agreed priorities to meet customer demand.
  6. Shape a number of different ‘subcultures’ inside the business to underpin the different supply chain types. This will involve all of the above plus additional effort in areas such as defining roles; defining incentives; methods of internal communications; recruitment of specific types of personnel; introduction of a range of T & D programs; and role modelling.
  7. The resilience to recover from a major unplannable disruption in our supply chain network.
  8. Conscious development of an IoT strategy and corresponding analytics capability, including customer/supplier sensing.
  9. A blended combination of ‘business as usual’ and search for new innovations.
  10. Managing capacity at all points in our supply chain network as all times.
  11. Channels selection.
  12. Requisite collaboration with appropriate network members.

These internal capabilities should be supplemented by supply chain specific capabilities as follows:

  • Product design: CAD; modular; supply chain friendly.
  • Manufacturing: CAM; automation/robotics; AI; 3D-printing; group technology; FMS.
  • Logistics: Postponement; insourcing/outsourcing mix; control towers; 3PL management; network optimisation modelling.

There are many moving parts in contemporary supply chains, and many external factors that can potentially impact performance. Nevertheless, if we are able to increase the clockspeed of the entire enterprise and literally get in synch with the operating environment, complexity is materially reduced and operational and financial performance correspondingly increased.
The book referred to in this article is Charles H. Fine, Clockspeed: Winning industry control in the age of temporary advantage, Basic Books, Cambridge, MA, 1998. For more information email john@gattornaalignment.com.
 
 

Read your latest MHD article

Dexion has designed and installed what is believed to be New Zealand’s most advanced integrated warehouse system to enable the world-leading Auckland-based plastic food container manufacturer Sistema better service retail contracts in Europe and the United States.
Sistema designs and makes high quality, stackable, food-safe storage containers in its Auckland manufacturing and distribution facility and supplies these products to millions of customers in 82 countries around the world. The company is one of New Zealand’s leading export manufacturers.
Founded in a garage 30 years ago by managing director Brendan Lindsay, Sistema is now famous for its ‘Klip It’ collection of storage containers with their distinctive blue clips. That range has been added to with the ‘Microwave’ and ‘To Go’ families of products.

The business challenge
To meet rapidly growing global demand for its plastic food storage and cooking containers, including from leading European and United States retail chains, Sistema commissioned a new multi-million dollar manufacturing and distribution facility to be built at The Landing Business Park at Auckland International Airport. Sistema’s site is New Zealand’s largest privately owned manufacturing facility covering 25 hectares.
Kerrect Logistics consultant Scott Kerr, who was appointed to manage the supply and installation of an integrated material handling system for the new facility, says the challenge was to design a distribution system capable of handling future throughput requirements, predominantly driven by increased export volumes.
Kerr said the material handling system was critical to Sistema’s future success as it would drive the whole distribution operation, from receiving products from production to dispatching product at the container docks.
The project also had specific business and technical requirements, including:

  • Sistema had to move from its existing premises into the fully operation new facility in 12 months.
  • The new material handling system had to be integrated to a new Enterprise Resource Planning (ERP) software system Sistema was concurrently implementing.


The design
Dexion’s proposed material handling installation for Sistema started with a careful analysis of the company’s current business and future plans.
“We wanted to ensure our solution would enable Sistema to achieve its current goals and also its future growth targets by proposing a fully automated, scalable solution,” said Dexion regional sales manager for integrated systems Dan Austin.
“We submitted a formal proposal in response to Sistema’s request for proposals along with a presentation and then conducted workshops with the company to refine concepts. We demonstrated our capability by showing Sistema through sites with similar systems to that proposed.”
At the heart of the Dexion’s proposal is an automated storage and retrieval system (ASRS) for storing and despatching pallets of product bound for export markets. The system features:

  • Over 15,000 pallets of ASRS racking in multi-deep configuration.
  • Five storage and retrieval machines (SRM).
  • A pallet conveyor system, including four pallet elevators and two high-speed transfer cars.
  • Over 15,000 pallets of Dexion’s Speedlock single-selective racking.
  • Dexion’s Real-time Distribution System (RDS) software comprising Warehouse Control System (WCS) for control of the automation, and Warehouse Management System (WMS) for control of warehouse inventory and associated processes: receiving, put-away, replenishment, picking, dispatch, cycle counting etc.


Breathe easy
Mr Austin said Dexion had a dedicated and highly experienced project management team who developed the overall program to ensure go-live at the required time.
With the ASRS installed, Sistema’s manufacturing and warehousing operations are now fully integrated. Products come straight off the manufacturing line into assembly and storage – a process managed by Dexion’s RDS software.
The system enables 24×7 operations – it is high density, high throughput, accurate and has the flexibility allow for growth of the business.
“Sistema uses technology to design and build its products, and now with this system it has a world-class material handling installation designed to meet its specific requirements,” said Mr Austin.
Dexion’s material handling system is meeting Sistema’s throughput and storage requirements exactly as planned with the required capacity for the future.  And the software implemented by Dexion has worked seamlessly and manages all processes as planned.
Mr Austin said the key reasons for success are:

  • A strong local Dexion presence and solution development team.
  • Strong experience in the implementation of ASRS systems.
  • High-quality product from Dexion and strategic partners.
  • An experienced and professional project management team.
  • An experienced software engineering team.
  • A strong relationship with Sistema and a team approach to delivering the solution.


On completion of the project, Sistema founder and managing director Brendan Lindsay and CEO Drew Muirhead summed up their appreciation: “We wish to acknowledge the tremendous efforts of Dexion and the project team to deliver this solution as promised under some very demanding circumstances and challenges.
“Sistema has learnt much from this journey and, more importantly, we have collectively delivered a world-class facility of which we should all be proud, in full and on time. Well done and thanks.”
For more information call +61 412 689 072, email damir.pletikosa@dexion.com.au or visit www.dexion.com.au.
 

From MHD: Cut the risk

Sean Ryan

With technology rapidly advancing and evolving, now is the time asses the available options in intralogistics management solutions that use Industry 4.0 technology, are modular, and mitigate long term business risks. Intralogistics is evolving from large, rigid systems into modular, flexible, and software-driven solutions – robot-supported and self-optimising.
CarryPick: a flexible solution for e-commerce businesses
When it comes to deploying automation technologies, although intriguing to many supply chain professionals, many do nothing, but end up spending more and ultimately lag behind in investing in state-of-the-art technology. The warehouse and picking system CarryPick was developed to boost employee productivity, provide scalability and drive substantial cost reductions. Even though highly automated, this goods-to-person system delivers the desired flexibility and adapts quickly and cost-efficiently to future business growth, thus being a completely scalable and forward-looking system.

Unlike traditional warehouses with fixed racks, the modular CarryPick goods-to-person system completely organises the picking warehouse using mobile racks. Low-profile robot vehicles drive underneath the mobile racks and deliver them to workstations, where the requested items are picked and placed in the shipping boxes provided.
Floor space savings of 30 per cent or higher
To maximise the picking rate per mobile rack, each picker is able to process a larger number of orders in parallel, assisted by lasers that illuminate the appropriate picking compartment on the mobile rack. The workstations themselves are equipped with put-to-light technology – small lights let the picking employees know to which order a picked item belongs. Compared to traditional systems, the productivity of the employees at the workstation is considerably higher. At the same time, picking errors are virtually non-existent and floor space savings of 30 per cent and higher are made possible.
Low initial investment – maximum flexibility
The main benefit of the CarryPick system lies in its flexibility. If the product range changes, the rack structure can be modified accordingly. If the quantities to be processed change, the system can be flexibly extended. The initial equipment needed includes a basic number of mobile racks, at least one workstation, and a small number of ‘Carrier’ automated guided vehicles (AGV). As shipping volumes increase or the product range grows, the CarryPick system can be extended with additional components such as racks, carriers or workstations. There is no need to make major up-front investments in systems whose full performance capacity will not yet be needed.
CarryPick is easily integrated into legacy structures that normally would not have the space to support automation. The compact storage system, consisting of a workstation and mobile racks, can be installed in buildings with a ceiling height under three meters.
CarryPick is a part of the Swisslog Click&Pick portfolio for businesses. Click&Pick is a modular concept that can be flexibly adapted to changing customer needs and business models. Depending on the solution concept, companies can fulfil orders up to five times faster than with manual rack systems.
CarryPick supports sustainability
At Swisslog, sustainability is a top priority. CarryPick saves energy. Workplace regulations mandate that only the relatively small workstation areas be provided with heat and light. Any unmanned warehouse areas housing the mobile racks therefore do not need heat, lighting, or ventilation.
Furthermore, CarryPick is a model of ergonomic workplace design. Employees in the warehouse concentrate mainly on their core abilities: see, touch, and pick. Pushing heavy picking carts over long distances becomes a thing of the past, leading to a significant reduction of illness-related absences, perhaps even extending employees’ working life. CarryPick provides a forward-looking option that improves warehouse performance is appreciably increased, and all at minimal expense that is repaid in the timeliest fashion possible.
PowerStore: increase capacity and maximise resource savings
The pallet shuttle system PowerStore provides reliable cost benefits and maximises resource savings. This innovative warehouse equipment boosts capacity, is suitable for high-density environments and can be used in deep-freeze environments. This technology allows businesses to be at the forefront of Industry 4.0 initiatives.

The modularity of the PowerStore pallet shuttle system enables storage of up to 60% more pallets compared to manual systems. It can also be individually tailored for all shapes and sizes of warehouse buildings. The PowerStore pallet storage systems can be used in a wide range of environments, from -30°C in frozen food storage to 50°C. It can be used in buildings with unusual shapes. The modular design of the PowerStore system opens completely new possibilities for automation in existing warehouses. The system is also suitable for manufacturing businesses, especially those in the fast-moving consumer goods and food and beverage industries.
Unique and modular
PowerStore is backed by over 40 years of global experience in optimising systems with high throughput and reliability. PowerStore’s control software is fully integrated in Swisslog’s SynQ suite of warehouse management software and is designed to work seamlessly with customers’ WMS and host systems. Furthermore, low-height carriers save storage space while still enabling industry-leading lift heights. This allows for normal pallet deflections and minimises the need for troubleshooting within the rack.
The PowerStore is a compact pallet shuttle system that is used in conjunction with vertical conveyors to utilise virtually every square metre of available space. The compact system supports storage depths of up to 20x and beyond per channel within a rack design. This rack design can have ten or more levels and adapts to virtually any building topography, accommodating existing support walls as well as multi-level and barrel roofs.
At Pepsi Bottling Ventures (PBV), for example, PowerStore increased storage capacity by as much as 60%.
Row and aisle carriers are used for pallet storage and retrieval. Vertical conveyors allow these carriers to be used on any rack level. At PBV, PowerStore’s high dynamics support 580 pallet operations (storage and retrieval) per hour. At the same time, customers benefit from state-of-the-art software control and energy-saving operations, thanks to advanced mechanical and electrical components from a manufacturing process that meets ISO 14001 and emphasises environmentally friendly product design.
PowerStore is integrated into an advanced software landscape and can be connected to Swisslog’s SynQ software platform, or used in conjunction with virtually any other modern warehouse management system. PowerStore displays great flexibility when used across industries and can be deployed in deep-freeze environments with temperatures as low as -30°C.
A fully automated way for creating mixed pallets
ACPaQ will automate one of the most important areas of intralogistics operations: creating customised mixed pallets for individual stores from single-SKU pallets. ACPaQ is universally applicable for fully automated order picking of mixed case pallets.

Store-friendly pallets are automatically built in distribution centres using the combination of proven technology, such as the CycloneCarrier light goods shuttle system, conveyor systems and high performance de-palletising and palletising robots. It is configured using modules and scalable for small, mid-size and large distribution centres handling up to 500,000 cases per day. This innovative palletising system has a highly modular design and enables a fully automated process controlled by the SynQ warehouse management software which, compared to traditional methods, doubles or even triples the speed of picking cartons in distribution centres based on store layout, item groups or item classes.
The palletising software allows you to customise the palletising order to increase efficiency during in-store replenishment. ACPaQ can be used in ambient temperature and chilled warehouse zones, and can handle almost all types of cartons, shrink wrapper or foiled packages, and pallet types used in retail & beverage industries.
At the core of ACPaQ is the RowPaQ cell featuring a state-of-the-art 5-axis jointed-arm KUKA robot. It is equipped with a flexible gripper with adjustable forks that allows it to pick up as many as four cartons at a time, even if they don’t have the same dimensions or weight. A RowPaQ cell is capable of setting down up to 1,000 cartons per hour in the exact location predefined by the palletising software. It is completely scalable and additional RowPaQ cells can be added to the system to increase throughput as required.
Networking new and proven technologies
Robot-based palletising builds on an intelligently organised process. Before cartons can be palletised in sequence, they are first separated, loaded into trays and stored temporarily in the highly dynamic CycloneCarrier shuttle system. Even before the warehouse management system issues the palletising order, Swisslog’s software autonomously performs a complex calculation process based on product parameters to determine the best way to load the pallet. The cartons are then transported in the exact sequence from storage to the RowPaQ cell. After palletising is complete, it is shrink-wrapped and transported via conveyor directly to the right shipping station.
Sean Ryan is the head of sales and consulting at Swisslog Australia. For more information call +61 447 771 933, email sean.ryan@swisslog.com or visit www.swisslog.com/wds. Swisslog is a member of the KUKA Group, www.kuka.com.
 

Raise the glass – to this week's article from MHD

Casella Family Brands has grown from a small family-owned business in 1969 to become Australia’s largest family-owned winery, based in Yenda NSW. The inception of the [yellow tail] label in 2001 propelled the business to new heights and it is now the most powerful Australian wine brand in the world. Twenty-seven per cent of bottled table wine exported from Australia is yellow tail, and it holds the record for the fastest growing imported wine in the United States’ market history. Today, Casella Family Brands ships over 12.5 million cases of wine to more than 50 countries around the world every year. Casella sources fruit from 37 of Australia’s 59 premium wine growing regions including Coonawarra, Wrattonbully, Padthaway, Barossa, Clare Valleys in SA and Mornington Peninsula. It has over 6,000 acres of vineyards, producing over 27 varieties.
Following a sustained period of rapid growth, including the acquisition of Peter Lehmann Wines, the company recognised a need to improve inventory visibility across its business, including two distribution centres. It also wanted to enhance its scalability to ensure it is set up for future growth. To fulfil these needs, Casella Family Brands engaged Manhattan Associates for a dedicated global distribution management and order fulfilment system.
Distribution manager at Casella Family Brands Sam McLeod said: “We have the fastest bottling line in the world, capable of processing 36,000 bottles an hour. Bottling at this speed and managing the volume of inventory associated with this scale of operation requires a strategic supply chain solution.”
The ongoing expansion of the [yellow tail] range and the integration of Peter Lehmann Wines led Casella Family Brands to look to Manhattan’s SCALE to address its demanding distribution management and supply chain execution challenges. Casella faced a number of supply chain challenges prior to integrating the solution, due to the fact that many of its warehouse processes were manual, time consuming and prone to human error.
Increasing warehouse efficiency and visibility
Casella Family Brands chose to implement the SCALE software in order to optimise order fulfilment processes across its various brands. By streamlining distribution and enabling ongoing business growth, the company was able to realise a number of key benefits:

  • Increased warehouse utilisation by 22 per cent.
  • Reduced labour costs.
  • Improved traceability throughout the supply chain.
  • Revolutionised planning whilst automating many of the associated processes.
  • Enabled the transition from a paper-based delivery system to a completely digital one.

Mr McLeod added: “Previously we were only able to track our stock by total production lot, for example in a run of 30,000 cases, we couldn’t distinguish the difference between the first and last pallet once the stock had shipped. With the introduction of Manhattan SCALE, we can now track stock to the pallet level due to the unique ‘license plate number’ (LPN) placed on every pallet prepared. In the event of a product recall this could save a significant amount of money.
“As a planning tool, SCALE is incredibly powerful,” he said. “We can now arrange as many as 300 shipping containers of stock in as little as half a day. This enables us to release orders for picking at the click of a button as opposed to manually keying in the contents, picking the location of each order and then manually updating once loaded, every day.
“All of our 750ml wine is produced in two different pallet heights. Manhattan SCALE allows us to quickly differentiate between these and if an imbalance is detected, we can produce the required pallet heights from our production line. Previously, these would have been manually restacked,” explained Mr McLeod.

Since implementing the program, Casella Family Brands has also worked closely with its export distributors to ensure they are ordering stock in optimum quantities (full pallets) to ensure it maximises the efficiencies the system provides.
Making an impact across the organisation
By working closely with Manhattan Associates’ consultants, Casella Family Brands was able to efficiently weave the solution into the fabric of the business, making the entire operation stronger. For example, the distribution teams (both export and domestic) were able to plan weekly loading into ‘waves,’ picking of all orders and the allocation of multiple SKU with differing pallet dimensions into containerised loads.

“We can now arrange as many as 300 shipping containers of stock in as little as half a day.”

The Planning and Inventory Team was also able to utilise SCALE for confirmation of production run quantities and obtain real-time status updates on production progress. The Production department now receives advance notification of incoming stock from the production line; and the Export Administration Team retrieves lot numbers for export orders for select customers. Additionally, with the combination of the unique LPN and lot numbers, the Compliance Team now has detailed traceability for audit and potential recall purposes.
“The combined effect of all these advancements enabled by the Manhattan technology has had a tremendously positive impact on our bottom line and has really set us up for future supply chain success. All of which has enabled us to focus on what we do best, producing industry-leading wines to share with the world,” said Mr McLeod.
Based on the success of its engagement with Manhattan Associates, Casella Family Brands is also looking to implement the system across its dry goods portfolio in the future.
For more information call +61 2 9454 5400, email info@manh.com or visit www.manh.com/en-au.
 
 

Your latest MHD article: Auto challenges solved


The automotive industry is a powerhouse
The automotive manufacturing industry is one of the most important global economic sectors. Having grown from a nil base at the start of the 20th century to an industry that produced 72.11 million passenger cars in 2016, plus 22.5 million commercial vehicles(1) is remarkable. In revenue this is a global turnover of over €2 trillion(2), which equates to the 6th largest economy in the world, if it were a country. The industry globally employs over 9 million people(2) directly in making vehicles and parts, with each direct auto job supporting another 5 indirect jobs.
But the automotive industry can also top lists in relation to customer quality expectations, variety of products available, and process complexity. It is also an industry that continually must manage change. Since the invention of the modern car in 1886 by Karl Benz, personal vehicles have enabled people to live, work and spend their spare time in ways not possible before.
… and it is here to stay
Today, according to the NRMA(3), private car-based mobility is the preferred form of transport for most Australians. Owning and using your own car is primarily seen as safe, comfortable and peaceful, compared to public transport. This ‘auto mobility’ is so entrenched in the Australian mindset that it can be difficult to see a time where you may not own a vehicle.
The overall vehicle population continues to grow. Registration in Australia has seen steady growth from 14 million vehicles in 2006 to 18.8million in 2017(4).
Even considering some predictions of a tapering off of private car ownership, car sales are not expected to decline in the foreseeable future, with fleet ownership, including car sharing, anticipated to fill any deficit. In a 2017 NRMA report, Matthias Mueller, CEO Volkswagen outlined: “In the future, many people won’t own a car. But they can all be a customer in one way or another, because we will serve a much broader concept of mobility than today.” (3)

The future of automotive aftermarket looks bright
Within the general automotive industry, the aftermarket and spare parts sector can be identified separately and treated differently, and currently it is experiencing steady growth.
Revenue for this sector in Australia stands at $5.2 billion with annual growth of 2.5% in the five years to 2018, and the industry is expected to outperform the overall economy over the ten years to 2023. 5. The global aftermarket industry should reach $722.8 billion by 2020. (6)
One contributor is the increase in the average age of cars on the road. According to the Australian Bureau of Statistics 2017 car census(4), in Australia the average age is 10.1 years, with campervans the only category to record a decrease since 2010. In the USA, the average age of passenger vehicles is 11.6 years, which has continually risen. As people keep their vehicles longer and are placing more importance on preventative maintenance to maximise vehicle life, demand for aftermarket parts is increasing, making it important for spare parts suppliers to become smarter and more efficient with their supply chain and stock management. (7)
Why the automotive aftermarket logistics is unique
The automotive aftermarket sector is a very different industry, with unique logistical and stock management characteristics.
One such characteristic is the massive variety of items that are stocked. Parts can vary from replacement parts, lubricants, accessories, cosmetic improvement items, tyres, tools and repair equipment. The required SKU can be both small and large, from a bolt to a door panel; can be both simple and complex, from a floor mat to a clutch assembly; and can be heavy or light, from a short motor to a headlight bulb. This is supplemented by the larger range of vehicle models and options now available, especially with new technologies such as gas/electric hybrids. One single model series of a premium German automobile brand can reach over 1,000 possible automobile variations. (8) The number of distinct SKU handled by the automotive aftermarket has grown enormously: operators can have anywhere from 60,000 to 125,000 SKU in their supply chains. (7)
As well as a massive number of SKU on hand, each can have different stock turnover rates. Some SKU turn over fast, while others might only be ordered annually. Not only is keeping the right parts in stock an issue for the automotive aftermarket DC, but they also need to consider storage options, which make fast-moving SKU easier to access and handle.
Automotive aftermarket industry members have also recently managed the introduction of fast, easy delivery options for ordered parts, and the growth of the online retail market for parts and accessories. All this paints a picture of the automotive aftermarket industry as being one dealing with significant growth and change, and one that needs to be nimble, adaptive and have flexibility built into their DC and logistics management practices. Automotive supply chains need to become more responsive and flexible to remain competitive.
Solutions from an industry specialist
SSI SCHAEFER is recognised worldwide for delivering customised solutions that offer maximum efficiency, no matter the complexity. SSI SCHAEFER has been a partner to the automotive industry for many years and has delivered countless world-class solutions for some of the biggest industry names both in Australia and globally. The comprehensive range of its industry-focused products and solutions provides total logistics systems for automotive spare parts DC operations, which can be tailored precisely to each site’s requirements and focused on those attributes of particular industry importance.
For flexibility to cope with growing demand and changing SKU ranges, SSI SCHAEFER offers an extensive and diverse range of racking, shelving and mezzanine systems for all storage tasks for automotive SKU; from small parts storage to tyre, bumper bar, glass, and exhaust systems to name a few. Every solution is optimally and individually configured to meet specific requirements and can include a large variety of accessories to meet all storage needs. Highest quality, modular configuration, diverse combination options and the greatest flexibility are key features of SSI SCHAEFER solutions.
The R3000 shelving system developed by SSI SCHAEFER is ideally suited to small parts storage. It is a boltless shelving system that can also be used to build multi-tier mezzanines up to four levels high. This fully integrated and customisable product is complemented with a full range of accessories designed to provide almost unlimited options for the automotive industry.
SSI SCHAEFER’s plastic shelf containers are designed with the R3000 shelving system in mind. They create order, no matter the size and complexity of the operation and product range, and the RK series shelf containers achieve maximum cube utilisation within the shelf. Each container can also be separated into multiple compartments with dividers, which can be individually labelled for improved classification of small items. A rear lip is incorporated allowing the container to hang off the shelf for hands-free picking and replenishing.
For the larger items that are a natural part of the auto-parts product range, SSI SCHAEFER offers a variety of sturdy, robust, safe, and expandable pallet rack systems that include pallet racking, cantilever racking and drive-in racking storage as a starting point.

Improving picking productivity
Picking is central to warehouse logistics. SSI SCHAEFER has developed a range of picking systems that incorporate conveyor and software solutions. SSI SCHAEFER’s WAMAS software manages and controls all the intralogistics processes and encompasses efficient and flexible order processing functions. WAMAS is configured and implemented on customer sites by our 1,200-strong global software team, and a highly experienced contingent of Australian-based software engineers.
For more information call +61 2 8799 3600 or visit ssi-schaefer.com.
 
References

  • https://www.statista.com/statistics/262747/worldwide-automobile-production-since-2000/.
  • https://www.oica.net/category/economic-contributions/.
  • The future of car ownership August 2017 report by NRMA and https://www.bcgperspectives.com/content/articles/automotive-whats-ahead-car-sharing-new-mobility-its-impact-vehicle-sales/#chapter1.
  • https://www.abs.gov.au/ausstats/abs@.nsf/mf/9309.0.
  • IBIS World Motor vehicle Parts retailing in Australia Aug 2017.
  • https://www.v12data.com/blog/a-look-at-trends-and-statistics-in-the-automotive-aftermarket-industry-2017/.
  • ‘The Nuts and Bolts of the Automative Aftermarket Supply Chain – Merrill Douglas 20 September 2013.
  • “Supply Chain Management in the Automotive Industry” from www.advantech.net.au.

 
A few case studies

PM Automotive Group (formerly Preston Motors)
The PM Automotive Group is one of Australia‘s leading automotive and spare parts suppliers, trading since 1912. It operates two DC sites in Melbourne to provide better geographical coverage and customer service, and the new Campbellfield DC was commissioned in 2015.
The new system needed to be designed to grow and still has the capacity to accommodate up to a 30% increase in order output. At this DC, Preston Motors holds 50,000 SKU and handles 2,500 picks per day, including accommodating 200-300 emergency orders per day. Orders are despatched three times daily, with guaranteed same-day Melbourne delivery.
Warehouse manager Lou Micevski explains how the SSI SCHAEFER system caters well for the ebbs and flows of the automotive spare parts industry.
“Winter is a busier time, with more crash orders in the bad weather. One of the appealing aspects is that this new high-end system is efficient and quick, and it delivers significant noise reduction and power savings on the previous system.”
Slotting of items is performed on a dynamic basis. Incoming stock is automatically assigned a storage location based on its dimensions, movement and available storage locations. The system, designed and installed by SSI SCHAEFER includes VNA and selective pallet racking, special parts storage racking and shelving, R3000 shelving and mezzanine, plastic containers, and zone divert conveying and sortation system.
 
Multispares

Multispares is the largest independent supplier of aftermarket truck and bus parts in Australia and New Zealand. Its products are sourced worldwide from leading manufacturers and specialist suppliers. At its 7,000+ m2 facility in Greystanes, NSW, more than 20,000 pick lines and 500 pallets of truck and bus parts are distributed monthly.
The system installed by SSI SCHAEFER was purpose-built for Multispares national and local branch demands. It maximises pick efficiency and was configured to current requirements but allows expansion to support future growth. It also delivers improved operating efficiency and employee safety.
“Our warehouse operations are critical to customer service delivery. SSI SCHAEFER’s broad range of high-quality storage solutions improved our warehousing efficiency and accuracy, giving us the opportunity to allow for expansion in the future,” said managing director of Multispares Geoff Stewart.
 
Volkswagen Group Australia

Facing strong automotive parts and accessories growth for the Volkswagen, AUDI and SKODA brands, the NSW-based NDC for Volkswagen Group Australia constantly reviews its in-house storage capacities to manage the orders for its dealer network of commercial and passenger vehicles.
In 2009, SSI SCHAEFER installed an automated two-storey small-parts shelving system in a new Melbourne DC to manage the Southern dealer network in Australia. This incorporates a conveyor system on both floors, narrow and wide aisle racking, and storage areas. An integral part of the fit-out is the R3000 shelving system that has been built as a two-tier mezzanine for the storage of awkward products and medium volume SKU. The system is designed to optimise storage options while minimising the space required to handle these specialist automotive parts.
With the success of this project, Volkswagen Group Australia has this year chosen SSI SCHAEFER to manage further expansion and development of both the Sydney and Melbourne DC. Both these projects are due for completion by the end of the year.
 
BMW

In the first decade of this century, BMW Group Australia had seen its sales increase by 85% with vehicle numbers nearly doubling. To ensure good customer service, BMW built a new 12,600m2 PDC in Moorebank, Sydney, while retaining its Melbourne Parts Distribution Centre.
SSI SCHAEFER installed selective pallet racking and R3000 modular shelving, configured as a three-tier mezzanine system with integrated lighting, goods hoist and sprinkler systems.
This twin-warehouse strategy with the introduction of the Sydney PDC is a demonstration of the commitment that BMW Group Australia has to its business partners, the dealer network and to vehicle owners. It means that BMW dealers across the country now receive optimum speed of delivery and customer service.
With the success of this project, BMW Australia has this year chosen SSI SCHAEFER to manage further expansion and development of the Sydney PDC. This project is due for completion by the middle of this year.
 

Your MHD article: 'Make it' in I4.0

Jason Low

You snooze, you lose! That’s probably the best phrase to sum up what manufacturers across the world are experiencing in today’s highly competitive landscape. Manufacturers can no longer take a ‘wait and see’ approach as they are met with the opportunities and challenges posed by the concept of Industry 4.0. Well, it’s actually not just a concept, but a reality, that defines how manufacturers automate and adopt technologies that make them smarter.
A nation’s economy is tightly intertwined with its manufacturing output. According to the World Trade Organisation, 80% of the global trade activity between all regions is classified as manufactured goods, versus 20% as services. It is no wonder, then, that countries around the world are locked in a competitive race to become the next manufacturing hub. And many nations in the Asia Pacific are strong contenders.
For the last 20 years, China has been a steadfast superfactory for low-cost, low-value manufacturing, supplying the world with everyday commodities from food to apparel. As China moves into high-value manufacturing, a vacancy for low-value manufacturing has opened up. With its huge local market of 1.2 billion consumers, a large base of university graduates and engineers, and a friendly policy environment, India exhibits the potential to take over China to become the powerhouse for low-value manufacturing in the near future.
Comparatively developed countries like Australia, Japan, Korea, and Singapore are already in the business of manufacturing complex, innovative products. Singapore has sustained strong manufacturing growth for the last 12 months as of August, painting a bright picture for the future economy. Thailand retains a strong foothold in high-value manufacturing, enjoying a stable production in the automotive, electronics, food, and chemical-related industries. Indonesia’s manufacturing sector continues to be the nation’s biggest GDP contributor, despite a decline in the past three years.
Although these APAC countries are at different stages of transformation, and they all have their eyes on technology adoption to boost their manufacturing sector. Their intentions are telling from the findings in Zebra Technologies’ Manufacturing Vision Study.
Industry 4.0 will shake things up for manufacturers
One key insight from the study is the rise of Industry 4.0 in the region. This refers to the creation of smart factories that give manufacturers actionable visibility of their operations at every stage.
Manufacturers will be able to gain visibility of their goods at every stage of production, and the status of their assets through both proactive and reactive services to minimise downtime. In addition, the increased operational visibility will allow these manufacturers to ensure that its people are accounted for and optimise their productivity on the plant floor. With smart technologies, smart factories can ensure that enterprise processes and regulatory compliance are met throughout the manufacturing cycle. Finally, smart factories also benefit from increased security and safety.
To accomplish that, employees and plant floors are equipped with a range of technologies such as wearable technologies, Internet of Things (IoT) connectivity, radio-frequency identification (RFID) solutions, and real-time location systems (RTLS) to achieve visibility over every aspect of their operations, including goods, assets, and processes.  The study estimates the number of manufacturers in the region supporting fully connected factories would nearly triple over the next five years to reach 46 per cent by 2022, significantly ahead of the worldwide average.

Technology adoption is non-negotiable 
While there are lingering concerns that automation and robotics will eventually displace the low-skill jobs on the factory floor, many industry experts and economists concede that it will be an irreversible trend. The earlier the manufacturers shore up technology and start upskilling the workers, the less painful the transition will be later.
In today’s vast and busy factories, it can be daunting to do everything manually, not to mention it is extremely slow, inefficient, and prone to mistakes. Increasingly, factory workers are offloading tasks to their technological helpers. The Zebra survey shows that in 2022, 72% of factories will arm their workers with mobile technology such as handheld computers, printers, and scanners. These mobile devices can assist the workers in looking up and recording information, and generating and inputting product labels.
Wearable and voice-directed technology are on the rise too, with 65% and 51% of respondents planning to implement them for the workers. While wearable technology is relatively new, it unlocks potential for monitoring worker safety and locations in the factory, therefore allowing operation managers to quickly attend to workplace safety events and more effectively allocate manpower in different stages, leading to improved productivity.
Voice-directed technology, on the other hand, is proving to be popular for large companies managing immense factories. Voice technology allows workers to carry out a task with both hands and receive or give instructions at the same time, elevating efficiency and productivity. What’s more, many of the big manufacturers also rely on voice technology to efficiently coordinate for just-in-time (JIT) shipments, which are typically hectic and labour intensive.
RFID, a cousin to barcode technology and a building block for IoT, is also playing a key role in connecting the factories from point to point, corner to corner, by giving the goods a digital voice and allowing them to be ‘heard’ and, therefore, tracked in real time. An RFID tag can contain much more information than what is traditionally printed on a pallet, including detailed work instructions, bill of materials, and tracking numbers, helping workers better move the goods through a production line. Today, RFID is used to vastly improve order accuracy and traceability of an item. By 2022, only 9% of the factories will be devoid of RFID.
Finally, RTLS are becoming popular among manufacturers, too. In the past, manufacturers only tracked their products at the goods-in and goods-out stages of the process, making it extremely challenging to accurately locate the source of a quality issue should one occur. This has contributed to unnecessary spending on rectifying the issue. RTLS comes to the rescue by illuminating the typically dark, obscure production process and monitoring quality issues.
That is not the only benefit. Manufacturers can also deploy RTLS to collect critical data about assets including location, stage, and condition – actionable information for factory managers to make better business decisions. These data can also be sent quickly to internal and external suppliers, so they can respond to restocking requests or demand surge swiftly. Unsurprisingly, by 2022, more than 55% of factories will be furnished with RTLS.
Conclusion
Manufacturing is no longer about simply making things. It will be about making high-quality things in the precise moment when they are needed – and even where they are needed (with 3D printing). Manufacturers also need to increasingly diversify their product variants, adding to the complexity in production. With trends such as mobility, robotics, automation, and IoT, the competition is heating up in the manufacturing industry.
By 2022, half of the manufacturers in APAC will have smart factories, compared to one third as the global average. Are you ready to make it big by turning your operations into an intelligent enterprise, or will you choose to stay behind?
Jason Low is the APAC lead for Specialty Printing Group, Zebra Technologies Asia Pacific. For more information visit www.zebra.com.   
 

The city of 2050

Andy Cunningham

As the world rapidly urbanises, transport needs within cities are changing. In Australia, capital cities have experienced tremendous growth, with two thirds of the population currently residing in them. It is also estimated that Perth, Brisbane, Melbourne and Sydney’s populations will be the largest growing among top industrial countries by 2050, so millions of additional people will need a way to get from point A to point B in an efficient and environmentally friendly manner.
In tackling this challenge, however, there is no one-size-fits-all solution. How we design and implement new transport solutions will depend on whether they’re being created from the ground up in new cities that offer a blank slate for development, or if they’re being integrated with current infrastructure and behaviour patterns in existing cities.
New cities: taking a ground-up approach
Let’s start with new cities. Think of a master planned project like Masdar City in the United Arab Emirates, or even a new area being built from scratch like that planned for Greater Sydney. What type of transport will have the biggest impact, and how will they shape the development of the city?
In the 20th century, cities were largely built to accommodate cars — specifically, cars that run on fossil fuels. In these new cities, there is a fantastic opportunity to take a more sustainable approach to automobiles by creating an environment specifically designed for electric vehicles (EV). This ranges from designing roads with EV infrastructure such as charging stations already in place — making them as common as petrol stations are today — to more adventurous ideas, like wireless charging, which is currently being tested in the City of Adelaide.
According to noted urban design expert James Moore of Jacobs Advance Planning Group, an equally effective way to sustainably achieve a high degree of local accessibility and regional mobility right from the start is through transit-oriented development.
This process starts by laying down an extensive regional public transport network, which can either be rail-based or some form of bus rapid transit. With a fixed route and dedicated stations, this regional network will provide a framework for efficient development in the coming decades. The tallest buildings and most intense development can be placed within walking distance of the transit station, creating a dense activity centre of jobs, residences, shops, restaurants, and services. For a majority of residents, going to work or going shopping is as easy as walking a few blocks.
Further away from the stations, you can have less dense development and single-family homes. For people in these less dense areas, an array of intriguing transport modes can step in and assist. On-demand shuttle buses, like those currently being tested by the NSW Government in Sydney and on the Central Coast, can dynamically route pick-ups and drop-offs based on users, who can hail a ride via their phones or online. This system improves operational efficiency and reduces carbon emissions by eliminating unnecessary stops.
A German company called Floatility is tackling the last kilometre by developing connected electric scooters that can be accessed on demand. Since the scooters communicate in real time to a back-end server that constantly tracks location, users need only launch an app on their phone to find one nearby, rent it, and take it for a ride.
Floatility is not the only company bringing last kilometre transport to market. There are scores of electric bikes, skateboards, and hovercraft all vying to be your new mode of urban transport.
Overall, the ground-up, blank-slate approach is a long-term play: it takes a large initial investment to build out an EV charging infrastructure or lay down a regional transport network, and decades to fully develop the areas around transit stations. But for cities that undertake it, and ensure the last kilometre is easily covered, the end result is an immensely accessible city with mobility baked into its very design.
Existing cities: fine-tuning what’s already there
Implementing vast new types of infrastructure might be a best practice for new cities being built from scratch. But what transport will work best in an area that’s already densely developed, be it Sydney, Melbourne, New York, Tokyo, or even Cairo? For these cities, a better bet is to find ways to improve the efficiency of what’s already in place.
A good starting place is making more efficient use of their stretches of existing roads. Autonomous vehicles and vehicle-to-vehicle (V2V) technologies that allow automobiles to ‘talk’ to each other provide the opportunity to improve street capacity by allowing more cars to safely be on the road at the same time. Meanwhile, financial and behavioural levers like congestion pricing tolls can limit the number of cars on the road during peak hours.
IoT sensors have a role to play as well. Smart traffic lights, for example, can vary their signal in real time to improve traffic flow when they sense that several cars are stuck waiting at a red light while no cars are using the green light. Alternately, these smart traffic lights can sense when a bus, light rail, or some other form of public transport is approaching and make sure to give it signal priority.
A best practice that existing cities implement is re-examining how much road space is dedicated to automobiles instead of pedestrians or cyclists. In cities like Portland, Oregon or Amsterdam, for example, many roads give bike lanes the same width as car lanes, while some roads are completely dedicated to cyclists.
Additional space on the roads might be set aside for other emerging forms of mobility. VeloMetro, a Canadian start-up, is designing an enclosed electric cycle that provides car-like mobility for short urban trips. Meanwhile, Catapult Design is creating a new type of pedicab that will modernise the traditional tuk-tuks or rickshaws common to Southeast Asia.
As they re-allocate road space to accommodate these alternate types of mobility, city planners will need to understand the trade-offs involved for the transit system as a whole. For example, if they put in a bike lane, they lose a lane for cars. Software from companies like Autodesk now exists to help urban designers model their systems in four dimensions – the three dimensions of space, as well as the dimension of time. As a result, planners can simulate how their proposed changes will impact street capacity and commute times before any changes are implemented.
As a final step, existing cities should look at how they can modify the usage patterns of the millions of people already living there. One small way to make a big difference is simply by properly incentivising residents to use public transport rather than driving. Financial incentives have shown to be effective in this regard. They are just one more set of tools existing cities have at their disposal to help shape transport over the coming decades.

Two paths, one destination
While they might take different approaches, new cities and older cities will likely arrive at a similar destination in the year 2050: a cityscape where transport has specifically been designed to be more efficient, more environmentally friendly, and more enjoyable.
In the case of new, blank-slate cities, this will largely be achieved through big infrastructure investments, augmented by last kilometre solutions. For older cities, it will mainly occur through a series of smaller refinements to the existing transport environment.
Regardless of approach, there is a huge opportunity for planners and designers to use the proper software and other technologies to meet these challenges and ensure that cities can continue to flourish as hubs of people and activity in the 21st century and beyond.
Andy Cunningham is regional director at Autodesk. For more information email andrew.cunningham@autodesk.com or visit www.autodesk.com.au.
 

This week's MHD article: Bargain? Maybe not…

Everyone loves a bargain, but in the tough world of modern industry, where deadlines are critical and wriggle room for errors non-existent, some equipment-related ‘bargains’ can be disastrous.
Freight movement demands a just-in-time inventory system, a system that is constantly in motion. Stock comes in, stock moves out and the entire process works on the domino principle, with each phase of the job falling into place exactly.
Should a domino fail to fall at a critical point, though, the supply chain breaks, causing a hold-up of unknown proportions that creates a bottleneck effect in any warehousing structure.
Trucks sit idle because they cannot be loaded, and when they do finally move, they are late and the stock is delayed getting to the retailers, sometimes bringing penalties, sometimes causing contract cancellations.
In many cases the most critical pieces of equipment are the forklifts used for unloading, racking and reloading the vital goods being shipped around the country.
And the forklifts recording the highest failure rates also happen to be the cheapest: lift trucks made by independent enterprise companies and often built using inferior and sometimes counterfeited parts.
Second-hand grey import forklifts, offered without Australian Standard compliance, also have the potential to cause headaches for owners and operators.
Making it worse, these lift trucks are usually imported and sold by opportunistic entrepreneurs with little or no understanding of the lift truck industry at worst or a basic working knowledge at best.
Compounding problems, the trucks are promoted and sold in a “never mind the quality, feel the width” scenario reminiscent of the 1970s Gold Coast white shoe brigade.
The equipment is cheap, usually nasty and the service back-up variable at best. In many cases the retailers – having sold their shipment of cheap lift trucks – leave independent service technicians to deal with the mechanical fallout.
Industry experts say the sellers of the often strangely named lift trucks rarely have a servicing plan in place for ongoing support, and warranties, at best, often mean little more than supplying owners and operators with replacement parts and leaving it up to the owner to find a fitting service.
The big picture
Currently there are more than 80 forklift manufacturers building lift trucks and other industrial equipment independent of the trusted brands that make up the Australian Industrial Truck Association (AITA).
The importation rate of vehicles from these companies into Australia is variable with trucks arriving in small batches, the numbers largely dependent on both the number of local businesses prepared to commit to establishing themselves (briefly, in many cases) as importers and distributors, and the number of companies prepared to commit to actually buying the cheap forklifts.
In many cases, according to members of the AITA, those who do set themselves up to handle the non-mainstream imports are either existing second-hand industrial equipment retailers or opportunistic importers willing to take a punt on shifting the bargain basement equipment.
The biggest issue is that the cut-price forklifts are being bought by small business operators working to tight budgets: people who are generally unfamiliar with lift trucks, but in need of a unit to help with stock management.
In almost every case the retailers are independents with no long-term business plans and the trucks sold without the backing of well-represented state or national dealer networks.
In some cases there is not even any real shopfront scenario, and instead the lift trucks are advertised online or in the classified sections of newspapers and industry publications.
“You can actually buy a brand new forklift off Gumtree, Ali Baba or eBay,” said Crown Equipment’s director of sales and marketing Craig Kenchington. “Rarely do they have sales experts checking the suitability of the vehicle for a customer’s application.
“On top of that, many of the trucks – both new from non-AITA recognised brands and grey imports from well-known companies – come with possible compliance issues.”
Like all imported goods, from toys to toasters, imported industrial trucks are required to meet all the applicable Australian Standards before they can be sold. But there are problems.
Because the industry is effectively self-regulated, there is no independent monitoring and the AITA has no real knowledge of the various brands coming in, the numbers or what proprietary systems they are running.
“Without any formal inspection procedures in place there is a high risk of possible problems ranging from basic construction standards through to Workplace Health and Safety issues,” Mr Kenchington said.
“It’s like lawn mowers, there are no real controls. There are no current emission standards, for example.”
Cameron Paxton, director of sales at Toyota Material Handling Australia, said that inferior products from marginal manufacturers create headaches for buyers and the material handling equipment industry as a whole.
“In many cases comprehensive site surveys are not completed during the sales process, resulting in inappropriate equipment being supplied,” Mr Paxton said.
“On this equipment, compliance plates often don’t meet Australian Standards. Sometimes lift trucks are supplied that aren’t capable of lifting to the required capacity.
“Developments in technology, which are readily available from most mainstream specialist forklift manufacturers, are not fitted.
“This results in Australian owners not providing the safest possible work environments for their people.
“l don’t believe this is what our industry is about. We are all committed to providing fit-for-purpose material handling equipment, and the number one priority is to keep operators as safe as possible,” he said.
No guarantees
According to managing director of Lencrow Materials Handling Ross Grassick, warranty is another area where non-mainstream lift trucks can cause headaches.
“The problem we’ve seen with many customers buying these units is they are offered a warranty but when a problem arises they are told that it covers only parts,” Mr Grassick said.
“To compound the problem, the part has to come from the country the unit originated from and it often takes seven to 10 days, leaving the customer with no forklift and having to find a repairer to do the work.
“Many repairers are reluctant as they cannot be assured that the unit complies with Australian standards.
“In most cases these are small, single-unit companies, so breakdowns have a heavy impact on their ability to continue to work for the time that unit is out of action.
“These costs are rarely measured, along with the four or five hours to diagnose and repair the unit, the cost of interruption of business, and the hire of replacement unit.

“One or two of these events will erode the value of the cheaper option over well supported equipment.”

Unknown quantities
How many lift trucks are coming into the country? AITA cannot say because it is unable to scrutinise the import information, but evidence suggests the number of enterprise imports has jumped from an ‘almost nothing’ baseline in 2010 to around 2,000 units in 2016.
By comparison, total Australian lift truck sales last year were around 15,000 units.
AITA says buyers and operators of the non-mainstream trucks have often described after-sales service from importers and retailers as “generally hit and miss” and stories abound about owners and operators being sent replacement parts under warranty but having to organise and pay for their own repairs.
Derek Gearing, proprietor of Our Town Forklift Service in Newcastle, describes the budget-priced forklifts as a “headache” when it comes to technical support, build quality and spare parts.
“There are no manuals and you can’t identify parts to tell you where they might have come from. You have to find a bit (from another manufacturer) that looks about right and then try to modify it,” Mr Gearing said.
“They’re built to last for a certain period of time – about two years – and then you have to get a new one.
“If you are trying to get a lot of work out of them they just won’t do it. Maybe two or three hours a week will be okay but more than that is not good. A lot I’ve seen are poorly made, too, with mild steel chassis and the like.”
Mr Gearing said much of the money saved by buyers on the initial purchase was spent on repairs and added maintenance time with the extra time and effort spent chasing-up parts and, in many cases, modifying them to fit, all of which adds to the cost of ownership.
“I’d much rather work on product from any of the established brands,” he said.
Mr Gearing’s claims support those of the AITA regarding the warranties being offered with the cheap trucks and the way those warranties are being honoured.
The AITA says it is hard to determine whether or not the importers and retailers are meeting their obligations because some of them are reportedly not staying in business long enough for a proper audit to be conducted.
Full service importers and retailers, on the other hand, warrant their new vehicles for service, parts and labour in a very different method to the ‘ship and fix’ system employed for many of the independent enterprise brands.
A hard bargain
So is a bargain really a bargain? And how do the purchase prices compare between the ‘known’ and ‘unknown’ brands?
In general terms, Komatsu Forklift Australia national business development manager Jack Socratous said the upfront price difference between a ‘brand name’ truck and a comparable low-cost import is about $6,000.
“A six-grand difference over five years is about five dollars a day but if it breaks down and you’ve got a bunch of urgent orders to get out then it’s worth nothing.

“And if the forklift blows a gearbox at 5,000 hours, then the business has blown the $10,000 it saved, because it has to rent a replacement lift truck whilst it is waiting for that new gearbox to turn up and get fitted.”

Mr Socratous also questions vehicle longevity. The generally accepted working lifespan of a properly maintained new forklift from a recognised manufacturer, he says, would be about 10,000 hours – which is approximately the equivalent of travelling 200,000 kilometres – before major revitalisation work is needed.
And while there is no solid data on the operational lifespans of the independent truck brands, information from operators suggests ‘equipment deterioration’ sets in at around 1,000 to 1,500 hours – as little as one-tenth of the proprietary brand’s working life prior to refurbishment.
That has an obvious effect on the residual price of the equipment, Mr Socratous said, suggesting the retained value of a properly maintained mainstream lift truck would be ‘strong’ whilst an unknown brand would not enjoy anything close to the same sort of percentage value.
He suggests, in fact, that after the same time period and even with an acceptable maintenance schedule, the unknown brand vehicles have almost no residual value.
His view is supported by Damien Garvey, chief executive officer of Adelaide-based NTP Forklifts who said that, in his opinion, the budget enterprise imports have no real trade-in value whatsoever.
“Honestly, I’d be reluctant to trade (them) at a fair market price. There is no real secondary market (for these lift trucks) and no back-up support. That lack of support has really come home to roost,” he said.
Mr Garvey added that almost all purchases of the independent enterprise trucks were motivated by the price point with no thought given to the operating durability or maintenance needs of the vehicles.
The bottom line? The benefits of saving money upfront on the initial purchase soon evaporate, disappearing in a cloud of smoke caused by unknown build quality, modest or non-existent warranties, lack of replacement parts, poor service back-up, higher maintenance costs, early onset deterioration, an almost-guaranteed lack of reliability and almost-zero retained value.
A number of independent importers and retailers were approached for comment during the research for this story. All declined to be interviewed.
 
Compliant to the Code
The AITA is providing peace of mind for consumers purchasing material handling equipment through its Code of Conduct.
AITA member companies are required to implement, maintain and embrace the association’s principles, which state that their products must be compliant to Australian Standards, as well as having adequate warranty cover, parts availability and longevity.
For more information contact the Australian Industrial Truck Association (AITA) on +61 2 6290 1505, email aita@commercemgt.com.au or visit www.aita.net.au.
 

This week's MHD article is here!

Mike Reed

One of the key differences between Sales & Operations Planning (S&OP) and Integrated Business Planning (IBP), is that IBP includes far more robust financial integration. However, this not only requires careful thought but an entire re-evaluation of how the finance group interacts with the rest of the organisation.
At Oliver Wight, we often see that those organisations that enjoy a successful IBP process, also integrate their finance community in a similar way. One of the most common attributes in these businesses is that finance has been reinvented from its traditional role as ‘a recorder of financial information’ to one of ‘finance business partnering’. This enables finance to become tightly incorporated into the IBP process, allowing the department to become highly involved in crucial decision-making processes, which substantially improves business opportunities. So much so that the Finance Business Partner has become a vital role in market-leading organisations, as well as a major enabler of successful IBP.
Finance business partnering structure
There are, of course, many ways that finance can be structured within an organisation. However, having finance people embedded within the different departments of the company is an extremely useful model to follow, as shown in the structure in Figure 1., used by an Oliver Wight client.
A key advantage of this structure is that although the finance people still have the finance department as their home base, they are highly involved in individual departments, with their guidance sought day-to-day, by team members. They become more familiar with the detail of what is going on in the business and not seen simply as ‘the bean-counter’, who visits periodically and is often just a distraction for the rest of the team.
This model has become more common during recent years, whether the organisation has moved to an IBP model or not. In any case, it is a great structure from which to build the finance roles that will make IBP work most effectively.

Getting the right approach for success
The CFO at a leading company describes the core roles of finance in IBP as being ‘collaborator’, ‘enabler’ and ‘custodian’ (Figure 2.).

  1. Finance collaborates with its business partners and process facilitators through the different elements of the IBP process to help develop and critique assumptions and translate these into financial terms.
  2. As an enabler, finance ensures that all the financial implications are explored and understood, and built into the recommendations that lead to decisions being made within the IBP process.
  3. As custodian, finance safeguards the integrity of the financial projections, making sure forecasts are credible, business cases are robust, performance measures are accurately reported and gaps to commitments are made visible and are understood across the planning horizon. It also ensures that the drivers for the 24-month financial forecast are correctly captured, including volume, sales, trade spending, costs and capital expenditure plans.


Similarly, the CFO at a global manufacturing group, tells us two key principles must be observed by finance if it is to be successful in supporting IBP:

  1. Be ‘roughly right’ rather than ‘precisely wrong’. She encourages her team to focus on the things that make the difference, rather than spending time trying for perfection before they act. This may be a culture change for some, who perhaps have been more used to a high degree of precision in reporting. However, it is important to note that IBP is about the future and is based on assumptions. As such, nothing can be precise, only directional.
  2. Insist on one set of numbers to run the business, with finance driving the integrity of the financial projections. This means all areas of the business use the same ‘source numbers’ and questions are managed through the monthly IBP cycle, rather than off-line or in separate forums.

Answering the five questions
IBP review meetings should be action oriented, not discovery sessions. Key assumptions supporting each part of the plan need to be understood, any changes from previously agreed plans acknowledged, and the implications of these changes identified. Finally, action plans need to be agreed to support the business over a 24-month horizon.
A few years ago, Oliver Wight developed the concept of the ‘Five Key IBP Questions’ – simple ‘must-haves’ that can be applied in any organisation and that can be used in each of the IBP review meetings to ensure they address the key issues facing the business in a standardised way, so plans can be validated and the necessary decisions made.
The finance team has a vital role to play in answering these five questions.

QuestionFinance Role
1.    How are we performing now?·       Report on current financial measures
·       Provide an understanding of where the measures indicate shortfalls to the plan assumptions made in previous months
2.    Is the new plan valid?·       Provide supporting analysis of key assumptions
3.    Is the plan enough?·       Provide financialisation of the new plan
·       Compare new plan outcomes to financial targets
·       Provide understanding of shortfalls
4.    Are there any Vulnerabilities or Opportunities?·       Provide “what-if” analysis and scenario modelling
5.    What is needed to deliver the plan that is not already in place?·       Provide financial support to enable fact-based decisions
·       Support teams in building business cases for decisions

 
Senior leaders chairing the key IBP review meetings need to see information being presented in a business-like and commercial way, and this information needs to be ‘decision-grade’. The Finance Business Partner helps by ensuring that the financial implications of the five questions are properly presented, in a consistent and easily digestible fashion.
Finance’s role in the review meetings
The monthly IBP cycle consists of five major elements as shown in Figure 3. These are the Product Management Review, Demand Management Review, and Supply Management Review, Integrated Reconciliation Review and finally, the Management Business Review
Oliver Wight recommends that finance is included as a key participant in each of the review steps. It is important to define what role finance will play both in the lead-up to the meeting as well as in the meeting itself.

To understand how this works, it is worth unravelling the process and looking at the specific role that finance should play in each process element.

  1. The Product Management Review

For those companies that have adopted a Finance Business Partnering model, the Commercial FBP is likely to be the finance team member at the Product Management Review (PMR). A typical preparation cycle for the PMR is shown in Figure 4.
The commercial Financial Business Partner ensures that any financial information concerning planned changes to the portfolio (e.g. product rationalisations, cost reductions, product changes) have been properly incorporated. Updated information is based on any changes to portfolio plans since the last IBP cycle.

The horizon for the product and portfolio plan must be a minimum of 24 months. In many companies, this horizon is considerably longer, and may be 36 or even 48 months depending on lead times for product innovation and development. Working with the Product Planning Manager (the facilitator of the PMR), finance ensures the resultant financial forecast has the correct assumptions, such as attrition through the funnel, which projects to include at which stage in the funnel, and ramp-up after launch.
The Financial Business Partner also ensures that any financial measures being reported in the meeting (such as the percentage of sales from new products) are correctly captured and reported. Any financial updates to new product projects are also properly evaluated and included in the assumptions. These are drawn from latest information provided to the stage and gate process and from an understanding of recent performance of newly launched products.
Within the stage and gate process itself, the Commercial FBP provides the financial support to development projects including net sales value, contribution, return on investment capital and so on. For each of the projects, they also provide a critique to assumptions and ensure that these are based on credible information.
At the same time, Opportunities and Vulnerabilities are fleshed out, and financial implications understood. For the PMR, Vulnerabilities and Opportunities are likely to arise from such circumstances as delays in a project, or the potential to bring a project forward. The Commercial Financial Business Partner ensures that the financial implications and impact on the business (the revenue and margin in particular) are understood. Decisions need to be made at the PMR, and potentially at other points in the cycle, so reliable information supporting those decisions is required.

  1. The Demand Review

Depending on how finance is structured, it is likely that the Commercial Finance Business Partner also supports the Demand Review.
The monthly demand review process will have been mapped out to describe in detail the various steps that are required to make the Demand Review successful. This includes all the activities that involve finance.

Figure 5. illustrates the key steps in a typical demand preparation cycle.
Finance is involved in many of these steps. Early in the month, reliable financial measures are captured and reports assembled. It is not simply a case of reporting the numbers. Rather, finance provides the analysis behind the numbers. How does the financial performance relate to the plans that were reviewed and approved in the previous IBP cycle? Which assumptions were proved wrong? This requires close coordination with the demand team to ensure that evaluation of the financial measures lines up with root cause analysis on measures such as aggregate demand plan performance and forecast accuracy. Ultimately, there should not be two conflicting stories here.
Modelling and Scenario Planning also require support from the finance team. The implications of the various scenarios on the financial outcomes predicted for the business need to be understood. Parameters used in any models and resultant assumptions and projections must be robust and agreed by the different functions involved. A true indicator of failure here is if someone in the Demand Review says, “Where has this number come from? It doesn’t match mine.”
The consensus process often includes pre-meetings such as Category Team meetings or Pre-Demand Reviews. Finance also supports these. In larger companies, it is possible that Commercial Finance support consists of a team reporting to the Commercial Financial Business Partner. In this case, its various team members support the pre-Demand Review activities and attend associated pre-meetings.
Opportunities and Vulnerabilities for demand are fleshed out and the financial implications determined. This should not simply be a case of finance listing all the Opportunities and Vulnerabilities, applying some sort of probability, adding them up and netting them off, as we have seen in some companies – this makes no sense. Finance must help sort through the various Opportunities and Vulnerabilities that arise and ensure that the focus is on the significant items identified. The objective is to find ways to exploit Opportunities and defend Vulnerabilities – not simply make a long list that is impossible to manage.
Finance consolidates all the inputs that have been received, critiqued and analysed and identifies gaps to financial commitments – this year’s budget, next year’s targets and further out over the company’s planning horizon. However, simply identifying the gaps is not enough. Finance must support the production of gap-closing recommendations with robust financial information. These form a key part of the agenda for the Demand Review itself.

  1. The Supply Review

Where finance business partnering is in place, the Operations or Supply Chain FBP supports the Supply Review and its associated process. As with Commercial Finance, there is often a team in this area, especially where there are multiple manufacturing facilities.

Again, the Supply Review process will have been mapped out with all inputs, outputs, roles and responsibilities identified, and shown in Figure 6.
Where there are multiple manufacturing sites and/or more complex supply chains, the Supply Review process is typically broken up into Supply Point Reviews as well as an overall Supply Chain Review. In this case, various FBP team members support the Supply Point Reviews as required.
The finance team provides reliable financial measures as part of the overall set of performance measures for supply. This typically occurs quite early in the month. As with all performance measures, there is appropriate root cause analysis to understand which assumptions in the plan were not met.
Finance also plays a part in scenario modelling for alternative supply plans, ensuring the financial implications are clear. Opportunities and Vulnerabilities are captured and financialised as appropriate, again focusing on the important few rather than the trivial many. Financial projections are developed so the financial outcome of the supply plan is understood; this includes material and labour costs, inventory, overhead recovery, plant performance and capital plans. Financial analysis is required for decision briefs, dealing with issues such as capacity, shift changes, pre-stocking and alternative sourcing models. Gaps to commitments are identified with gap closing plans proposed and the FBP monitors the profit improvement plans in the operations and supply functions.
All of this comes together so recommendations can be reviewed and decisions made with confidence in full knowledge of the financial implications.

  1. Integrated Reconciliation and the Reconciliation Review

Integrated Reconciliation and Optimisation is a continuous monthly process lead by the IBP Process Leader and the facilitators for each of the three core process elements of IBP (Product Planning Manager, Demand Manager, Supply Chain Planning Manager) work as a team to ensure issues are captured and moved through the IBP process effectively. Here, finance works hand in hand with the IBP Leader and process facilitators to make sure that financial implications are clear and the financial picture builds accurately through the month. This is shown in Figure 7.

Leading up to the Reconciliation Review finance pulls together the financial picture for the company ensuring the forecast reflects the metrics and assumptions from each of the three preceding reviews. So, the full ‘Gap to Commitments’ analysis is brought together for current and future fiscal years. Finance ensures that scenarios and alternative plans for presentation at the Management Business Review have the appropriate level of analysis for decision making by the executive team.
In many organisations, the finance team holds a Finance Review meeting leading up to the Reconciliation Review to ensure the financial metrics are well understood and projections robust. This is where the FBPs from across the organisation come together in a meeting chaired by the CFO.
In some organisations, the CFO may also chair the Reconciliation Review, which is attended by the process facilitators and all the FBPs. The purpose is to identify the decisions required for the Management Business Review and ensure that alternative plans and recommendations have been prepared and are ready for consideration. The focus is on understanding the current state of the business and having gap closing recommendations on the table for decision. As an organisation matures, the focus shifts from gap-closing to re-planning and re-optimising the business. With more robust assumptions and plans, the company can now drive to aspirational targets with better balanced Opportunities and Vulnerabilities.

  1. Management Business Review

As a member of the executive team, the CFO attends the MBR. The CFO is the process owner for the financial appraisal component of the entire IBP process and in some companies also acts as the executive owner for Integrated Reconciliation.
The CFO ensures that all financial plans have been properly evaluated. They may be the custodian of the business scorecard and will certainly provide the key financial metrics for the MBR (such as EBIT, ROIC performance and projections). The CFO ensures that decision briefs are in place for the MBR to enable gap closing decisions, and that appropriate scenarios have been modelled for key Opportunities and Vulnerabilities. The CFO also helps the executive team understand what is at risk.
All of this ensures the MBR is a forum for executive decision-making. The focus is on driving the business to meet its goals and closing gaps to commitments, with the financial implications clearly understood. More mature organisations use the MBR to drive the organisation to aspirational targets using balanced Opportunities and Vulnerabilities as the levers, and built on quality assumptions and robust financial information.
Concluding thoughts
A key differentiator of Integrated Business Planning from S&OP is the inclusion of more robust financials. This delivers much greater value to the company providing a company-wide focus on gap-identification and gap closure and maturing to continuous re-planning and re-optimisation.
To achieve this, the finance community in the organisation needs to play a significant role in the IBP process. It may take a change in culture, moving from ‘keeping the score’ to a much more active role in driving the business. The financial forecast is taken from the same place as all other forecasts – one source of the truth. Properly done, this drives ownership of the numbers by the business, which begins to consistently deliver to forecast, month-in, month-out.
The central role of finance in IBP is to provide a vital business partnership, enabling visibility and accountability for the financial outcome. Finance is pivotal in the development of successful IBP in all areas of the business. It must move to challenge and support the organisation and act as an enabler rather than compliance police. In this way, finance becomes part of leading the business not only in day-to-day activity but by engaging in commercial strategies and solutions that drive better results.
Mike Reed is partner at Oliver Wight Asia Pacific. For more information call +61 3 9596 5830, email information@oliverwight-ap.com or visit www.oliverwight-ap.com.
 

From MHD: Spotlight on the 7 key warehouse processes

Mal Walker
Are all warehouses the same? Short answer: no, but yes!
This contradiction in terms is probably best explained by the Thai phrase; ‘Same same, but different’. This phrase is used widely in Thailand to explain to naïve tourists (such as myself) the similarities between one product and another.
Let me explain.
Yes, warehouses are the same in 7 key respects. They share 7 key processes. Two relate to inwards flow, (yellow), three to outwards flow (green), plus returns and value adding. Same same!
Now here is the ‘different’ part.
There is a plethora of nuances in how each process is physically conducted and electronically controlled. For example, two competitors with the same products will often have different ways of doing things. Idiosyncrasies across industries adds further diversity. Even third-party logistics companies do things differently.
The SCOR model and companies such as GS1 have blueprints of key processes using barcoding and radio frequency controls, which offer standard ways of reading and recording data, but the physical materials handling logistics and ways of doing things in each warehouse are somewhat unique to each business. This is driven by factors including magnitude of the warehouse operation, storage capacity, temperature, order profiles, legislative requirements, company culture, and volume of goods moving through the facility.
So, what are the key processes and how are they handled?
 

  1. Receiving

The act of handling products into a warehouse and onto a system. Receipts may be for single products, objects, litres, cartons, packets, crates, kilograms or full pallets. Items maybe large such as pallets, or as small as a split pin. The best way to receive products is via an Advance Shipping Notice (ASN) from a supplier. With this information on system, operators can scan consignment barcodes to bring up the ASN. If the delivery matches the ASN, then goods can be system-received. But at this point they are still at staging, albeit ready for put-away. Some systems allow for goods to be received into inventory at this point, whereas others require the goods to be delivered to a specific stock location before inventory is updated. This depends entirely on the customer requirements and how the system is set up.
Lesson: Organise ASN on your system for automatic receiving and put-away. Ideally, use RF equipment for scanning and updating your management systems.
 

  1. Put-away

A good system will prompt put-away staff with a note indicating that stock is in staging waiting to be transported to a storage location. The process commences when operators accept the put-away task from the Enterprise Resource Program (ERP) or Warehouse Management System (WMS), and then scanning the relevant barcode of goods to be put away. If there is no barcode, then a manual entry can confirm that the goods have been identified. At this point the system will be directing the put-away staff to deliver goods to the relevant storage location. Once at the location, the operator will either scan the relevant stock location barcode, or manually confirm that the correct location has been found, then place the goods into the slot before confirming that the put-away process is complete.
Lesson: Use a system that can direct put-away to vacant slots according to demand of the goods.

  1. Picking

There are two main types of picking.
Primary. This is the first picking of goods. In some cases, the first picking is delivered directly to a staging area or packing bench for finalisation, consigning and dispatching, thus the first picking becomes the last picking.
Secondary: This is a second picking process. Some primary picks are subject to a second picking process, particularly where picked goods must be allocated to clustered orders (bunch of orders), or discrete orders (single orders) via a sortation process or system. With the boom in online sales across many industries, far more companies are conducting secondary picking processes than ever before.
Once orders are received, it is common for orders to be released ‘real-time’ or in ‘waves’. Real-time orders are downloaded as they are received. Orders accumulated for specific picking times and transport routes are called ‘waves’.
Waves can be released at the discretion of the DC manager according to criteria that they determine. As alluded to above, picking may be discrete, i.e. one order at a time, clustered, i.e. multiple orders at a time, or batched, i.e. picking all the goods at once to sort to specific customer orders.
Often, companies may use all three types of picking. With increasing online orders, companies are increasingly installing picking apparatus such as put walls, put-to-light systems, goods-to-person systems and cross-belt sortation systems, to cope with the larger volume of small orders.
What about accuracy of picking? This is one of the most common questions asked by warehouse managers. Should you scan the product or location, or both during picking?
This depends largely on the degree of accuracy required. If both are scanned accuracy increases, but picking velocity will be lower compared to simply scanning the location. Where voice systems are used, no scanning will be used, but check digits at the location serve to ensure the operator is at the correct location. Voice picking obviates the need to scan at all, but with a touch of risk. The risk lies in the operator achieving the right count, upon picking, without making a mistake.
While companies worry about the accuracy issue, evidence suggests that voice picking and/or scanning the location only, gives a surprisingly high level of accuracy, without impeding picking velocity. For ‘accuracy intensive’ warehouses, accuracy can be enhanced by a statistical sample of QA checks, normally around 10 to 20% of orders.
Lesson: Picking uses a large amount of resources, and can reflect around 60% or more of warehouse staff. Smart picking systems and WMS are a must for increasingly complex businesses.
 

  1. Packing

There are scores of ways that goods are packed within distribution centres. Rather than delve into the specific details of packing processes, it’s suffice to follow five rules for successful packing:

  1. Goods picked must be traceable in terms of location from which they are picked, plus relevant ‘use-by’ dates and/or ‘batch’ dates and codes.
  2. Accuracy and QA checks must be built into the process.
  3. Goods picking from different zones within the warehouse must be easily ‘combined’ and system-managed to ensure order completeness.
  4. Goods must be packed according to their size, quantity, temperature, toxicity, value, fragility, hygiene and legislative requirements.
  5. Consignments must always be system-traceable to documents and/or invoice numbers for future traceability.

Lesson: Packing is an extension of the picking process and must be system-managed and treated with care to ensure that orders are complete, and accurate.
 

  1. Dispatching

The successful art of dispatch lies in the operation’s ability to have goods ready for departure, just in time for carriers to load their trucks. The DC manager must therefore balance and forecast packing and dispatching according to carrier pick-up times. Goods that are ready too early, for example, will clutter staging areas, while dispatches that are late, will delay loading and potentially cause late deliveries.
As indicated earlier, many firms resort to using their systems to release orders, for picking and packing in waves, aligned to specific delivery routes or carrier types.
Lesson: Avoid jambs and late deliveries by scheduling picking waves to align with carrier picking up times.
 

  1. Returns

This is something most companies wish will just disappear! However, returns are an intricate part of most businesses, and alas, the volume of returns is growing for many organisations – mainly due to the e-commerce revolution. Alarmingly, much of returns for many firms is for just one item at a time.
The complexity around handling returns mandates the following rules:

  1. When customers return goods, they should seek, and be given Return Management Authorisation, which outlines what is being returned and why.
  2. All returns must be traceable, to their order, document and invoice.
  3. Companies must have a pre-determined returns process that delineates what is to be done with the goods once received back into the warehouse, e.g. return to stock, repair, destroy, discard, recycle, return to manufacturer, etc.
  4. All credits must be system-recorded together with reasons why the goods are returned.
  5. Inventory must be updated where goods are returned to stock, or held for further action.

Lesson: Returns is a complex part of any business. A defined process must be in place that accurately and reliably records the whole transaction and credit process.
 

  1. Value-adding

This is the part of the business where products are produced, kitted, assembled, relabelled, modified, ‘burnt-in’, or subject to some other value adding process. The value adding part is about performing work on the product to make it ‘ready for sale’.
This process of value-adding can be complex, particularly when many different items are combined to form a new product. Complexity around handling value-adding processes and the changing nature of component products in and out of shelf locations can be daunting. Over the years, systems have evolved to assist, yet there are many companies that find recording of value-adding inputs and outputs a significant challenge, as the value-adding components may be incompatible with how the logistics system or conventional ERP or WMS have been set up.
Lesson: Review your value-adding processes and make sure that your system can handle the requisite activities and transactions.
 
To conclude…
So, there you have it, 7 key processes that are ‘same same’, yet ‘different’ for each organisation.
From the above, you will realise that modern distribution centre supply chains are a complex mass of processes, activities and transactions. All of which must be individually crafted by humans to make your warehouse operate effectively
The days of using a pad and pencil or even a spreadsheet to manage warehouse functions don’t seem very long ago, yet the unrelenting technology improvement and complexity of modern-day business dictates that companies invest in appropriate ERP and WMS systems to remain competitive. Equally important is that they are correctly configured to the ‘different’ aspects of your business.
Mal Walker is the manager, consulting, at the Logistics Bureau. For more information contact Mal on 0412 271 503 or email mwalker@logisticsbureau.com.
 

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