October 15, 2015
strategic insight | Conveyance Innovation Report

Starting over

Starting over

Calsonic Kansei North America abandoned its old internal logistics processes and adopted a completely new approach, eliminating local drayage, building a brand-new DC, and installing custom-designed automatic guided carts. The award-winning project achieved ROI well ahead of schedule.

By Toby Gooley

Automated guided carts
Automatic guided carts feature "cow catchers" (on the left and right) to prevent a forklift operator from getting caught between the frame and the AGC. The double-stacked racks sit on top. The carts run on magnetic guidance strips on the floor.

One of Calsonic Kansei North America's mottoes is "Work together, improve together, succeed as one." That can-do attitude was clearly evident in the way the automotive supplier's supply chain organization approached its task when asked to cut logistics costs and eliminate inefficiencies in its Lewisburg, Tenn., manufacturing and warehousing operations.

Rather than settle for incremental improvements in existing processes, which included shuttling loads by truck between a plant and warehouses located a few miles apart, Mike Turner, the company's senior vice president, purchasing, supply chain management, and total cost reduction, and his colleagues came up with something completely different: a brand-new distribution center connected to the manufacturing plant, with a fleet of automatic guided carts (AGCs) to transfer loads between the two.

The ambitious plan presented both financial and engineering challenges, but with help from the AGCs' supplier and manufacturer, it moved ahead. The project has been so successful that Calsonic Kansei North America (CKNA) hopes to replicate it elsewhere. And no wonder: The AGC portion of the project alone has saved the company millions of dollars and achieved a return on investment (ROI) in just 14 months.

FRESH THINKING

CKNA is a unit of Calsonic Kansei, a supplier of automotive parts and components based in Japan. Calsonic Kansei's main products include cockpit modules, exhaust and air conditioning parts and systems, instrument panels and clusters, and electronics. It has a presence in Europe, Asia, and North and South America, and counts many of the world's largest automakers among its customers.

North American headquarters are located in Shelbyville, Tenn.; additional facilities are located in Tennessee, Mississippi, Michigan, and Mexico. The Lewisburg plant, which makes plastic and electronic parts and components, ships 65 to 75 truckloads a day to vehicle assembly plants owned by Calsonic Kansei's parent company, Nissan Motor Co., in Smyrna, Tenn., and Canton, Miss.

Like many businesses that experience rapid growth, CKNA eventually reached the point where its order volumes exceeded its physical infrastructure's capacity. To keep pace, the company had to lease additional warehouse space, requiring as many as four buildings to store raw materials, empty racks and containers, finished goods, and miscellaneous components. To move all of that to and from the plant, CKNA relied on "switchers"—a fleet of 12 over-the-road trucks and dozens of leased trailers. Not only was it costly to run the drayage operation, but the extra handling also created opportunities for errors and made it harder to track inventory accurately.

The "breaking point" came several years ago, when Nissan planned to launch a new model, and it was unclear whether the operation would be able to manage the additional volume. Turner asked his colleagues to take a hard look at Lewisburg's internal logistics practices and find a way to eliminate as much cost and inefficiency as possible.

If much of the excess cost, inefficiency, and errors stemmed from moving items over the road between the manufacturing plant and the warehouses, then the solution must be to eliminate those trips and handoffs. The team proposed something completely different: build a DC immediately adjacent to the plant. The two buildings would be connected by enclosed "travelways," and all raw materials, finished goods, and empty containers would move between the buildings through those connectors. But CKNA didn't own the parcel where a DC could be constructed, and its parent companies didn't want to sink capital into buying land or another building. Turner had a solution for that, too: lease a "build to suit" DC, a strategy that would allow CKNA to get exactly what it needed at an acceptable cost. With support from Calsonic Kansei US COO Eric Huch and Calsonic Kansei Americas Chairman and CEO Shingo Yamamoto, who approved funding, the project was a go.

AN UPHILL CLIMB

The new DC, which opened in April 2014, is 310,000 square feet with 26 dock doors. CKNA moved everything out of the leased warehouses and into this single facility, which is located immediately adjacent to the plant. CKNA was able to eliminate the fleet of switchers; instead, all items move between the DC and the manufacturing plant via two travelways connecting the buildings. These structures measure 12 feet wide and 93 feet long, with concrete floors and metal roofing. Loads are carried through the connectors by AGCs guided by magnetic tape. (Engineers had also considered using conveyors or forklifts but deemed them not flexible enough and a safety risk, respectively.)

Conceptually, the use of automated vehicles to move materials between the plant and DC was simple and straightforward. But in reality, it was fraught with challenges. That's where the motto "Work together, improve together, succeed as one" really came into play. Before ground was even broken on the new DC, CKNA called in Meiji Corporation, a value-added reseller (VAR) and systems integrator for automation products, and asked it to bid on the AGC segment of the project. Meiji Corp., the U.S. arm of Japan's Meiji Denki, had previously installed Model 100TT SmartCart AGCs manufactured by Jervis B. Webb Co., a unit of Daifuku North America, in the Lewisburg plant.

CKNA was looking for something that, at the time, was not available: an AGC that could carry up to 4,000 pounds of variously shaped items ranging in length from three to eight feet, stacked up to eight feet high, up a 1.5-degree grade; make tight turns at fairly high speeds without tipping over or dropping anything; and safely come to a stop while carrying a heavy load, even on the downhill.

There were other challenges, too, including figuring out a way to charge batteries in carts that would be constantly on the move. Lift truck drivers serving fast-moving production lines would need the ability to call for loads and release AGCs without leaving their vehicles. Furthermore, the traffic control system would have to work with the existing fleet of SmartCarts as well as interact with production control to prevent the release of too many AGCs into the plant at one time, explains Josh Popowski, Meiji Corp.'s Chicago branch manager and engineering solutions project leader. It would be a challenging assignment, to say the least. "The Calsonic team pushed us out of our comfort zone to think of things we had never thought of before," he says.

Meiji called in experts from Jervis B. Webb to help it determine whether such a cart could be built. Webb had a heavy-duty concept vehicle called the SmartCart Model 300TT but had only produced a couple of prototype units, recalls Vice President, Sales Bruce Buscher. Buscher himself thought the model could be modified and standardized to fit CKNA's needs.

Webb's engineers conducted a preliminary system simulation using the proposed DC layout. It could all be done, they said, but it would not be easy—especially since there was one more hurdle to overcome: CKNA required the project to achieve a return on investment in 24 months or less.

Turner gave the go-ahead, and all three companies set to work.

DESIGN CHALLENGES

Webb had to make numerous changes to the prototype AGC. The carts would have to carry all types of loads, from reusable totes to tall racks full of door panels. The original idea was to have an AGC towing a trailer behind it, but space in the plant was too tight for a cart with a trailer to make the necessary turns safely.

To maintain throughput, CKNA wanted to stack some items, such as racks, up to a height of eight feet. The cart, therefore, had to include a load-handling frame that could accommodate items of all shapes and sizes, including the stacked racks, Buscher says. Working together, the three companies and Topper, a local fabricator that makes load-handling frames for Meiji Corp., developed a version with pins in the corners to anchor the stacked racks and a lip to prevent loads from hanging over the sides. The frame, which can be loaded and unloaded with a forklift at either end, also includes tapered load-placement guides and a "cow catcher" in front to prevent a forklift operator from getting caught between the frame and the AGC.

Because the carts would have to climb the graded ramp from the plant to the DC while carrying heavy loads, it was necessary to boost their power and drive capacity. On the return trip, the issue was how to safely bring the carts to a controlled stop, without toppling the load and in compliance with safety standards, while traveling downhill at 130 feet per minute. Modifications to the software—Popowski compares it with the kind of controls in antilock brakes—ensured safe stops, even at the carts' maximum speed. The sliding load problem was solved by applying a nonskid rubber coating of the type used in the beds of pickup trucks to the load-handling platform. (The lining has the added advantages of dampening noise and reducing wear on both the AGC and the loads.)

On average, a cart is loaded and sent to the plant every 40 to 50 seconds. Given that pace, the question was how to charge their batteries without creating a bottleneck at the charging stations and delaying dispatch. Meiji's solution: parallel fast-charging lanes, so that AGCs can pull out unimpeded when they're called. To ensure they are quickly yet properly charged, the carts have a faster-charging, higher-grade battery than is typical in vehicles of their type.

FASTER AND MORE EFFICIENT

The way things work now is a far cry from the previous process. Today, the manufacturing plant is broken down into seven drop and load zones, each of which handles products and materials with a particular load profile. When a forklift operator in the factory requires, say, a particular type of empty rack, he or she presses a button associated with that type of rack on a forklift-mounted human-machine interface (HMI) device (which is similar to an oversized tablet computer) and specifies the number of units required. The system signals the appropriate lift truck driver in the DC that, for instance, two Type A racks are needed in Zone 1. The driver in the DC pulls the racks and brings them to a common staging area where the AGCs are loaded.

Continuing the example, when an empty AGC pulls up at the DC's loading area, the forklift driver uses the HMI to confirm that the required loads are on board and releases the cart. The AGC goes to a staging buffer area and waits for a signal that the AGC currently being unloaded in Zone 1 of the plant has completed its job—Greg Rucker, CKNA senior manager-supply chain management, compares it to one driver telling another, "I'm leaving, and that parking space is opening up now." The cart heads off through one of the travelways to Zone 1. When it arrives, the forklift driver unloads the racks. He or she then loads finished goods destined for the DC onto the same cart and presses a "go" button on the HMI to confirm that the items (identified by scanning bar codes) are on their way. The AGC then trundles off to the specified locations in the DC.

At the loading area, a large monitor displays information, zone by zone, of what's being loaded and unloaded, along with a map of the whole system. If there's a problem, an alert identifying which AGC is involved will appear on the screen. (Managers can also monitor activity on smartphones, laptops, and desktops.)

The software that runs on the HMIs is integrated with the AGC control system to ensure that traffic is well regulated. "We don't want to create logjams by sending too many vehicles at one time to a drop zone or through the main travel arteries," Popowski explains. "We can prevent that by regulating the number of AGCs being dispatched." And because both types of AGCs, the 100TT in the plant and the new 300TT, use the same traffic control system, they can share the same paths and magnetic tape without fear of holdups.

The automatic guided carts were not the only significant change CKNA instituted. The company took full advantage of the opportunity presented by the brand-new DC to retool workflow. "We changed just about everything: the way we ship, the way we receive, even the way we talk to each other," Rucker says. "We didn't keep any of our old processes."

For example, CKNA switched from propane to electric lift trucks, and because the new facility has narrow-aisle storage for certain products—something the previous facilities did not have—for the first time included stand-up trucks in its fleet. (Not surprisingly, all of CKNA's lift trucks are supplied by Nissan, now known as UniCarriers.)

Another important change was the adoption of a new scanning and labeling system that has improved inventory accuracy. Previously, CKNA only tracked information in receiving at the pallet level, without considering the individual boxes on that pallet. Now, receivers scan the label and the individual serial number on each box, and the number of inventory locations in the DC has increased significantly, from dozens to over 11,000. The new system accurately tracks the location of each item or carton, and allows order pickers to verify and ship the oldest one first.

SUCCESS, AND WHAT'S NEXT

The impact of all these changes has been remarkable. For example, under the "switcher" system, it used to take three to four hours to move loads from one building to another, and manufacturing lines would order an entire shift's worth of components to ensure they'd always have what they needed. Now, the transfer between plant and production line takes as little as three to 10 minutes. As a result, the lines can order just the materials they need when they need them, which has freed up additional space for manufacturing.

Congestion has been reduced and safety greatly improved. Before, there were a lot of forklifts weaving around each other and moving throughout the plant. With the AGCs in place, the forklifts only operate in their own zones. And because the AGCs run on magnetic strips, Buscher says, pedestrians can see the carts' exact travel path. Furthermore, their laser "bumpers" prevent collisions with pedestrians, vehicles, or other obstacles.

The project achieved ROI in just 14 months, well ahead of the 24-month mandate. Some of the greatest savings—in the millions of dollars—came from a reduction in labor. Overtime is a thing of the past, as are the switchers and trailers that shuttled between the factory and the off-site warehouses. At the DC, less labor is required at the shipping and receiving docks, and a number of forklifts across three shifts have been eliminated. CKNA emphasizes that employees whose positions were no longer needed were offered new positions in the DC, in the plant, or at other company facilities.

That's not the end of the story, though. Currently, the three partners are studying whether the SmartCarts could load and unload themselves by means of power belt conveyors mounted on top. CKNA is also working with Meiji Corp. to put radio-frequency identification (RFID) tags on racks and shipping containers in order to better track them. The DC also aims to replace manual scanning with automatic readers mounted on the forklifts, allowing better tracking of inventory within the facility and connecting it with the lift trucks' movements.

Given its quick ROI, this bold toss-it-out-and-start-over solution was bound to attract attention. And it has: The project received the 2015 Calsonic Kansei CEO's Award for the region encompassing North America, Mexico, and Brazil.

About the Author

Toby Gooley
Senior Editor
Before joining DC VELOCITY and its sister publication, CSCMP's Supply Chain Quarterly, where she serves as Editor, Toby Gooley spent 20 years at Logistics Management covering international trade and transportation as Senior Editor and Managing Editor. Prior to that she was an export traffic manager for 10 years. She holds a B.A. in Asian Studies from Cornell University.

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