Filling orders from an inventory of 69,000 parts sounds anything but simple. Yet the folks at Future Electronics' new DC insist their workers could do it with their eyes closed.
David Maloney has been a journalist for more than 35 years and is currently the group editorial director for DC Velocity and Supply Chain Quarterly magazines. In this role, he is responsible for the editorial content of both brands of Agile Business Media. Dave joined DC Velocity in April of 2004. Prior to that, he was a senior editor for Modern Materials Handling magazine. Dave also has extensive experience as a broadcast journalist. Before writing for supply chain publications, he was a journalist, television producer and director in Pittsburgh. Dave combines a background of reporting on logistics with his video production experience to bring new opportunities to DC Velocity readers, including web videos highlighting top distribution and logistics facilities, webcasts and other cross-media projects. He continues to live and work in the Pittsburgh area.
The front section of Future Electronics' new DC—the part on public view—is a showcase for modern DC design. Its 252 employees report each day to a brightly lit, air-conditioned and humidity-controlled wing of the 250,000-square-foot building that features the latest in ergonomic design. What visitors don't see is the cavernous expanse (180,000 square feet) of unlit space yawning behind that sunny wing, where totes and pallets are picked and sequenced in near total darkness. But there's no need to call OSHA. The denizens toiling in that shadowy interior couldn't care less about lighting conditions: they're robotic cranes and automated storage and retrieval systems.
Future Electronics' new $50 million distribution center in Southaven, Miss., is a marvel of automation, featuring programmable logic controls, conveyors, cranes, two automated storage and retrieval systems (AS/RS) and state-of-the-art information technology. Inside its walls, associates pick resistors, microchips and other electronic parts and components for shipment throughout the world.
The Southaven DC, located a few miles south of Memphis, is the main U.S. distribution site for the Montreal-based company, which is one of the world's largest electronics distributors. Future Electronics now has offices in 39 countries in the Americas, Europe and Asia, and it prides itself on being a full-service distributor. "Every electronic component available in the world is offered through Future Electronics," says Bernard Betts, vice president of worldwide distribution operations. "Whether you're building a car, a computer or a telephone, we carry the electronic parts for it."
Up until recently, U.S. distribution was handled out of a DC in Bolton, Mass. But four years ago, Future management decided to move its U.S. distribution operations to the Memphis area. It built the new DC from the ground up, which allowed the company and its systems integrator, Witron, to customize the layout to its exact specifications.
This was no ordinary design project. For one thing, the DC houses an enormous range of components—69,000 active SKUs, with a total of 120,000 SKUs available for sale. For another, most of the items are small, delicate parts that must be handled with care. Some are so sensitive they cannot be touched directly. The challenge would be to engineer an intricately choreographed order fulfillment system that would reduce touches, cut labor needs, boost picking accuracy, slash operating costs, and allow for growth on the order of 10 percent per year.
Right from the start
The new DC began full operations this past fall. And now that it has gotten up to speed, products seem to fly through its doors.Yet the distribution process starts off at a somewhat slower pace. The sheer volume of information to be gathered about each product and the demand for extreme accuracy make receiving the most time-consuming part of the order fulfillment process.
When incoming trailers arrive, associates unload the products and move them via forklift to a staging area at the dock (the facility uses only one lift truck, although a second vehicle is on hand as a backup). At the staging area, associates scan each case's bar code before loading the case onto a specially designed slave pallet with shelving, known as a "cube." On an average day, workers load about 250 of these cubes, which have three shelves apiece. The cubes fit on a wheeled dolly so workers can move them around the dock easily.
When a cube is full, an associate wheels it over to a pallet conveyor. If SKUs on the cube are needed immediately, the conveyor whisks the cube to a second-level receiving station for further processing before it can be released for picking. If the items are not needed right away, the cube is routed to the facility's pallet-sized automated storage and retrieval system, where it is temporarily parked until a receiving station opens up.
The pallet-sized AS/RS can hold 4,200 cubes in its three aisles, each of which measures 600 feet long and 50 feet high. This AS/RS also houses oversized and bulky items, like heavy solder paste, although these items account for less than 3 percent of all products stored.
As receiving stations become available, a storage crane removes the cubes (on a first-in/first-out basis) and deposits them on a conveyor. At the receiving station, an associate removes each item from the cube, scans it and verifies the quantity, date code and part number, among other things. If the item is new to the facility, the associate also records its weight and dimensions using a dimensioning system (a CubiScan system from Quantronix). The associate then deposits each SKU into its own product tote, which is also scanned to tie its contents to that particular tote. The receiving process is not complete until all these steps are finished. Although Betts acknowledges that receiving consumes a lot of time, he considers it time well spent. Taking pains to collect data up front speeds up picking operations later, and the double checks built into the process ensure very high accuracy.
Perfect picking
Though a few urgently needed items go directly to picking stations, the vast majority of totes leaving the receiving stations next enter the Order Picking System (OPS). Like the pallet-sized AS/RS, the controls and the warehouse management system, the automated OPS was supplied by Witron. The OPS, which is an immense mini-load storage and retrieval system, can accommodate 360,000 totes in its 23 aisles (each of which has its own storage and retrieval crane). But as its name implies, the Order Picking System plays a role that goes well beyond storage. It also has 23 sophisticated picking stations on two levels.
The OPS was designed on the principle that it's more efficient to deliver products to a picker than to send the picker out to hunt for items. "In Massachusetts, a person had to go to the shelf where the product was stored to pick it. She had to find the specific box she was looking for and then had to try to pick first in/first out. Now the system automatically delivers the right box directly to her," explains Betts.
As incoming products clear the receiving process, the warehouse management system (WMS) allots them to orders and assigns picking in waves based on shipping routes and trailer departure schedules. At the same time, it designates a picking workstation for each order.
Hitting the road
Once it's made the assignments, the WMS dispatches cranes within the mini-load AS/RS to retrieve totes containing the products needed to fill the orders. The cranes deposit the totes onto a conveyor that carries them to the adjacent picking stations. Pickers never have to wait for items to reach them; the OPS automatically sequences and buffers products to ensure a steady flow. Nor do pickers have to worry about mixing up orders. Items for different orders are delivered to alternate sides of the U-shaped workstation. For instance, the product totes for the first order are delivered to the left side, while items for the next order are sent to the right side.
Other totes used for gathering the orders are delivered to the middle of the workstation, where an associate scans one to begin the process. The warehouse management system then assigns that tote to an order. Pickers next receive directions from a display screen at the workstation that shows the number of items to select from each of the product totes. They scan each item as they transfer it from the product tote to the order tote. The scan confirms that the correct SKU has been picked and captures its serial number for tracking purposes.
When the computer display indicates that picking is complete, the associate gives the order tote a little nudge. The conveyor then kicks on and carries it to a quality control area.
After dispatching the order tote, the associate signals the system to return the product totes to the AS/RS, where they're stored until needed again. But before those totes leave the area, the picker receives a prompt on the computer screen asking if the tote is dusty (electronics components must be kept dustfree). If the picker decides it's dusty, he or she hits a key to send the tote to an automatic vacuuming station before it goes back into storage.
Meanwhile, order totes arrive at the quality control stations, where associates remove each item from the tote, scan it to verify proper selection, and pack the items into a shipping carton. If the customer has requested special labeling or some other type of special handling, the order moves to a value-added processing area. Otherwise, the packed items move via conveyor through sealing and labeling machines before heading to a pop-up sorter, where the cartons are diverted to five shipping spurs. Automatic conveyor extenders are located at the end of the spurs to facilitate fluid loading at 10 dock doors (each extender is shared by two trailers). As they load cartons onto the trailers, associates scan them one last time to verify that the items are on the right truck. In the future, the company will switch to RFID technology to eliminate the need for manual scanning.
Most overnight orders are trucked to FedEx's Memphis hub, located just 10 minutes away. Packages slated for second-day delivery are hauled to the Memphis hub run by UPS. In total, the Southaven DC ships out about 3,600 cartons each day.
Big returns
Is the company satisfied with its $50 million investment? If the numbers are any indication, it should be ecstatic. Since the automated facility opened, labor needs have plummeted. Compared to the Massachusetts facility, Southaven requires 60 percent less labor to process the same volume.
In addition, picking productivity has skyrocketed. Where the average worker in the Bolton facility could perform 19 pick lines an hour, the average Southaven employee can perform 50. And as the facility's operations are fine-tuned, that number should hit 60—more than triple the Bolton facility's rate. Future's managers believe that's largely a function of the automation. "The picking is very easy. Our workers could actually pick with their eyes closed," Betts claims. "It's designed that way because we have to go so very fast."
Not only is the new system fast, it's cost- effective. Future's managers say the DC is likely to achieve a return on investment in less than two years. And thanks to the double checks built into the system, they report that they're seeing very high rates of order picking accuracy.
Future Electronics has discovered an unexpected benefit as well: the stunning visual impact of all the ultra-high-tech equipment on visitors touring the facility. "Customers and suppliers who ... walk through this building are impressed, and as a result, they want to be associated with this project," says Betts. "In short, the building is a great place to close a deal."
It’s getting a little easier to find warehouse space in the U.S., as the frantic construction pace of recent years declined to pre-pandemic levels in the fourth quarter of 2024, in line with rising vacancies, according to a report from real estate firm Colliers.
Those trends played out as the gap between new building supply and tenants’ demand narrowed during 2024, the firm said in its “U.S. Industrial Market Outlook Report / Q4 2024.” By the numbers, developers delivered 400 million square feet for the year, 34% below the record 607 million square feet completed in 2023. And net absorption, a key measure of demand, declined by 27%, to 168 million square feet.
Consequently, the U.S. industrial vacancy rate rose by 126 basis points, to 6.8%, as construction activity normalized at year-end to pre-pandemic levels of below 300 million square feet. With supply and demand nearing equilibrium in 2025, the vacancy rate is expected to peak at around 7% before starting to fall again.
Thanks to those market conditions, renters of warehouse space should begin to see some relief from the steep rent hikes they’re seen in recent years. According to Colliers, rent growth decelerated in 2024 after nine consecutive quarters of year-over-year increases surpassing 10%. Average warehouse and distribution rents rose by 5% to $10.12/SF triple net, and rents in some markets actually declined following a period of unprecedented growth when increases often exceeded 25% year-over-year. As the market adjusts, rents are projected to stabilize in 2025, rising between 2% and 5%, in line with historical averages.
In 2024, there were 125 new occupancies of 500,000 square feet or more, led by third-party logistics (3PL) providers, followed by manufacturing companies. Demand peaked in the fourth quarter at 53 million square feet, while the first quarter had the lowest activity at 28 million square feet — the lowest quarterly tally since 2012.
In its economic outlook for the future, Colliers said the U.S. economy remains strong by most measures; with low unemployment, consumer spending surpassing expectations, positive GDP growth, and signs of improvement in manufacturing. However businesses still face challenges including persistent inflation, the lowest hiring rate since 2010, and uncertainties surrounding tariffs, migration, and policies introduced by the new Trump Administration.
Both shippers and carriers feel growing urgency for the logistics industry to agree on a common standard for key performance indicators (KPIs), as the sector’s benchmarks have continued to evolve since the COVID-19 pandemic, according to research from freight brokerage RXO.
The feeling is nearly universal, with 87% of shippers and 90% of carriers agreeing that there should be set KPI industry standards, up from 78% and 74% respectively in 2022, according to results from “The Logistics Professional’s Guide to KPIs,” an RXO research study conducted in collaboration with third-party research firm Qualtrics.
"Managing supply chain data is incredibly important, but it’s not easy. What technology to use, which metrics to track, where to set benchmarks, how to leverage data to drive action – modern logistics professionals grapple with all these challenges,” Ben Steffes, VP of Solutions & Strategy at RXO, said in a release.
Additional results from the survey showed that shippers are more data-driven than they were in the past; 86% of shippers reference their logistics KPIs at least weekly (up from 79% in 2022), and 45% of shippers reference them daily (up from 32% in 2022).
Despite that sharpened focus, performance benchmarks have become slightly more lenient, the survey showed. Industry performance standards for core transportation KPIs—such as on-time performance, payables, and tender acceptance—are generally consistent with 2022, but the underlying data shows a tendency to be a bit more forgiving, RXO said.
One solution is to be a shipper-of-choice for your chosen carriers. That strategy can enable better rates and more capacity, as RXO found 95% of carriers said inefficient shipping practices impact the rates they give to shippers, and 99% of carriers take a shipper’s KPI expectations into account before agreeing to move a shipment.
“KPIs are essential for effective supply chain management and continuous improvement, and they’re always evolving,” Steffes said. “Shifts in consumer demand and an influx of technology are driving this change, in combination with the dynamic and fragmented nature of the freight market. To optimize performance, businesses need consistent measurement and reporting. We released this study to help shippers and carriers benchmark their standards against how their peers approach KPIs today.”
Supply chain technology firm Manhattan Associates, which is known for its “tier one” warehouse, transportation, and labor management software products, says that CEO Eddie Capel will retire tomorrow after 25 total years at the California company, including 12 as its top executive.
Capel originally joined Manhattan in 2000, and, after serving in various operations and technology roles, became its chief operating officer (COO) in 2011 and its president and CEO in 2013.
He will continue to serve Manhattan in the role of Executive Vice-Chairman of the Board, assisting with the CEO transition and special projects. Capel will be succeeded in the corner officer by Eric Clark, who has been serving as CEO of NTT Data North America, the U.S. arm of the Japan-based tech services firm.
Texas-based NTT Data North America says its services include business and technology consulting, data and artificial intelligence, and industry solutions, as well as the development, implementation and management of applications, infrastructure, and connectivity.
Clark comes to his new role after joining NTT in 2018 and becoming CEO in 2022. Earlier in his career, he had held senior leadership positions with ServiceNow, Dell, Hewlett Packard Enterprise, Arthur Andersen Business Consulting, Ernst & Young and Bank of America.
“This is an ideal time for a CEO transition,” Capel said in a release. “Our company is in an exceptionally strong position strategically, competitively, operationally and financially. I want to thank our management team and our entire workforce, which is second to none, for their hard work and dedication to our mission of advancing global commerce through advanced technology. I look forward to working closely with Eric and continuing to contribute to our product vision, interacting with our customers and partners, and ensuring the growth and success of Manhattan Associates.”
The Japanese logistics company SG Holdings today announced its acquisition of Morrison Express, a Taipei, Taiwan-based global freight forwarding and logistics service provider specializing in semiconductor and high-tech logistics.
The deal will “significantly” expand SG’s Asian market presence and strengthen its position in specialized logistics services, the Kyoto-based company said.
According to SG, there is minimal overlap between the two firms, as Morrison Express’ strength in air freight and high-tech verticals in its freight forwarding business will be complementary with SG’s freight forwarding arm, EFL Global, which focuses on ocean freight forwarding and commercial verticals like apparel and daily sundries.
In addition, the combined entity offers an expanded geographic reach, which will support closer proximity to customers and ensure more responsive support and service delivery. SG said its customers will benefit from end-to-end supply chain solutions spanning air, ocean, rail, and road freight, complemented by tailored solutions that leverage Morrison's strong supplier and partner relationships in the technology sector.
The growth of electric vehicles (EVs) is likely to stagnate in 2025 due to headwinds created by uncertainty about the future of federal EV incentives, possible tariffs on both EV and gasoline-powered vehicles, relaxed federal emissions and mileage standards, and ongoing challenges with the public charging network, according to a report from J.D. Power.
Specifically, J.D. Power projects that total EV retail share will hold steady in 2025 at 9.1% of the market, or 1.2 million vehicles sold. Longer term, the new forecast calls for the EV market to reach 26% retail share by 2030, which is approximately half of the market share the Biden administration targeted in its climate agenda.
A major reason for that flat result will be the Trump Administration’s intention to end the $7,500 federal Clean Vehicle Tax Credit, which has played a major role in incentivizing current EV owners to purchase or lease an EV, J.D. Power says.
Even as EV manufacturers and consumers adjust to those new dynamics, the electric car market will continue to change under their feet. Whereas the early days of the EV market were defined by premium segment vehicles, that growth trend has now shifted to the mass market segment where franchise EV sales rose 58% in 2024, reaching a total of 376,000 units. That success came after mainstream franchise EV sales accounted for just 0.8% of total EV market share in 2021. In 2024, that number rose to 2.9%, as EVs from the likes of Chevrolet, Ford, Honda, Hyundai and Kia surged in popularity, the report said.
This growth in the mass market segment—along with federal and state incentives—has also helped make EVs cheaper than comparable gas-powered vehicles, J.D. Power found. On average, at the end of 2024, the average cost of a battery-electric vehicle (BEV) was $44,400, which is $1,000 less than a comparable gas-powered vehicle, inclusive of hybrids and plugin hybrids. While that balance may change if federal tax incentives are removed, the trend toward EVs being a lower cost option has correlated with increases in sales, which will be an important factor for manufacturers to consider as they confront the current marketplace.