If all the world's a stage, then one of the more intricate dramas being played upon it is cargo distribution. Warehousing used to play a dull, if significant, role. But recent changes in supply chain strategies have thrust it center stage. The warehouse's transformation to a distribution center means that, to play its part well, it could probably benefit from a dress rehearsal. In supply chain technology terms, that means simulation software.
Simulation software has been used to improve manufacturing operations since the '70s. It traditionally allows a manufacturer to play out what-if scenarios in a purely theoretical environment, experimenting with changes in production schedules, product mix and staffing levels without having to try it out on the production floor. But there are plenty of reasons for logistics managers to consider simulation as a tool in warehousing and distribution, or even as part of overall supply chain management.
Why take the time and trouble to learn about yet another kind of software? The simple answer is: because warehousing and distribution facilities are becoming as tricky to run as manufacturing plants. Warehouse management systems (WMS) help, but they concentrate on facilitating a plan that's already in existence. Simulation software, on the other hand,can help figure out in advance whether a change in that plan would improve operations,without your having to shut anything down or rebuild a conveyor system. "In today's world, your real limits are in figuring out where products are going to go. You have to have appropriate spacing in the warehouse, you're increasingly mixing shipments and so on," says Malcolm Beaverstock, manager of business simulation at General Mills in Minneapolis, Minn., who's been using simulation software for 20 years, three of those years in warehousing. "Ten years ago, the bottlenecks in manufacturing were physically within production itself; now it's about scheduling, sequencing, size of orders. These all add complexity."
AMR Research analyst Matt Bilodeau says warehouse and distribution facility operators need simulation now because their businesses have to juggle more roles than a sketch comedy performer to meet their customers' demands. Warehouses have to adjust to changing product lines and seasonal promotions or even perform some light assembly.
"Warehouses are taking on processes that they were not traditionally asked to do," says Bilodeau. "Supply chains are becoming more demand driven, so if you can postpone final assembly until as late as possible, you can customize as close to the customer as possible. That's the big trend now. And I would like a simulator if I was running that kind of warehouse."
Take it for a test drive
Simulation in the distribution center is already catching on. A survey published in April by the Warehousing Education and Research Council (WERC), showed that 18 percent of warehouse managers said they regularly performed simulation. Bilodeau says simulation initially found favor in the warehousing world as a tool for planning the design and construction of large warehouses being built from scratch. "When you're building a new facility, you want to be able to take it for a test drive before you've even poured the concrete," he says.
UPS, for example, used simulation from Brooks Automation's AutoMod language to help in designing the expansion of its Louisville, Ky., distribution hub (the project was completed in August 2002). The company, which handles 2 million express or next-day packages in the United States every day, was able to theorize about what would happen if it changed such variables as package and container volume, aircraft parking positions, container destination lineups and the aircraft arrival schedules. UPS says these scenarios helped determine the best aircraft, container and hub setup for each likely cargo-handling scenario. The company also ran simulations to see how the breakdown of one piece of equipment would affect the overall performance of the facility, in order to arrive at a better design.
Many simulation software vendors get a foothold with new customers at this "green field" level by partnering with the companies that sell material handling systems such as conveyor belts for new facilities. But now simulation is being used more and more for ongoing operations. "It makes a lot of sense," Bilodeau says, noting that warehouse operations change so often, you need a simulation program to stay one step ahead in day-to-day operations. "The way we did business 10 years ago, one person could pretty much understand it himself," adds General Mills' Beaverstock, who uses several software systems, including one from Flexsim Software (formerly F&H Simulations), in Orem, Utah. "That's now getting harder and harder."
Greg Gossler, sales and product manager in charge of CACI Products Co.'s SIMPROCESS software, agrees there's been a shift."In the past, it was really used for analysis and after thought or some kind of forecasting," Gossler says. "We're now trying to move it into operational use, to answer the question: 'What are we going to do today?'"
Roger Hullinger, vice president at Flexsim Software, confirms that usage patterns are undergoing change: "Previously, the customer would identify one big problem. For example, at the end of every day they were 10 percent behind on filling orders. They'd find out how to improve that and walk away, but that's not happening now," he says."Customers are using it more on an ongoing basis."
Simulation is also being adopted in general logistics management scenarios, says Jeffrey Herrmann, associate professor of mechanical engineering at the University of Maryland's Institute for Systems Research in College Park, Md. Herrmann cites applications that model a transportation network, or even an entire supply chain. But warehouses are particularly well suited to simulation, he notes, because with operations literally under one roof, data can be gathered relatively easily. Supply chains are almost never under the control of a single company or management team, Herrmann points out. Gone are the days when Ford Motor Co. owned everything from the mines to the auto dealerships—a setup that would have made data collection a matter of simply insisting different departments submitted reports. Now supply chain information has to come from parts suppliers, freight forwarders, carriers, third party logistics firms, retail outlets and so on. In terms of supply chain simulation,"the main obstacle is getting information about your suppliers and downstream customers that you can use," says Herrmann. In warehouses, where you have what is known as a closed system, that's less of a problem.
Another reason to investigate simulation is that the systems are becoming more compatible with other business management software such as warehouse and transportation management systems. In other words, even though you may not be able to simulate an entire supply chain, simulation can feed from other technologies involved in overall supply chain management, as well as feed information back up the line.
Matt Rohrer, director of simulation products and services with Brooks Automation of Orem, Utah, says the company's AutoMod simulation software can download hard historical data from a WMS in order to closely mimic a new scenario before it happens—for example,a change in product lines, promotional packaging, work shifts or delivery schedules. In the simulation business, performing a dress rehearsal like this in tandem with operations management data is called "emulation." Vendors admit that this kind of integration is still rare, but they predict an increase in demand soon. Using simulation in this way facilitates more risk-taking and radical rethinks, says Rohrer, since the scenarios can be tested with real historical data, making predicted outcomes more accurate.
AMR's Bilodeau says the really interesting crunch will come when WMS vendors begin to integrate simulation with their products, either developing the software themselves or buying simulation vendors. He predicts that in 12 to 18 months, simulation may well be a competitive advantage in WMS and that consumers will regard it as a factor in choosing one WMS vendor over another. Professor James J. Swain of the University of Alabama, Huntsville, published a survey in 2001 showing that simulation software was "fairly well established and international." He adds that he sees simulation software increasingly linked to other "decision software," such as production scheduling programs.
Something else is changing—the systems are becoming easier to use, typically employing colorful three-dimensional graphics and animation to show the results of a "what-if " scenario. You can actually watch the script unfold,as boxes move through a hypothetical conveyor system, or imaginary staff move around in a theoretical stacking and picking schedule. Rohrer says the ease of use means the systems can be used by logistics and warehouse managers rather than by techies who don't necessarily understand the day-to-day practicalities of running a facility.
Beaverstock says this capacity to preview changes visually has greatly increased his company's use of simulation since 1995, when animation became available. General Mills bought Pillsbury in 2001, making it one of the largest food manufacturers in the world. The newly enlarged corporation decided to consolidate warehouses, reducing the number from more than 200 to around 50. Beaverstock says simulation's been crucial in helping make that happen."It's an intrinsic part of our business now," Beaverstock says. "Simulation is not quite in the same position as logistics and distribution, but it's getting there."
Simulation is not necessarily attractive for every warehouse operation, even in relatively large facilities, however. Brad Friedman, vice president of information services at Burlington Coat Factory Warehouse of Burlington, N.J., says he won't be using simulation for the new warehouse management system the company is building with software vendor Compliance Network. "I think the people in our distribution [operations] have a good feel for it and they don't need anything else," says Friedman. "We're not including any 'what-if ' capabilities in this new WMS."
If you decide to investigate the advantages of simulation software, the experts' advice is to move cautiously. A report compiled for Automation Associates Inc. by Jerry Banks and Randall Gibson suggests that potential customers ask a software vendor to solve a small version of a problem first. However, Brooks Automation's Rohrer says it's important that customers see simulation as something more than a quick fix for some niggling problem in warehouse operations. "It should become part of the decision-making process," he says. Typically, a customer will use simulation to automate one facility or one particular set of operations and then move out from there.
Rohrer also warns that there may be initial difficulty in selling the system inside a company. Often the investment peaks before the improvements in efficiency really start to show, making internal management buy-in slow. But he says this all changes when the benefits of simulation really start to kick in.
Banks and Gibson advise buyers to look for references from customers who've already used the software for sometime. It's also a good idea, they say, to seek the opinions of consultants who use several products from different vendors. And although price will necessarily be a consideration, it should not be the main criterion for choosing a system, says Banks and Gibson. "Productivity is more important."
Productivity and, of course, accuracy. Yet even the best software will deliver inaccurate results if it's fed the wrong data. Carefully gathering information is essential, Herrmann emphasizes, to avoid "garbage in, garbage out." A dress rehearsal of "King Lear" may bring down the house, but it won't mean much if you're staging "Chicago."
Author's note: A comprehensive list of vendors, compiled by James J. Swain in February 2001, can be found at www.lionhrtpub.com/orms/surveys/Simulation/Simulation.html.