The state of California has postponed its e-pedigree requirement to 2011, giving manufacturers more time to assure that all drugs distributed within the state's borders are accompanied by electronic pedigrees that document their history.
John Johnson joined the DC Velocity team in March 2004. A veteran business journalist, John has over a dozen years of experience covering the supply chain field, including time as chief editor of Warehousing Management. In addition, he has covered the venture capital community and previously was a sports reporter covering professional and collegiate sports in the Boston area. John served as senior editor and chief editor of DC Velocity until April 2008.
Cardinal Health's state-of-theart distribution center in Sacramento, Calif., is all dressed up with nowhere to go. More than six months ago, the pharmaceutical and health-care products distributor fully equipped its DC with RFID technology to meet California's upcoming electronic pedigree (e-pedigree) requirement.
But now that Cardinal Health is fully compliant, it can't find a dance partner. Although it conducted successful RFID e-pedigree trials with several pharmaceutical manufacturers last year, none will be ready to apply RFID tags to all of the products they ship to Cardinal Health anytime soon. So while Cardinal Health is ready to move forward, it has no choice but to put its plans for full deployment on hold until its manufacturing partners are ready.
"In order to meet the California requirement, we'd have to receive all products with RFID tags and [the industry] just isn't there yet," says Tara Schumacher, a spokeswoman for Cardinal Health.
Currently scheduled to take effect on Jan. 1, 2011, California's law is by far the most aggressive drug pedigree law in the United States as well as the only one to require electronic tracking. As of that date, the state will require that all drugs distributed within its borders be accompanied by an electronic pedigree that documents their movement through the supply chain. The measure calls for pharmaceutical manufacturers to originate item-level e-pedigrees for their drugs and requires companies within the pharmaceutical supply chain (including distributors like Cardinal Health) to update those pedigrees upon each change of ownership. Although the law does not mandate the type of technology to be used, most manufacturers and wholesalers are turning to either RFID tags or two-dimensional (2D) bar codes, which hold more information than a traditional bar code.
Penalties for not falling into line could be severe. Dr. Paul Rudolf, a former senior adviser for the Food and Drug Administration who has been helping the drug industry decipher the California law, says that companies that don't comply face the possibility of fines of up to $5,000 per occurrence; for one shipment of 100 units that don't meet the e-pedigree standard, that equals a $500,000 fine. However, in a Webcast on the subject, he noted that it's possible that California will issue warnings first, allowing companies some additional time to meet the mandate.
Meeting the mandate appears to be a serious stumbling block right now. Although many drug wholesalers and distributors are prepared for the initiative, drug manufacturers have lagged. In fact, the California State Board of Pharmacy (CSBP) has been flooded with requests to postpone the effective date of the legislation for up to two years. As for why so many manufacturers are apparently unprepared, Carol Rozwell, vice president and distinguished analyst at Stamford, Conn.-based research and consulting firm Gartner, says it's partly because they haven't been drawn into the pedigree fray until now. Laws in other states don't require tracking until after the product has been shipped to a wholesaler.
The CSBP, however, is holding firm to its January date. The board believes that the e-pedigree mandate represents the best remedy for what ails the pharmaceutical supply chain—mainly, counterfeiting and theft. And it plans to go forward with the mandate this January.
Startup hurdles
But several things must fall into place for that to happen. Under the California law, drug makers must initiate e-pedigrees with unique identification numbers for each of their products at the smallest saleable unit level. For this to occur, the pharmaceutical industry must first agree on a standards-based approach and a single RFID protocol and technology, said Cardinal Health in a statement issued last year. Otherwise, the industry will be dogged by significant process and cost inefficiencies.
There are also some technical issues to be resolved with RFID. Steve Inacker, executive vice president of global supplier services at Cardinal Health, says that technology and process improvements are needed to consistently achieve acceptable read rates at all packaging levels.
And right now, cost remains a barrier—at least to RFID adoption. Greg Cathcart, senior vice president of sales, marketing, and services at SupplyScape, a Woburn, Mass. based e-pedigree-solutions provider, says that 80 percent of pharmaceutical manufacturers have adopted the less expensive 2D bar-code option. However, with new RFID-based solutions hitting the market at a fast pace, some analysts predict a wholesale shift from 2D bar codes to RFID over the next 12 months.
Though the masses may be flocking to bar codes, there are still a number of companies, including some industry heavyweights, that have been using RFID for some time now. Pharmaceutical giant Pfizer has been tagging every bottle of Viagra it produces since the end of 2005, and last year, the drug maker announced plans to begin tagging cases and pallets of overthe-counter pain reliever Celebrex. Speaking at the RFID Healthcare Industry Adoption Summit in Washington, D.C., last year, Byron Bond, director of trade operations and customer service for Pfizer, said the first RFID-enabled cases and pallets of Celebrex would be ready to roll off the manufacturing line by late last year, with tagged product working its way to wholesalers and pharmacies by early 2008.
Applying tags to cases and pallets of Celebrex is much more complicated than tagging Viagra, which is produced on a single production line in France. Celebrex is produced on four high-speed lines at Pfizer's manufacturing facility in Puerto Rico.
"We wanted to roll out the technology being applied to Viagra somewhere else. Celebrex far outsells Viagra and it's a high-volume product," Bond said at the time. "Within the next four to six years, we expect to have something close to a universal track and trace [e-pedigree mandate], so we realize we need to spread our RFID capabilities into other areas."
Another RFID veteran is Purdue Pharma L.P. Purdue has been using RFID as a security measure for its narcotic painkiller OxyContin since 2005. The drug maker has also been tagging another potent painkiller, Palladone, for just over three years.
A productivity cure, too
Once the industry settles on an e-pedigree solution, the benefits should go well beyond track and trace capabilities for drug wholesalers, especially those that embrace the change as an opportunity to do more than just meet a mandate.
"Unfortunately it's too easy to just focus on compliance, with the attitude that meeting the regulatory mandate is just going to be a lot of hassle and expense," says Gartner's Rozwell. "But many companies are taking advantage of having this new information at a very detailed level about their products, and the fact that they have much greater inventory visibility. The upside is actionable intelligence that can be used to maximize efficiencies and re-engineer the business."
Cardinal Health understands fully what that upside can look like. The company plans to leverage the new data made available by RFID technology to identify opportunities to boost efficiency in key areas, including returns and order accuracy, which can deliver value to the entire pharmaceutical supply chain.
Global Pharmaceutical Sourcing (GPS), a Bethesda, Md.-based wholesaler of drugs and medical supplies, is also benefiting from an e-pedigree solution. The company has invested in a pedigree system from SupplyScape that allows it to track products carrying 2D bar codes as they enter GPS's distribution centers across the country.
Hani Eshack, senior vice president of technology at GPS, says the company began pursuing an e-pedigree system long before the California law entered the picture. One upside of that decision is that today, in addition to being in compliance with the California measure, GPS has begun realizing some in-house process improvements.
Among other benefits, GPS is saving vast amounts of paper, says Eshack. Under the company's paper-based system, a stack of paperwork almost an inch thick accompanied most orders out the door of GPS's DCs. "There was a huge amount of photocopying, paperwork, and faxing," recalls Eshack. With e-pedigrees, that is eliminated entirely.
In addition, the company's e-pedigree solution has reduced labor and expedited order processing, resulting in greater throughput in its distribution facilities. Yet in Eshack's eyes, there's an even bigger benefit. "More importantly," he says, "this is helping our company to realize some of the high ethical standards we set for the company about assuring ourselves and our customers—particularly the patient—that they are getting what they paid for and that it is authentic."
Robotic technology has been sweeping through warehouses nationwide as companies seek to automate repetitive tasks in a bid to speed operations and free up human labor for other activities. Many of those implementations have been focused on picking tasks, a trend driven largely by the need to fill accelerating e-commerce orders. But as the robotic-picking market matures and e-commerce growth levels off, the robotic revolution is shifting behind the picking lines, with many companies investing in pallet-handling robots as a way to keep efficiency gains coming.
“Earlier in this decade and the previous decade, we [saw] a lot of [material handling] transformation around e-commerce and the handling of goods to order,” explains Josh Kivenko, chief marketing officer and senior vice president at Vecna Robotics, which provides autonomous mobile robots (AMRs) for pallet handling and logistics operations. “Now we’re talking about pallets—moving material in bulk behind that line.”
Kivenko explains that whether items are being packaged and shipped directly to a customer’s home address or moved as finished goods to a shipping bay for store delivery, those items are first moved in bulk in some way, often by human hands and with human-operated equipment. He describes warehouses as chaotic environments in which humans move pallets and cartons in multiple ways—up and down, side to side, from receiving to storage, from storage to shipping, or via cross-docking. Automation can help bring order to that chaos.
“What we’re trying to do is relieve some of the pressure [on the] humans [doing] this work,” Kivenko says of companies that develop pallet-handling robotic technologies. “At the end of the day, we’re trying to automate some of those flows, relieve labor pressure, save costs, and keep the goods flowing.”
But automated pallet handling isn’t right for every situation, so it’s important to understand the warehouse conditions required and the protocols and best practices needed to make it a win. Here are some guidelines for applying pallet-handling robots and gaining the most from your investment.
FIRST, UNDERSTAND THE TECHNOLOGY
Pallet-handling robots fall into four general categories, explains Rich O’Connor, vice president of storage and automation for Raymond West Group, a business unit of lift truck manufacturer The Raymond Corp. They include:
Palletizing/depalletizing robots, which are used to load or unload items onto and off of pallets, usually with the use of a robotic arm for picking and placing. Today, these systems are being increasingly integrated with automated storage and retrieval systems (AS/RS) to further streamline pallet handling in the warehouse, O’Connor explains.
Autonomous guided vehicles (AGVs) and autonomous mobile robots (AMRs), which are used to transport pallets within the warehouse. Often outfitted with lift decks or conveyors, or designed to tug or tow items, these robots move pallets from point A to B within a facility. AGVs, which often follow a marked guide-path or wire in the floor, have been around for many years, but the advent of high-performance guidance and vision systems is allowing them more flexibility today, O’Connor says. AMRs are self-guided vehicles that use software and sensors to navigate their way through the warehouse.
Forklift AGVs and AMRs, which can move products both horizontally, from place to place, and vertically, into and out of storage racks. They come in various styles—including stackers, counterbalanced trucks, reach trucks, and even very narrow aisle (VNA) vehicles for use in densely packed warehouses. These vehicles are more complex than those used only for horizontal transport, O’Connor explains. They must be “highly integrated” into the facility’s warehouse management system (WMS) or warehouse execution system (WES) so that they know precisely where to retrieve and deliver pallets within the facility.
Robotic pallet shuttles, which move pallets into, out of, and within dense storage racking. The Raymond Corp. describes such a system as “a standalone, automated deep-lane pallet storage system that utilizes self-powered shuttle carriages to move pallets toward the back or front in a racking channel. Shuttles are motor driven and travel along rails within a storage lane.”
O’Connor and others say that no matter which of these technologies you’re investing in, it’s important to remember that they are all part of a larger system designed to optimize operations throughout the warehouse.
“The expanding role of all these different styles working together is what’s amazing today,” O’Connor says.
SECOND, ENSURE THE TECHNOLOGY IS A FIT
Kivenko, of Vecna, also emphasizes the importance of pallet-handling robots working in concert, particularly AMRs and AGVs.
“The magic isn’t just that the robots are autonomous and driving by themselves. The magic is multiple robots—when you have a [whole integrated] system [in place],” he says. “[It’s] how the fleet operates autonomously and optimizes itself for continuous improvement. That’s where the exponential gains are. [It’s] not just about automating what a worker does; it’s about automating a system.”
But you can’t install these systems in just any warehouse and expect magic. Kivenko and others point to certain conditions that enable the best robotic pallet-handling outcomes, especially when it comes to transportation-based and forklift-type AMRs and AGVs.
“The robots that I sell are large-load machines with very expensive technology,” Kivenko explains. “They move material, generally, in larger facilities. And in order for them to produce a return [on investment]—because that’s the name of the game here—they have to be higher-velocity facilities.”
He says pallet-handling robots work best in large facilities running multiple shifts, usually more than five days a week. Wider aisles allow the equipment to move more freely through the facility and at higher speeds, to optimize efficiency and productivity. Strong Wi-Fi networks and clean, dry environments also help keep equipment running at top performance.
O’Connor agrees that pallet-handling robots are best suited to facilities with multishift operations, where they can ease labor constraints and boost productivity. And he says many customers are willing to extend the typical two- to three-year ROI period to five years in order to achieve those gains. But there is even more to it than that. O’Connor’s colleague John Rosenberger says customers must first step back and analyze their processes to ensure that, even if they have the right facility for pallet-handling AMRs or AGVs, they are moving material in the most efficient way to begin with.
“Many times, we find that the processes in place [are inefficient],” says Rosenberger, who is director of iWarehouse Gateway and global telematics for The Raymond Corp. He emphasizes the importance of analyzing existing data—from an equipment telematics system or similar—to determine the best path toward automation.
“Do you have congestion zones now?” he asks. “They’ll still exist if you automate [those processes exactly].”
THIRD, MAKE SIMPLICITY A PRIORITY
Another basic rule of thumb when implementing pallet-handling robotics: Keep it simple.
Andy Lockhart, director of strategic engagement for global warehouse and logistics process automation company Vanderlande, says that when designing a pallet-handling robotics system, “you want to minimize the processes you [automate]. When you can create [an automated system] that focuses on one task—for example, AMRs delivering pallets from a high-bay [storage rack] directly to the palletizing cell—you can do that efficiently and effectively. When you ask the AMR to do this and this and this … you are adding risk of failure.”
Lockhart’s colleague Jake Heldenberg advises customers to first test their target processes via pilot programs within the warehouse or DC. Heldenberg is Vanderlande’s head of solution design, warehousing, North America.
“If AGVs or AMRs for pallet handling are interesting [to a customer], the best thing to do is pilot one or two in an existing DC,” he says, explaining that the process can help companies troubleshoot, understand integration timelines, and gauge ROI. But pilot programs can add expense to a project, making it unaffordable for some.
“If that’s the case, then the best advice is work with a vendor who has experience integrating [the technology],” Heldenberg says. “Use their experience to benefit your business. You won’t have the same hiccups and challenges you would with a less-experienced vendor.”
Jeremy Van Puffelen grew up in a family-owned contract warehousing business and is now president of that firm, Prism Logistics. As a third-party logistics service provider (3PL), Prism operates a network of more than 2 million square feet of warehouse space in Northern California, serving clients in the consumer packaged goods (CPG), food and beverage, retail, and manufacturing sectors.
During his 21 years working at the family firm, Van Puffelen has taken on many of the jobs that are part of running a warehousing business, including custodial functions, operations, facilities management, business development, customer service, executive leadership, and team building. Since 2021, he has also served on the board of directors of the International Warehouse Logistics Association (IWLA), a trade organization for contract warehousing and logistics service providers.
Q: How would you describe the current state of the contract warehouse industry?
A: I think the current state of the industry is strong. For those that have been focused on building good client relationships over the years, I think it’s a really exciting time. Coming out of all the challenges of the past few years, I think there’s a lot of opportunity for growth and deeper partnerships. It’s fun to see the automation and AI (artificial intelligence) integration starting to evolve [in a way that’s] similar to what we saw with WMS (warehouse management systems) in the early 2000s.
Q: You are now president of your family firm. Is it an advantage having grown up in the business as opposed to working elsewhere?
A: I definitely believe it was an advantage growing up in the business. Whether it’s working with family or someone else in the industry, there’s always an advantage when you have mentors[to guide] you. I’ve been blessed to have several mentors, some in the industry, others just in life, and I’m thankful that they were willing to mentor me and that I was willing to listen to them.
Q: What are the biggest challenges currently facing 3PLs, and how are you addressing them?
A: Labor and legislation are both tough right now. The two seem to have a lot to do with each other, and it can make it tough to find and retain people. So I think we’ll see more and more automation of processes industrywide.
Q: Third-party service providers often must handle a wide variety of products for a lot of different clients. Does this variety make it difficult to invest in automation and other new technologies?
A: It can make things more difficult when looking at certain automation, but it’s in the “difficult” that a lot of opportunities lie. It would be tough to find a single solution that fits every client’s needs, but there are always opportunities to improve in certain areas. It just takes a bit of vision and commitment, and a willingness to invest in your own long-term success.
Q: As a 3PL, what do you look for when selecting the clients you work with?
A: Quality relationships that will last a long time. When both parties are happy and working together in the same direction, everyone wins.
Q: You’ve been a board member of the International Warehouse Logistics Association since 2021. Why is your involvement with this organization important to you?
A: I think it’s important to understand what’s happening in the industry. IWLA is a great resource for staying up to date and getting a solid education when it comes to the latest logistics trends. I also think it’s important to give back and pass along what we’ve learned to those just getting started in the business. As important as it is to have a mentor, it’s just as important to mentor and help others.
“While there have been some signs of tightening in consumer spending, September’s numbers show consumers are willing to spend where they see value,” NRF Chief Economist Jack Kleinhenz said in a release. “September sales come amid the recent trend of payroll gains and other positive economic signs. Clearly, consumers continue to carry the economy, and conditions for the retail sector remain favorable as we move into the holiday season.”
The Census Bureau said overall retail sales in September were up 0.4% seasonally adjusted month over month and up 1.7% unadjusted year over year. That compared with increases of 0.1% month over month and 2.2% year over year in August.
Likewise, September’s core retail sales as defined by NRF — based on the Census data but excluding automobile dealers, gasoline stations and restaurants — were up 0.7% seasonally adjusted month over month and up 2.4% unadjusted year over year. NRF is now forecasting that 2024 holiday sales will increase between 2.5% and 3.5% over the same time last year.
Despite those upward trends, consumer resilience isn’t a free pass for retailers to underinvest in their stores by overlooking labor, customer experience tech, or digital transformation, several analysts warned.
"The 2024 holiday season offers more ‘normalcy’ for retailers with inflation cooling. Still, there is no doubt that consumers continue to seek value. Promotions in general will play a larger role in the 2024 holiday season. Retailers are dealing with shrinking shopper loyalties, a larger number of competitors across more channels – and, of course, a more dynamic landscape where prices are shifting more frequently to win over consumers who are looking for great deals,” Matt Pavich, senior director of strategy & innovation at pricing optimization solutions provider Revionics, said in an email.
Nikki Baird, VP of strategy & product at retail technology company Aptos, likewise said that retailers need to keep their focus on improving their value proposition and customer experience. “Retailers aren’t just competing with other retailers when it comes to consumers’ discretionary spending. If consumers feel like the shopping experience isn’t worth their time and effort, they are going to spend their money elsewhere. A trip to Italy, a dinner out, catching the latest Blake Lively and Ryan Reynolds films — there is no shortage of ways that consumers can spend their discretionary dollars,” she said.
Editor's note:This article was revised on October 18 to correct the attribution for a quote to Matt Pavich instead of Nikki Baird.
A real-time business is one that uses trusted, real-time data to enable people and systems to make real-time decisions, Peter Weill, the chairman of MIT’s Center for Information Systems Research (CISR), said at the “IFS Unleashed” show in Orlando.
By adopting that strategy, they gain three major capabilities, he said in a session titled “Becoming a Real-Time Business: Unlocking the Transformative Power of Digital, Data, and AI.” They are:
business model agility without needing a change management program to implement it
seamless digital customer journeys via self-service, automated, or assisted multi-product, multichannel experiences
thoughtful employee experiences enabled by technology empowered teams
And according to Weill, MIT’s studies show that adopting that real-time data stance is not restricted just to digital or tech-native businesses. Rather, it can produce successful results for companies in any sector that are able to apply the approach better than their immediate competitors.
“ExxonMobil is uniquely placed to understand the biggest opportunities in improving energy supply chains, from more accurate sales and operations planning, increased agility in field operations, effective management of enormous transportation networks and adapting quickly to complex regulatory environments,” John Sicard, Kinaxis CEO, said in a release.
Specifically, Kinaxis and ExxonMobil said they will focus on a supply and demand planning solution for the complicated fuel commodities market which has no industry-wide standard and which relies heavily on spreadsheets and other manual methods. The solution will enable integrated refinery-to-customer planning with timely data for the most accurate supply/demand planning, balancing and signaling.
The benefits of that approach could include automated data visibility, improved inventory management and terminal replenishment, and enhanced supply scenario planning that are expected to enable arbitrage opportunities and decrease supply costs.
And in the chemicals and lubricants space, the companies are developing an advanced planning solution that provides manufacturing and logistics constraints management coupled with scenario modelling and evaluation.
“Last year, we brought together all ExxonMobil supply chain activities and expertise into one centralized organization, creating one of the largest supply chain operations in the world, and through this identified critical solution gaps to enable our businesses to capture additional value,” said Staale Gjervik, supply chain president, ExxonMobil Global Services Company. “Collaborating with Kinaxis, a leading supply chain technology provider, is instrumental in providing solutions for a large and complex business like ours.”