Faster, higher, stronger ... that's what DC execs are demanding of their warehousing systems. Once they get a taste, they always want just a little bit more.
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.
Today's relentless pursuit of speed is by no means limited to the push for Pentium-powered PCs, turbocharged sports cars or lightning fast Internet connections. Talk to any vendor involved in developing systems for managing warehouse operations, and you'll quickly learn that even the humblest distribution center is now demanding double-time throughput (as well as a whole lot of extras).
One company that is looking for some serious velocity in its distribution operations is Saks Inc., parent company of Saks Fifth Avenue and other high-end retail stores. A couple of years ago, the corporation, which has doubled in size every year for 10 years, was facing huge integration issues following a spate of acquisitions. In hopes of bringing some order to its operations, Saks Inc., which handles logistics, finance and IT for the operating companies in its group, decided to close five of its eight existing distribution centers and build a new $25 million state-of-the-art flow-through distribution center in Steele, Ala.
Directing the action in the 180,000-square-foot center, which opened two years ago, is a warehouse management system (WMS) from Catalyst International. Thanks to that system's robust capabilities, merchandise can now be processed directly through the DC to the appropriate shipping dock with little human intervention. Merchandise is received on the first floor of the facility through 20 shipping doors. The cartons are unloaded onto conveyors and immediately are scanned for correct vendor identification. Correctly identified material moves up the conveyors to the second floor, where cartons are sorted, scanned, marked and processed to shipping by a completely automated operation. The goods are then directed to 126 shipping doors, marked for delivery to a specific department store.
The new DC can move a single carton through in just under four minutes,with shipping accuracy of 99.9 percent. In fact, since installing its robust WMS from Catalyst, Saks has nearly tripled throughput, from 15,000 boxes per shift to today's rate of 43,000 while operating with fewer people than it did when 15,000 boxes per shift was the norm. "Now that's leveraging technology," says Peggy Winstead, director of systems planning for Saks. "We tripled our throughput, which is a huge gain. It's very, very fast. Logistics is all about speed. This just zooms."
When the plans were being drawn up, Saks Inc. envisioned a facility where no merchandise would be put away or stored. And at this point, the company is well on its way to achieving that goal. Today, 94 percent of product is crossdocked -a level the company hopes to bump up to100 percent in the near future.
The right stuff?
To keep goods flowing through its DC at a turbo pace, Saks has pushed all value-added services-including tagging, labeling and quality functions-back to the vendors. But that doesn't mean the company has handed off all responsibility for quality assurance. To make sure that the cartons it sends to the stores contain the right stuff, Saks audits a portion of them with the assistance of its WMS.
"Vendor quality management is a very important add-on to your basic WMS," says Winstead. "In order to operate a 94-percent cross-dock facility, we have spent years partnering with our vendors to get them into full compliance with our floor-ready merchandise standards. We have a responsibility to our corporation to audit a statistically valid portion of cross-docked cartons, to assure that vendors remain in compliance. We also owe it to our vendor partners to provide feedback to recognize their successful efforts or alert them to any new concern."
Cartons are randomly selected for auditing purposes. Once a carton receives an audit tag, Saks' material handling system diverts it to an audit station. The carton is opened and, using the WMS system and RF devices, workers audit the contents to verify that the merchandise in the carton matches the UPC data. Records are then sent to the company's vendor quality management system. The end result is that Saks is able to give monthly report cards to its vendors, letting them know how well-or how poorly-they are performing.
In its quest for ever-faster performance and higher throughput, Saks has already figured out its next move. The company plans to roll out its WMS platform later this year at distribution centers in Green Bay, Wis.; Ankeny, Iowa; and Aberdeen, Md. The company is also pushing forward toward its goal of 100-percent cross docking, says Winstead, "but to do that we need to reach out to the next frontier." In this case, the next frontier is XML (extensible markup language). "You're always going to have some small vendors that can't get to EDI," she says, "so we are looking toward XML as the next step."
Business Casual
Another company with a need for speed in its distribution operations is the Casual Male Retail Group Inc., the retail brand operator of well-known stores like Casual Male Big & Tall, Levi's Outlet by Designs and Dockers Outlet by Designs. CMRG is hoping that a robust system from Manhattan Associates will streamline distribution processes at its 600,000-square-foot DC in Canton, Mass. The facility, which will be up and running later this year, will eventually fulfill orders for more than 600 retail store locations that are now served by two separate DCs.
"We had some challenges," admits Adams. "Basically the employees need to be somewhat computer literate, since they are now working with a computer as opposed to paper and pencil. Not every employee started up smoothly. It took some workers months to make it work for them, while others were up in two or three days."
When it comes to the new system, CMRG has great expectations: It hopes to save between $20 million and $25 million by synchronizing distribution processes, improving its ability to cross-dock and manage inventory in real time through RF-based transactions. In addition, CMRG expects the move to a fully automated, state-of-the-art supply chain execution solution to help the company reduce labor costs in the DC by nearly 70 percent.
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.
The market for environmentally friendly logistics services is expected to grow by nearly 8% between now and 2033, reaching a value of $2.8 billion, according to research from Custom Market Insights (CMI), released earlier this year.
The “green logistics services market” encompasses environmentally sustainable logistics practices aimed at reducing carbon emissions, minimizing waste, and improving energy efficiency throughout the supply chain, according to CMI. The market involves the use of eco-friendly transportation methods—such as electric and hybrid vehicles—as well as renewable energy-powered warehouses, and advanced technologies such as the Internet of Things (IoT) and artificial intelligence (AI) for optimizing logistics operations.
“Key components include transportation, warehousing, freight management, and supply chain solutions designed to meet regulatory standards and consumer demand for sustainability,” according to the report. “The market is driven by corporate social responsibility, technological advancements, and the increasing emphasis on achieving carbon neutrality in logistics operations.”
Major industry players include DHL Supply Chain, UPS, FedEx Corp., CEVA Logistics, XPO Logistics, Inc., and others focused on developing more sustainable logistics operations, according to the report.
The research measures the current market value of green logistics services at $1.4 billion, which is projected to rise at a compound annual growth rate (CAGR) of 7.8% through 2033.
The report highlights six underlying factors driving growth:
Regulatory Compliance: Governments worldwide are enforcing stricter environmental regulations, compelling companies to adopt green logistics practices to reduce carbon emissions and meet legal requirements.
Technological Advancements: Innovations in technology, such as IoT, AI, and blockchain, enhance the efficiency and sustainability of logistics operations. These technologies enable better tracking, optimization, and reduced energy consumption.
Consumer Demand for Sustainability: Increasing consumer awareness and preference for eco-friendly products drive companies to implement green logistics to align with market expectations and enhance their brand image.
Corporate Social Responsibility (CSR): Companies are prioritizing sustainability in their CSR strategies, leading to investments in green logistics solutions to reduce environmental impact and fulfill stakeholder expectations.
Expansion into Emerging Markets: There is significant potential for growth in emerging markets where the adoption of green logistics practices is still developing. Companies can capitalize on this by introducing sustainable solutions and technologies.
Development of Renewable Energy Solutions: Investing in renewable energy sources, such as solar-powered warehouses and electric vehicle fleets, presents an opportunity for companies to reduce operational costs and enhance sustainability, driving further market growth.
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.”