Planning a material handling system is not about what equipment to install—not at first. It's about starting with a clear understanding of what the system should do when it's up and running.
Peter Bradley is an award-winning career journalist with more than three decades of experience in both newspapers and national business magazines. His credentials include seven years as the transportation and supply chain editor at Purchasing Magazine and six years as the chief editor of Logistics Management.
When planning a major material handling system, it can seem a long road between inception and completion, from the blank page to an effective operation.
That journey begins with a good map—or, more precisely, with a detailed system design for the warehouse operation. Crafting a detailed plan can be a complex and often daunting process. Experienced systems integrators say the journey begins with a clear understanding of the destination.
"The first thing we like to do is get a handle around the real objectives or goals of the project," says John T. Giangrande, a senior account executive for Fortna, a major systems integrator and supply chain consulting firm. "If you're building a new DC or expanding an existing DC, what's the driver? Is it about business growth, or are you consolidating distribution centers?" Labor productivity or transportation costs could be other factors affecting a design. "That leads to a more in-depth conversation to reach an understanding of the impact on operations," he says.
Giangrande is the author of a white paper for Fortna titled "Profitable Distribution System Design" that outlines the steps involved in revamping a warehouse operation. The first step is "Begin with the end in mind."
As Giangrande explains, that means asking questions like what is the business case—is it to reduce redundant inventory, consolidate processes, or improve customer service response? "That's really critical," he says, "because it helps develop the framework over what to do. That's where we start."
Setting objectives also requires some level of foresight into how business flowing through a DC is likely to evolve. "What are the numbers of orders, the number of lines per order, and how is that likely to change over time?" asks Giangrande.
It's important to engage not just distribution, logistics, and transportation in the discussion, but all the parts of the business that will rely on the system's success. Jimmy Benefield, director of strategy and operations for enVista, another supply chain consulting specialist, says, "One of first things we do is sit down at a roundtable with different stakeholders within the company—operations, but also sales and finance. We talk about where they are heading. Are they looking for acquisitions or will there be a change in the types of product in the next three to five years? We want to make sure we are not missing things."
That's particularly important if operations are likely to change substantially. To make the point, Giangrande cites the experience of two clients. One, a sports cap distributor, is expanding its product line from one sport to several. "What that means is that while the legacy business is growing, the majority of growth will be from a surge of orders for the new lines," he says. In contrast, another customer projects a steady 3 percent annual growth rate, but wants to consolidate two DCs into a single existing facility. Both companies needed complex material handling systems, but the designs were based on very different business drivers.
Do look back
While a detailed goal based on both tactical and strategic plans should be at the heart of the planning process, knowing where you are going and how to get there starts with understanding where you've been. Designing an appropriate system requires a complete understanding of current operations, and that demands careful analysis of detailed data, preferably for a full year of operations.
"We're big proponents of focusing on a data-driven design," Giangrande says. It is not just hard numbers—SKUs, order profiles and such—but a feet-on-the-floor look at current processes, which sometimes can yield surprises.
Giangrande says the data gathering should include interviews with operations personnel—supervisors and line personnel—who often have a different view of current processes than managers. "Managers may be out of touch with what is actually happening on the floor," he warns. That process, while perhaps time consuming, assures that the system plan is based on reality rather than perception.
That does not necessarily mean that current processes provide the best model for a new system, say both Giangrande and Benefield. After all, the very fact that a new or upgraded system is in the works implies that current operations cannot meet current or expected business requirements. Further, improvements in material handling equipment, controls, and software may offer the potential for gains well beyond what installed systems could provide. "We used to collect data to try to understand order profiles, and we still do that," Benefield says. "But we take a hard look at the processes from a lean standpoint. We look at the potential for eliminating touches."
Giangrande recommends looking at order profiles over at least a 12-month period, which will show seasonal or other cyclical trends or unusual spikes. He warns against relying too heavily on averages in designing a system. In his white paper, he writes, "If your business is seasonal and/or experiences cyclical trends, planning to averages will most likely yield a design that works very well except at the time you need it to perform the most."
Benefield also advocates looking at a full year's order data, but says there are exceptions. "Sometimes, [the client] may say we've been growing drastically. Then we might use six months."
Crunch the numbers
All this can add up to a lot of information, as informed decisions require looking at each of perhaps thousands of SKUs. A typical SKU analysis breaks down inventory into segments from fast movers to slow movers (Fortna ranks them A through D, plus an E category for idle inventory). "You can look at the number of SKUs, the number of units, and even how much cube they are taking up," Giangrande says.
The analysis also includes what he calls cross profiling—an examination that relates, say, fast-moving SKU categories with order profiles. Giangrande explains that such an analysis might look at what percentage of orders could be picked complete from A-category SKUs or A and B SKUs.
Major integrators as well as software companies have developed tools to help deal with the volume. Benefield says enVista offers a tool that can automatically generate as many as 7,500 charts and tables comparing the data in a wide variety of ways. "We look for spikes during the year or in lines per order, single line orders—we can break it out in a variety of ways. We have tables that show how orders break down, the percentage of As, ABs, and ABCs. That's one of the most valuable charts we generate."
The detailed look at SKUs and orders can suggest cost savings in the design through what Fortna calls a warehouse within a warehouse—clustering the fastest-moving goods in one segment of the warehouse, which could limit the amount of automated equipment needed. "When you go to do the design, you can better utilize your capital investment," Giangrande says.
He describes a project for a customer in the lawn and garden industry that could complete 71 percent of its orders from its A and B SKUs. The design consolidated those goods into a 10,000-square-foot area in the DC, making use of zone routing and a combination of static and flow storage. The company, he says, can now complete 70 percent of its orders in that area faster than it could with the previous layout, resulting in increased throughput and improved labor productivity. "It was not a radical change in how goods were stored, but a change in how the goods were grouped together, then adding appropriate material handling to that and ensuring we did not engineer in any bottlenecks," he says.
Benefield adds that in existing facilities undergoing a retrofit, it often turns out that DCs can benefit from implementing tactical changes in processes. He cites one customer whose data analysis showed that half the firm's orders were single-line, single-unit orders. By switching from discrete order picking to batch picking those orders in a single wave, the operation reduced travel time for order selectors dramatically, improving labor productivity. "When you are looking at the data, you can find opportunities," he says.
Draw the map
With a full understanding of the requirements, it's time to move on to the design. Giangrande says the design should incorporate four major areas: people, processes, systems, and assets. He treats DC space as a separate issue, particularly for retrofits in existing buildings. "Space is the Achilles heel of a design," he says. "You can have the best systems and good media, but if you need 200,000 square feet and you only have 150,000, things are going to suffer. Or if you have 300,000 square feet, that's going to be detrimental."
During the design process, Benefield says, it is crucial for the design engineers and the DC management to stay in touch. "Communication is key," he says. "You cannot work in a vacuum."
Ideally, he says, the designers will develop alternatives for DC managers to consider. They can guide customers through an economic analysis of each alternative, comparing crucial factors such as up-front investment costs, space utilization, labor costs, throughput, and expected return on investment. The analysis should also include an evaluation of such qualitative factors as flexibility, expandability, safety, security, integration, and ease of implementation, he says.
Ultimately, the design has to incorporate all of the pieces of the operation—receiving, storage, picking, areas for value-added services, shipping, etc. The decisions on storage media alone can be complicated, involving such considerations as cube utilization, level of automation, forward pick versus reserve requirements, and more. Those decisions will be dictated in large part by the order profiles and processes. "If you sell a million units, your storage media are going to look very different if you sell them one at a time than if you sell them 100,000 at a time," Giangrande says.
The completed plan serves as the road map for the implementation—the selection of appropriate technology, material handling equipment, etc. Developing such a map requires time and effort, to be sure. But it's the single best way to keep the journey from veering off course.
States across the Southeast woke up today to find that the immediate weather impacts from Hurricane Helene are done, but the impacts to people, businesses, and the supply chain continue to be a major headache, according to Everstream Analytics.
The primary problem is the collection of massive power outages caused by the storm’s punishing winds and rainfall, now affecting some 2 million customers across the Southeast region of the U.S.
One organization working to rush help to affected regions since the storm hit Florida’s western coast on Thursday night is the American Logistics Aid Network (ALAN). As it does after most serious storms, the group continues to marshal donated resources from supply chain service providers in order to store, stage, and deliver help where it’s needed.
Support for recovery efforts is coming from a massive injection of federal aid, since the White House declared states of emergency last week for Alabama, Florida, Georgia, North Carolina, and South Carolina. Affected states are also supporting the rush of materials to needed zones by suspending transportation requirement such as certain licensing agreements, fuel taxes, weight restrictions, and hours of service caps, ALAN said.
E-commerce activity remains robust, but a growing number of consumers are reintegrating physical stores into their shopping journeys in 2024, emphasizing the need for retailers to focus on omnichannel business strategies. That’s according to an e-commerce study from Ryder System, Inc., released this week.
Ryder surveyed more than 1,300 consumers for its 2024 E-Commerce Consumer Study and found that 61% of consumers shop in-store “because they enjoy the experience,” a 21% increase compared to results from Ryder’s 2023 survey on the same subject. The current survey also found that 35% shop in-store because they don’t want to wait for online orders in the mail (up 4% from last year), and 15% say they shop in-store to avoid package theft (up 8% from last year).
“Retail and e-commerce continue to evolve,” Jeff Wolpov, Ryder’s senior vice president of e-commerce, said in a statement announcing the survey’s findings. “The emergence of e-commerce and growth of omnichannel fulfillment, particularly over the past four years, has altered consumer expectations and behavior dramatically and will continue to do so as time and technology allow.
“This latest study demonstrates that, while consumers maintain a robust
appetite for e-commerce, they are simultaneously embracing in-person shopping, presenting an impetus for merchants to refine their omnichannel strategies.”
Other findings include:
• Apparel and cosmetics shoppers show growing attraction to buying in-store. When purchasing apparel and cosmetics, shoppers are more inclined to make purchases in a physical location than they were last year, according to Ryder. Forty-one percent of shoppers who buy cosmetics said they prefer to do so either in a brand’s physical retail location or a department/convenience store (+9%). As for apparel shoppers, 54% said they prefer to buy clothing in those same brick-and-mortar locations (+9%).
• More customers prefer returning online purchases in physical stores. Fifty-five percent of shoppers (+15%) now say they would rather return online purchases in-store–the first time since early 2020 the preference to Buy Online Return In-Store (BORIS) has outweighed returning via mail, according to the survey. Forty percent of shoppers said they often make additional purchases when picking up or returning online purchases in-store (+2%).
• Consumers are extremely reliant on mobile devices when shopping in-store. This year’s survey reveals that 77% of consumers search for items on their mobile devices while in a store, Ryder said. Sixty-nine percent said they compare prices with items in nearby stores, 58% check availability at other stores, 31% want to learn more about a product, and 17% want to see other items frequently purchased with a product they’re considering.
Ryder said the findings also underscore the importance of investing in technology solutions that allow companies to provide customers with flexible purchasing options.
“Omnichannel strength is not a fad; it is a strategic necessity for e-commerce and retail businesses to stay competitive and achieve sustainable success in 2024 and beyond,” Wolpov also said. “The findings from this year’s study underscore what we know our customers are experiencing, which is the positive impact of integrating supply chain technology solutions across their sales channels, enabling them to provide their customers with flexible, convenient options to personalize their experience and heighten customer satisfaction.”
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.
Two European companies are among the most recent firms to put autonomous last-mile delivery to the test with a project in Bern, Switzerland, that debuted this month.
Swiss transportation and logistics company Planzer has teamed up with fellow Swiss firm Loxo, which develops autonomous driving software solutions, for a two-year pilot project in which a Loxo-equipped, Planzer parcel delivery van will handle last-mile logistics in Bern’s city center.
The project coincides with Swiss regulations on autonomous driving that are expected to take effect next spring.
Referred to as “Planzer–Dynamic Micro-Hub w LOXO,” the project aims to address both sustainability issues and traffic congestion in urban areas.
The delivery vehicle, a Volkswagen ID. Buzz battery-electric minivan, will feature Loxo’s Level 4 Digital Driver navigation software, a highly automated solution that allows driverless operation. The van was retrofitted to include space for two swap boxes for parcel storage.
During the two-year pilot phase, Loxo’s Digital Driver will navigate a commercial vehicle several times a day from Planzer’s railway center to various logistics points in Bern's city center. There, the parcels will be reloaded onto small electric vehicles and delivered to end customers by Planzer’s parcel delivery staff.
Following the completion of the pilot phase, Planzer and Loxo will build on the program for rollout in other Swiss cities, the companies said.
The partners said the project addresses the increasing requirements of urban supply chains and aims to ensure the “scalability of their disruptive solution.” With largely emission-free delivery, it contributes to greater levels of sustainability for the city as a living space, they also said.
“The uniqueness of this project lies in the fact that it will have a direct impact on society,” Planzer’s CEO and Chairman Nils Planzer said in a statement announcing the project. “We didn't just want to integrate automated technology into existing systems, we wanted to develop a completely new concept and a new business model.”
As the hours tick down toward a “seemingly imminent” strike by East Coast and Gulf Coast dockworkers, experts are warning that the impacts of that move would mushroom well-beyond the actual strike locations, causing prevalent shipping delays, container ship congestion, port congestion on West coast ports, and stranded freight.
However, a strike now seems “nearly unavoidable,” as no bargaining sessions are scheduled prior to the September 30 contract expiration between the International Longshoremen’s Association (ILA) and the U.S. Maritime Alliance (USMX) in their negotiations over wages and automation, according to the transportation law firm Scopelitis, Garvin, Light, Hanson & Feary.
The facilities affected would include some 45,000 port workers at 36 locations, including high-volume U.S. ports from Boston, New York / New Jersey, and Norfolk, to Savannah and Charleston, and down to New Orleans and Houston. With such widespread geography, a strike would likely lead to congestion from diverted traffic, as well as knock-on effects include the potential risk of increased freight rates and costly charges such as demurrage, detention, per diem, and dwell time fees on containers that may be slowed due to the congestion, according to an analysis by another transportation and logistics sector law firm, Benesch.
The weight of those combined blows means that many companies are already planning ways to minimize damage and recover quickly from the event. According to Scopelitis’ advice, mitigation measures could include: preparing for congestion on West coast ports, taking advantage of intermodal ground transportation where possible, looking for alternatives including air transport when necessary for urgent delivery, delaying shipping from East and Gulf coast ports until after the strike, and budgeting for increased freight and container fees.
Additional advice on softening the blow of a potential coastwide strike came from John Donigian, senior director of supply chain strategy at Moody’s. In a statement, he named six supply chain strategies for companies to consider: expedite certain shipments, reallocate existing inventory strategically, lock in alternative capacity with trucking and rail providers , communicate transparently with stakeholders to set realistic expectations for delivery timelines, shift sourcing to regional suppliers if possible, and utilize drop shipping to maintain sales.