Supplier Management

Far too often companies have a need for a supplier and after the contract is signed, simply hope for the best. However, working with a supplier on a regular basis is an on-going relationship that must be constantly evaluated and worked on. Rarely should a supplier be in a position to negatively influence your business and if you have a supplier that can hurt you, make sure that you have a backup plan in case of the worst.

For your typical business you probably get most of your supplies from a third party. It could be paper and office supplies from the local office stores or specialty products with logos and slogans from someone else. Whatever it is that you need to maintain your business on a day-to-day basis requires oversight and control. If you can't control them it's time for a change. If you are already in a situation where your suppliers seem to have too much control and are starting to impact your business it may be time for a heart to heart with them. If they aren't willing to become part of the team it's time to make a new team.

No company is in business so that they can let someone else tell them what they have to do and what hoops they must jump through; especially someone that they are purchasing through everyday. If communication isn't regular and friendly between groups, make a change.

Warehouse RF Network

It is becoming more and more common for warehouses to have an RF or wireless picking system. The advantages of the system outweigh the initial costs. Increases in productivity, inventory accuracy and order visibility reduce overall costs every single year as the warehouse becomes more adept at using the system. However the installation of the system has become a point of question to many looking at RF. Who should design the system? How do I know what I need? What am I missing?

Having built and fit-out several warehouses with this technology it is not going to be as bad as you think from a design and installation point of view. The key to a successful system install is to team with a quality and knowledgeable IT and Data Wiring vendor. Whichever vendor you ultimately select should have the ability to layout and procure the IDF cabinets, Access Points, wire pathways and all other equipment. They should know the proper specs and ranges for all of the equipment they recommend and should give you an electronic drawing of everything in your warehouse.

There are several aspects to an RF system that you will need to decide. The first is what kind of bar code technology will be used on products and locations. Wikipedia has a page describing the many types of bar codes that exist and their many uses. Most handheld scanners have the ability to read multiple bar code types, but it is still important to coordinate and make sure that everything is compatible from the bar codes to the printers to the scanners to the WMS. If you receive product from other vendors they may already have their own standard that you can use. Check with them if you are thinking of matching their technology.

In the typical warehouse there are many ways that bar codes will be scanned and many obstructions that could interfere with the wireless signal. Rack in particular is the biggest issue with warehouse RF. It is important to take into account several rack related RF issues during your strategy:

1) Lift Equipment Scanners - Vehicle mounted RF or Handheld units. Forklifts present several issues of their own. Vehicle mounted RF is typically more robust, more difficult to steal and more difficult to drop and break. However there is the additional cost to mount it to the forklift and you don't have the flexibility to use the scanner for floor picks.

2) Lift Equipment - Man-up forklifts or Man-down forklifts. The type of forklifts used in the warehouse come into play with where location tags can be placed on the rack. For man-up forklifts the tags will go directly underneath the product on the beams. In man-down environments the tags will have to all be placed on the first or second level to allow scanning. If there is a mixed environment there could be room for quite a bit of confusion.

3) Rack Density - The more packed together the rack in your warehouse is the harder it will be to get a clear signal to every point a scanner could be used. For a density of one pallet every 4 square feet you will need to have the wireless access points much closer together than for a density of one pallet every 7 square feet.

4) Rack Flexibility - If there is the ability to add and remove pick levels or locations there will be a need for a more flexible labeling scheme throughout the warehouse. The most flexible scheme I've come across follows the AA-12-34-56-78 format. AA stands for the rack type or forklift used to pick and putaway in the area. 12 is the aisle, 34 is the bay number in that aisle (odds and evens should be on opposite sides), 56 is the beam level within the bay and then 78 is the location on the beam. (ex. SS-23-34-02-02 would mean the location is in the Single Selective rack on aisle 23 in bay 34 (with evens being on the left) 2nd level up and in the right hand position.)

Once all of these issues are decided it is time to work with the IT vendor to actually develop the design. Don't stretch any of the equipment you get to its maximum range. Your IDF cabinets will likely be about 250 ft apart. Your access points will be staggered throughout the building on about 100 ft to 150 ft centers depending on rack density. With a 500,000 sf building your probably looking at a 400 ft depth which gives you two rows of IDF cabinets running along your building and 3 rows of access points. There are a lot of items that need to be coordinated so much sure you develop a robust plan for what you want and need this system to handle.


Sign Up for the Blog Email

________________________________
UPDATE:

There has been a lot of interest in this post. If you have any additional questions feel free to email me at dmusic [at] integratedstrategiesinc [dot] com .



Technorati Tags: rf, wireless, warehouse, design, barcode

Greening the Warehouse

Helping the environment is the big push in business. We've talked about the advantages to the marketing side of the business before. Today I'd like to go over some of the options out there for making your warehouse more environmentally friendly and why it's a good idea.

Warehouses are typically looked upon as industrial and environmentally unfriendly. This perception is holding back many companies from making real progress at cleaning up their act in the distribution centers. The opportunities available to reduce waste and energy are immense because of the purpose and operation of warehousing. Just like with offices, it is much more difficult to "Green" an existing warehouse than a new one but it is still possible and will save you money in the short and long-terms.

What areas are most ready to cut your costs and help the environment? To name just a few, you have paper reduction, transportation efficiency, lighting and air conditioning/heating. With all of these you can implement simple equipment or procedures than can provide you with quantitative results.

Paper Reduction

Old warehouse methods typically generate a large amount of paperwork. The less warehouse technology in place means that there is more paperwork needed to track all the transactions taking place. Some warehouses have room upon room for file cabinets filled with paperwork. Paper is may be recyclable but generating it and using it is not environmentally friendly. Technology is a way to reduce the paperwork generated by an operation and improves productivity at the same time. Advance Shipping Notifications (ASNs) and Warehouse Management Systems (WMSs) are the two best ways to reduce paper usage in a warehouse. Storing and backing up all the data across a building server or servers is the best way to enable quick retrieval and efficient storage.

Transportation Efficiency

Trucks stopping and going at your distribution center let out exhaust which releases greenhouse gases into the environment. Minimizing the impact of the trucks in your control can further reduce your environmental impact. Carbon footprint studies take into account the transportation associated with your company and products during the calculations. Moving trucks through faster or putting procedures in place for them to shut off engines when waiting is minimal cost but provides an impact.

Lighting

The lighting industry is beginning to take off on the back of environmentally friendly solutions. The reason for this is the extremely aggressive pay-back period for the technology in almost any application (both new or existing). If you are currently using metal halide, high-pressure sodium or t-12 lighting you fall into the category of prime candidate for an upgrade. Typically the payback period is going to be less than 2 years and the on-going savings are fairly significant. New environmentally friendly bulbs also give you the ability to discard your light recycling program that is draining money because you can throw the new bulbs away with the regular waste.

T8, and more commonly now T5, lights offer significantly lower energy usage and higher light output which means fewer lights required for the space. It's the best of both worlds. When you implement the light fixtures in combination with motion detectors to deactivate unneeded lights the savings becomes even more significant. Every major light manufacturer is moving to provide attractive T5 solutions and replacement plans to existing operations. More often than not they will come to your site and perform a free lighting assessment to show you the potential savings for your warehouse. Again, if you are using the older technology the Return on Investment will probably fall in at less than 2 years. As far as green technology goes, that is hard to beat.

Air Conditioning/Heating

Unless you fall into one of those great parts of the country (like San Diego) that has nearly perfect weather all year long, there is a good chance you spend money on heating and possibly cooling for your warehouse. Most warehouses in the country typically only provide heating unless there is a business need for air conditioning. The utility costs for heating a warehouse can be fairly significant though. There are three areas of the warehouse that can help you cut the cost you spend on heating and cooling.

First is the roof. If you are in an existing facility it is probably unlikely that there is anything that you will be able to do to upgrade this. New roofs are costly affairs and would probably result in operational downtime which is usually difficult to justify. However, in new warehouses the roof should be evaluated as more than just a way to keep out the elements. Look at the insulation value of the roof to determine the potential savings on heating and cooling. All that warm air in the warehouse rises to the top and a poor roof will exchange the warmth from inside for the cold outside forcing you to heat more on the inside than you would otherwise. Work with a specialist in HVAC if necessary to run the calculations.

Second is the warehouse doors. Dock doors are the primary contributors to warehouse air leaks. Cheap dock doors offer almost no insulation value from the outside. During the winter the cold air outside will cool down the air inside the warehouse. The principle is the same as with windows in residential housing. High performance windows offer better insulation and lower your heating/cooling costs every month. Doors with higher insulation factors are more expensive but could lower your monthly operating costs. However, the second problem with dock doors is that they are often not aligned correctly to be flush with the warehouse floor or dock leveler. Leaving doors open or gaps under and around the door will defeat any added insulation the door many have. Even with regular doors, make sure that they are flush with the floor and stay closed as much as possible during cool months.

Third is the walls themselves. Warehouse walls are usually not the most insulated construction materials in the world. Concrete tilt-up panels or metal walls offer more protection than dock doors, but still let in the cold. Adding additional insulation around the inside of the building will also reduce energy usage. The additional insulation keeps warm air in and the cold air out. You don't need to add it from top to bottom on the walls. Usually all that is needed is from the roof to about 15 feet above the floor. The goal is to protect the warm air in the warehouse (which has risen to the rafters) from trying to exchange heat with the outside. This is the same reason why upgraded roofs are good ideas.

Finally, use energy efficient equipment. Heating and cooling equipment is slowly becoming more energy efficient and you should take advantage of that fact in your operation. It is the simplest and easiest method to quantify the savings on.



Focusing on these four areas of the warehouse will give you the greatest environmental improvement for the cost. There are many different ways to green your warehouse and many of them will also improve your business and bottom line. Evaluation for potential impact by a professional consulting company will often cost little if anything. There is almost no reason not to try and find the areas you can help.


Technorati Tags: green, warehouse, environment

Forklifts, Order Pickers and Pallet Jacks.....Oh, My!

Sorry for the late post today and for the cheesy title. I simply go with pops into my head too often for that. Forbes.com has a great article today on Crown Lift Trucks. Crown is another company that we have worked with a lot when we deal with warehouse design and equipment. It seems like every time we've needed something out of the ordinary they were able to pull it together for us.

Yesterday we discussed warehouse metrics and I'd like to tie this in with that. Having the proper storage equipment and material handling systems is critical to proper productivity. Racking and forklifts go hand in hand. Sure if you want to set your warehouse up to handle every type of forklift available you can. Throw 12 foot aisles in everywhere and you really won't have an issue using any piece of equipment you can find off the street. You're sacrificing all kinds of valuable real estate, but if up front costs are all you care about then you may be onto something.

If you operate either a high volume or large footprint warehouse then you know how much that forklifts cost over the life of your operation. Nothing has more far reaching impact as your equipment. Proper material handling strategy can help ensure that your warehouse is successful. There are all kinds of concepts that we could go into that would blend together the use of a Warehouse Management System, product storage areas and material handling equipment. That will have to be a post for another day to really give it the thought it deserves.

On a high level though you need three strategies no matter the size of your operation:

1) Receiving
2) Putaway and Picking
3) Shipping

These are three distinct areas of the warehouse that have a high chance of handling either different volumes of product or different sizes of products. Any material handling decision that you make should always account several factors:

1) Size of product to be handled (there could be multiple)
2) Volume of each size product through the area
3) Space you have available to work in

It can sometimes not be obvious what the obvious solution is. There are so many factors that go into making the proper warehouse design factors that it can be hard to really wrap your hands around it. Once you do get it figured out it looks really good and works very well.

Our relationships with both ISS and Crown put us in the ideal position to design and implement the best warehosue solutions for your company or to give you the help you need to put it together internally. The life span of a warehouse implementation can be anywhere from 3 to 10 years. That is a long time to be losing money because a bad plan was put into place.


Technorati Tags: warehouse, design, crown, iss, forklifts

Changing the Supply Chain Game

Let's take a look on the inside today and evaluate how well we are playing the game we are in. What I mean by this is that we need to look into the puzzle pieces of our company to make sure everything is still working the way it was intended. Seth Godin talked about "Changing the game" for your business to out-maneuver the competition. Similarly, you should change the game internally to avoid creating long-term bad habits.

Everyone knows by now that metrics are the keys to understanding how things work. If you are curious as to how well your car is running you track the miles per gallon it is using, how many dollars per month it is costing in maintenance and how comfortable the ride is. Using those metrics you get a pretty good feel for if your car needs work done or if it is time to trade it in for something newer. The same applies to your supply chain where you should be constantly tracking your metrics. What metrics matter most in your supply chain? How about:


SF per Area (Receiving, Putaway, Picking, etc)
Workers per Area

Pallet Product In
Carton Product In
Each Product In

Pallet Product Out
Carton Product Out
Each Product Out

Operating Hours to Date
Orders Out

Utilities Cost
Admin/Overhead Cost

Why are these the important metrics for your warehouse? They tell you just about everything you need to know about your suppliers, your customers and yourself. These metrics will let you know when situations change and you need to adapt. Look at these numbers on a either a bi-weekly or monthly basis. If you evaluate daily or weekly there will be too many fluctuations to see clear trends. More than monthly and you won't be able to react or understand the changes. Let's look at each of the metrics so that we can see why the metric is important.

Square feet per area and Workers per Area go hand in hand. You should already be allocating work hours by department so that you can understand where your costs are coming from. This is an extension of that. If there is a change in the number of Workers per SF in an area then it is time to evaluate what is going on in that area.

Monitoring the way product comes in and out gives you an understanding of supplier and customer trends. If there is a shift to in type of units inbound there may be a need to change the storage methods to accommodate the new size. You'll have the data to go to the purchasers or suppliers and ask them about the change so that you can adapt to meet it or explain why it isn't going to work. You will be able to meet with them before you get overwhelmed by the change. On the customer side you can begin to pre-work items to meet expected customer demand. If customers are ordering cases instead of pallets, there may be the wrong allocation of forklifts and order pickers to meet the change.

Orders Out and Operating Hours tells you how many orders per person-hour are going through your facility. This is the high level facility efficiency. If this changes downward then there is probably over-staffing. An upward trend should coincide with changes made to improve efficiency. If an upward trend suddenly occurs it gives reason to look at the staffing throughout each area.

Utilities and Admin costs help you understand and plan for operating costs. Seeing the trends in these costs will help you understand the economic conditions around your business. Spiking admin costs without the resulting improved orders should be a call to scale back. Utilities that are trending upward should be a sign to plan for higher future costs.

Knowing these metrics and charting them regularly will give you the tools to improve and monitor your supply chain. Using these metrics assumes that the operation currently in place is efficient and operates the way you want it to already. Monitoring the metrics of a poor operation won't help the underlying issues and will be of little value at all. If you need help in determining if your supply chain is in good shape our company can help.


Technorati Tags: supply chain, metrics, warehouse, consulting

Understanding the Long Tail

In sticking with the internet theme of the past two days, I want to introduce people to the fairly recent concept of the "Long Tail." First pointed out on Wired.com by Chris Anderson, the long-tail concept has to do with the cost of search. The Pareto Principle says that, generally speaking, 20% of the products sold in a retail environment will account for about 80% of the volume. It has been shown over and over in traditional retail environments how this holds true and planning for it is regarded as a good move. The Long Tail Principle takes that concept and expands it within the internet age. I first read about the concept in the paper called "Goodbye Pareto Principle, Hello Long Tail" by Erik Brynjolfsson, Yu Jeffrey Hu and Duncan Simester. It is an incredibly relevant subject for anyone who's business touches both a supply chain and the internet.

At the highest level, the Long Tail states that as the cost of search decreases to $0 (free) the Pareto Curve will shift up from the X axis marking an increase in the volume contributed by the slowest moving products. Essentially the Pareto Curve is still correct but consumers will more easily find the niche and unique products. The Long Tail can be considered an extension of the Pareto concept but making the rules a little more complicated.

The Pareto Principle was true because the time it took consumers to find the specialized product that they would want cost more than the advantage of having that perfect product. Essentially most consumers would choose the product that was closest to their requirements that was easily found inside the store (one of the more heavily advertised products). It was advertising and location that helped the top 20% of products as much as anything else, not always some other factor.

Amazon.com and Ebay.com have become the lead examples of the power of the long tail. Someone looking for a book on 15th Century Coin Collecting can now find a very specific reference when previously they may have been forced to settle on a generic collection book pushed forward by their local bookstore. Between Amazon, Ebay and similar sites everyone can find exactly what they are looking for with a little time.

So how does this apply to your business? Well first, if you have (or plan on having) a significant online presence you can almost forget about the Pareto Principle. You may be about to play by a whole new set of rules. Data analysis and demand planning/forecasting are much more important in the open environment of the internet. In a traditional store it is very easy to funnel people past what you really want to sell. You can put those last minute impulse buys near the register to get the late purchase. Targeted advertising for other departments was simple to accomplish. Online people may never see your homepage where you advertise the items you would like to sell most. An item you never expected to sell at all may become a smash overnight hit in a market you have never served before.

Figuring out how the Long Tail affects your online business is important. On the internet everyone can be a superstar if they play their cards right and use a little bit of planning. Companies with major physical store presence can struggle to find an online market while small two person businesses can suddenly gross millions in revenue. It's a new game that plays by different rules. Understanding the environment behind the rules could be the difference between success and failure.


Technorati Tags: long tail, supply chain, pareto, inventory

Distribution Design Mistakes to Avoid

Distribution Centers (DCs) are some of the most important aspects of any supply chain. An effective distribution center can be the difference between losing money and making money. As we've discussed previously, Supply Chain health can often be overlooked. Without putting the correct processes in place the supply chain won't function correctly even if every aspect was well designed and implemented. But in order to even have a chance to run an effective supply chain, the design at each step must fit the purpose. The first cog to the supply chain is the DC.

Many DCs fail to even minimally live up to the high business expectations set for them during the initial strategy and planning stages. The issues that they face are varied but the symptoms are usually the same: low throughput, processing errors that impact service levels, inadequate inventory controls, poor productivity due to inefficient design. Many reasons exist for the struggle to open successful DCs. Most struggles can be associated to either lack of consensus on the plan, project plans run over budget and cannot be fully implemented or the proposed ROI for the design is inadequate to justify the project.

Beyond those, there are 10 common mistakes that should be avoided:

1. Incomplete Supply Chain Strategy
2. Lack of Financial Objectives
3. Overstated Inventory Levels
4. Failure to Utilize Postponement Strategy
5. Planning Without Data
6. Failure to Apply Lean Principles
7. Irrational Demand Buffering
8. Ineffective Space Utilization
9. Poorly Designed Value-Added Services Operations
10. Misapplication or Lack of WMS Technology

Ultimately a Distribution Center is a large machine where each part must work together. If even one part is incorrectly designed or fails to perform correctly the entire operation will suffer. Information and products must flow between areas seamlessly or it will back up and cause havoc.

Look at receiving docks in DCs. It is a fairly straight forward area where product comes in and relatively few tasks must be performed. A truck backs up to the dock and product is unloaded either manually or with some sort of fork lift. There may be a quality and count verification once off the truck, but for the most part the product is now ready for putaway into the storage area. Too often the receiving dock gets clogged with processed inventory that has not been put away. Usually this also means that orders cannot be placed against that product. The backup is usually caused by pickers focused on filling orders in hand and forgetting the putaway process. Eventually no more product can be received if nothing else is putaway simply because there is no room to put anything else.

The best way to avoid design mistakes is to always design with a process flow in place for facility operations. Before you can design a receiving area you must know what tasks will be performed there, what the putaway strategy will be and how many people will be in the area. It is not possible to design an effective storage area without knowing the picking processes and technology that will be used.


Technorati Tags: design, warehousing, process

Warehouse Design

When it comes to product storage in a warehouse there are all kinds of choices. Knowing which one you should use in your operation becomes a little trickier. A lot of people cut out the hassle and simply install pallet rack everywhere and use it to suit whatever needs they happen to have. Need to store a single box of paper? Throw it in the rack! Want a forward pick area? Front, lower section of the rack!

There are a few people that run in the opposite direction and end up with 7 types of storage mediums: Pallet rack, push-back rack, pallet flow rack, carton rack, carton flow rack, bin shelving and floor storage. Maybe this was what they needed during their first look at what they had on hand, but does it help them grow their business? Is it actually making them more efficient?

First let's go over what each type of rack is and what it is used for (in-depth looks within the links from Integrated Storage Solutions a company we have worked with extensively over the years):

Floor Storage / Bulk Storage: The simplest, cheapest, easiest and sometimes most dense storage solution. Highly flexible and if your pallets can be stacked 3 or more high the density is comparable or better than traditional pallet rack.

Single Selective Rack (SSR): Traditional pallet rack installed in a back-to-back configuration. Used for storing pallets of products on multiple levels. It can be installed with varying aisle widths depending on the material handling equipment that will be used in the operation. If you're looking for the most dense configuration you'll have to spend about $75,000 on a Turret Truck, but your aisles will only be 5 feet wide (the so called "Very Narrow Aisle" (VNA) configuration).

Double Deep Rack (DDR): Pallet rack with a twist. Like SSR it is used for storing pallets on multiple levels, however DDR takes puts two bays of SSR together so that you can store two pallets of the same product together. Think of all that slow moving product you have in multiple quantities but can't get rid of. With a double deep configuration you improve your storage densities without sacrificing significant investment in fancy rack. You will have to spring for a double deep forklift and you can't use the VNA configuration.

Push-back Rack (PBR): Double deep rack with a twist. Like DDR, multiple pallets are stored in the same location. Push-back rack is significantly more expensive because of the moving parts but if you product moves at a fairly swift pace and you have wall space to spare this could be for you. One of the great things about it is that you can bring back the VNA configuration because the next pallet will always be in front position. It's a great space saver for expensive real estate like freezers and refrigerators.

High Rise Decked Rack (HRD): Now we move away from the pallet storage to case storage. HRD exists mostly on the carton side but can be used as pallet storage in a pinch. HRD is essentially SSR that is 48" to 66" wide and not in a back-to-back configuration. Even though it is not installed back-to-back, there is a pick face on each side because cases are stored instead of pallets. Picking is performed by hand from an order picker or cherry picker instead of with a pallet forklift. Because pallets are not being stored it is possible to increase the number of beams and create customized slots for your various smaller products. Very good for getting your non-standard products in 2 pallet or less quantities into dense storage. A floor pick can be set up on the bottom levels to increase picking efficiency.

Bin Shelving: Simple 72" tall gray shelving. Used for storing small product in a dense environment. Perfect for non-automated and minimal investment operations. If you are starting small this is generally what you will have. It can be put into a mezzanine configuration to pick from two or three levels. Flexible and more easy to reconfigure than most other types of rack. More expensive than most people realize and usually only cost justified in small areas or operations.

Carton Flow or Pallet Flow (CF / PF): Great for a Forward Pick area. If you know you need a certain amount of a product in a three to five day period and want to minimize the labor to pick it, this is the system you'd be looking for typically. Product goes in the back and slides forward for convenience. This is not a storage medium necessarily, but a pick medium. However it usually gets classified as storage. Forward pick justification will be a topic for another day.

There are additional racking systems including Drive-in Rack, Cantilever Rack, Triple Deep Rack (for the truly brave) or Stacking Rack but for the most part these are used sparingly and for very specific needs.

With all of these choices, how should a warehouse storage solution be designed? The answer, of course, varies by requirements. No warehouse will be the same. The products, building specs, capital available, labor rates and more will vary project to project even within the same company. What flexibility is required for long-term business objectives? How much real estate is actually available for use? What sort of processing areas are needed besides storage? Warehouse design is not a simple process and good warehouse design requires pouring through at least a year's worth of product and ordering history.

Recently we have been working with brokers to help clients develop space models for their needs. They usually come to us with two or three spreadsheets showing their overall product on hand numbers, warehouse turns and some general requirements. Of course this is helpful for the design but it ultimately doesn't tell us anything about the operation. If their operation turns 4 times a year there could still be significant product turning 8 times and significant product turning 1 or fewer times. Overall numbers don't showing seasonal peaking. There may be an average of 30,000 pallets on hand during the year, but if their peak period requires 50,000 the design will be wrong before the design period even begins.

Once the data issues are worked out there is still the problem of balancing capital costs with on-going operational expenses. Almost any operation can operate entirely off the floor or in bin shelving, but the labor costs and real estate costs would be through the roof. Similarly, any company could implement a completely automated warehouse with almost no labor, but the capital cost would put them out of business before the first product was picked. Those are the extremes, but even for warehouses that are entirely SSR there are break points. Different Material Handling Equipment (MHE) has different labor productivity rates and capital costs. They require different aisle widths which affect the real estate costs. Which one should you use?

Warehouse design is not a task that is performed every year or even every third year for most companies. It should be a well though out process to help develop an effective plan. There is a reason that Third Party Logistics providers (3PLs) are adding customers everyday. They offer a convenience service to people that don't want to deal with these issues. Before looking to outsource, bring in a specialist to evaluate what is right for your company. Some networks should be outsourced because of size or regulation issues, but most can be kept in-house for minimized costs or even to operate at a profit to the business. With new Value Added Services that can be performed simply there is opportunity to sell services to your customers before the product even leaves the door. Not to mention the potential to add e-commerce to your existing business.


Technorati Tags: rack, consulting, design, warehouse, ecommerce

Supply Chain Importance

Do you have someone that keeps their finger on every layer of your supply chain? A Chief Supply Chain Officer (CSCO) so to speak. If your business involves moving a product(s) to an end user there should be someone in charge of supply chain health. Ignoring the supply chain is quite possibly the number 1 way to add unnecessary cost to products, force you to lease more real estate than necessary, and eat away at overall profit margin.

Supply Chains are not sexy things. They are composed by your greedy suppliers, transportation companies that find new ways to make your life difficult, buildings that are ugly and expensive, workers you wouldn't want to associate yourself even when you are at work, and equipment that just keeps sucking down your money. This is the last way you should envision your supply chain. In the end there are three types of supply chains. Those that:

1) Put you ahead of your competitors, reduce your costs, and make you a superstar to your customers.

2) Keep you in the race with no advantages.

3) Drain your money, make your customers hate you, and put you out of business tomorrow.

More companies than not fall into that #2 category. Probably 80% of all supply chains exist because they have to. They have minimal thought put into them and simply operate on their own. 10% fall into the superstar category and 10% fall into the quickly going out of business category. How many companies realize they are in the wrong one? Probably not many until it is too late.

Designate a person who is in charge of keeping the supply chain healthy. This person should understand the workings inside your distribution centers, know the suppliers and track product and order lifecycles. Processes should be in place to track the key metrics around these areas. If you do not have anyone who can do this, it may be time to look for outside help. There are many consultants or consulting companies willing and capable of assisting you in your evaluation of what you have and what you need. Do not be afraid to bring someone in, the future success of your company could be at stake.


Technorati Tags: supply chain, consulting, distribution

What is Knapsack and Why We Use It

Knapsack problems are a type of problem that involves deciding which of a number of items should be placed into a limited amount of space. The problem type gets its name from trying to fill a backpack (knapsack) with items needed to go camping. In the classic scenario the items are a compass, matches, map, portable grill, food, clothes, tent, books, hunting equipment, etc. Each of these items has an assigned weight and value to the packer. If only 30 pounds can be held in the backpack which items should be chosen?

The problem boils down to a cost/value association in it's simplest form. Matches have a value of 10 and a weight of almost nothing, while a book has a relative value of 2 and a weight of maybe 2 pounds. It's a fairly simple decision to pack the matches before you pack the book. More decisions fall under this philosophy than realized. Anytime there is a choice between two items there is a potential knapsack problem.

Why am I explaining this? Well, not all problems are that cut and dry. Think about a distribution center and deciding the storage medium that should be used. It's a form of knapsack problem with several expandable size bags. Each rack type is a knapsack (Pallet Rack, Carton Storage, Floor Storage, Bin Shelving, etc.) and each item needs to be placed into one. Imagine the costs involved: real estate, labor, material handling equipment, cost of the storage medium. They all vary by rack type. The Value of each item is how quickly it moves through the warehouse (lines per day and seasonality). Now run this evaluation over 5,000+ SKU types. Not a simple problem anymore but it can make a big difference in the effectiveness of your distribution center or distribution network.

Thinking in terms of Knapsack provides definition to problems that previously would not have had much form. It allows an evaluation method for each of the options that must be considered as long as there is an ability to assign a Cost and Value. Cost could be anything from money to size to weight to business flexibility. Likewise, Value could be money, growth potential, profit potential or speed. Assuming that a very reliable and understandable Cost and Value are assigned to each decision variable, a solution can be reached.

Obviously not all problems can fall be solved using Knapsack and not all solutions reached by using this method will be optimal. There are some grey areas around the theory. For certain Cost/Value ratios it is better to not fill up the bag than to continue filling it. Some decisions allow you to pick an option multiple times with decreasing value each time (if you want to pack three books and two boxes of matches). However, it provides the framework to begin thinking through some of the decisions facing you today. Making decisions is one of the most difficult jobs in business and sometimes it is near impossible to make them without outside help. The cost of making a bad decision usually outweighs the cost of bringing in help to make the right one.



Technorati Tags: knapsack, consulting, decision making

E-commerce and the Flexible Supply Chain

Traditional retail models are moving more and more to add an e-commerce aspect to their business models. However, adding this aspect of the business is not as simple as just creating a website and listing all of your products on it. There are a large number of distribution concerns that need to be taken into account to seamlessly tie the internet into an existing business; concerns above and beyond the new technology requirements for e-commerce. If your business is currently looking at adding e-commerce as a growth driver, make sure that your supply chain is setup and capable of handling it.

The first thing to remember about e-commerce is that there are many ways that the venture could fail. Any number of costs could spiral out of control. Your inventory management processes are not able to keep up. Customers continually fail to find your website. Orders are constantly placed against product you don't have and can't get. Be careful! The internet can be a dangerous place to play for the unwary business.

A sound strategy for how to enter the game is key. This is not the same world that you have been in, this is something strange and new with different rules. The first thing you must realize is that your customers could come from anywhere in the US (forgetting the global aspect for a second) and that your distribution must be able to handle the geographic swings. If you are an established company then your internet presence will likely continue to mimic that same distribution. As your online ads and popularity begin to spread this could change quickly.

Once your internet sales surpass your brick and mortar sales, a new change will have to take place through your network. Now you have to reprioritize all the orders that come into your facility. Should you expand your product offerings? Do you expand them online only or in store as well? Should you contract some of your retail fronts and move more focus onto the internet? Do online sales have the same seasonality patterns as store sales and what's my Christmas swing going to be? There are going to be some growing pains but if you put the right plan in place early you will be able to weather through those to gain new levels of success and profitability.

Remember that there are companies out there to help you set your business up for success. Not every company can have a core competency in every aspect of business that they come across.




Technorati Tags: ecommerce, logistics, retail, consulting

The Power of Technology

Technology can provide a powerful way to differentiate your company. Whether it is your ability to use technology to lower your costs, improve your service or increase your visibility, technology should be on your radar. The cost of implementing different forms of technology has decreased in terms of cost and ease of execution. A few years ago it took an expert to start up a blog. Now all it takes is a few seconds and the ability to type. With free blogging services the cost is nothing either. The same is true of user forums and wikis (such as wikipedia).

Every company is different in how they would be able to use technology, but there is no one who can't benefit from some use it. The benefits are there for anyone to see: improved communication, quicker customer feedback, active community involvement in design, etc. Technology is not a cure all for every company though. Some business cultures just cannot support it because employees are scared of it or customers don't need it or their IT rules are too strict to allow it. It is these companies that need to look at alternative deployment methods.

For companies that have scared employees, start a grassroots movement until it gains traction. Start a program to roll it out to interested employees and develop a history of use. Prove its benefits and eventually everyone will buy in. This applies particularly to the newspaper industry. For decades they have had a very successful and profitable business model. Over the past five to ten years that model has begun to fail with panic spreading across the industry and many insiders becoming technology-phobic. However it is the companies that have strong technology models that are having the most success.

For companies with customers that aren't technology savvy, begin training them in the ways it can be used to their advantage. Also, branch out and begin drawing in new customers using technology. The wine industry had been very anti-technology until just very recently. Australian wine companies discovered that technology could be used to produce inexpensive, superior tasting wines. Others in the industry now have to try and catch up.

For companies that have strict IT policies preventing new technologies, it may be time to reevaluate why those policies are in place. Often those policies came about through fear of the unknown or were reactions to stories in newspapers and magazines. Different companies require different security policies and often require multiple policies depending on the group or customer involved. Just because one group or customer needs the highest level of security and policies does not mean it should apply across the board.

Technology should be part of your core business model. Even though it is changing at a seemingly daily rate you should be willing to embrace it and put it to work for you. Be wary that it does not leave you behind in the changes though. It is not a one time investment and then forget about it. It is a long-term investment of time and energy, but it will pay off in the end.


Technorati Tags: it, technology, consulting