With all the talk of recession lately I've been thinking about the new green economy that is being developed and what it could mean for the US manufacturing industry. There has been the lingering fear of manufacturing jobs eventually disappearing from US soil as they are slowly off-shored to cheaper labor markets. Sustainability dictates that the trend will reverse.
Sustainability principles put more weight on carbon than on price; regionally procured products are even one of the points available for LEED certified projects. As the market for green products grows, there will necessarily be a corresponding growth in regionally operated factories. There is a premium inside of sustainability for products produced and warehoused within 500 miles of the purchasing location. This also would mean a reemergence for the local mom & pop brick and mortar stores.
Whenever things seem to be going one way, there is usually a light at the end of the tunnel. In the short term sustainable practices offers higher prices and new ways of doing things. Long-term there is a potential for a rebirth of the good old days.
March 11, 2008
US Manufacturing Should Embrace Green
November 12, 2007
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
October 30, 2007
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:
- Incomplete Supply Chain Strategy
- Lack of Financial Objectives
- Overstated Inventory Levels
- Failure to Utilize Postponement Strategy
- Planning Without Data
- Failure to Apply Lean Principles
- Irrational Demand Buffering
- Ineffective Space Utilization
- Poorly Designed Value-Added Services Operations
- Misapplication or Lack of WMS Technology
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
October 25, 2007
Entrepreneurial America
Small business is the backbone of America. Economic growth depends on new businesses and small businesses. Sometimes it can be scary to hear the success rate statistics or about the flash in the pan businesses. A lot of people that would like to break away from the corporate world decide not to because they hear that only 20% of businesses survive past 4 years.
Fear not though. According to many recent studies most small businesses actually make it past the four year mark. 50% according to some studies. If ever there was a time to break out on your own and ride that idea that has been sitting in the back of your head it is now. Most people have that one idea that they think could be their key to independence and financial security. Deciding to actually break out and execute it is the hardest part. Leaving a secure job and pay check is a scary thing to do.
Fortunately, it has never been easier to find assistance in starting up your business. Venture capital companies seem to be everywhere giving out money to all kinds of new businesses. Small business loans are fairly easy to get for the common entrepreneur. Consulting companies are around to help you plan out every aspect of your business you don't have the know how to set up perfectly yourself. Consulting companies specializing in every aspect of business exist: Real estate, management, recruiting, logistics, inventory, workplace, business strategy, strategic assessments, site selection, etc. The list is as long as your imagination.
Unfortunately it is nearly impossible to find a consulting company that specializes in everything you are looking for. Who wants to bring in five different companies to help them. Life would just become more complicated than if you tried to figure everything out yourself. Those people that pull the trigger and start their business go out and get their financial backing, find a real estate broker and start getting everything lined up. All the ducks seem to be in a row, but are you sure you aren't missing anything?
Integrated Strategies works with real estate brokers. Our job is to help those brokers' clients be in the best position to succeed long-term. Our goal is to create partnerships with businesses so that we can help each other over the long-term. We see our role as that of client advocate, setting up everything necessary. We can set you up with procurement strategies with the vendors you will need on an everyday basis. We have the capabilities to manage your facilities or assist with your asset tracking. We have the tools to implement, design, or manage any physical work you need completed. And we aren't outsourcing any of that work, it's all done in house so you can meet, know and have that single point of accountability for the entire aspect of your business that you need help with.
America has become a small business, service economy. Specialization is the key to success anymore. Specialize what you do well at and we'll help you with the rest.
Technorati Tags: consulting, entrepreneur, small business
October 24, 2007
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
October 19, 2007
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
October 12, 2007
E-commerce and the Flexible Supply Chain
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
