This Week on SCDigest:
Automated Case Picking is Coming
Supply Chain Graphic of the Week, plus more Supply Chain News Bites
SCDigest On-Target e-Magazine
Guest Expert Insight - Supplier Risk Management: Aren't We Already Doing That?
This Week on "Distribution Digest"
NEW Reader Question - On Improving DC Labor Relations
Trivia  Supply Chain Stock Index  Feedback

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  Newsletter Archives October 15, 2009 - Supply Chain Digest Newsletter

Featured Sponsor: J. P. Morgan

This Fall's Featured Videocasts

How Enterprises Gain from
Global Trade Management:
A New Process Model for
the China-to-US Trade Lane

October 21, 2009

Operational Excellence with
Smart Planning and Scheduling

A Four-Part Series

Part 2: Reduce Working Capital with Better Inventory Planning

October 28, 2009

Pride, Passion & Profit:
The New Framework for Working Together in the Consumer Goods-to-Retail Supply Chain

A Four-Part Series

Part 3: It All Comes Down to the People

November 3, 2009

Next Generation Supply Chains: Eliminate Operator Scanning to Optimize Manufacturing and Warehouse Operations

November 5, 2009

Breakthrough Logistics
Strategies Series

A Four-Part Series

Part 3: Supply Chain in the
Cloud - A User Perspective
on the Advantages of
Hosted Applications

November 10, 2009

This Week's Supply Chain News Bites
Only from SCDigest

Supply Chain Graphic of the Week: Should 3PLs become "Supply Chain Orchestrators?"


This Week's Supply Chain by the Numbers - China's Global Domestic Consumption, Collaborative Procurement, Q3 Freight Volumes, Exported Manufactured Goods



Our Supply Chain and Logistics stock index had an extremely good week as the overall market rebounded as well.

In the software group, JDA climbed 13.9%, recovering last’s weeks loss and adding over 5%.  Ariba, also within the group and with double-digit growth, was up 10.6%.  In the hardware group, both Intermec and Zebra had a good week – up 5.4% and 4%, respectively.  In the transportation and logistics group, Canadian National finished the week up 8.5%, followed by CSX, Norfolk Southern, and Prologis (all with gains of 6.7%).

See Full Stock Report

Each Week:

Global Supply Chain
Trends and Issues
Guest Column
by Tim Albinson, Aravo Solutions

Supplier Risk Management: Aren't We Already Doing That?

360-Degree Supplier Risk Framework Essential to Predicting and Preventing Supply Chain Disruptions

Holste's Blog:
Material Handling Industry Front and Center at G-20 Summit

Top Story: More of the Same from Annual 3PL Study - but Will the Recession Serve as an Inflection Point?

Other News: Most Effective Use of Task Interleaving May Require Rethinking Product Flows


Visit Distribution Digest



What are the 5 largest industry sectors in terms of US manufacturing output value?

Click to find the answer below
On Improving DC Labor Relations

Any recommendations or best practices regarding retaining quality labor at the lower levels?

  See our expert response.

Add your insight!

Automated Case Picking is Coming

Disruptive changes are coming in distribution center automation – and you heard it here first. We are approaching an inflection point that will have some profound effects on how we think about distribution processes and technology.


Two years ago or so, I wrote a column called The Two Paths for Distribution Center Automation, which predicted at a high level that over time companies would likely choose one of two paths for their DCs: (1) go “Lean” and highly flexible, with relatively little or no physical automation; or (2) adopt very automated DCs that will be levels above where most thinking on that topic is today.


The middle would get squeezed – the sort of moderate levels of automation so many DCs have implemented today. Some agreed, some disagreed (as it should be), but I stand by my prediction.


What’s driving my prediction? Number one is the tremendous concern over labor costs, demographics and headaches; two is fear about increased unionization that could come from “card check” legislation; and third is the general trend towards fewer, larger DCs that make investment in automation more possible or even necessary.

Gilmore Says:

"The vision was emerging, but the reality lagged. Automated case picking has been really something of a “holy grail” in DC automation."

What do you say?

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your Feedback here

Those concerns/trends came out in spades in a number of one-on-one interviews that our Materials Handling and Distribution Digest editor Cliff Holste performed as part of the research for our major, just released report on automated case picking. This is truly a groundbreaking research effort – more on that in just a second. (To download the report, go to Automated Case Picking 2009: The Next Frontier in Distribution Center Management.)


What is happening, in part, is that at the same time DC labor costs and headaches are increasing, the cost of DC automation is flat or, in some cases, declining. Project out that curve, and the automation equation becomes increasingly attractive relative to labor costs/concerns.


However, there have been many barriers to moving to this higher level and even “lights out” distribution, not the least of which was that it was difficult to truly automate many DC processes, perhaps most importantly, full case picking and multi-SKU pallet building. The vision was emerging, but the reality lagged. Automated case picking has been really something of a “holy grail” in DC automation.


That landscape is changing, and changing rapidly. Holste and I were first struck during our reviews of the ProMat 2009 materials handling show in January at the number of new technologies focused on automating or semi-automating case picking processes.


Hence, our research and the new report. I can assure you that there has never been research like this performed in this area to date, anywhere. I can’t emphasize enough how surprised we were at the developments and what is happening in technology to automate case picking processes. A lot of R&D investment has been made, and many joint vendor-customer development projects are in play to solve the case picking and palletization challenge.


The research for the report included a survey that drew responses from over 200 logistics managers. That was followed by detailed, very insightful one-on-one interviews with a number of companies, including several supply chain/logistics executives. Then came detailed research on available solutions.


The labor and other concerns mentioned earlier were consistent themes. Not unsurprisingly, the data showed huge interest among those with large case pick volumes in new technology to automate the case picking process.


Overall, 40% of total respondents expressed Very High or Fairly High interest in automated case picking solutions. For companies with DCs doing 20,000 to 40,000 full case picks per day (at peak periods), that number jumps to 57%, and to a remarkable 76% for DCs doing more than 40,000 full case picks per day.


That is just one of the many data points and charts you will find in the report.


“We have many more labor headaches today than we did 10 years ago, and see a changing workforce with even more turnover,” one executive told us. “So across the board we are relooking at automation, and we have heavy case pick volumes.”


Clearly, some of the “new” solutions involve partial or substantial use of technologies that have been around for awhile. Others are truly new invention. We start with traditional batch pick-to-belt systems with downstream sortation as a sort of baseline, which we would say mechanizes case picking, but automates sorting and segregating. It has been the paradigm for two decades.


The great news is that an impressive array of technologies that attack the related issues of case picking and mixed-SKU pallet building from a variety of angles are already here or nearly here. Much (but not all) of this is driven by step-change improvements in software controls and computing power that is available today to drive these systems. There have also been significant improvements in the range, flexibility and dexterity of devices that can handle individual cases – a big limitation of the recent past. Major developments in robotics also play a key role. Some is just bright thinking.


In the report, we comprehensively categorize this case picking solution landscape, and are confident that this is the first time it has ever been done. Existing solutions range from big improvements in some existing solution categories, to mobile robots, stationary robots that are much more flexible and smart than in the past, systems that dispense cases like vending machines onto conveyors, high-speed gantry cranes that rapidly build pallets, a new approach to mini-load AS/RS that increases throughput and lowers cost, and more.


I wish I had time to do more justice to what is in the report, but I guarantee that if this topic at all interests you, you will find it valuable – especially as it is free. Cliff and I leaned a heck of a lot, and promise you will too.


In the space I have left, here are some key takeaways:

  • The good news is the range of the solutions available now is indeed very broad, though many are, to date, little known by most logistics professionals. This range of solutions is, in part, based on different visions/research directions by materials handling vendors, and also because the needs of different industries and DCs will also vary, based on order profiles, case packaging and characteristics, cycle time requirements, floor space, appetite for change, etc.

  • The epicenter of automated case picking right now is the beverage industry (beer and soft drinks), where much activity, development and deployment is happening. The food sector will be close behind, but others are testing too, including a major paint company that has already deployed a solution.

  • We can honestly say that the potential of where some of this could go is breathtaking. There are examples already in Europe. It will be difficult for many companies and managers to envision this level of automation, such as drastically reduced labor counts and robots running around the DC. This, we believe, will actually be a more important barrier to adoption than ROI or technology fit.

  • As Holste repeatedly reminds me, another huge barrier in the past has been flexibility to handle operational changes and varying carton sizes, weights, etc. Some of the approaches have clearly solved these challenges. Other have made improvements that have dramatically increased flexibility.

  • Many companies are likely to deploy combinations of these technologies over time.

  • The role of systems integrator – as SIs emerge that really understand this landscape – will likely expand, though there are truly just a handful that see the whole picture currently.

I wish I had more space. Maybe a part 2 soon. We have learned so much. Please download the reportas you can see we are proud of the effort. Look for upcoming Videocasts on the topic. There is no one in the industry that understands this subject right now as well as our Cliff Holste, and we want to find a way to make that insight available one-on-one to readers. Email us at the Feedback button below if you are interested in speaking with him.


What is your reaction to Gilmore’s column on new case picking technologies? How big is the need or opportunity? Will managers be ready for a much more highly automated DC future? Let us know your thoughts at the Feedback button below.

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Catching up on a variety of Feedback this week. We received a few good letters on our article on the Seven Timeless Supply Chain Challenges
, as articulated by Dr. J. Paul Dittmann of the University of Tennessee and former Whirlpool supply chain executive. Our Feedback of the Week is on this topic from Dick Locke of the Global Procurement Group, who takes some exception to the Globalization challenge.


Steve Wilson also smartly weighs in on this by recommending another timeless challenge that we agree should make the list.


We also have letters on increasing “speed” and incorporating Lean into distribution operations. See them all below.

Feedback of the Week – On Timeless Supply Chain Challenges:


Regarding challenge 7, globalization, I'm troubled by that constantly recurring list of issues.


I agree that distance can be an issue. However, buying outside of the US doesn't necessarily mean increased distance. Guadalajara in Mexico is closer to Chicago than San Francisco is, and Guadalajara is way the heck down there. If you're in Texas, obviously Mexico is closer than most of the US. I do agree that someone sourcing a volatile, unpredictable product shouldn't have a long supply chain, but the crucial factor is time, not distance. Air freight from China takes only an extra day or two compared to air freight in the US. I wouldn't recommend Asia for a product with an unpredictable demand unless you can afford air freight.


China makes sense for socks and underwear, but not fashion goods. China makes sense for laptop computers, but not desktops because laptops can be flown at a small percentage of their manufacturing costs and desktops cannot.


Exchange rates? What's the risk? It's the same risk as sourcing domestically. It's the risk of your supplier's currency strengthening.


Strengthening with respect to what? With respect to your customers' currencies and with respect to your competitors' currencies. Only companies with no foreign customers and no competitors who source globally are immune to that risk. If you only source domestically, the problem is insidious because your accounting system won't signal a problem. The first warning will come from overseas sales people who report your product is too expensive.


Volatile fuel costs? Well yes, they have been volatile. But volatility affects all potential suppliers, not just those in other countries.

Distance does increase the risk but see comments about Mexico above.


Geopolitical? Well OK, some industries are compelled to go to dodgy places. Some natural resources are in places where you wouldn't build a cell phone factory. If you are sourcing items such as palladium or diamonds or oil, geopolitics is a big issue. But if you have a choice, stay in safer places. Seems obvious, doesn't it?


This issue of risk can be an excuse to avoid the learning challenges that come with sourcing and purchasing globally.  One sign of that is if someone tries to build risk into a landed cost formula and uses that formula for a sourcing decision. (Your article 'Getting to Accurate Total Landed Costs" advocates this practice.) Almost invariably, the current supplier will come out best. There's incredible momentum to stay with existing suppliers. The way to handle the risk issue in sourcing is to figure out the lowest cost supplier without considering risk and then see how much has to go wrong before the lowest cost supplier is no longer lowest cost. How much does that exchange rate have to change? Is it likely? Would the same thing happen with other potential suppliers?


What will we do if it does happen?  These are very important issues, but they are not part of a landed cost. A good model will quantify most of those risks.

Dick Locke

President, Global Procurement Group

Global Supply Management Training

More On Timeless Supply Chain Challenges:


What’s missing is the eternal struggle of cost vs. service.  Perhaps this could roll up under supply chain strategy, but it needs to be explicitly recognized. While always a push to reduce costs, it’s also true that customers continue to demand ever higher levels of service, which one can define as high inventory fill rate, short order-to-delivery lead time, and/or “customized” services such as building display pallets and product labeling, etc.  Often, high levels of service drive supply chain costs well beyond optimal.  Yes, it is possible to improve both, but that presumes relatively low current performance.


Another issue to recognize is simply acknowledging a dynamic environment.  Witness the events of the last five years, with the longshoreman strike on the West Coast, the capacity crunch in transportation in 2004/2005, last year’s dramatic rise in fuel prices and, of course, the current “great recession."  What was a problem in the past may not be so important in the future, and what was taken for granted may be difficult or scarce going forward.


Steve Wilson

Feedback on the Need for Speed in the DC:


Here are some other ideas to increase DC speed by analyzing the supply chain to make sure things “stand still” for less time:


1) Cross docking and flow-through means less time standing still;


2) Time between order capture and warehouse picking (i.e., don’t batch all today’s orders for sending to the DC tomorrow – send them as received); and


3) Use waveless picking in the DC to ensure continuous flow (i.e., don’t accept the excuse that waves make DCs more efficient - with today’s WMS and automation technology, this is no longer valid!).

Nick Turner
Senior Product Manager, Execution Solutions
Sterling Commerce


Feedback on Lean in Distribution:


I teach a course in Logistics Management at the university level and lean processing is heavily emphasized all along the way, including 3PLs, international logistics, and manufacturing. 


Lean more appropriately represents elimination of cost, waste, and reduction of lead time, not just lot-size-of-one kanban manufacturing.  There are a lot of opportunities to implement lean/six sigma in a distribution environment, and technology is a necessary driver to accomplish it and remain competitive.


Sanford Friedman

Check out our book Value Driven Channel Strategy: A Lean Approach published by ASQ's Quality Press.  We address many of the issues that you have raised.  Distribution systems, by their very nature and economic necessity, incorporate a large number of pathologies that can and should be addressed by Lean. 


In addition, my numerous value analyses for manufacturers that depend upon distribution networks often indicate that the key drivers of value are not product drivers, but dealer and network drivers.  In other words, distribution systems offer manufacturers a potential differential advantage along the lines achieved by CAT.  This is a tough pill to swallow for many manufacturers who are product focused and do not understand their markets.


R. Eric Reidenbach


What are the 5 largest industry sectors in terms of US manufacturing output value?


1. Chemicals; 2. Food and Beverage; (3) Computers and Electronics; (4) Fabricated Metal Products; 5. Machinery