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  July 21 , 2006 - Supply Chain Digest Newsletter
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Featured Report

Considering adding Warehouse Management to your SAP environment? 

Many companies are considering adding best-of-breed Warehouse Management solutions to their SAP ERP environments, but are uncertain as to integration options and issues. This informative white paper from Softeon reviews WMS deployment options within an SAP environment, describes the technical requirements in a straight-forward, jargon-free fashion, and overviews the importance of SAP's certification program for integration external WMS solutions with the ERP and new NetWeaver platform.

Integrating WMS with SAP White Paper


First Thoughts by Dan Gilmore, Editor

Transportation Infrastructure - Should You Care?

There has been a growing crescendo of complaint and worry about the state of U.S. transportation infrastructure, and with good reason. It’s in pretty poor shape, and not much indication I can see that there is anything much happening to change that.

As UPS CEO Michael Eskew said in a speech a few months ago, “Our highways, waterways, railroads and aviation networks are simply not keeping up with ordinary demands.”

Many of you probably saw results from the 2005 report of the American Society of Civil Engineers, grading many aspects of U.S. infrastructure. While I’m not clear how the assessment was done, and recognizing there may be some self-interest in the ratings, the ASCE dished out the following grades:

  • Bridges – “C”:  It will cost $9.4 billion a year for 20 years to eliminate all bridge deficiencies. Long-term underinvestment is compounded by the lack of a Federal transportation program.
  • Navigable waterways – “D-” - Of the 257 locks on the more than 12,000 miles of inland waterways operated by the U.S. Army Corps of Engineers, nearly 50% are functionally obsolete. By 2020, that number will increase to 80%. The cost to replace the present system of locks is more than $125 billion.
  • Rail – “C-”: For the first time since World War II, limited rail capacity has created significant chokepoints and delays. This problem will increase as freight rail tonnage is expected to increase at least 50% by 2020.
  • Roads – “D”- Total spending annually is well below the level needed to improve transportation infrastructure conditions nationally. One estimate said in our busiest markets, already choked with traffic, volumes would increase by 70% by 2020.

Then there are the ports. While the “crisis” of 2004 has temporarily moderated, in the end, containers volumes are growing at approximately 10% annually. While there are certainly some improvements happening, including automation and process improvement (e.g., Savannah’s efforts, the Pier Pass program at Long Beach/LA), the total effort seems well under the projected volume growths. Very few U.S. ports, especially those on the east coast, are capable of handling the new generations of supersized cargo vessels. Plans for new port facilities in Virginia are the only real major new port development plans I am aware of.

But the real question is: Does it matter, really? And to whom? Interestingly, as I talk about this topic with supply chain and logistics professionals, it’s clear that the major urgency is felt by large importers, who are battling where to bring in product, and all the delays and uncertainties the ports, drayage and rail/intermodal networks are causing. Domestic-focused shippers are aware of the issues and the traffic congestion, but in general seem less concerned, and at one level with good reason. The pain isn’t acute yet, and certainly second to capacity and fuel surcharge issues. When UPS reduces by a day the time it takes packages to get to the west coast, for example, as it did in 2005, then maybe things aren’t getting better, not worse.

But with more and more companies moving to offshore manufacturing and global sourcing, they too will be impacted by the challenges of inbound logistics. I recently spoke to head of supply chain for one of the country’s largest container importers, who noted they were less worried in a sense because of their volumes and contracts, CT-PAT compliance, etc. Their containers would be first off the boat, first out of the port, etc. The smaller importer: “They are going to be in real trouble down the road.”

Congestion is going to continue to cause increased transit times, which in the end has to increase costs for carriers and shippers, and probably at some level leads to even more driver attrition. With the driver shortage already acute, further attrition will only exacerbate the capacity issue and in the end lead to higher labor costs and freight rates.

Lastly, in a global economy where many of the traditional competitive advantages of the U.S. are disappearing, and where most agree efficient supply chains are a key element of corporate competitiveness, it would sure seem we need an infrastructure that is also world class to support those supply chains. Here I will note the leading Asian ports are something like six times as productive as those in the U.S.

As Rosalyn Wilson stated in last month’s 17th annual state of logistics report, “We have not made sufficient investment to maintain and improve our aging transportation system and it can no longer meet the needs of the record setting growth in freight flows. We face capacity constraints at virtually all major freight gateways and congestion and bottlenecks throughout the system as it approaches full capacity.”

But who is responsible for doing something: the ports, the cities, the states, the Feds, the rail carriers? All of the above? And what should or more importantly realistically can be done? We passed a pork barrel transportation bill in Washington earlier this year – will that do much to help?

I am going to share my thoughts in a future column, but I’d welcome a broad response from SCDigest readers on their opinions.

Is the U.S. transportation infrastructure in dire shape, or is the hand-ringing overblown? Is it an issue, really, for importers and shippers? And what do you think needs to be done, and what realistically can be done?

Let us know your thoughts.

Dan Gilmore

Quote of the Week

“These are big companies with heavy back end systems that can track everything. But if human beings are involved, problems are going to happen.”

PenAgain co-founder Colin Roche, on the troubles the small company was surprised to encounter getting the test product moved successfully from Wal-Mart's DC to store shelves

See "Ok, Wal-Mart Needs RFID" story below in News and Views



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Aug 3: The RFID-Enabled WMS

RFID is coming to logistics, but what is the real impact on distribution systems? How must Warehouse Management System (WMS) capabilities and architectures adapt to use RFID effectively - or maybe at all!

You'll learn all this and more in this informative Supply Chain Videocast™.

More information/register.

July 21, 2006
Getting China Sourcing to the Next Level

Most companies believe they are not nearly realizing the true potential, McKinsey study finds

July 21, 2006
Spectrum Brands Latest to Blame Retailer Inventory Cutbacks on Sales Shortfall
Is it real, or just a handy financial excuse?

July 21, 2006
Ok, Wal-Mart Needs RFID
Small supplier finds getting its products to the right place in-store isn’t easy

July 21, 2006
HP Announces New Memory Chip, with Attributes of RFID, But Much Greater Storage
“Memory Spots” will be able to hold megabytes of data

July 13, 2006
Global Logistics: Will You Become Your Own “4PL?” It may be the right global logistics model, says AMR’s Greg Aimi

July 13, 2006
Georgia Tech Extends Project to Benchmark Global Lead Time Variability
Everyone has the problem, but few have a good handle on the data

July 13, 2006
Coke Says It Feared Private Label Sports Drink Brand by Wal-Mart if It Didn’t Change Distribution Approach
Private label threat and reality continues to affect consumer goods and other companies


Q. What is pdf-417?

A. Click to find the answer below


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Feedback is coming in at a rate greater than we can publish it - thanks for your response.

As we noted previously, we received a tremendous amount of feedback on our columns on To Wave or Not to Wave, which discussed when wave processing in the distribution center made sense, and suggested maybe it was time for some new approaches which retained the benefits of waving without some of the downsides.

We received a number of fine responses, many of which are printed below. That includes our Feedback of the Week from Bruce Welty of Scenic Technology, but you'll find a number of other fine commentary as well below.

Keep the dialog going! Give us your thoughts on this week's Supply Chain topics. As always, we’ll keep your name anonymous if required.

Feedback of the Week: On to Wave or Not Too Wave

Generally speaking, the waving process is a good way of organizing the work and making the workforce efficient.  We have found that the wave concept is flexible enough to support very large and very small waves.  In certain of our customers, we will have waves that are very small (even single orders) but they will still go through the full wave process.  We just automate the grouping (planning) process so that no human can slow it down.  (I agree with Brian Hudock of Tompkins Associates that one would not want to build specific rules into a base product.  There are just far too many ways the customer may want to do this.  We do have some methods built-in though).  This allows orders to naturally fall into their proper grouping, get generated, released, and executed and still retain the efficiencies and auditability of the full wave process. 

The original wave concept was probably driven from the IBM off-line batch processing days as that drove much of our thinking then, but now, with fast processors, connectivity, internet ordering, blanket parcel shipping contracts, real-time everything, wireless connectivity, and customers that want it now, we can be and have to be much more flexible about how we define waves.  Each end of the continuum (a few large waves vs. many small waves) benefits from the wave process differently, but they both benefit.


Bruce E. Welty


Scenic Technology Corporation


More On to Wave or Not Too Wave:

These concepts have been wrestled with for decades in manufacturing operations, with the result being what's now often called 'lean manufacturing'. It is sad that there has been so little spill over to supply chain operations, despite the very significant gains that are possible when an organization gets away from batching. Whether you call it cycle time reduction or time compression, the effects of free flowing orders are lower cost, reduced errors, greater flexibility, less lead time, and on and on!  A great synthesis book is 'Competing Against Time' by Stalk & Hout.

Greg Stubbs
Fulfillment Services Manager
Royal Caribbean/Celebrity


In our world we are building multistop truckloads shipments to deliver to our stores, so the planning is wave planning, we just don't call it that.


In our process we plan the outbound loads first through a outbound routing optimization package from Supply Chain Intelligence.  Orders go into the TMS and we plan what the outbound routes look like.  We take the plan out of that and load it into the WMS, route dispatch time and stop order.  The orders that load into the nose of the loads that dispatch first are in the first "wave, then perhaps the nose loads of the next group of trucks along with the tail orders of the first group of loads, and so on.


Dispatch times are driven by route distance and the delivery time to the store.  In that first wave we might have some stores that are next morning delivery that are 500+ miles away, and some routes that are same afternoon for stores that are only 70 miles away.  Again, the whole wave plan is optimized by the outbound transportation.


What we have found is that the only "in the four walls" benefits are on the loading dock, don't have the tail arrive on the dock until the nose is loaded.  That is why in some of our centers the wave execution is the nose loads of group 1 loads, then the nose loads of group 2, then the tails of group 1 .AND. the nose or group 3.


Dave Schneider

Pep Boys


Where does use of pick waves make sense?


We utilize a wave pick methodology for warehouse efficiency as well as some relief on transportation cost. Under a three warehouse model we have retail store delivery requirements that make sense (large volume along with long transit miles) to wave through the warehouse, then on to a line-haul traveling a minimum 500 - 700 miles. The line-haul delivers to an LTL hub where the LTL provider will sort and segregate individual orders and run locals to few hundred stores within a geographic area.

Peter Schmidt

Fuji Film

I appreciate your articles and thoughts on Supply Chain issues.  In our DC we support manufacturing operations on site as well as multiple regional warehouses.   Currently we issue all picks on demand, however we are about to experiment with wave picking our routine replenishment orders for the regional warehouses.  We will pick the parts in the way that supports our shipping and the regional warehouse receiving the parts.  We eliminate the time the parts spend “staged” in Shipping.  Also we eliminate some of the material handling.   Your thoughts around using a hybrid approach give me confidence that we are on the right path.

Ron Whitlock



Q. What is pdf-417?


A. A "two-dimensional" bar code symbology invented in the early 1990s by Symbol Technologies, capable of storing a large amount of data. Though certainly used still today in many applications, the technology never approached the adoption level Symbol anticipated after substantial investment in development of the code and related readers. "pdf" stood for "portable data file," and the 417 related to the structure of the code pattern.

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