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  July 27, 2006 - SupplyChainDigest Newsletter
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Uncover the hidden costs of WMS
Uncover the hidden costs of WMS

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First Thoughts by Dan Gilmore, Editor

Random Musings

In the midst of the summer season, I thought it would be fun to offer some random thoughts on a variety of supply chain topics.

Relative to my piece a few weeks ago on Customer Sacrifice is Different than Customer Satisfaction, we received several humorous responses from readers who noted they regularly used the irons in hotel rooms. The point Jim Gilmore was trying to make, of course, was not that no one used the irons in hotel rooms (I threw out the figure of 1 in a hundred or less). Obviously, some people do. The point was that whatever the percentage is, it’s certainly well less than 100%, but hotels chains go to the expense of outfitting each room with the equipment nonetheless. This whole concept of understanding customer sacrifice is still very interesting to me. Take a look at the piece if you haven’t read it and share your perspective.

You think GM has it bad? I saw a recent piece that said that the new CEO of Volkswagon is lobbying hard to get the work week for factory employees raised from 27 hours per week to 32. Makes union/UAW issues in the U.S. seem almost trivial by comparison. Still, while the German automaker isn’t knocking the ball out of the yard, it is making money, while GM bleeds red ink.

There are so many supply chain and logistics related academics, spending so much time on research – why is 90+ percent of what is produced is unreadable and of little or no use to practitioners? It seems such a shame. I regularly peruse CSCMP’s Journal of Business Logistics looking for something worthwhile for SCDigest readers, for example, and it’s a rare find. I understand that many of the journals are written largely for other academics, and the drive for tenure and all that, but it just seems like we have this engine for better understanding of supply chain management that just goes to waste. There are some exceptions, for sure, but not many.

One really interesting question for RFID is this: When will it go main stream, and be just another data collection technology? It’s interesting because when that happens, many of the RFID specific publications, events, and company positions will quickly evaporate, just as they did with bar code. I knew a fellow who for a long while had the position at GM of something like “Director of Auto ID,” and was mainly focused on the use of bar coding. Can’t imagine that job exists today, at least in the structure it was. I’ve been told that at one point recently, Procter & Gamble had over 30 people looking at various aspects of RFID, and that was before the Gillette acquisition with its large RFID team (I know there has been some rationalization of the two teams). So, is that mainstreaming 2 years away, or 5 or 10? At one level, many people, including SCDigest, benefit from this RFID think dragging out for many years.

Just to show you how things change, early in my career I was involved in several projects where large companies (the old AT&T comes to mind) that literally procured bar code printers from at least a half dozens vendors and ran each of them for weeks printing labels to determine which was the right brand to standardize on corporately. The expense of the label and ribbon materials alone was huge. This was in the early 1990s. In just a few years, printers became largely commodities.

So, “Lean Six Sigma” is quite the rage.  I think we should add Theory of Constraints to the mix. So, “Lean Six Sigma, powered by TOC” or something. Actually, in our interview with TOC inventor Eli Goldratt, he suggested Lean and Six Sigma were tools often used to execute TOC-based strategies. More on all this soon.

I’ve recently spoken with a number of supply chain executives at publicly traded companies who say it is amazing the number of questions from the financial analysts each quarter about company inventory levels. I really think this all traces back in large part to the Cisco inventory debacle of 2001, in which a charge of $2 billion was taken related to excess inventory. The inventory concern really isn’t related to the operating cost of the inventory, and the ability of lower inventory to improve free cash flow and other benefits; it’s all about two things: as an indicator of sales momentum and as a future risk factor of a big inventory write-off that will severely reduce profits.

Most companies are barely scratching the surface on their use of analytic application in supply chain. Yes, we have an increasing number of reports, but these true analytic applications (from traditional supply chain software vendors as well as a few specialist firms) can drive a lot of value in root cause analysis, operational improvement by getting a quicker handle on negative trends, and other benefits. I’ll write more on this topic later, but do you agree we have a long way to go better leverage all the operating data supply chains throw off?

I’d love your comments on any of the above as well.

Let us know your thoughts.

Dan Gilmore


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Aug 3, 2006
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July 27, 2006
Dell Financial Troubles

Are supply chain innovation and efficiency tapped out?

July 27, 2006
What are the Limits to �Leanness?�

Some companies are pushing the envelop too far, some experts believe

July 27, 2006
When Changing Businesses Processes, How Much Time Should You Expend Documenting the Current Ones?

The current model may be a needed link to get employees to accept and understand the change, one consultant suggests


Q. Where does the United Postal Service rank in Fortune�s list of the top 500 companies globally by revenue?

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.

Well, our News and Views piece on "Is Saudi Arabia Running Out of Oil?" generated quite a bit of feedback, with many interesting and divergent points of view. We think actually much of the feedback came from non-SCDigest readers who found the article during general web surfing on the topic, but we're glad to have it too.

Several readers took the piece as not giving muh credit to the "Peak Oil" theorists - which we certainly didn't intend, and our re-reading of the piece leads us to believe we didn't write it that way. Indeed, while no one knows the real story right now, we are keeping a very open mind and reporting the news as we learn it. Our feedback of the wek is from Robert Lopez, economics reacher, and again you will find many other letters of all stripes on the subject 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 to Wave?

I'm of the opinion, the real secret to optimizing the warehouse does not come from the scope of Order Release, but from the WMS' ability to intelligently and dynamically prioritize, group, assign and execute the work tasks created by the Order Release. I have found the most efficient order release grouping to be the Shipment (The whole Truck Load). Anything more or less than this adds unnecessary complexity to the WMS' work task management logic. It has also been my experience that a WMS with intelligent work task management should have 2 - 4 hours of warehouse work in the work task queue. Anything less than 2 hours runs the risk of not exploiting the optimization opportunities, and anything over 4 hours runs the risk of not being able to quickly make informed decisions when exceptions occur.     
Steven. K. Schroeder
Sr. Mgr. M&A - Cross Enterprise Initiatives
Kraft Foods, Inc

More on To Wave or Not to Wave?

I remember having an on and off debate over 6 years ago with my colleagues at a WMS vendor around the topic of "is wave picking dead". Knowing WMS applications very well and understanding how you can automate the prioritization, grouping and execution of warehouse tasks in real time lead us to believe that wave picking was in many circumstances no longer needed. However, as a WMS vendor you needed good wave building and management tools to get to the table.

As you should perhaps expect the WMS vendors were ahead of a lot of their customers thinking in this area. (That said there are a few around that won't actually work unless you put orders in to waves - and to pick by order very order has to be added to a wave!).

Wave picking seems to me to be a hang over from the use of paper based methods in large DCs. With RF and real time control you should know when a pick face needs replenishing and not have to fill them up before you release the wave. If you have 48 diverts on your sorter then release orders as each divert becomes free - not loads 48 when all 48 become free. With a reasonably competent WMS you should be able to manage a DC in such a way that you do not need wave picking. 
If your orders trickle in all day and you ship by parcel carrier then have the WMS automatically release and pick the orders on the "next day before noon" service level ahead of the "ground" orders. A WMS can batch these for an efficient sorted pick into containers automatically passing 4, 8 or however many is appropriate via RF to the picker.

You can provide later order cut off times and supervisors do not have to manage a task queue - freeing up time for exceptions and emergencies. In fact "emergencies" can be automated too: the WMS can allocate, release and pass the picks to the next free (or closest) picker. Much better than having the call center try call the supervisor to ask him to make special arrangements.

Nick Turner

Our DC just installed a new WM system of which Waving is a critical component.  I would like to see more of your/other companies’ thoughts on lessons learned with Waving and how to best optimize the system with B to C and retail fulfillment in the same building.

John Tramburg
PDC DC Operations Manager

Regarding the use of waving orders for selection & shipping, we in the fresh food industry work within a system that is highly time sensitive.  Given that our stores contain multiple departments, each of which must transmit daily orders within an assigned "order window", this alone takes several hours of the day. Once all orders are in, the download for routing is done. When those orders are finally available for billing, the processing time this step takes comes in to play.  Since billing a small wave produces a batch of orders available for selection far sooner than billing all orders at once, the selection and loading process can begin earlier. Subsequent waves can then process while the first wave is being worked on. This in turn allows that shift to complete their assigned duties just in time for the receiving shift to come in and start the whole process over again.
 In a high volume, high velocity environment, where system processing times are an element, waving provides the ability to keep things moving and make full use of all 24 hours in a day.

Don Feickert
Raley's Sacramento Distribution Center


Q. Where does the United Postal Service rank in Fortune�s list of the top 500 companies globally by revenue?

A. 61ST, with �revenues� of almost $70 billion.

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