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February 22, 2008 - Supply Chain Digest Newsletter
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First Thoughts by Dan Gilmore, Editor

Sortation Systems in Distribution

In late 2007, we created quite a bit of discussion from my piece on The Two Paths for DC Automation, which basically argued companies would increasing either heavily automate to get rid of distribution labor issues or remove most automation to enable higher levels of flexibility.

Gilmore Says:

" Sortation systems emerge out of some other pain – rising costs, customer service troubles. Only later, as an answer is sought to alleviate that pain, does a sortation system emerge as a potentially good solution."

What do you say?

Send us your comments here

I still stand by my thesis, but learned a lot over the past few weeks as we put together the latest Supply Chain Digest Letter this month on Sortation Systems in Distribution. It may just well be our finest SCDigest Letter ever. For a variety of reasons, we made this issue available as an electronic copy only, so don’t look for it as usual in your inbox. But if you are at all interested in DC automation, improving DC throughput and order picking, etc., I know you will enjoy this issue. You can download it at SCDigest Letter on Sortation Systems in Distribution.

As always, we have put together an outstanding resource page on this topic, which includes the Letter, excellent columns on this topic from our new Material Handling Systems editor Cliff Holste, white papers, vendor brochures, case studies, and more. See the Sortation Systems Resource Page.

Clearly, there are some trends that continue to drive interest in sorting technologies. My research shows sortation systems – integrated material handling systems that provide automation of order picking, order consolidation and often truck loading processes – have seen a strong upsurge in recent demand, as the “need for speed” and a variety of distribution labor issues have made the investment in sortation attractive for many companies.

Some of those trends include:

  • Larger, “Mega” DCs that offer more scale to justify automation.
  • Continuing Labor Concerns, as mentioned above.
  • Changing Order Profiles – the more case picking, the more sortation makes sense.
  • The Growth in E-Commerce, both from dedicated consumer direct companies as well as a growing number of traditional retailers and other types of companies that are finding e-commerce success.
  • Increased Interest in Cross Docking both in retail and in other industries, for example to distribute goods in containers from offshore suppliers.

We cover a wide range of topics in this issue of the Supply Chain Digest Letter, including key trends and developments, a whole section on the Warehouse Control System (WCS) software that drives this automation, a “Sortation System Dictionary,” a look at what these systems actually cost, and much more.

In doing the research for this issue, here is what caught my eye:

  • Sorter and supporting conveyor speeds continue to increase, driven in large measure by smarter controls that can enable gaps between cartons/totes of just a few inches, and high speed “merge” processes. This means obviously you can get more throughput from a given sortation system footprint, which has many advantages.
  • There are big changes going on in Warehouse Control System (WCS) software – and there is a looming battle coming between WCS providers and Warehouse Management System companies. A new generation of WCS software attempts to move further back into the order picking process, and look to optimize the entire flow of work on to the sortation system, with a goal of maximizing system utilization. But I am just scratching the surface – we cover a lot more in the Letter. Companies also have more WCS choices to weigh through today – e.g., the conveyor manufacturer, the WCS from a systems integrator, or a handful of independent WCS providers that aren’t tied, as most were in the past, to the hardware implementation.
  • Both the above factors (controls and WCS) means in many cases a company may be able to upgrade a current system and achieve substantially more throughput without major new hardware investments.
  • Interest in sortation was often thwarted in the past because the systems then couldn’t handle too many carton sizes – such as those that were too light, had odd dimensions, etc. While there are still exceptions, the number of the dreaded “non-conveyables” in most cases is significantly reduced from systems of just a few years ago.

Our Cliff Holste made an interesting point. He said relatively few companies start out looking for a sortation system. The exception may be when a new executive comes in who has successfully implemented sortation elsewhere, and leads the charge at the new company.

But in general, sortation systems emerge out of some other pain – rising costs, customer service troubles. Only later, as an answer is sought to alleviate that pain, does a sortation system emerge as a potentially good solution. Often, of course, a consultant or systems integrator is involved in that analysis.

I also spoke with a couple of companies that told me they were able to either avoid building a new DC or to reduce the footprint of a new DC by using sortation to get more throughput from a smaller building. This saved them millions in capital expense.

From my own experience and talking with many others, thorough upfront planning is really the key. Holste says that with the quality of today’s equipment and engineering, if a system fails to meet expectations, it is the lack of that upfront work at the level of detail required that is almost always the culprit. For example, the sortation system is starved because forward pick locations can’t be replenished efficiently.

Those are my thoughts – take a look at the SCDigest Letter on Sortation Systems in Distribution, or the full resource page. If you are considering or are interested in sortation or distribution improvement, I know you will enjoy them.

Also, take a look at our Best Practices in Distribution Center Design, Operations and Management Workshop series, featuring Ken Miesemer, former Director of Distribution and International Logistics at Hershey. These will be outstanding education courses – sessions in April in Dallas and Chicago.

What’s your take on sortation system implementation? When does it make the most sense? Where have you seen it fail to meet expectations – and why? Let us know your thoughts at the Feedback button below.

Let us know your thoughts.

Want a printable version? Go to:


Dan Gilmore


Videocast Series

Optimizing Supply Chain Performance with On-Demand Transportation Management and Vendor Compliance Technology

Part 1: Achieving Actionable Supply Chain Visibility and Improved Vendor Compliance

March 10, 2008

Part 2: Using On-Demand TMS to Power Inbound and Outbound Transportation Excellence

March 24, 2008



Best Practices in Distribution Center Design, Operations and Management Workshop

Achieve New Levels of Performance in Warehousing and Distribution with our Outstanding Logistics Training Program

April 8-9: Dallas
April 15-16: Chicago

Workshop Leader: Ken Miesemer, former Director of Distribution and International Logistics at Hershey Foods.

More information, and to Register


This Week’s Supply Chain News Bites – Only from SCDigest

February 22, 2008 Supply Chain Graphic of the Week - Opportunities in The Long Tail

February 22, 2008
Supply Chain by the Numbers: February 22, 2008


After a troubling start, the U.S. stock market closed out the week on an up note.

Our Supply Chain and Logistics stock index eeked out slight gains as well.  In the software group, Logility recovered over half of the previous week’s losses; however, i2 slipped another 5.2%.  The results were mixed in the hardware group with Intermec falling 3.8% and Zebra up a mere .2%.  In the transportation and logistics group, Expeditor’s International slid 5.1%, while Canadian National was up 3.2%.  

See stock report.



Bringing Lean Strategies to Companies in Process and Hybrid Manufacturing Industries

How to Reduce Waste, Work-in-Progress inventory and Cycle Time while
increasing Throughput via Improved Resource Utilization

More Information or to Register

Sorting it Out

by: Cliff Holste

Designing Your Distribution System from the Inside Out

Careful Planning Upfront Pays Big Dividends Later; Maximizing Flexibility in Storage and Material Handling System Options


Each Week:

-Global Supply Chain
-Distribution/Material Handling
-Trends and Issues

Read it Now

Weekly On-Target Newsletter
February 19, 2008


Q. What are the three primary variables used to compute the Economic Order Quantity (EOC)?

A. Click to find the answer below


Reader Question: Can Bucket Brigades Work with Mechanized Order Picking?

Reader Question: Is there a True Global RFID Standard?

See our expert answers at the links above. Share your knowledge or perspective.

Or, ask your question


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We're really behind again - bear with us. But keep the letters coming! In the next few weeks, we'll start adding feedback right on specific story pages, so you can see what others are saying.

More great letters this week. Our Feedback of the Week is from Michael Rummelhoff, Vice President of Operations at Meyer, who reacts to our article on the "Two Paths to DC Automation" and says there is only one real way. David Tompos of Toro was one of a number of readers who briefly thanked us for our 2007 year end review. Friend of SCDigest Adrian Gonzalez of ARC offers some additional perspective on the Carbon Disclosure project, while Greg Nichols adds some thoughts on protecting IP when working with Chinese suppliers.

All are good - take a look.

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

Feedbacks of the Week - On Two Paths to DC Automation

There are many reasons for pursuing automation technology, and the individual paths that companies take will be dependent upon their need for a decent return on investment and internal rate of return.  

Ten years ago, we took steps to automate our picking operation, which included zone picking operations with zone printing and manual label application.  After application, the cases would travel to a sort lane by way of a scanner, which validated the UCC 128 label with the item it was assigned by scanning a Code 39 label (internal control item number), providing 100% accuracy for picking.  This led to a significant reduction of charge backs from our customers due to mis-picks and substitutions and resulted in a return on investment in less than one year.  Then came a change in focus by the customer base, the alignment of the label itself on the carton and space from leading edge and from the bottom of the carton.  This was overcome by additional training and use of templates for the novice pickers to use while applying the label.  

Five years ago, we were challenged by 50% of our customers to provide price tickets on the product as part of the Floor Ready Merchandising process, touting earlier arrival of our product by flowing through their (retailer) distribution centers faster.  We were being charged back by the retailers $.25 to $.50 per item and another $250 to $500 per purchase order if we did not comply.  We were able to complete the process and achieved the application of the labels with 99.9% accuracy for approximately $.10 per item.  Then came their change, they required specific logos on the price ticket or the charge backs would be steep.  

Two years ago, when the Department of Transportation changed the rules for drivers, most of the industry knew that there would be a significant impact on the transportation piece of the supply chain.....and it came to fruition through detention charges.  At the same time, the transportation industry, along with every American who drove a gas or diesel powered vehicle, was hit by higher fuel prices.  So our retailers told us we had to load the trucks, floor loaded, within two hours or pay a detention charge (usually about $65 per hour).  Then came the administrative charges to process this detention charge, in some cases upwards of $2,000.  

Although all three of the previous scenarios provide ample return on investment opportunities, they also provided our retailers additional sources of revenue as we completed a transition to meet their demands.   So here is the real challenge; how do you reduce costs while meeting the ever-changing demands of your customer as they continue to create revenues from your mistakes and delays in meeting those changes?  We are taking drastic measures to look forward, into the potential for all charge backs hazards in the supply chain road.  This means that we use automation to pick the product, automate the labeling process to ensure alignment and placement, reduce the handling time for staging picked product, and automate the delivery of picked product to the truck floor for staking while recording the UCC 128 bar code label as it is tendered on the truck.   There may be two paths of automation, but there is only one path of success and better margins........complete automation.

Michael Rummelhoff
Vice President of Operations

On SCDigest's Year in Review:

Thanks for the 2007 “Year in Review”!  I found it a great memory-jogger for the events of 2007, and hope you continue this article in the future years.

David M. Tompos
The Toro Company

On the Carbon Disclosure Project:

Calculating the carbon footprint of a supply chain is a challenging task, especially if you have a multi-tiered global supply chain.  How far back into their supply chains should companies go?  Does Dell or HP, for example, have to track the carbon emissions involved in converting sand into silicon?  And how do you get this data from vendors in places like Vietnam?  Therefore, the work being done by the Carbon Disclosure Project (CDP)and its member companies is an important step towards developing standard green house gases (GHG)measurement and reporting methodologies.  I assume, and hope, the CDP is aligning its efforts with those of the standards community, specifically ISO (International Organization for Standardization), the World Resources Institute (WRI) and the World Business Council for Sustainable Development (WBCSD), who recently signed a Memorandum of Understanding (MoU) under which they have agreed to jointly promote the ISO 14064 standards and the WRI and WBCSD GHG Protocol standards.

Adrian Gonzalez
Director, Logistics Executive Council
ARC Advisory Group

On Protecting IP in China:

The first thing is to know who is working for you.  I am surprised that is not on the list.  I am always amazed at both the lack of knowledge and the lack of skepticism that many multinationals operations in China display.  In many cases they have upper level manager working for them whose relatives work in similar domestic companies.  I have also seen several instances where multinationals assume that hiring overseas Chinese (i.e. American Born Chinese) management will mitigate this risk.  In fact, I know of several ABC Managers where the pressure to help the “extended” family is even greater than it is for locals as they don’t really understand how to deal with such pressures in an acceptable manner.

Greg Nichols


Q. What are the three primary variables used to compute the Economic Order Quantity (EOC)?

A. Annual usage in units, order processing costs, and inventory carrry costs.

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