Big Picture: Cisco’s warehouse of the future

At ProMat this year, I spoke to a major retailer who made a provocative statement: Forget all the cool automation on the show floor. He viewed that as a commodity. What he wanted was intelligent software that could give him more real-time information about more aspects of his operations than he was getting now. “I think suppliers need to stop thinking of themselves as hardware shops and start thinking of themselves as software shops,” he said.

That sentiment strikes a chord with Jack Allen, senior director of logistics and manufacturing solutions for Cisco. “I walk through a lot of warehouses where people are enamored with the mechanical technology,” Allen says. “But, in our view, it’s not about mechanical automation: It’s about software.”

As one of the companies that provide the hardware, software and systems that connect to the Internet, it should come as no surprise that Cisco is focused on the Internet of Everything, or IoE. This is the idea that all of the machines, equipment, gadgets, appliances and things we use in business and our daily lives will be connected to the Internet. IoE is more than just connecting things, it’s about connecting things, people, processes and data in a way that’s usable and useful.

The idea has supply chain implications—if trucks, conveyors, lift trucks, packages, pallets, people, suppliers and customers can all communicate, there’s an opportunity to rethink the way we do things. For that reason, Cisco is in the process of remaking its own supply chain processes for the Internet of Everything, and they call it Cisco’s connected supply chain and logistics of the future.

Included are plans for the warehouse of the future. But when Allen and his colleagues talk about a much more automated warehouse, they’re not necessarily talking about materials handling automation. Rather, Cisco is thinking about ways to automate decision-making and mundane processes that are currently done by people.

And, it’s more than just software. The warehouse of the future will also use sensors, data collection technologies, analytics as well as smart, connected machines that can communicate more information from more nodes in the supply chain. Put them all together, and you end up with a supply chain that can automatically take actions up and down the supply chain—including inside the four walls of the warehouse—to respond when events occur.

“The value is in the integration of the pieces of the supply chain, what we call the value at the seams,” Allen says. “It’s having access to the information between areas like manufacturing and distribution, shipping and the customer or this silo and that silo.”

Allen uses the example of the Japanese tsunami to illustrate how that might work. “When the tsunami hit, you had a lot of people going through spreadsheets to find out that the material to build the components to build the subassemblies to build the thing that they needed were actually coming from only two suppliers—and they were both in Japan inside the affected zone,” Allen says. “They had to get on the phone and scramble to find supply.”

In a connected supply chain, the system might analyze unstructured data from external information, such as Twitter, and conclude that the tsunami was going to disrupt supply. It would then automatically migrate orders to factories outside the impacted area or send orders to warehouses that have inventory. “You’re going to speed up trucks already in route to avoid a problem; you’re going to stop trucks that haven’t moved yet; you’re going to issue POs to your secondary source of supply; and you’re going to expedite those orders by putting them on planes,” he says.

The most important aspect of that scenario: It will all happen automatically. People will only get involved to handle the exceptions that cannot be addressed by the system.

To do that, Allen adds, you have to have sensing technologies to know where your trucks, inventory and orders are located; and you have to have the methodology to speed up or slow down your order fulfillment processes. “Ninety percent of that is information and not the mechanical movement,” Allen says. “That’s why we believe the future will be as much about the movement of data as it is about the physical movement of goods.”

He adds, “In the big picture, that’s where we want to go.”

It’s not new
In many respects, the industry has been talking about global visibility, collaboration and event management for years. Moreover, the tools of Cisco’s trade, such as sensors, RFID, RF, data collection technologies and supply chain software are already on the shelf. What’s new, according to Allen, is the integration of these tools to create new and innovative processes. “If you think about it,” he says, “the touchscreens and the user interface in the first iPhone weren’t new either. The secret sauce was in how Apple put it all together,” he says. “That’s what we want to do in the supply chain.”

It takes a layered technology model to make all of this happen. The first layer consists of edge-sensing devices that gather structured and unstructured information from across the supply chain. Structured data would include information generated by a system such as a purchase order, confirmation of the receipt of a shipment or a wave of orders created in a warehouse management system (WMS). Unstructured data might include weather or news reports, social media and trend analytics about events that could disrupt operations. That could be everything from the Japanese tsunami to the bankruptcy filing of a critical vendor.

The second layer analyzes that information and makes decisions about what needs to happen next based on rules and protocols. That way, only the exceptions that fall outside the rules have to be handled by people.

The third layer includes the execution systems, like warehouse and transportation management, that put plans in motion and route orders to where they need to go. This is facilitated by workflow, decision support and intelligent agents in a machine-to-machine, management-by-exception environment.

One of the critical components in this model could be the lowly pallet. It’s already a platform for the physical movement of goods.

Cisco is also viewing the pallet as a platform to collect, carry and communicate information about the movement of goods. In this scenario, every pallet would be equipped with some kind of a sensing device that can be populated with information about the shipment and automatically updated and read as the pallet moves through a manufacturing plant, distribution center or transportation hub. Something similar could be applied to assets like forklifts in a facility or trucks on the road that would allow them to be tracked. Allen says Cisco is still trying to determine whether that technology should be some kind of a bar code, RFID tag or other sensing device.

Warehouse of the future in action
The point, however, isn’t just to track the location of a pallet, a container or a lift truck. Instead, it is to use these technologies to connect warehouse and logistics processes in innovative ways.

Some of this is already happening at organizations other than Cisco. In Frankfurt, Germany, for instance, Lufthansa Technik Logistik Services, or LTLS, has built a highly automated distribution center to expedite the delivery of spare parts and components to repair an aircraft that has been grounded for repair. The facility includes a mini-load automated storage and retrieval system (AS/RS) that stores 30,000 parts and components and automatically delivers them to a packing station. When LTLS has a required part in stock, it can have an online order ready to ship within 15 minutes of commitment to the customer.

The backbone of the facility, however, is a unique set of software solutions that includes enterprise resource planning (ERP), transportation planning and a collaboration portal for customers and logistics providers. The system automates the time-consuming process of validating whether LTLS can meet a customer’s service level requirements. In the past, when a customer called with an expedited order, specialists had to get on the phone to confirm that the part was in stock, determine when was the next available flight to the airport where the repair would take place and check on the availability of couriers to pick up and deliver the part. In all, it could take 48 hours from the first phone call to get a part in the hands of a repair technician.

Today, those steps are automated. Customer orders are received electronically. The system then checks to see if the part is in stock and evaluates all of the available transportation options to meet a service level requirement. If the order is a go, it then automatically creates a transportation plan based on the cheapest option to meet a customer service requirement, schedules the delivery and sends an electronic order to the warehouse, which initiates the order fulfillment process in the mini-load AS/RS. Along the way, the system communicates with the airline ordering the part and monitors the logistics process for any exceptions that would delay delivery.

As a result, LTLS can now reach any airport in Europe within 12 hours of receipt of an order and reduce transportation costs.

Cisco’s warehouse of the future
Cisco is similarly using automatic data collection technologies and the cloud to change the way it manufactures and distributes set top boxes to cable customers. Each box is uniquely tied to a key that allows a customer to unlock the box when it’s installed in a consumer’s home. “If you don’t have the key, the box is a brick that can’t be unlocked,” says Allen.

In the past, information about the set top box was collected and managed manually in a time-consuming method. Now, the process is done automatically. The original manufacturer sends identifying information about each box to Cisco’s manufacturing execution system (MES) and automated test system. That data is then fed to secure sites in the cloud where key information is stored. When the boxes arrive at a Cisco location, the serial numbers don’t need to be scanned—they were scanned once at the manufacturer. All that needs to be scanned are the pallet IDs (license plates), which are scanned into the system and sent to the cloud where they are married with the keys for all of the serial numbers on that pallet. Later, when Cisco builds an order for a customer, the license plate bar code on a pallet provides a link to the information in the cloud for all the set top boxes in that order.

“When we send it to a customer, and they scan the license plate bar code, all of the key information they need for the boxes on that order is pulled down from the cloud and goes into their billing system,” says Allen. In the past at Cisco, he says, every box had to be manually scanned, multiple times, by Cisco and its customers. “The physical process isn’t new,” he says. “People have been scanning license plate bar codes for years. What’s a model for the future is the process to use the data.”

In the warehouse of the future, Allen envisions using data coming from pallets in other innovative ways. For instance, a warehouse could receive information from a carrier about the delivery of a pallet needed for a hot order. The warehouse could then pull together and stage the other items needed for the order in locations equipped with lights with an IP address.

When the hot pallet is scanned at the receiving dock, a lift truck driver would get a signal to go to the dock to get the pallet. The driver could then go to the lit storage locations to assemble the rest of the order. Meanwhile, the system could automatically schedule the outbound transportation for that order and notify the customer that it’s on its way. “Bar code scanning isn’t new,” Allen says. “But the process is new.”

“I believe we’re at a major cusp of another wave of disruption, another wave of productivity in the warehouse,” he adds. “In a connected world, we’re going to be much more intelligent about how we do things and use things.”