Learning to speak the language of the supply chain

MHI and our industry are in transition as materials handling’s profile is raised in the supply chain. The challenge is learning to speak the language of supply chain managers.

Four walls and two windows. That was a marketing slogan created by Dematic a few years ago. It’s an apt description of our industry today, I realized while attending the recent MHI annual meeting in San Diego earlier this month.

Increasingly materials handling is less about the movement of goods and more about the fulfillment of orders. More importantly, its about making good on the promises a company makes to its customers, whether those customers are other businesses or retail consumers. Four walls and two windows recognized that transition: What we do happens inside the four walls of the distribution center, but with a window into what is coming into the DC and another window into what’s going out the DC to the next link in the chain.

Of course, a warehouse or distribution center has always had to know what it’s going to receive and what its going to ship to be efficient and accurate. But that concept, and hence our visibility as an industry, has become much more urgent in an era of just-in-time/just-in-sequence delivery to a factory, same-day shipping and next-day delivery to wholesale and retail customers, the perfect order and the omni-channel retail experience. Suddenly, people in the C-suite realize that what we do is more than just store and move stuff. We’re an integral part of their promise to their customer and hence their supply chain strategy. In some cases, they’re incorporating us into that strategy, and in others they’re struggling to understand what we do and where we fit.

Let me give you a couple of examples.

Recently, I had the opportunity to interview the global supply chain officer for one of the world’s leading CPG companies. He described how his company is evolving from a product-focused company to a customer-centric company. When I asked for an example, he explained how they are rethinking their manufacturing and distribution strategies. For example, they are in the process of building a network of six “mixing centers.” These will be highly automated crossdock centers that can assemble and deliver an order comprised of any of the company’s portfolio of products within 24 hours, anywhere in the United States. It is a supply chain strategy designed at the highest levels of the corporation that will be enabled by our order fulfillment solutions.

In November, Modern is publishing the story of how Papa John’s replenishes 3,200 pizza stores twice a week from 10 distribution centers. This is a company that is truly demand-driven, using a combination of point-of-sale data at the stores and global visibility into inventory levels at the DCs to orchestrate the delivery of fresh ingredients into the DCs and on to those stores. That supply chain strategy is enabled by technologies we work with every day in our industry, including warehouse and transportation management systems and voice recognition technology. In this instance, the DC truly has to have a window into what’s going to arrive and another window into what’s going out to the stores because the orchestration between the two is so important.

In those two instances, materials handling is speaking a language the supply chain can understand.

Meanwhile, there are struggles, even at very smart and experienced companies. I recently had a conversation with the vice president of distribution for a leading retailer who told me about the e-commerce distribution strategy he had recently delivered to senior management. The strategy was designed to meet the e-commerce plans of the sales and marketing teams. The biggest question from the C-suite: Why is it so expensive to fill e-commerce orders when it used to be cheap to crossdock cartons to the stores. In this instance, there are two conversations going on, in different tongues.

That’s our challenge as an industry, and the challenge that MHI is attempting to meet as it reaches out to supply chain programs, such as presentations from MIT and Cisco at the annual meeting, the co-location of a supply chain event at Modex and a dialogue with other industry associations like APICS.

Clearly, we’re not sure exactly where we fit. But the industry understands that we need to learn some of the language if we’re truly going to be four walls with two windows.