Bob Trebilcock

Why materials handling matters
April 10, 2008

Let’s be honest: materials handling suffers from an inferiority complex. Far too many people think that most of us spend our time moving boxes or running lift trucks into pallet racks.

I discovered this years ago when I worked in a family-owned industrial packaging business. Just calling it an industrial packaging business was a way of elevating the fact that our bread and butter came from selling wooden pallets, the most basic materials handling product on the planet. I still remember the afternoon about 25 years ago when I asked a purchasing agent I’d called on about a dozen times what it was going to take to bid on his business. “I buy $2 million worth of chemicals a year,” the guy said. “Do you think I have time to mess around with some pallet salesman?”

So, I asked the obvious question: “How much do you spend a year on pallets?”

“$2 million,” he said. “But that’s not the point ……”

The real point was, dollar for dollar, the chemical industry was sexier than pallets. I didn’t get an order.

Until the dot.com boom, many businesses turned up their noses at their warehouses and distribution centers. Sure, they had to have them, but they played second fiddle to manufacturing and sales. No one who counted in corporate wanted to actually visit the DC.

That said, I’m beginning to see a new attitude emerging. Several of the facilities I’ve profiled over the last year or so have touted great improvements in productivity and throughput. But, more importantly, they have revamped their materials handling and distribution processes to meet the business goals of the company. In some cases, the latter was more important than the former.

Urban Outfitters, our April cover story, is a case in point. For years, Urban outsourced its western distribution operations to a 3PL. When Urban decided to speed up the time it takes to get product from the port to the store shelf, it took over the reins and built a state-of-the-art DC. “We were evaluating our supply chain from the time a product is conceived until it ends up with a customer, and looking for ways to compress that whole end-to-end process,” Ken McKinney, Urban’s director of distribution, told me last fall. “I knew we’d have more opportunities to compress that cycle if we—instead of a third party—were in control of all our facilities.”

Shortly after writing that piece, executives at Chrysler proudly told me how new, highly-automated materials handling processes are enabling a shift from traditional auto making to lean manufacturing at their Belvidere, Ill., plant. You’ll be able to read about that in May.

That point was driven home again last week as I was writing the June cover story about Boscov’s Department Stores, a $1.2 billion a year retailer with 50 stores on the east coast. Between 2004 and 2006, Boscov’s increased the number of stores in its chain by 25%, in part by acquiring seven stores from Macy’s. In the next few years, the privately-held retailer plans to add another 25 stores. To accommodate that growth, Boscov’s recently revamped its DC, with additional dock doors and a third high-speed sortation system. Yes, Boscov’s has increased throughput and made the DC more efficient: Cartons that used to cross-dock in seven minutes now make the journey in just six. That’s a 14% improvement in velocity. But materials handling is also crucial to the chain’s ability to maintain its reputation for superior customer service while accommodating a business plan that calls for rapid growth. “Without these changes, I don’t think we could be in business today,” said Bob Goonan, director of logistics.

In all three instances, forward thinking companies understand that materials handling counts. I’m hoping that purchasing agent who didn’t have the time of day to talk about pallets 25 years ago realizes that now too.

Posted by Bob Trebilcock on April 10, 2008 | Comments (0)