Bob Trebilcock

The year of working efficiently in the supply chain.

According to the Chinese calendar, 2008 is the year of rat.

It’s fitting. Looking at the economy, I think I smell a rat. That’s why in materials handling, 2008 will be the year of efficiency, according to Susan Rider, president of Rider & Associates, a consulting firm, and a member of Modern’s advisory board.

“Based on what I’m hearing from users, companies are focused on getting more efficient and effective with their software, layout and designs,” Rider told me the other day. “They’re making sure that within the four walls, they have the most efficient tools to get the job done.”

Put aside a challenging economy. Even before business began to slow, Rider says she was seeing examples of the latest push for efficiency at work in the supply chain. Here are a few. 

Globalization: Going off shore to reduce manufacturing costs is a familiar tale. The less-told tale is that the distribution supply chain now begins at the port. “We’re becoming a cross-docking supply chain,” says Rider. “Instead of shipping containers to a regional distribution center, we’re unloading and distributing right from the port.” Why is that efficient? Setting up a cross-dock center near the port allows you to bypass the DC and ship directly to the store in some instances; or to pre-allocate inventory before shipping it to a regional DC. 

Simplify, simplify, simplify: The availability of labor continues to rise to the top. “Our warehouses and distribution centers are scrambling to find good workers,” says Rider. On the one hand, that’s driving companies to automate processes where the volumes justify the investment, and to make better use of software to manage processes behind the scenes. Think of it as idiot proofing the warehouse. Then, there’s the expanded use of technologies like pick-to-light that simplify picking. “With pick-to-light, the picker doesn’t have to think, they just have to count,” says Rider. Why is that efficient? More accurate picking means fewer returns.

Taking automation global: Emerging economies have traditionally relied on cheap labor rather than automation to get the job done. The workload increases; just throw a few more warm bodies at the problem. That doesn’t work in today’s complex supply chains. “Companies are beginning to take best warehousing practices, like automation, overseas where they’ve never had to think about automation in the past,” says Rider. Example: One major high tech electronics company just built an automated distribution center in Singapore that mirrors what they have in North America. Why is that efficient? With rising transportation costs, even low wages have to be controlled. 

Quality counts: That is one of the lessons from the lead paint and food scares from last fall. “Before then, most companies had someone in charge of quality fly over once a month to check on conditions,” says Rider. “Now, they’re beginning to put quality assurance departments where the goods are manufactured.” Why is that efficient? It’s cheaper to create a QA department on site than to get stuck with a whole boat load of shirts with the collar button sewed in the wrong spot, as recently happened to one high-end shirt maker.

It’s time to upgrade: Tier I companies that implemented warehouse and transportation management systems 8 or 10 years ago have hit a wall. They’ve squeezed all the gains they’re going to squeeze out of those systems. Meanwhile, the competition is jumping ahead. “If you want to be more effective, you have to put in new systems,” says Rider. What’s the most important reason for a new system? Rider says it’s visibility. “I talked to a customer the other day that just implemented a new WMS,” she says. “They said they can now track an item all the way to the end customer. Before, they just guessed that it got there.” Why is that efficient? Better visibility means more accurate orders and less time on the phone dealing with customer service issues.

Tell us what your company is doing to get more efficient in 2008.

Posted by Bob Trebilcock on January 29, 2008 | Comments (0)