Get an unfair advantage

Monday marked the opening of Supply Chain Advantage, the annual logistics conference in Park City, Utah sponsored by Dematic.

If you operate a warehouse, distribution center or transportation department (sorry, competing vendors are not invited), the conference is a little like Woodstock for material handling engineers and logisticians – in a higher end setting and without the mud. Think three days of good food, networking, prominent guest speakers and educational sessions in the mountains. Heck, this year, there was even rock and roll music – an outdoor concert for about 300 by the Doobie Brothers. It’s also very low key: there has long been a no selling allowed policy at the event.

This year’s theme is “the knowledge to give you an unfair edge.” The idea is that the end users in our end of the business are tired of hunkering down in their fox holes. The best companies are investing in their warehouses, distribution centers, manufacturing plants and transportation systems to get a leg up on the competition. Maybe even an unfair leg up.

Mike Kotecki, a Dematic senior VP and the long-time master of ceremonies of this event, put it this way in his opening remarks. “You can look at the unemployment rate and argue about how well the economy is doing, but the middle link of the supply chain that moves materials is rocking right now,” Kotecki said. “People aren’t looking for survival. They want big thinking and big changes.”

Now, you can argue whether the people who travel to the middle of nowhere Utah to attend a logistics conference are a self-selected group and whether they are representative of North American business, but during the morning session, one attendee after another stood to say that they were there to learn about automation, to look for ways to improve their processes or to get some information before launching a new project back home. The mood was rocking.

I attended a handful of sessions on Monday and came away with a number of takeaways.

Too often, we take employees and safety for granted: Donald Kernan, a retired executive from Supervalu, detailed a program he launched to improve the safety and morale at one of the distributor’s warehouses. The ostensible goal was to lower the number of OSHA reportable incidences in a DC that had about 3 times the national average. The approach he described was designed to create “discretionary performance” – a culture where employees do more than the minimum because they want to, not because they’re afraid not to. The result: at one point, the number of OSHA reportables dropped to zero; meanwhile, productivity doubled. I asked Kernan if he had made any process improvements or added any new materials handling technologies that might have contributed to the productivity improvements. “Other than doing a better job of slotting, it was the same facility,” he said. “The results you achieve are directly produced by the processes and culture you have in place.”

Docks may not be as exciting as robots, but we ignore them at our peril: Everyone has a dock, just like everyone has a lift truck or, at the least, a pallet jack. Most of us take them for granted. Walt Swietlik, a director of customer relations at Rite-Hite, gave a strong overview of some of the common and costly mistakes he’s come across in recent years as companies adapt to changes in trailers and transportation. Like the company that was thrilled about the 40 foot long staging areas they’d designed for their new DC until Swietlik pointed out they were shipping in 53 foot trailers, or the new logistics manager who decreed they would ship in 8-1/2 foot wide trailers – except the dock doors were only 8 feet wide. “The grocery industry has about $2.6 billion in unsaleable merchandise each year,” he said. “About $1.5 billion of that is because of damage and a big source is the result of what happens at the dock.”

Small systems can deliver big savings: That was the message delivered by Abe Kassin, vice president of operations for LT Apparel Group, a manufacturer and distributor of children’s clothing. LT’s heritage is shipping pallets and full cartons to retail stores and distribution centers. A couple of years ago, LT had an opportunity to license the manufacturing rights to the children’s clothing lines from Carhartt and Adidas. The new lines called for new distribution processes: garments on hanger, value added services and lots of piece picking. After doing it with manual processes for the first season, LT made a modest investment in a pick-to-light and put-to-light picking system driven by a warehouse control system to direct the picking. The result was a 70% reduction in labor, a reduction in lead times from 10 days to 24 hours, and an ROI in less than one year. More importantly, both companies renewed their licensing agreements with LT.

That’s an investment that led to a real competitive advantage. Maybe even an unfair advantage.