Squeezing New Productivity Out of Mature Technology

Squeezing New Productivity Out of Mature Technology

New industry collaborations are resulting in fresh approaches to a chronic problem both in transportation and distribution: the need for higher productivity.

The return on a technology investment doesn't have to end. As long as there are opportunities to increase logistics productivity in a distribution center or on the road, customers will pursue them with networks of technology providers. These relationships are more partnership than purchasing.

PepsiCo Inc. is a prime example on the user side. When it implemented a transportation management system (TMS) a few years ago, it saw the project as more of a map in its business evolution than as the purchase of a tactical point solution to save transportation dollars.

Mark Whittaker, vice president of PepsiCo Transportation, saw a threat to that evolution resulting from a possible 5% to 8% shrinkage in truckload capacity due to pending driver hours of service and safety regulations. Not only did he want visibility into the productivity of his own company's private fleet, but he wanted a window into his other transportation providers as well.

What Whittaker learned about the business of transportation led him to establish Pepsi Logistics Co. Inc., or PLCI, as the internal logistics services division for the various PepsiCo business units. Indeed, it enabled PepsiCo Transportation to launch a strategic transportation provider network integration strategy to support a stronger alignment between its distribution network and its internal and external transportation providers. Whittaker expects this effort to address PepsiCo's transportation capacity problem by driving captured capacity into the network, minimizing carrier cost and availability volatility. He also sees it as a way to cut the number of miles needed to deliver Pepsi products -- and minimize the company's carbon footprint.


A warehouse worker uses a voice-directed device to pick items as directed by warehouse control software. The pallet truck, manufactured by Crown, is equipped with Dematic AGVS controls.
"We're committed to minimizing PepsiCo's environmental impact by doing what's right to reduce the overall need for transportation," he says. "We're consolidating loads, driving the least amount of miles and using competent carriers that are EPA SmartWay certified. These practices are contributing to PepsiCo's overall environmental goals and, specifically, PepsiCo's transportation sustainability strategy."

The SmartWay Transport Partnership is a public/private collaboration between the U.S. Environmental Protection Agency and the freight industry to improve fuel efficiency, increase environmental performance, and encourage supply chain sustainability. Fab Brasca, vice president of Global Logistics at JDA Software, which provided PLCI's transportation management system, says his client's approach puts software in a new light.

"It's the difference between looking at a TMS as just an execution-level functional deployment that yields x% cost savings to really looking at it as a roadmap that points to each step that will evolve how the organization approaches things over time," he adds.

It's also part of a trend where companies are using supply chain-spanning informational tools and involving people outside their boardroom and management offices -- including people on the plant floor.

Better Use of Labor

The strategic value of logistics software really comes into play when trying to maximize labor productivity. That's more important than ever as companies struggle to draw skilled labor into their logistics ranks being vacated by retiring baby boomers.

Peter Schnorbach, labor management expert with Manhattan Associates, a logistic software vendor, says labor makes up about half the cost of most distribution operations, but it tends to be the last thing managers worry about. "There's a lot of bang for the buck there that companies could use to fund the automation projects they want to do," he says.

It's one thing to measure labor productivity, but engaging employees to be more productive has to come first. Schnorbach suggests that by giving employees access to data and enabling them to provide feedback, processes can be streamlined and improved.

Research supports his contention. Julie Fraser, lead analyst with Cambashi, an industry research firm, is working with the Manufacturing Enterprise Solutions Association on a study called "Pursuit of Performance Excellence: Business Success through Effective Plant Operations Metrics." It's still early in this project, but findings are leading to interesting conclusions regarding the connection between labor productivity and automation. One of those conclusions is you need to give employees stewardship in any process.

Were committed to minimizing Pepsicos environmental impact by doing whats right to reduce the overall need for transportation.
-- Mark Whittaker, Pepsico
"Asking employees to enter the data for measuring processes helps them to really understand the process and how to improve it," Fraser says. "Data requires analysis, including validation and verification. Making sure the employees understand what they are improving can be critical. Manual operations can have good measurements and targeted key performance indicators, but there is a built-in challenge with the data collection in that it requires cleansing."

Automating Production Movement

While labor may represent half the cost of distribution operations, it can be 80% of the cost of operating a lift truck. With lift trucks being the most common material handling tool in a plant or DC, labor management becomes that much more important. That's why lift-truck vendors and systems providers are providing ways to automate lift-truck movement and data collection.

For example, Toyota Material Handling's Automation Group offers its own line of automated guided vehicles (AGVs), but the company can also help customers convert its standard lift-truck tow tractors into AGVs using an aftermarket kit. The kit allows the customer to use the truck in either automatic/AGV mode or manual operator mode.

These vehicles are being used to move tractor cabs through the production line at John Deere's Waterloo, Iowa, plant. According to Deere's project manager for cab assembly, Annie Kappelman, their ability to switch between operator and no-operator modes is a plus to plant productivity in several ways. "AGVs increased the assembly line flexibility at John Deere and provided improvements in quality and ergonomics while decreasing direct labor," she says.

Automating Operations Data

The Raymond Corp. also offers an automated/manned combination unit it calls an Automated Lift Truck. Unlike most unmanned AGVs, an Automated Lift Truck has no fixed routes. An operator teaches it what to do. It "learns" routes and the actions to perform on a route while an operator drives it.

These vehicles double as information generators when equipped with devices that transmit and facilitate data for speed-control, zone-control, load identification (RFID) and lift-truck location. Lift-truck battery voltage and load weight can also be monitored remotely. This enables fleet analysis to help ensure labor is as productive as the automation. Software can help managers analyze how the fleet is being used, including how much time is spent lifting versus traveling. This will indicate if each truck type is being used for its intended purpose.

Users can track productivity hour by hour, truck by truck, or look at aggregated data, collected from several buildings.

Romark Logistics, a third-party logistics service provider, uses Raymond's iWarehouse lift-truck fleet optimization system to help manage its fleet of 53 lift trucks in its Hazle Township, Pa., warehouse.

"Having the capability to collect data is important, but using that data to be both efficient and cost-effective is critical," says Ryan Ziegler, director of facilities management for Romark. "Previously, we would manually collect data from each of the trucks and then create a spreadsheet to use for further analysis. Today we collect real-time data wirelessly and then generate reports we can use to evaluate maintenance costs and analyze causes of unplanned maintenance."

Industry Partnerships

Lift-truck providers are not only providing their own automated solutions, but they're partnering with material handling system providers to interface with warehouse management and operations control software. Dematic, providers of material handling automation, demonstrated this kind of partnership when it teamed up with Crown Equipment Corp. to develop a semi-automated picking solution. This partnership demonstrates that with the combination of Dematic's voice directed technology, AGV guidance and warehouse control system software, Crown's PC 4500 Series rider pallet truck can be used in a case picking scenario.

In such an application an operator is directed to a location and then provided with the quantity to pick. The operator places the case on the pallet contained on the pallet truck, then the AGV controls allow the pallet truck to automatically advance to the next pick location. The operator doesn't need to get on and off the pallet truck. Also, the AGV controls allow the pallet truck to move automatically to the shipping dock while the operator meets up with another pallet truck.

"Typical operations will see a 40% increase in labor productivity including improvements in order accuracy," says Ken Ruehrdanz, market development manager at Dematic.

No More Information Islands

Pieces of information gathered in any work environment must be part of a bigger picture, not generated by "islands of automation." The material handling industry is evolving toward a more integrated approach to help customers achieve that end. Partnerships and mergers and acquisitions among complementary companies are proceeding at a rapid pace. Another business that's growing along with this trend is facilitating such arrangements.

John Sidell, former principal of TranSystems, a logistics consulting firm, started New Course LLC to help private-equity firms find the right combinations of material handling and logistics talent among small to medium sized companies. He sees the material handling industry as one filled with ripe pickings for these firms.

"One of our clients is a $2 billion-plus material handling vendor engaging us to help them build out what will be their technology group," Sidell says. "It will be game-changing stuff if they can get their head around it in the next 12 months. It's part of a trend. Five years from now there won't be islands any more; there will be much deeper integration."

Tom Andel is chief editor of IndustryWeek sister publication Material Handling & Logistics, which provides information for corporate managers who oversee the handling, storage and movement of raw materials, in-process goods and finished product throughout the supply chain.


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