Material Handling Moves Up

Dec. 21, 2004
Decision-making that was once incidental to the production process has assumed major competitive significance.

One metric of manufacturing's mounting competitive challenge is industry's annual spending for material handling, projected at $63 billion for 2005 compared with $34.5 billion in 1990. With a new emphasis on beating the competition by tracking and manipulating material flow, producers are seeing material handling in a new light. A recent example is an award-winning material-handling system installed at News International Ltd., the London-based publisher of the Sunday Times, the News of the World and the Sun. The system's implementation won the 2003 "Most Innovative Technology of the Year" award given by a leading British publishing association, the Newspaper Society. The win is a milestone in several ways. For the Society's members, the publishers, the award marks the first-ever material-handling winner. (Previous winners honored the significant implications of software or printing equipment.) For manufacturing at-large, the award is an important signal of material handling's growing significance to the management strategies and decision-making that create business success. John Nofsinger, CEO, Material Handling Industry of America, a trade association of material handling and logistics providers, sees the incubation of technology through the 1990s as responsible for the current wave of exciting process alternatives to traditional material-handling practices. One problem: The pace of change is providing little margin of error in applying solutions to today's material-handling needs. A Glimpse Of The Future? Not all of today's material-handling issues are new, but they have never been present in the same combinations or complexities. For example, in recent years technology has provided tremendous opportunities to improve the flow of information and goods concurrently, notes Nofsinger. That has essentially allowed a tremendous amount of information to be known about processes and has driven inventories lower and lower. That's had a significant impact on being able to reduce finished-goods inventory. The News International example dramatizes how time cycles are being compressed in the logistics chain, says Martin Clark, director of international newspaper operations for St. Louis, Mo.-based Alvey Systems Inc., a member company of FKI Logistex and the turnkey solutions provider. "In the newspaper game, you're talking about a four-hour production window, a four-hour distribution window and a shelf life of less than 24 hours." Clark describes the scope of that challenge: "The operating requirements start with the product -- a newspaper -- that embodies, even exceeds, the challenges the rest of manufacturing confronts with mass customization. With newspapers, ad inserts are becoming more customized. Right now the ad inserts in home-delivered newspapers are becoming specific right down to street and sub-zip code levels. What that means is that if you're going to 800,000 customers, you're dealing with a compressed logistics cycle of 800,000 stock keeping units. At the ultimate, pet owners, for example, would receive ad inserts pitching products for their specific pets." More and more of the products being manufactured are sharing the production and material-handling characteristics of the output at News International. The requirements also insist on flexibility for unpredictable, lastminute delays. Does any of that sound familiar? Underlying all those operating requirements is the imperative need to respond to competition. As with many other manufacturing companies, competitive forces had put the publisher's product in flux. As a result, News International's production and distribution processes required a material-handling system flexible enough to respond to the competitive challenges posed by television and then the Internet. Enhancing Concurrence Increased competitiveness is not the only factor that's incurring a response with the latest material-handling technology. Nofsinger points to how internationalization and globalization also join to create new business models for industry. "Material handling and logistics functions that were once handled internally are now involving third- party logistics providers. "Concurrent movement of information and goods is further integrating supply chains as well as opening doors for cross-company collaboration." Nofsinger says global standardization is becoming increasingly important in dealing with interoperability issues. How much of a watershed is RFID (radio frequency identification)? Nofsinger's begins his response by noting that the technology has been around for a number of years -- so strictly speaking, RFID isn't new. Its early applications were in logistics -- identifying high-value things such as railcars or shipping containers, for example. Two large organizations have completely repositioned the technology. Wal-Mart and the Department of Defense have stipulated January 2005 as the date for pallet-level RFID tagging. "By setting a deadline, those organizations are unlocking the technology for wider commercial usage. The net effect is the possibility of a new price-point for the RFID tags." He says the technology is set to spread more quickly to a wide variety of consumer items, maybe even grocery items. RFID could dramatically change supply-chain management in retail and consumer industries. What's unknown is how quickly the deadline will accelerate broad acceptance of the technology. Now is the time for planning to determine if and how the RFID scheme applies outside Wal-Mart and the DOD. "Will this (RFID) work end-to-end, and will everyone be plugged in by January 2005? Definitely not. It will take a while." He notes that bar coding, a veteran technology of perhaps four decades, still hasn't been adopted by everybody, and he expects a similar pattern for RFID. "The unknown is whether RFID will take as long to become the ubiquitous way of communicating vital product information in the supply chain." RFID's Enterprise Connection Nofsinger equates today's position of material handling to the capabilities presented by its convergence with computers and information technology. "That convergence of past decades has transformed material handling from a tactical consideration -- an indirect labor activity that was to be avoided when ever possible -- to an issue that drives overall business strategy. (In 2000 that evolution changed IW's sister publication from Material Handling Engineering to Material Handling Management.) IT is the connection of material handling to the enterprise. RFID provides a new capability to the gathering of information in the supply chain, but the technology is only useful if there is an infrastructure that supports maximum use and analysis. RFID may only be as effective as its enterprise connection. Are software solutions available to seamlessly integrate data gathered by RFID into enterprise applications? The connection is necessary to successfully gather, access, analyze and use information to make the best business process decisions. Logistics information is key to increasing profit potential according to a Gartner presentation "Optimizing Fulfillment Through Supply Chain Execution." "Through 2004, enterprises that provide customers and trading partners with visibility of orders, shipments and events across the extended supply chain will experience up to a 15% increase in profitability, because they will be able to reduce inventory while increasing customer satisfaction." The opportunity has not been overlooked by business software providers. In January, SAP AG announced a packaged RFID solution at the National Retail Federation show in New York. Built on the SAP Web Application Server as part of the SAP NetWeaver technology platform, the solution is designed for seamless extension and integration into SAP and non-SAP IT environments. "Our packaged RFID solution merges the virtual world of data with the real world of RFID-tagged assets," says Claus Heinrich, executive board member, SAP. SAP and its consulting and technology partners expect to help customers with individually tailored RFID solutions that address business case building, integrating RFID hardware infrastructure, creating solution blueprints and implementing projects. SAP says its automatic identification concept enables companies to manage multiple Auto-ID technologies, including RFID, barcodes and sensors. "This is a solid enterprise infrastructure for RFID that will allow for the practical usage of RFID data across more processes and applications than many of the point solutions on the market," says analyst Steve Banker, service director for supply-chain management at ARC Advisory Group, Dedham, Mass. "As companies discover and pursue RFID-related programs, which are oriented toward business improvements, they will need to build an RFID infrastructure that can be used across their business." SAP's RFID research efforts reach back to 1998 and also has served as the first enterprise software sponsor of the Auto-ID Center, the predecessor of EPC Global, which leads the development of standards for the Electronic Product Code (EPC) Network. SAP is also a founding member of the METRO Group Future Store Initiative in Rheinberg, Germany. With more than 40 partners, including Intel, the initiative showcases the potential of RFID in a retail store of the future setting. About 1,700 products sold at the store have RFID tags, helping to track and trace items as well to build a more effective and adaptive supply-chain and logistics practices. (Recently, the Wall Street Journal Europe presented SAP with one of its annual European Innovation Awards for the company's role in the Future Store Initiative.) RFID isn't just about tags, the supporting electronics and retail applications, says Adam Bartkowski, president and CEO of enterprise software provider Apriso Corp., Long Beach, Calif. Last November, his firm announced an implementation that helped to RFID-enable a warehouse in Texarkana, Texas. Using RFID hardware supplied by Matrics Inc., Columbia, Md., Apriso's FlexNet system helps International Paper perform a vital inventory-tracking function. The task: locating paper rolls -- up to 75 inches in diameter and weighing tons -- and transmitting routing instructions to forklift operators in real time. FlexNet's Web-services-based warehousing and inventory management applications are interfaced with International Paper's RFID inventory-location application to provide real-time workflow instructions. Location information can be relayed to lift-truck operators in less than a second. Last September Apriso and Matrics teamed to offer turnkey RFID solutions. Apriso's Nelson M. Nones, vice president and chief products officer, contends that location-sensing via RFID opens up industrial possibilities that go far beyond simple barcode replacement. "Many businesses lose track of inventory that continually shifts between locations or bins to make space for other product. Often this happens when procedures for transferring stock from one location to another are so tedious and time consuming that employees ignore them." Nones also suggests RFID location sensing to facilitate sequenced production as popularized by the Toyota Production System. "With TPS, sequencing is enforced through fixed conveyor systems whose speed matches the required takt time of the plant -- a method that is highly effective for Toyota, but sometimes problematic for plants that operate flexible production times." With location sensing, the position of ultimate production units and their individual components are continually kept up to date and accurate, with zero human effort. Reaching A 'Higher Level' MHIA's Nofsinger sees a continuing software challenge. He's not referring to top-level enterprise systems or warehouse, factory, transportation or order management -- but rather in integrating between supply chains. "Partners' systems may be at different levels, thus complicating integration." Accelerating change is the rule of the day, not only for material handling users, but also for the vendors who are transitioning to turnkey solution providers, says Steve Ackerman, president, Alvey Systems. "It challenges us to provide controls and software solutions that solve customer problems at a much higher level. It is no longer the simple requirement of providing a conveyor or a material handling system to take a product from point A to point B. The challenge has progressed to interfacing with the customer's upper-level data systems to enable smart decisions to be made on the fly and pass data back and forth in real time."

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