Orchestrating a DC Strategy That Won’t B Flat
Distribution center technology and equipment working in harmony can keep any supply chain sharp.
Distribution centers (DCs) should operate much like an orchestra, says Tom Moore, chief executive officer with AutoScheduler, which offers intelligent warehouse orchestration solutions. During a performance, each instrument plays in concert with the others.
It should be the same in a resilient, responsive distribution center. “You want everyone to do their part when they’re supposed to,” Moore says. For instance, when a truck loaded with products arrives at the dock door, employees should be ready and able to unload it.
Of course, distribution centers face constraints and challenges that differ from those facing musicians. They have a set number of dock doors and employees, and only so much space for inventory. The continued proliferation of stock-keeping units (SKUs) means it’s nearly impossible for even the sharpest humans to efficiently track all items, making automation increasingly essential. Labor and driver shortages and shipping delays add more obstacles.
In addition, store replenishment times have tightened and become more frequent, and more consist of split cases, as growing numbers of retailers use their stores to fill e-commerce orders, says Reuben Scriven, senior analyst with Interact Analysis.
Thoughtful operational changes and technology solutions can help distribution centers tackle current challenges, build resilience, and boost responsiveness.
A starting point is ensuring the facility’s layout is as effective as possible, says Oleg Yanchyk, chief information officer and co-founder of Sleek Technologies, a freight procurement automation provider. Among other steps, this means assessing how to optimize the location of products and identifying ways to stage loads so drivers can efficiently drive in and out.
An engaged, productive workforce remains essential to most well-run, resilient distribution centers. While technology has become increasingly essential, few DCs are completely automated. In light of the tight labor market, operators need to focus on being a strong employer.
One way is simply to trust and respect workers and ask for their input before turning to outside consultants. “We often underestimate the people who are there every day,” says Ron Liebman, head of the transportation, logistics, and supply chain management practice with McCarter & English. “They’re logisticians, not just people in a warehouse.”
Distribution center operators also want to consider technology’s ability to make employees’ jobs easier and more enjoyable, as well as its ability to automate processes. Technology can boost retention. For instance, autonomous mobile robots (AMRs) that work with employees (co-bots) can transport products, cutting walking time for employees.
Effective supplier management, including the ability to quickly switch between vendors, can also boost resilience within a distribution center. Given ongoing supply chain disruptions, distribution centers need “secondary, flexible options,” Yanchyk says. If one supplier is unable to deliver, potentially delaying operations, another might come through.
Connecting purchasing and warehouse operations also can enhance operations. If purchasing isn’t buying in optimal quantities—perhaps because it lacks vital information—it’s more likely to purchase too little, risking delays, or too much, hindering efficient operations.
Even once automation is introduced, most systems have some capacity limits. Distribution center operators need to identify the orders that will move to automation and those that will be handled manually. “You need both automation and coordination,” Moore says.
Cross-docking and Scheduling
Just as airlines can ensure (most of the time, anyway) passengers will make connecting flights, distribution center operators need to coordinate their own operations with logistics. “To drive productivity, you need to increase the number of things that are cross-docked,” Moore says.
This requires a detailed understanding of inventory placement and capacity, such as loaders and pickers. Schedules need to be synched, so items unloaded at one end can quickly ship out from the other, rather than sit on the dock or inside the distribution center.
A common challenge is timely replenishment of pick spaces. That’s more likely to occur if activities within the warehouse are siloed and managed independently.
Instead, distribution center operators should be able to identify in advance, often using technology, when items will need replenishment. In addition to knowing inventory levels, this requires understanding the workload and schedule of the pickers.
Moreover, as retailers request more frequent shipments, the ability to wait days to unload a truck, because that’s when it best fits within the center’s schedule, is becoming more of a luxury. Instead, it’s more common to have to unload immediately, or close to it, because the products are going out in several hours.
When information flows between shippers, manufacturers, and logistics providers, so each can identify the actions it will take and when, resilience is enhanced. “Partnership is an overused term,” says Kristi Montgomery, vice president of innovation, research and development with Kenco Logistics.
But the more all parties can work together, the more they can boost value and responsiveness. For instance, the sooner Kenco learns a shipper is expecting significant growth, the more quickly the 3PL can implement solutions and technologies to facilitate that growth. Given that some technology solutions currently measure lead times in months—or longer—timely notification becomes critical. “It’s the whole concept of collaborative transparency,” Kristi says.
Similarly, accurate, thorough data on the number of SKUs with which a shipper is working, along with requirements around packaging and labeling, are essential to forecasting labor requirements. This is another step to ensuring efficient throughput.
Visibility and Connections
Along with operational changes, a few technology solutions are proving key to resilient DC operations today. Artificial intelligence and machine learning can provide visibility to products, allowing for better decision making. Distribution centers operators who know an upcoming component will be delayed can hustle to find a substitute or shift processes to accommodate the delay.
Real time data exchanges between the warehouse and logistics operations, generally using API connections, also have become essential. While API is common in many customer-facing solutions, slower EDI or file transfer solutions still are common in back-end systems like demand planning, says Christopher Deck, founder and CEO of Deck Commerce, a provider of a cloud-based order management system. That can hinder responsiveness.
“The name of the game is speed with respect to transferring data from one system to another,” Deck says.
Technology also needs to facilitate communication across sales channels. “Siloed distribution practices create blind spots that often leave available inventory on the shelves when demand swings do occur,” says Keith Brereton, director of client services with Tecsys, a supply chain management software company.
Supply chains need to recognize how markets are converging: Warehouses are fulfilling individual customer orders in addition to supplying retailers, while stores are picking, packing, and shipping like mini warehouses. Factor in drop shipping, click and collect, return logistics, and 3PL partnerships, and a technology layer that optimizes and distributes across channels becomes indispensable.
Collaboration and Connection
Flexibility is another component of distribution center resilience, and that’s driving interest in autonomous mobile robots (AMRs). “Retail changes all the time,” says Gary Allen, vice president of supply chain excellence with Ryder. Technology needs to be able to manage that variability.
Robots often are better at handling high numbers of SKUs than fixed systems, such as automated storage and retrieval systems (ASRS). They tend to be less expensive, as well.
Robots also can accommodate tighter turnaround times on orders. That has become critical, as delivery deadlines on retailers’ orders continue to shrink, including on truckload orders.
Another benefit: AMRs can work within existing DC infrastructures and relatively easily scale to meet peaks in demand. “AMRs have been the technology that’s made the biggest impact,” says Adrian Kumar, global head of operations science and analytics with DHL Supply Chain.
Because collaborative robots receive information from the warehouse management system and then work with humans to execute operations, it’s often possible to double productivity, Kumar says. For instance, the robot may have a screen that shows a picture of the item to be picked and the quantity. In addition, it will stop in front of the pick location, so pickers can easily see where the items they need are.
In contrast, employees trying to navigate a warehouse using radio-frequency guns usually need to understand an aisle numbering scheme like 10-03-04-08, or Aisle 10, Bay 3, Level 4, Slot 8—hardly intuitive or easy to learn. “A co-bot can help guide the associate to the location quicker,” Kumar says.
This capability helps explain the growth forecast for the market for the AGV and AMR market. Research firm LogistisIQ predicts it will top $18 billion by 2027, with a growth rate of about 24% for AGVs and 43% for AMRs.
The pandemic and related supply chain delays highlighted the risks of slashing or, in some cases, eliminating safety stocks. At the same time, amassing quantities of all products can be expensive and unwieldy. For key movers or critical products like medical devices, keeping safety stock nearby often is critical.
One cost-effective way to do this is through brokered warehouses, Liebman says. Computer platforms match companies with extra warehouse space across the country so they can store, for instance, 300 pallets for three months.
Visibility and connectivity enable the application of data analytics, another factor in building resilience. Technologies like machine learning and artificial intelligence can leverage data to predict demand weeks out, based on a range of factors. Instead of looking only at sales history, it’s now possible to consider social media, weather, and real-time sales data and then marry all the information together, Montgomery says.
A system can also assess how potential disruptions will impact demand and in what SKU categories, so retailers and distribution centers can adjust operations.
Digital twins can facilitate what-if and scenario planning, Montgomery says. This entails using data to create a digital version of the supply chain today and asking it to assess various scenarios: What happens if shipping ports shut down on the West Coast? What if a hurricane hits production facilities in Los Angeles?
Based on the analysis, the distribution center can optimize safety stock levels and the locations used to store different SKUs.
Self-distribution, Vertical Integration, MFCs
Some industries, like healthcare, have seen significant adoption of the self-distribution model as a way to gain “centralized, comprehensive control of their supply chains, from source to patient,” Brereton says.
As TechTarget explains, in a self-distribution model, companies purchase goods directly from their manufacturers, store products in their own warehouses and transport them through their own networks, cutting out the middleman.
“By altering their distribution management processes and going directly to manufacturers, health systems are able to buy strategically while safeguarding against bottlenecks at third-party distributors,” Brereton adds.
Because last-mile facilities like micro-fulfillment centers are increasingly replenished with individual items in addition to pallets, traditional upstream filling activities are moving downstream, Scriven says. He provides an example: a supplier ships T-shirts to large distribution center, where they’re unloaded and put into totes. From there, the T-shirts, still in the totes, move to a last-mile fulfillment center.
“Loading the totes is done upstream, where rents are lower,” he says. “When shipping items downstream, they’re already pre-loaded.”
Democratization of technology
Not only is technology playing an increasingly vital role in many distribution centers, but the “democratization of technology,” is allowing even smaller operators to implement it, says Bill Denbigh, vice president of product marketing for Tecsys.
For instance, while voice picking systems have been around for years, they previously required separate terminals and systems, that together often cost well into six figures. Now, most industrial mobile devices are based on the Android operating system. Warehouse management system (WMS) vendors are able to build voice prompts into their solutions simply by utilizing standard Android API calls.
Modern WMS solutions increasingly offer voice as a way to drive user efficiency, rapid system adoption, and user compliance, or following what the system says to do, he adds.
Down the road, blockchain or distributed ledger technology likely will gain greater adoption. “It can facilitate better demand planning because of the openness and transparency along the supply chain, and the removal of latency periods between partners,” Montgomery says. The lack of government standards has been a big factor in holding back implementation so far, she adds.
Openness, transparency, and immediacy help build resilient distribution operations that can anticipate disruptions and respond even before they occur.
“Like hockey great Wayne Gretzky, they can skate to where the puck will be,” Moore says.
Changing Keys: Making the Switch to Direct Selling
Transitioning from business-to-business to direct-to-consumer (D2C) fulfillment is an increasingly important competitive edge for manufacturers, sellers, and third-party logistics providers.
The initial change is in basic philosophy. Most providers go from worrying about bulk servicing thousands of units on palletized loads to managing the throughput time of thousands of orders requiring additional touches for picking and packing.
Several factors come into play when transitioning to a D2C model without exponentially increasing costs. The physical layout of your pick zones maximizes the space and creates an efficient picking environment for your associates, while choosing the right storage solution for commodities should allow for products and markings that are easily visible.
Inventory management is critical too, because having clean receipt, put away, replenishment, and cycle count processes in place keeps order fulfillment streamlined, efficient, and accurate.
Understanding the profile of the inventory that you are shipping is also important. For example, monitoring the velocity of products and utilizing that data in the slotting process will make your picking process operate more efficiently by reducing the pick path and distance for operators.
There is no way around implementing some level of technology to be a competitive D2C fulfillment operation. At the very foundation, a functionally rich warehouse management system seamlessly manages e-commerce’s fluctuating demands.
Also, it’s much easier to expand your automation solutions when you start with the right baseline efficiency. Then you’re not redefining your entire process to accommodate a new technology, which can be extremely time-consuming and expensive. It’s better to find solutions that modulate well, so that you are simply enhancing your efficiency with additional tech.
In short, having the right mindset, tools, and solid plan allows for an optimized process and smooth transition for the organization and its ops team.
– By Brian Kirst, VP Sales & Business Development, Synergy NA, SnapFulfil WMS