Can you explain what Eskay does?
Eskay is a full-service, total integrator. We do the designing and studying of systems, and design a system that is expandable. We’ve done an awful lot with companies like Dell, which just won the Industry Week’s “Best Plant in the Country” award; we’ve done all their distribution centers for them. People [in the warehouse] don’t touch the product, but they get it out the door and it gets to the customer right away. With Motorola, we designed a system so that if you want a part for your pager, your radio, two-way radio, shortwave radio, or anything like that, you can call that order in up until 6:30 p.m. and it will leave by 7:00 p.m. and be to you tomorrow. That’s what people are expecting with high-speed distribution. We also work with Nike and Hewlett-Packard. Between us and our parent company, we have over 17,000 installations.
In particular, Dell has reported that its supply chain is one of its assets as it gains market share from rivals. How have they done it?
Dell has cut out the middleman transportation in their supply chain. There are a lot of customers that Dell has like Ford, where they have set everything up where they will ship directly on Ford’s vehicles. What they do, all the way up the line, is make sure that when they manufacture, nothing hits a dock door until everything is ready to go. They’re not keeping anything out on the floor or trying to build it and then hold it, and then maybe go steal from it. They build the computer boxes for Ford. When everything is ready to go, then they’ll release everything else, the speakers, printers, monitors, and accessories. They all go directly over to be built on the pallet , go directly into the truck, and leave.
If it’s you or I who’s just buying a computer, it’s UPS. What they’ve done there is bypass the local UPS. Instead of putting it into a truck and sending it to a local hub, sending it to a main hub, and then out from there, they will actually do a direct line haul and go straight to the local hub. They bypass at least a day or two of local-type handing. Since they’re not going to touch a dock until the whole order is ready to go, Dell has taken a lot of time out if its supply chain internally
How did Dell approach supply chain optimization?
Dell came to the realization that they could not automate their existing system. It doesn’t do any good to automate an inefficiency. You’re just making the inefficiency better. Nothing is as useless as doing something efficiently that you shouldn’t be doing at all anyway. Secondly, they learned that long distances kill their productivity. Also, they learned that you only touch the material if you’re going to add value to it. You don’t add any value to picking something up and putting it on a truck, so don’t do that. They do everything real time. They basically are always feeding the workers, so the worker works as fast as the worker can work. They don’t have to look for material to work on. And, they look at every stage of their operation as being a customer. Even in delivery, JC Penney says, if you’re going to send me “this” much stuff, you’ve got to use my truck. Dell plans ahead for all of that.
What has Eskay done to enhance Dell’s operations?
We went in and walked through their operation to see what it is they do. Once we see what it is they’re doing, and what they’re trying to accomplish, we sent a team there to go in that has material handling, data analysis, and applications expertise. They looked at everything Dell was doing, how the material flows, and identified where the problems were. We came up with a proposal containing three scenarios, then they decided what they wanted to do. What we have done is taken all of the touches out of the distribution side of the business and streamlined the flow of the manufacturing. The only people who touch a product once that’s been completed is the person who’s going to put the packing slip on the box, and the guy who loads it into the truck, and that’s it. What we’ve done is automated those things that don’t add value by a person being there.
Does Eskay only work with its own proprietary systems?
No, there’s some pieces there that we supply, and they are pieces that others supply. Lantec made the stretch wrappers that we put in there, we used [another manufacturer’s] conveyor, we use some of our conveyor, we use our sorters, our ASRS system, we used all Dell computers all the way through it, of course, and Accu-Sort barcode readers. There are a number of other products that we don’t supply that we put in and there’s some stuff that’s cheaper than ours that makes sense to do. We’ll do whatever’s right. Everything has to be cost-justifiable. The PN2 facility at Dell that won the award is actually a kind of central distribution hub. Some of the smaller factories around will use that same distribution network. We’ve got 13 different jobs that we’ve done with Dell. Some of them were in Nashville, some of them were in Austin, some in Reno, some in Ireland; we’ve done a number of jobs, but we basically implemented the same concept with different configurations throughout the world for Dell.
What are the most common problems you have seen when assessing warehouse performance?
I did a walk-through for a company that makes turbine engines. The first thing that I did is took the president and said, “walk me through your facility.” So he went out and started to show me what is done in certain areas, and I said that I wanted to walk the material flow from when you receive it until you ship it. He showed me the receiving dock, and when started to walk away from it, there was a big turbine engine there. The fifth time we walked past the engine demonstrated the point that the distance that people travel to fulfill an order is sometimes ridiculous.
At O.C. Tanner, the company that made all of the medals for this year’s Olympics, it took each person who touched product over one mile of walking to fulfill an order. Now go figure the number of orders that they do in a day. They walked almost a thousand miles a day through their factory with all their people. That kills their productivity. That’s probably the biggest thing that we see. People have put processes in because they’ve got an empty corner, or it might fit there. And so they look at it based on where a machine might fit, or where they might put a tunnel, or something like that instead of looking at the overall process and what it’s taking to fulfill it. That distance is what’s killing a lot of companies; it takes a long time to walk a thousand miles.