HISTORY LESSON

Mar 01, 2005 10:30 PM  By

THE STATISTICS seem to bear out the headlines. Capital spending has increased after two years of recession, and companies up and down the supply chain are once again digging into their pockets, by an estimated 3%-4% more this year, according to one national survey.

That may not be surprising. But the picking equipment they’re buying — and how they’re buying it — may be.

“Just trying to slam technology is not always the answer,” says Aaron Miller, principal for Tompkins Associates, a logistics and supply chain consultancy in Raleigh, NC. “You have to have a plan to absorb the technology. Otherwise, you have a mess.”

In fact, the go-go days of the late 1990s, when more technology was always the answer, are nothing more than a history lesson, say warehouse officials, fulfillment executives, and distribution center managers throughout the industry. These days, companies are still looking for the cutting edge, but cutting edge means different things to different people. It isn’t necessarily acquiring new technology; rather, it’s using what can guarantee the best return on investment, be it the latest gadgets and gizmos, refurbishing old equipment, or upgrading software without buying new hardware.

It’s not about spending money as much as it’s about spending money wisely. Says Tom Koenen, director of sales for Wauconda, IL-based Heartland Computers, a seller of used, refurbished, and surplus handhelds, scanners, and bar code products: “It’s about adaptive uses, whether it’s old technology or new technology. It’s about flexibility.”

TRENDS AND CHANGES The events of the past several years have been well documented — consolidation among manufacturers and suppliers, the slumping economy, and an industry-wide reluctance to do much more than keep an eye on the bottom line. But, says a survey published by the National Association of Business Economics, more than half of the corporate planners and financial analysts surveyed forecast growth of 3% to 4% this year in spending on computers and equipment.

So what are they going to do with all that money?

“I think they’re being very picky,” says Philip Heacock, director of airport systems for FKI Logistex Airport, Post and Parcel in St. Louis. “They’re going through to find out what they need exactly, and what they’re looking for is increased efficiency and return on investment. All decisions are being based on ROI.”

THAT SEARCH, say consultants and operations and fulfillment executives, is often starting with an outside perspective to determine what’s needed after the past two years of either not investing in new equipment, software, and hardware, or actually postponing new purchases. Says Miller, whose company has recorded significant increases in business since the middle of 2004: “Companies are going back to fundamentals, analyzing what they’ve got, and discovering there may still be a lot of low-hanging fruit that they can deal with by making internal changes.”

A couple of guidelines are paramount in those analyses. First, companies want picking equipment that helps them to continue to reduce labor costs. Despite the recovery, the Business Economics survey says, just 30% of executives expect their company to increase hiring in the first six months of 2005 — the smallest proportion in more than a year. Almost 60% of respondents said corporate payrolls will remain the same.

Second, they want equipment that can further increase the efficiency of their operations. Technology has improved so much, says Miller, that 99% picking accuracy is no longer good enough. Today, companies in the low 99s want to go to the high 99s, because that difference can cut otherwise difficult-to-contain expenses on the back end, such as labor, transportation, and handling for returns.

NEW AND NOT SO NEW Deciding how to do that differs, of course, from situation to situation. Sometimes, it’s an equipment upgrade. Allentown, PA-based Cherrydale Farms, PA, which handles fundraising order fulfillment for schools and other non-profit organizations, last fall installed a new, CAPS-NEXT light-directed system with automated pick lines from the division of Kingway Material Handling located in Exeter, NH. The upgrade came after what Cherrydale vice president of operations Mark Gilliland called a rigorous technology review.

Cherrydale and its 190 employees (90% of whom are temporary) picks between 125,000 and 135,000 split-case units daily, or an average of 11,500 to 12,500 orders per day, during the four-month fund-raising season from Labor Day until Christmas. The company has a 17-day shipping window. The results of the purchase of the light-directed picking system, says Gilliland, were impressive — the new system achieved 10% more productivity than its previous CAPS setup, and almost double that of its old manual system.

Often, used equipment is the solution, says Koenen of Heartland Computers. Various firms have moved to fill niches as technology has evolved. Want to upgrade a discontinued product? Someone can probably do it for you. Want to maintain support for products that are no longer supported? Someone can probably do it for you. In many cases, costs may be significantly less, he says.

“No one likes to be forced to upgrade a system that still works just because what they’re using isn’t being manufactured or supported anymore,” says Koenen, who notes that about one-third of his company’s business is independent support for otherwise non-supported products, including such items as scanners and bar-code peripherals. “No one likes to have a software event drive the need to upgrade their hardware.”

Finally, there is the entire question of RFID technology, and how — and where — it will drive picking equipment. FKI’s Heacock says that recently enacted standards will go a long way toward easing RFID into the mainstream. RFID-driven technology has steadily improved over the past three years, and the concept is now at a place where it will be cost effective “and can do what it is supposed to accomplish,” he says.

BUT HEACOCK, who has been overseeing a major RFID project at Las Vegas’ McCarran International Airport, adds that RFID is not necessarily a cure for what ails your distribution center. “I think the real value is going to come in high-end merchandise,” he says, noting that the technology may be more productive in airports tracking luggage than in warehouses tracking widgets. “If you have something like an RF tag on a circuit board, and you use that to control theft, that may be the biggest help in the supply chain process.”

Although new apps may be interesting to try out, new technology is no longer appealing for its own sake. What matters is return on investment, and the return from a circuit board that makes it from manufacturer to customer will show that the investment paid off.

Jeff Siegel is a Dallas-based freelance writer whose articles have appeared in Forbes, American Way, and many other magazines.

CHEAT SHEET

Use what guarantees the best ROI.

Consider going back to the fundamentals.

Look for equipment that increases efficiency.

Talk Time

Aaron Miller wishes more people would speak up. “I’m just not sure why more people don’t look at voice technology,” says Miller, principal for Tompkins Associates, a supply chain consultancy in Raleigh, NC, and a leading advocate of the voice-directed picking process. “It has progressed from adolescence to the adult stage in the last few years. It’s a lot more reliable than it has been, and it can hold up to comparisons [with other systems] much more than it has in the past.”

Voice uses many of the same systems that the phone company does in dealing with customers. Warehouse employees wear a wireless computer that is connected to the warehouse management system in real time. The computer uses speech recognition and speech synthesis software to direct the picking process, literally telling the employee which item to take. That means non-English speaking employees aren’t a problem, and no one has to train them how to use handheld scanners. One company, says Miller, reduced returns by one-half after installing voice, saving itself $1.3 million the first year. In addition, shortages dropped by 11%, and mispicks decreased by more than 25%. As Miller says, if it works in your car, why can’t it work in your distribution center?
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