Logistics - On the move

Two of the most time consuming processes in the warehouse are picking and pack out process. They also account for the majority of the warehouse operating cost - Lets discuss some of the key aspects that should be considered to reduce cost and increase warehouse operations efficiency. Product slotting

    Deciding the location for placing the SKU plays a key role in increasing the material handling efficiency. Following factors should be considered while assigning a location for a particular SKU, number of counts of the SKU, SKU's cube and weight, sales volume during normal and peak periods of warehouse operations, special handling requirements and if any value added services like kitting etc is required to be done.
    Typically products are slotted in the storage mediums like pallet racks, drive in or drive through racks and bins. Once location is designated the next thing would be the numbering and grouping of the locations. Numbering should be done based on the building, zone, level bay facing and aisle. This activity will help in increasing the picking efficiency and reduce the time spent by the pickers searching for products.

Grouping

SKU's should be grouped intelligently like fast movers, slow movers and medium movers. One should place the fast moving SKU's in the slots which are closest and easier to reach and in a place close to the order fulfillment stations, this will improve the operating margin and time taken to fulfill an order. Similarly slow movers can be slotted in remote slots inside the warehouse as it will not be affecting the average picking time since these are sparingly ordered.

Replenishment

System must be developed to replenish the fast moving goods in the line locations this will help in reducing the time taken to pick as the pickers will not be going back with zero inventories in the designated locations. Warehouse operations can decide the basis for replenishment like need based or blanket replenishment's which will reduce the labor cost in doing replenishment.

Storage types

Couple of broader classifications available for storage of products is flow storage and static storage. This contributes a lot in improving the bottom line and reducing the time and labor for doing picking and replenishment's. The main advantage of flow storage is that the products will be coming to the pickers and they don't have to go in search of SKU's. With the help of modern control systems any warehouses using the conveyors and carousels to bring the products to the place of order fulfillment stations will be able to show a much higher productivity. The capital expenditure done to accomplish this will make a lot of difference in the bottom line of warehouses. This one time expense can be justified if the warehouse experiences a lot of activity and involves a lot of labor for picking and packing.

Posted by Sainathsubramanian Ganesan at 6:57 PM | Permalink | Comments (0) | TrackBacks (0)

In my previous blog, I talked about the challenges of doing Business Transformation (BT) programs in transportation & logistics enterprises with large scale IT modernization. In this blog, I would like to list five fundamentals for BT programs that I believe are a must for the program to be successful.

1. Establishing clear vision and roadmap:  A clearly defined vision and roadmap for the program which is achievable and aligned with the overall business and IT strategy for the enterprise is a good starting point. A roadmap with a 3-5 year horizon is probably ideal. Program Leadership must ensure that the right focus on the roadmap and vision is maintained throughout the program and must be on top of the program at every stage.

2. Visionary thinking: Insiders in the organization are sometimes limited by the organization constraints and past experiences and may fail to deliver the true value that a business transformation program intends to bring. It is critical to bring visionary thinking and industry best practices, which may be achieved by bringing in industry experts / external consultants to the program.

3. Ownership and Governance: This is one of the most critical aspects for the success of a business transformation program and has to be a strong backbone throughout the program. With a large number of stakeholders involved, there needs to be very strong program management to ensure accountability on the ground and adherence to costs / timelines. Lack of good governance is one of the typical root causes of failure of business transformation programs.

4. Stakeholder buy-in: It is critical for a business transformation to have representation from all the different geographies where the transformation will be rolled out, particularly for a transportation & logistics enterprise. More so it is necessary that stakeholders from different regions / countries to buy into the program and feel that there are benefits for them to take away for their own geographies. Strong leadership and management is once again needed to ensure this buy-in is sustained through the tough times of the program, especially for tradeoffs where one region tends to lose and other region tends to gain.

5. Business Ownership of the program: Business must own a BT program and be the primary driver for it. IT plays a significant role in any business transformation and must act in a complementary role to the business. There are phases where IT begins to take lead in the business transformation and business takes the backseat but this is definitely not in the benefit of the program!

Business transformations are no doubt complex as they require alignment of a large number of people and a unified vision to reach that common destination. They are also expensive and it takes substantial time to get the program direction right and roll  out the first products on the ground. Typically, it could take 18 to 24 months from inception, before the first IT products and transformed processes can be rolled out and business transformation starts touching ground level. The investments in the program need to be sustained right through and where margins are very thin, this can be quite a challenge. For transportation and logistics enterprises, this makes it all the more important to get the building blocks right before embarking on the complete journey.

 

Wish you all a Merry Christmas and a very Happy New Year !!

 

Posted by M. C. Radhakrishnan at 6:28 AM | Permalink | Comments (1) | TrackBacks (0)

Acquisitions, agents and partners are integral to the DNA of the transportation and logistics industry. With a myriad of different entities working across the globe to establish a strong network comes the increased complexity of diverse processes, diverse metrics and disparate IT systems often stitched together to keep the business running. 

In most logistics companies today, this diversity is accompanied by problems like data quality issues, lack of standard enterprise operating model, increased transaction costs, reduced end to end tracking / visibility etc.  These challenges manifest more distinctly when the organization tries to get a unified view of the data and processes across the enterprise and enable strategic imperatives like network optimization, cost reduction and other levers for top line and bottom line growth.

 A business transformation program coupled with large scale IT modernization is needed to alleviate many of the above issues and help an enterprise take its business to the next level. With the ever increasing speed of commerce, freight forwarders and other transportation players are rapidly rolling out large business transformation programs to bring more agility and better control over their business.

How difficult is it to carry out a large business transformation program and more so sustain it for a transportation player? What are the challenges to look out for and how should an enterprise be prepared to overcome them? Is it better to go all out in transforming the enterprise or take small steps and let the momentum gather? This is no easy job and requires time and effort to be spent by people at multiple layers in the organization combined with sufficient geographic representation to cover the globe. One also needs to take into account customs / regulatory constraints and other external factors influencing the transportation business.  A significant investment of time and money is needed and on razor thin margins that logistics companies make, it is extremely critical that the program doesn't wind up becoming just a money draining engine.

Many business transformation programs risk getting sucked into the above paradigm and while they start out on a very high note, they tend to falter in the implementation phase due to shortage of funds, or due to budgets running out on account of overspending in the initial stages. In order to make a business transformation happen successfully, there are a few fundamental building blocks which we need to get right. Watch out for my next blog which will cover five critical success factors which I think are needed to get a BT program right!

Posted by M. C. Radhakrishnan at 6:24 AM | Permalink | Comments (0) | TrackBacks (0)

Countries such as Australia, US and EU operate a well regulated supply chain for air cargo to prevent explosives and thefts. Secure Freight - with its security templates, documents and best practices - is a step by International Air Transport Association (IATA) to bring other nations that do not have as comprehensive security programs, at par.

Idea is to organize a system that facilitates cargo screening as per TSA (Transportation Security Administration) guidelines before it hits the airport, by putting the onus on shippers and logistics service providers (LSP) to audit the cargo and certify its tamper-free journey till the airport. The program envisions an air cargo industry having certified secure operators working through a secure logistics supply chain compliant with international cargo security standards, recognized by appropriate government authorities. Thus, secure freight provides an out of the box security paradigm solution for countries that do not have the means to implement state of the art security programs on their own. For the established high security ports in US/EU etc., it eliminates the need to examine inbound and transshipment freight as long as the port of on-board was a secure freight enabled airport, thus optimizing the already constrained security resources of these countries.

The program minimizes the need for costly scanning machines enabling needy governments to realize security regimes that work hand in hand with their own resources and methods, at the same time reducing multiple inconsistent security standards airlines have to comply with across the globe. Monetary benefits are estimated in the range of hundreds of millions of dollars for the industry while reducing delays - a win win solution for all - the origins, the carriers and the destinations. 

No wonder, secure freight is now a critical discussion agenda on IATA Cargo Committee meetings.  The first pilot implementation began in Malaysia this year, and next pilot is planned in Cairo (Egypt). Malaysian government has signed up DHL and Intel as key contributors in the pilot which it hopes will reduce the large number of thefts happening in its air cargo space. Two other locations are being planned for next phase with lessons learnt from Malaysian pilot to be incorporated into the program. Amsterdam's Schiphol airport in Netherlands, which is a big time hub for transshipment cargo, would need to be a key party to the program for its success.

A Secure Freight Strategy and Benefits presentation has also been finalized with the direction to make the program workable in all countries regardless of the maturity of their existing air cargo security programs. One of the ideas is to transmit security information electronically including a special handling code in the message indicating proper shipment security to the airline (this perfectly fits with IATA's e-freight initiative that aims at converting air cargo transactions to electronic format).

Two important documents are being created - a Standards Manual defining the recognition criteria, activities and performance measures for a Secure Freight Operator such as shipper, LSP or carrier, audit rules for authorities, how cargo handover would happen between parties, ways to deal with and prevent tampering and incidents - and a Standard Operating Procedures defining how cargo and related information can be securely moved. There is also a drive going on to enlist as many shippers and LSP s as possible into this program.

However, it would not be easy to onboard new Countries, as the requirements specify governments to sign World Customs Organization's Safe Framework of security standards, plus an IATA MOU (memorandum of understanding), plus implement a legal framework allowing supply chain security collaboration with the private sector - all this to get help from IATA for security audits and training. Also US/EU approval for countries as being secure freight enabled is critical. Time will tell how successful the initiative is in tackling so many dependencies across the globe. For now, it is a good start in bringing global parity in air cargo security.

Posted by Sudipto Sengupta at 5:10 PM | Permalink | Comments (0) | TrackBacks (0)