Archive for RFID & AIDC

The health care industry in the US is undergoing transformation driven by the Affordable Care Act (Obamacare) and the increasing impact of consumerism. Healthcare providers historically have had prepaid plans where the cost of care was paid up front and the more procedures a hospital did, the more they got paid. Consequently providers felt little need to practice even the basic tenants of supply chain management or even understand the total cost of particular procedures.

Now reimbursements are not only going down, they are becoming incentive based. If a hospital does a procedure and the patient is released but then has to be readmitted, the provider takes a major hit on what they are paid. That means the industry needs a lower cost structure even as they improve the quality of patient outcomes.

Obama Signs Affordable Care Act
Obama Signs Affordable Care Act

Typically, if the network has more than four hospitals, savings in procurement become a major opportunity. Historically, many integrated delivery networks ordered from large medical supply distributors like Cardinal Health or Owens & Minor. Those distributors bought in quantity, broke the bulk, delivered smaller quantities to their clients, and earned a 3-6 percent markup for their efforts.

Now larger healthcare chains are building warehouses, automating them, ordering direct from the manufacturers, and eliminating the middle man markup. In one hospital’s case, University of Pittsburgh Medical Center (UPMC), they leased a 150,000 square foot warehouse, installed all the racking, hired new workers, installed a warehouse management system (WMS), and still were able to get a payback within six months based on moving the volume of approximately 10 vendors to self-distribution!

Kaiser Permanente, the US’s largest healthcare organization, recently spoke at Oracle OpenWorld about the supply chain transformation they are undergoing.  I’ll provide a few highlights of this transformation, but if you want the full story you can click here.

Historically, nurses spent time as hunters/gatherers, searching for needed products; this of course limited the amount of time that nurses spent with patients. Not surprisingly, just in case inventory existed in multiple storage locations across the system.  On most ordered items, Kaiser Permanente set inventory levels at individual storage locations (par levels) through committee decisions driven by nursing; there was no science involved in selecting a par level. The processes for discovering expired and recalled products – and there are thousands of recalls per year – were manual.

What Kaiser Permanente wants to move to is a focus on the patient at the point of care. The supply chain organization can help by implementing bar coding, and then removing nurses and other technicians from the need to select, cycle count, or reorder inventory. In addition to taking over reordering, the supply chain will also be responsible for maintaining procedure cards – the list by doctor of all materials that doctor uses for particular procedures. This information will allow them to see variation of product usage across procedures and surgeons.

But by far the most interesting initiative at Kaiser Permanente is integrating product scans to a patient’s electronic medical record. This allows Kaiser Permanente to do a comparative effectiveness analysis.

Successful change initiatives are usually a combination of people, process, and technology.  Getting the people issues right is often the highest hurdle. In a health care setting, buy in from doctors will be critical. The goal of linking of products used to patient records is to be able to show doctors data on the effectiveness of different drugs and procedures. Kaiser Permanente is so big, that they can benchmark a procedure’s performance based on the sheer number of times that the procedure is carried out in their own system.

The most forward looking healthcare systems will drive a lower cost supply chain while improving care, and this will allow them to grow substantially as the Affordable Care Act takes hold. In short, the supply chain organization will become a critical player in the best healthcare system’s competitiveness, not an afterthought.

 

Traditionally, we said that warehouses were operated in either a manual, semi-automated, or highly automated fashion. In a manual warehouse, pickers used carts, forklifts and other “dumb” forms of carriage to go to picking locations, gather the inventory, and deliver those goods to the shipping dock. However, forklifts are becoming intelligent. With the right kind of control system, a warehouse using forklifts becomes semi-automated.

Modern intelligent forklifts include diagnostics that allow the equipment to signal when it needs to be serviced, speed controls, anti-slip technology that monitors wheel spin and improve traction on slick floors, collision detection, fork speed optimization, and more.

Intelligent forklifts promote new process flows in the warehouse.  When integrated to a WMS, the forklift’s fork and be raised or lowered much quicker. The WMS directs a forklift to a pick location. Once at the location, the forklift knows whether the pallet to be picked is being stored at a height of three feet, six feet, or whatever. The operator pushes a button on the console and the forks move at the maximum safe speed, a speed considerably faster than the operator would be apt to move them.

Speed controls can be used to help ensure safety. For example, RFID tags placed in the floor can signal the forklift that this is a busy section of a warehouse traversed by humans. The forklift automatically knows it cannot exceed a set speed, for example two miles per hour, and the governor automatically limits the top speed to two mph in those sections of the warehouse.

In mixed case picking, forklifts can integrate with pickers wearing voice systems, follow them up an aisle, lift the pallet to the correct ergonomic height for picking based upon the location of the inventory in the warehouse racking, and then, when ordered to do so, autonomously (without a human driver) make the trip to a shipping dock for unloading.

The most intelligent forklifts today are built with real-time location systems that allow drivers to proceed to a specified location and pick up (or put down) a load without the need for the driver to scan the location to prove that they have picked up (or delivered) the right load. This solution is designed for full pallet moves in either a warehouse with racks or a bulk warehouse in which pallets are stacked on top of each other.

The term “Internet of Things” is being increasing bandied about. In one definition of the term “Internet of Things,” almost all objects have sensors, connectivity to a broader environment, and intelligence. Sometimes the object just has a sliver of intelligence; but it can be much more substantial. Objects can be products, equipment, containers, or forms of material handling equipment including fork lifts.

The following diagram shows how warehouse management systems (WMS) WMS and warehouse control systems (WCS) have traditionally been visualized. The WMS contains the ORDER, INVENTORY and LOCA-TION logic. The WCS had the MOVE logic. The WMS knew that this many units of this SKU needed to be picked and where that inventory was located.

TradWCS

Traditional View of the WMS/WCS Architectural Stack

When inventory was inducted into the automated material handling sys-tem, it was the job of the WCS to MOVE those items. The WCS did not need to know what INVENTORY was being moved, or how that inventory fulfilled customer ORDERs.

Actually, in practice, it has often been more complicated than this.  But this is still the way many in our field think about WMS vs. WCS.

Warehouse control in the age of the Internet of Things, requires a new conceptualization of WCS. A forklift that integrates through a control layer to some of the logic in a WMS to move its forks faster and more efficiently is engaged in a MOVE activity. That means intelligent forklifts need to be part of a larger warehouse control solution.

NewWCS

The New WMS/WCS Stack

In an era of distributed intelligence, a robotic revolution, and an environment in which new forms of “goods-to-man” automation are arising, it is inevitable that we will see value migrate from certain types of solution providers to others. Value is beginning to migrate toward more mobile (non-bolted down) forms of material handling used in goods-to-man processes.

WMS and material handling suppliers that can provide WCS solutions that can treat a forklift as an advanced form of automation, allow companies to add new forms of automation while protecting the WMS upgrade path, and provide logic that helps optimize throughput (even in warehouses where bottlenecks may shift over time between manual and material handling system choke points), will be the winners in this brave new world.

 

 

 

Large chemical and oil and gas companies are, in general, far more advanced in their supply chain risk management practices than companies in other industries. But my coverage of this area convinces me that Dow Chemical, in particular, is one of the most advanced companies in the world in supply chain risk management.

Dow Chemical has revenues of $57 billion and employs 54,000 people around the world. It makes and ships agricultural, plastics and chemical products to customers in 160 countries.

This article is based on a speech Craig Casto, Global Leader of the RFID, GPS, AutoID, and the Telemetry Expertise Center at Dow Chemical, gave at the ARC Forum in February.

Dow makes approximately 7,000 shipments per day globally and it has the largest privately-owned railcar fleet in North America. Ninety percent of the company’s shipments involve non-hazardous chemicals. All North American railcars have two RFID tags, which allow Class 1 rail carriers to provide multiple updates per day on the location of each car. For non-hazardous shipments, this degree of visibility is sufficient. But for the 10 percent of Dow’s shipments that are classified as hazardous, a high degree of real time visibility is required.

Business requirements drive whether barcode, RFID or GPS is the appropriate form of Automatic Identification (AutoID). Cylinders are tracked with barcodes; transportation assets are tracked with RFID, cellular GPS, or satellite GPS. Transportation assets conveying hazardous chemicals require more extensive forms of tracking. For North American rail shipments of hazardous materials, cellular GPS is used to transmit location and sensor data multiple times throughout the day. Frequency of transmissions can be modified over the air based on the Department of Homeland Security’s threat level conditions. The GPS technology on the cars can create a wireless connection to various sensors monitoring car security, environmental conditions (temperature, pressure, shock, etc.) as well as the health of the mechanics of the car.

Dow_Sensor_Alert

Sensor Alert

Dow also leverages cellular GPS technology for intermodal container shipments with sensors that measure temperature, humidity, shock and light. For example, a light sensor would register a container door opening as well as the location where the door was opened.

Cellular networks only extend about three miles from the coast, so the technology has the capability to register GPS locations while in transit and download all information at the next opportunity that the vessel and container are within cellular range. Dow has also used tracking devices on sea containers that combine cellular with satellite transmissions while at sea, for constant tracking when placed on the deck of large vessels.

Event management software is critical in assuring that Dow personnel or supply chain partners are not overwhelmed with data. This is necessary partly because of the large number of different things that can generate alerts.

The event management software allows Dow to establish rules that when violated, generate email or text message alerts that drive a response. The rules are used to determine whether a response is necessary and who should respond. This is driven by the parameters used to generate a sensor alert — e.g., the humidity alert goes off if a sensor detects humidity outside of defined parameters.

The Dow Visibility Solution for Rail

The Dow Visibility Solution for Rail

The size of the ruleset is also driven by context; the same event can generate an alert in one situation but not in another. Context is often driven by GPS geofencing. If a railcar hatch opens, but the railcar is in the geo-fenced part of a manufacturing plant where chemicals are loaded, or at a maintenance shop, that would not be an alert situation. In the US, the Transportation Security Administration (TSA) has designated high threat urban areas, and thus geofencing and alerting must be designed to support the TSA’s initiative.

Finally, nesting logic is an important feature for a visibility solution. If a humidity alert goes off, it is perhaps because a wave has gone over the bow of a ship and water has seeped into the container, so every drum in that container potentially needs to be checked for quality.

Liquid Level Monitoring and Container Location

Liquid Level Monitoring and Container Location

Dow’s visibility platform allows it to provide more robust estimated time of arrival data to customers. Dow can also set alerts that tell it when inventory has been sitting in a particular location for more than a defined number of days. Thus, in conclusion, once you have the ability to track inventory, even if the purpose was initially to improve risk management, that capability can be leveraged to improve the supply chain.

On Tuesday morning I checked the reporting dashboard for Logistics Viewpoints. The screenshot below shows the search terms that were driving people to the blog that morning. The second item caught me by surprise; I thought only people interested in supply chain and logistics visited Logistics Viewpoints, but it seems like we attract a much broader and intellectually curious audience.

BlogSearchTerms

In other news this week…

Globe Tracker International (GTI) introduced its Smart Autonomous Asset Solution that combines the company’s Trade Data Exchange Network (TDEN) and Smart Autonomous Asset Network (SAAN) with its Globe Tracker Communications Unit to enable “end-to-end tracking, monitoring, and trade data sharing for the global shipping industry.” Here are some details from the press release:

GTI’s Trade Data Exchange Network uniquely allows supply chain partners to securely and selectively share supply chain data from their own private databases, behind their own security firewalls. No one gives up control of their private data. Anyone of the partners can request the latest data for a particular asset, a parcel being shipped from China to Canada for example, through a secure web portal.

 

GTI’s Smart Autonomous Asset Network tracks and monitors assets for the purpose of improving the assets efficient utilization and as a by-product provide the asset owner with valuable real-time data that can be shared with its supply chain partners.

 

The centerpiece of GTI’s SAAN is the Globe Tracker Communications Unit (GTI Comm Unit) which is permanently installed on the asset. It will track and monitor for the life of the asset, truck trailers, dry bulk and reefer cargo containers, and railway cars for example.

I’ve never been briefed by Globe Tracker International, so I don’t know much about the company and its solutions. But I’m generally a proponent of network-based solutions for supply chain and logistics processes, assuming they are architected correctly. On the other hand, these types of asset-tracking networks have had mixed success in the past (see the shutdown of Savi Networks). Ultimately it comes down to this: Does the value of the asset and the data you’re collecting (and the benefits you can achieve by leveraging that data) justify the cost of the tracking hardware and service? Historically, the math worked out only for a handful of industries and use cases, but as the cost of the hardware continues to decrease, the market opportunities are arguably better today.

The Freight Transportation Services Index (TSI) increased 1.2 percent in January from December, rising for the third consecutive month. According to the press release:

The TSI increase in January likely resulted from inventory growth. Wholesale inventories grew 1.2 percent during the month, according to the U.S. Census Bureau’s Monthly Wholesale Trade report. The restocking followed the drawdown of inventories in the fourth quarter of 2012.

 

Freight shipments measured by the index were up 1.2 percent in January compared to the end of 2012. In comparison, the index declined 3.6 percent during the same period a year earlier in 2012.

In related news, according to the Cass Truckload Linehaul Index…

Truckload linehaul rates stayed steady from January to February, but have risen 4.3% since February of last year. From a trend perspective, truckload linehaul rates have risen or stayed flat almost every month since they bottomed out in 2010. Rates today are at their highest point in the most recent eight years (the dates included in our index). Despite that the steeper-than-normal cost increases in late 2012 were at least partially the result of increased demand in the Northeast post Superstorm Sandy, the higher rates are likely to hold in 2013, as supply and demand seem to be relatively balanced.

Somewhat contradicting these stats is the findings from the American Trucking Associations’ (ATA) Trucking Activity Report that “the turnover rate for drivers in the truckload sector took a surprising dip in the fourth quarter… the likely result of a weakened economy and overall freight volumes.” Here are some additional details from the press release:

Turnover at large truckload carriers dropped from an annualized rate of 104% in the third quarter to 90%, its lowest point since the first quarter of the year. For all of 2012, turnover averaged 98%, the highest since 2007 when the churn rate averaged 117%.

 

“As freight volumes slid a bit at the end of 2012, we saw turnover follow suit,” ATA Chief Economist Bob Costello said. “However, this is just a respite from the long-term trend and driver shortage storm that’s coming when the freight economy accelerates; and even then, these relaxed levels are still quite high relative to recent years.”

My overall takeaway is that trucking activity is a bit stronger today than a year ago, with the scales tilted slightly toward stronger growth in the weeks and months ahead depending on what happens with the economy.

Finally, UPS is following in the footsteps of Walmart, Con-way Truckload, and others in making a commitment to hire 25,000 veterans over the next five years. For related commentary, see “The Greatest Talent Pool Available – America’s Veterans.”

Have a great weekend!

Song of the Week: “Grey Cell Green” by Ned’s Atomic Dustbin

Last week Macy’s, the department chain retailer, announced its fourth quarter results. The company has done well in a tepid economic environment. Macy’s has been beating estimates for same-store sales for several months, posting year-over-year comparable store sales growth of 3.7 percent. In its peer group, Macy’s is one of the industry’s star performers.

As Chief Financial Officer Karen Hoguet made clear in her call with financial analysts, Macy’s omni-channel strategy is one of three key strategies driving its success. According to a Wall Street Journal article, without web purchases, same-store sales for the fourth quarter would have only increased 0.6 percent. Ms. Hogue spent a good portion of the call discussing the omni-channel strategy, and because Macy’s is one of the most successful omni-channel retailers, it is worth reporting what she said in some detail. All quotes below are from Ms. Hogue’s comments.

Omni-channel offers “enormous opportunities,” which Macy’s has only begun to tap. The retailer has put significant resources into figuring out “how to best optimize the use of warehouses and our stores in an ever changing fulfillment environment.” For Macy’s, this means “filling many items that are ordered in our stores from the inventory either from other stores or from our online fulfillment centers. At the same time we began in 2012 to fill orders entered online out of inventory in our stores. 292 stores are enabled to fulfill goods, up from only 23 a year ago. By fall of this year, we expect to have 500 stores fulfilling orders.”

When it comes to fulfillment, “we are finding customers don’t really care where we fulfill the goods from, as long as we fill the order accurately and the delivery is timely.” Macy’s stores that are capable of omni-channel fulfillment have expanded back rooms where goods are packed. The picking is done in the front of the store. “One of our early lessons is that we had thought we would have special purpose people doing the fulfillment activity. We discovered we were better off using the support of the [store] associates we had because they better understood the merchandise. And people who are putting merchandise on the floor are going to find it much quicker.”

Nevertheless, store picking is not easy. Picking fashion items is difficult because of size, color, and style product variations. Macy’s is investing aggressively in RFID for replenishment. “By the fall we are hoping to have roughly half our replenishment business utilizing RFID… And we are just waiting as the vendors come up [to speed] and begin to tag the goods.” RFID will greatly aid store fulfillment people in locating the correct goods in the front of the store.

In addition to being an execution problem, store fulfillment is an optimization problem. “We’ve built algorithms to help us determine from where we pull the inventory…In the future we expect these formulas will be key to offering faster and even same-day deliveries. And [they will also] enable the customer to buy online and pick up in our stores. We’ve done a lot of experimenting this year with goods that are in the stores for which we don’t have [sufficient store] inventory backing it up.  A lot of those initiatives have done very well. We’ve also experimented with putting merchandise online that we don’t have inventory for in the online warehouses. The inventory is only in the stores. In the 4th quarter we had about 700 items we tested this with, very successfully. It is good from a profit perspective because these are typically goods whose economics don’t do so well in big warehouses.” I interpreted this as meaning that Macy’s has a tool for calculating granular total landed costs by product by channel. If true, that is impressive.

Another key initiative for Macy’s is focused on store personnel training. It is important for omni-channel and training initiatives to reinforce each other. “We are encouraging our store associates to think omni-channel. This means selling customers merchandise that may in fact not be in that store, whether it be out of stock or not even carried in that particular location. It also means embracing the customer making a return.”

In conclusion, an omni-channel strategy can be an important driver of growth for brick-and-mortar retailers. But it is not a quick fix. Macy’s began its omni-channel initiative in 2009. And it cannot succeed in isolation. “It all starts for us with our merchandise acumen and our ability to run great stores. These are central to our omni-channel success.”

[Editor's Note: For related commentary, watch last week's Talking Logistics episode where Adrian Gonzalez interviews two retail executives about omni-channel fulfillment and the future of retail logistics].

Categories : Retail, RFID & AIDC
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