Logistics Viewpoints

A complete analysis of logistics trends, technologies, and services

Takeaways from HighJump User Conference

Logistics Software Vendors | By •

HighJump Software (an ARC client) held its Innovation 2010 User Conference in Scottsdale, Arizona this week. HighJump sells solutions in three areas: Supply Chain Execution (WMS, MES, and TMS); Direct Store Delivery; and EDI, after its recent acquisition of TrueCommerce. However, when I think of HighJump, I think of the flexible Supply Chain Execution software company. That notion was reinforced at the conference, where I heard user case studies of implementations that are not quite like any other vendor’s.

Schneider Logistics spoke on how it took HighJump’s Supplier Advantage, which I had viewed as a web portal with fulfillment information sharing capabilities, and turned it into one of the largest and most robust Supply Chain Event Management solutions I have come across. The solution enables end-to-end real time event visibility for a supply chain starting in China and extending to the distribution centers – and sometimes stores – of a very large retailer in North America (see Schneider press release from July 2010). The solution supports two user groups – the retail merchants and logisticians. According to Schneider, the solution enabled the retailer to save $15 million in two main areas: lower inventory carrying costs, which you would expect; and a willingness to take ownership of more shipments in China – which saves them money – than in the US. Schneider Logistics had previously standardized on HighJump for its warehouses.

ARRIS, a global communications technology company that provides a wide variety of products to broadband operators, spoke about how it combined the HighJump WMS and Supplier Advantage solutions to solve a complex serialization problem for its cable modem products. ARRIS needed to capture product/child serialization (the modem being the parent, the battery the child), and a MAC number (a unique identifier assigned to network interfaces for communications). Originally, cable installers typed the MAC number on a piece of paper and brought it to houses for the installation. Not surprisingly, they sometimes had the wrong number, upsetting their customer’s customers.

The ARRIS supply chain starts in China with contract manufacturing partners. Before the HighJump implementation, the company had a complex receiving process where associates would break pallets down, scan every unit, and manually enter MAC numbers into the PeopleSoft ERP system. ARRIS now uses the Supplier Advantage product to get all the numbers it needs via EDI prior to shipment from China and for automated receiving – the company scans one label on a master pallet and it knows all the products on the pallet and their associated serial and MAC numbers. The Supplier Advantage product also allows ARRIS to automate the PO match process – if it orders 30,000 units and receives 35,000 units, the company knows it. ARRIS doesn’t have to kick off an expensive manual process to figure out what happened. 

One thing that interested me is that ARRIS is using PeopleSoft for its WMS solution. The company wanted to solve quality control issues without creating a lot of culture change in the warehouse. It implemented HighJump’s WMS only for receiving; all other warehouse processes continue to run on PeopleSoft. This is an example of the relatively unique implementations you sometimes come across with HighJump.

ARRIS is now looking to use this solution for a wide variety of other products and is entertaining the idea of standardizing on the HighJump WMS product for all warehouse processes.

In conclusion, I had always thought of HighJump’s WMS as particularly flexible. I came away from the conference with a new appreciation for its Supplier Advantage product and how the combination of its WMS and visibility products can improve end-to-end visibility and streamline fulfillment processes.

Labor Standards in the Warehouse (Part 6): Are Time Studies or Predetermined Time Systems Better?

Labor | By •

(Editor’s Note: This is the final part of a series on warehouse labor standards. Click here to read Parts 1-5).

The most granular labor standards are based on time studies or predetermined time systems (PTS). MSD and MOST, in turn, are the two most prevalent methodologies used to develop PTS time standards for the warehouse. 

I talked to subject matter experts at several consulting and software organizations active in this area (enVista, Kurt Salmon Associates, Manhattan Associates, RedPrairie, TranSystems, TZA, and West Monroe Partners) to get their views on the pros and cons of PTS versus time and motion studies. They all had differing opinions on the topic, but there was a high degree of consensus on the following points:

  • Both PTS and time studies can result in very accurate standards. The religious wars surrounding this topic, which were common five years ago, have largely died out.  If a client has a preference, most of the consulting organizations will use the methodology the client prefers. However, like a carpenter who has a favorite hammer, consulting organizations tend to have a methodology they are most comfortable with:
    • enVista: MSD by preference, time studies are done about half the time in practice
    • KSA: time study
    • Manhattan Associates: time study
    • RedPrairie: MSD
    • TranSystems: time study
    • TZA: MSD by preference, time study in practice
    • West Monroe Partners: MOST
  • Many clients do not have a strong preference, so the consulting organization can often use its favored methodology. However, if a client has industrial engineers (IEs) on staff, those IEs may have a preference. You don’t just put standards in and walk away; they must be updated from time to time. Most companies either have, or will hire, IEs to keep the standards up to date. If a company already has IEs experienced with a particular methodology, then that could be a good reason to select that method.
  • PTS studies will almost certainly have time study components. PTS is focused on the time associated with elemental human movements.  But warehouses also use machines that must be timed and this is typically done using time studies.
  • There are elements of subjectivity associated with both time studies and PTS. More seasoned IEs will create better standards. There are also methods consultants can use to minimize subjectivity. 
  • Over time, MSD consultants have developed elemental motions into patterns that are consistent for almost all warehouses. For example, a typical pattern might be “obtain a large dense case from the middle tier of a three tier pallet rack.” This is 60 TMUs. MOST is inherently more “pattern like” in the standards it develops. This means that PSD implementations are usually quicker and less expensive than time studies; they are also easier to keep up to date. However, consultants who favor time studies would argue that the fact time studies takes longer is actually a benefit; associates need to see consultants working hard to develop accurate standards.
  • Whichever method is used, cultural issues cannot be ignored. Consultants must communicate with associates about what they are doing, how they are developing the standards, and spend enough time on the floor so that the associates will view the standards as being objective. The education process is easier with time study projects because they are inherently easier to understand.
  • Whatever methodology you use, the standards should be kept in a labor management system (LMS) for several reasons. An LMS can provide real time feedback to associates on where they stand during the course of the day; they make it much less burdensome to calculate how associates are doing on an ongoing basis; they provide better support for companies that want to use incentive plans in conjunction with their labor program; and they offer other benefits as well. Buying a LMS from your current warehouse management system (WMS) software vendor is a growing trend. Advanced labor management systems can accept PTS or time study based standards.

Based on this research, you might wonder which methodology I would favor. Before I had these conversations, I was a predetermined time systems proponent. I still lean to MSD, but my views have softened considerably. Labor study methodology is only one of several decision criteria I would use in selecting a consultant. And I would no longer score methodology as strongly as before. I would now focus more on a consultant’s ability to identify and document best practices and standard operating procedures, support change management, and their ability to leave behind detailed operational plans to make sure the desired results are achieved.

(Note: Manhattan Associates and RedPrairie are ARC clients).

The Ottawa Hospital’s Supply Chain Transformation

Warehouse Management Systems | By •

I’ve been hearing about hospitals implementing warehouse management systems (WMS) in France and Canada. This is a new industry for WMS. So, when Oracle (an ARC client) mentioned that The Ottawa Hospital (TOH) was a WMS customer, I asked if I could interview them. Oracle put me in contact with Cameron Love, Vice President of Planning, Support Services and Clinical Programs at TOH, and with Joanne Read, Director of Logistics, who were both gracious enough to talk to me.

The Ottawa Hospital has three campuses and about 1,200 inpatient beds. The hospital began a supply chain transformation in 2004, which was aided by the province of Ontario’s willingness, starting in 2005, to fund operational excellence initiatives in back office and supply chain operations.

This transformation was based on a Supply Chain Strategic Plan the hospital developed to improve the efficiency of delivering Material Management services, as well as to achieve a benchmark cost profile within the industry. The strategic plan was organized around seven key initiatives aimed at reducing supply chain management costs and providing customer-focused service to support quality patient care.

Implementing Oracle’s e-commerce solution, for example, could improve procurement by enabling full electronic integration and increased collaboration with suppliers. The end-to-end supply chains of hospital supplies and operating room instruments could be improved through a collaborative demand management process; an extended supply chain monitoring and replenishment process; and centralized warehouse and distribution services based on Oracle’s WMS solution. In effect, the hospital wanted to get leaner by ordering and stocking only what it truly needed. 

This transformation could create larger opportunities for The Ottawa Hospital. There are 17 hospitals in the region and they are exploring the possibility of leveraging their total procurement spend to realize savings. Once TOH has transformed its internal processes, it will play a leading role in regional sourcing. 

TOH implemented the Oracle WMS solution this past year. Hospitals, unlike a traditional warehouse, have storage locations that are more distributed to support patient needs. Like a traditional warehouse, it barcodes and scans the 4,000 stock keeping units (SKUs) it receives and distributes out of the warehouses. 

Goods are picked and consolidated on carts that travel to respective storage unit locations. There are approximately 800 clinical unit locations at TOH containing inventory sourced from the warehouses. Each storage unit has between one and three carts with up to 30 SKUs. Nurses can pull items off a cart as needed without scanning them. 

To keep the total inventory count in the WMS correct, supply attendants use wireless handheld devices to scan goods onto the carts. There is also a cycle counting methodology at the cart level based on min/max levels set per item. Carts with high velocity inventory get counted more often. Real time monitoring of what is put onto the carts allows the hospital to cycle count only about three times per week instead of daily (other than for critical SKUs which are counted daily). Cart-level inventory counts can trigger TOH’s ordering system, which is integrated to the WMS, to place an order for needed SKUs.   

Because a key goal was to ensure that needed inventory was on the carts, it was critical that the min/max levels on the cart – what they call “par levels” in this industry – were set correctly. The WMS project took two years, much longer than a typical implementation, in large part because getting these par levels set correctly took time. Keeping them correct involves examining inventory and usage data on an ongoing basis, as well as collaborating with nurses to understand why a SKU is moving slow or fast, and whether it makes sense to change the setting.   

In hospitals, quality patient care is the ultimate goal. But quality care can often be achieved at a lower cost. TOH put in place a Product Evaluation Committee to ensure new products are reviewed by all interested stakeholders prior to being ordered and placed in inventory. No product can be ordered unless it is on the approved list managed through the Product Evaluation Committee. If a doctor wants a new product to be sourced, they must make their case to the committee. The committe looks at whether there are already similar SKUs available and then balances clinical need against costs.  

The hospital’s business case outlined a four year payback, longer than what most companies achieve when implementing supply chain programs. However, its goal was not only to reduce supply chain costs, but also to enhance patient care. This program delivers the right products, in the right quantities, to the right clinical locations. 

In conclusion, TOH’s supply chain was interesting, but its discussion about implementing best practices was even more interesting. In preparation for this project, the hospital examined supply chain best practices in both private industry as well as leading hospitals in Europe. I’d love to hear US hospitals start to talk and think this way too.

Warehousing Labor Standards Basics (Part 1)

Labor | By •

Back in July, I wrote a posting about the great results that DSC Logistics received after implementing a Labor Management System (LMS) in its warehouses. In one section I wrote that DSC “used a predetermined time system, Master Standard Data, as its methodology.” I knew at the time that some readers would not understand that reference, but I didn’t have the time or space to explain.

So today will be the first of several postings on warehousing labor standards basics, which I assume will be of value to logisticians who have not taken a course in Industrial Engineering (IE). 

Because I also lack a background in IE, I reached out to leading consultants in this area, including Al Gagnon and Tom Stretar of enVista who were particularly helpful.

In warehousing, a labor standard is the amount of time required by a fully trained associate, working at a reasonable effort level under normal operating conditions, to complete a task. 

How are standards created?

  1. You could guess or estimate the time or even arbitrarily set a standard, which is not uncommon. Often this rolls down hill from the budgeting process. The CEO demands a 5 percent improvement in productivity so he can impress Wall Street. The COO demands it of the VPs of manufacturing and distribution. The Distribution VP demands it in the warehouses. The warehouse manager then decrees that picking must be done 5 percent faster based on some measure (e.g., cases per hour). After several years of this, if workers are held to these arbitrary standards, you often have too many injuries and too much employee turnover. Or you have a very unhappy workforce that decides to unionize. 
  2. You can also use historical data to set standards, such as the transaction history in a warehouse management system. You can use this data to examine on average how long it takes to do certain types of tasks. You can create single variable or multivariable time standard formulas using historical data. The problem with averages, however, is that the average speed with which work is being done can represent far less than a “reasonable” effort. 
  3. There are also time studies. Time studies involve consultants with stop watches timing how long it takes to do particular types of tasks. This is one way to develop very accurate standards.
  4. Finally, there are predetermined time systems. Pre-determined standards are based on tables that document how long it takes to make very elemental motions. In warehousing, Master Standard Data (MSD) is the most common predetermined time system methodology. In MSD, the two most common elemental motions are “Obtain” (grasp and take control of an object) and “Place” (move an object to a new position). These elemental motions are aggregated into patterns. For example, mounting a pallet jack is a pattern built up from a series of elemental motions measured in Time Measurement Units (TMUs). A TMU is equal to 1/100,000 of an hour.  This is, perhaps, the most granular way to build time standards.

These standards are often tracked in an LMS. Multivariable, time studies, and predetermined time systems can create daily scoring systems for associates. Often 100 (or 100 percent) is considered a full and fair day’s work. If an associate has worked at under 100, they have not worked up to the standard. If they score over 100, they have exceeded the standard for that day.

Single and multivariable standards, time studies, and pre-determined time systems will be described in more detail, as well as their pros and cons, in future postings.

Brooks Sports Hits a Home Run with a SaaS Labor Management System

Cloud/Software-as-a-Service | By •

I recently spoke with Jeff Kastning, Senior Manager of Logistics and Distribution at Brooks Sports, about the company’s recent implementation of a software-as-a-service (SaaS) labor management system (LMS). Brooks Sports, headquartered near Seattle, Washington, designs and markets high-performance men’s and women’s running shoes, apparel and accessories.  

The company operates a 140,000 square foot distribution center (DC) that carries 12,000 SKUs and ships more than 6 million units per year. The facility uses a pick-to-carton methodology, where workers place the cartons on carts which they wheel through the warehouse. 

Over the years, Brooks’ volumes grew and the company had to grow its staff. Five years ago, Brooks had 35 fulltime employees and used three or four temps per day. By 2008, Brooks was still employing 35 fulltime workers, but the number of temps it used daily had grown to 15 to 20 people. 

In that same time period, Brooks realized that it had outgrown its IT infrastructure. In 2008 the company implemented a new Enterprise Resource Planning solution that also included a built-in warehouse management system (WMS). The WMS allowed Brooks to move from paper-based processes to real-time processes supported by RF scanners. 

While Brooks did not notice a significant improvement in productivity from the WMS, the WMS did provide it with the data it needed to put in a labor management system (LMS). In particular, the WMS provided data on how much time elapsed between scans. Brooks planned to use the LMS to drive productivity improvements. 

Brooks implemented an LMS – Labor Performance – from Integrated Management Systems (IMS), the company that handles its contingent staffing needs. IMS also, for some clients, has fixed bid contracts where it supplies all the labor at a customer’s site while agreeing to hit certain output levels. In order to make money in these types of contracts, IMS had developed a proprietary LMS, which the company decided to productize and develop into a SaaS solution. 

Historically, it has been difficult for traditional, license-based LMS solutions to provide a payback of less than a year for warehouses that employed less than 70 people. However, the risks and costs associated with the IMS solution were far less than they would have been with a best-of-breed solution. Brooks felt it had little to lose in implementing the IMS solution. Further, following the ERP implementation, Brooks had little appetite for another large software expense. 

Brooks began working with IMS in April of 2009 and the solution went live that November. IMS took a multivariable approach to setting standards. The six months was spent largely examining the WMS data to develop accurate labor standards formulas. These formulas are not based on tracking travel times or the use of time and motion studies. Instead, IMS used the WMS data and averages to set the standards.

For example, the data might say that it takes two minutes to pick a particular stock keeping unit (SKU). These are multivariable standards because the labor standards formulas use more than one parameter. For many picking tasks, in addition to the SKU as a factor in the equation, the number of items to be picked, the number of lines on the order (which tells you how many locations the worker needed to travel to), and the number of cartons on the cart that need to be filled are also used.

Developing the standards was an iterative process. The initial goal was to get workers to a baseline of roughly 80% of standard. While developing the standards, Brooks would occasionally see some employees hit a score of 30% or 180% for the day. That was an indication that there were additional metrics that needed to be included in the labor standard in order to make it accurate.     

Brooks got their productivity improvements in two stages. First, once workers knew they were being tracked individually, warehouse productivity improved 10-15 percent to 83% of a fair, but efficient, daily goal.   

After the solution went live in November, Brooks instituted daily productivity report cards and a three tier bonus structure:

  • Tier 1, workers who work at 100-120% of standard during a day get a $1.50 per hour bonus.
  • Tier 2, workers who work at 121-139% of standard during a day get a $3.00 per hour bonus.
  • Tier 3, workers who work at over 140% of standard during a day get a $4.50 per hour bonus.

Bonuses are paid only to workers with good accuracy and who follow the safety rules. Further, bonuses are paid only for direct labor –i.e.,  when workers are actively working and using their scanners—rather than on break, getting training, in group meetings, etc. Productivity increased another 10-15 percent following the implementation of the bonuses. 

Bonuses are calculated and shown to workers the next day. Following the day’s work, a supervisor downloads the data from the WMS, checks it, and sends it by email to IMS. IMS uses the data to create the daily report card and bonuses and sends this data back to Brooks, which then posts the results for every worker on whether they got their bonus and what tier they were in. This public posting creates peer pressure. If a particular worker sees that 70 percent of his colleagues got a bonus and he didn’t, he can’t help but take notice. 

Prior to going live, Brooks educated the staff on what they were trying to do. The goal was not to burn workers out, but rather to develop fair standards and standard operating processes (SOPs) based on working smarter that would support a bonus program. The bonuses were designed to be self funding. In other words, both Brooks and the workers would win if they earned their bonus. 

Jeff tells me this has been a “fabulous” solution for them:

  • They improved productivity by 25-30 percent.
  • The amount of time their staff spends on direct labor activities has increased from about 80 percent to over 90 percent.
  • Increases in productivity allowed them to cut the number of temps they employ from 10-15 per day down to 1-2.
  • The data has helped them improve their standard operating procedures. If Bob is the fastest worker at a particular task, they watch how Bob does the task and create the standard operating procedure (SOP). Bob becomes the lead and trains new employees on that process.
  • The data provides an executive dashboard that summarizes metrics at a higher level and allows Jeff to quickly understand how the warehouse is performing. Jeff looks at the following performance indicators daily: percentage of direct labor, labor productivity percentage for the warehouse, and bonuses in dollars (remember, bonuses are good because both Brooks and the workers win!).
  • They received payback only two months after they began working with IMS!

What Brooks and IMS accomplished with LMS is interesting to me for several reasons. I’ve rarely come across warehouses using a multivariable approach to setting standards or implemented an LMS in such a small warehouse. Also, I’ve never seen such a quick payback period for LMS. And I’d never heard of a SaaS LMS solution before—but I suspect it won’t be the last time.

Labor Management at DSC Logistics

Labor | By •

I recently spoke with Jim Chamberlain, the Director of Engineering at DSC Logistics about their rollout of RedPrairie’s Labor Management System (LMS) solution.

Jim began his career at Kraft where he worked to develop labor standards. Based on that experience, he knew this was a big opportunity for DSC when he joined them. In 2005, DSC evaluated the major suppliers of LMS solutions. They selected RedPrairie’s solution because they viewed it as the most comprehensive product available in terms of its ability to capture and measure all of their employee’s time-related activities. DSC wanted to track 100 percent of their warehouse staff’s direct and indirect labor from clock-in to clock-out. Even if all they could achieve was a more efficient clock-in at the beginning of the day and clock-out at the end of the day, along with better shift changes, DSC felt that alone would justify the project.     

In the fall of 2005, DSC piloted the program at their McDonough, Georgia facility, which was their best run facility. DSC uses a proprietary WMS, so a big part of the project involved developing interfaces between the WMS and LMS. From a training perspective, they used the “train the trainer” methodology.  They began one function at a time, starting with the areas where labor productivity improvements would provide the best ROI.  At McDonough, that was their case pickers. 

A LMS sets standards for workers. These standards can be set in different ways. DSC used a predetermined time system, Master Standard Data, as their methodology because they felt it was the most objective and consistent. The goal in setting standards is not to make workers work fast, but rather to have them work efficiently and steadily all day long. 

A worker who achieves a 100 percent rating for a day’s work has done everything expected of them.  At their McDonough facility, before the LMS productivity gains were achieved, it was pretty typical to see floor personnel working at a 75 percent level. Some were as low as 50 percent. DSC’s expectation for their workers was that they would improve 5 percent a week until they were up to 100 percent. No disciplinary action was taken initially if a worker failed to improve. Instead, managers would work with their warehouse staff to make sure that best practices—those that would make them maximally efficient—were being employed. Jim stressed how important change management efforts were. There needs to be extensive training, coaching, and counseling in order to make a smooth transition to the new way of doing business. To be able to do the necessary coaching and counseling on an ongoing basis, DSC’s goal is to have one frontline manager for every 15-20 workers.    

Once the great majority of their staff was regularly achieving their daily goals, DSC put in place an incentive program. They pay ten cents an hour above the base pay for every percentage point above 100 percent in direct labor that a worker achieves. This made the program self funding – both workers and DSC profited from higher productivity.   

DSC caps the bonus at 125 percent for safety reasons. Also, they pay close attention to workers that consistently work at very high productivity levels to make sure they are not taking any shortcuts. The incentive program is gated. Workers don’t get bonuses if productivity is achieved at the expense of safety or quality. For example, if a worker had a safety incident in the last month, they are not eligible for incentives.  

DSC did lose some workers because of this program. However, they felt the workers that left were the ones with the worst attendance and safety records, and so they were left with a lean and efficient work force. Today, turnover is as low as it has ever been, and most of that they attribute to this program.

Based on these results, it is not surprising that DSC decided to move forward with a network wide rollout. Before they would move to the next facility, the engineering team would stay until the warehouse was up to 100 percent on direct labor productivity and the percentage of indirect labor was down to an acceptable level. The engineering team is corporate based. 

Because the implementation team worked side by side with the implementation folks from RedPrairie, they became comfortable with the solution. By the fourth site, the DSC folks were ready to move forward without RedPrairie’s help. The next 18 sites were done solely by DSC.

If I was selecting a third party logistics (3PL) partner, I would never select a 3PL that did not have a rigorous continuous improvement culture. LMS can be a key part of that culture. When the LMS was implemented at a new site, DSC made sure the site was using best practices and that travel paths were efficient. The system also generates data for understanding their business better. If labor is unproductive at a particular facility, they can do a root cause analysis to see what is causing it. 

However, those kinds of improvements are what I would expect from any LMS project. One of the most interesting parts of the discussion for me was Jim’s description of how their coaching program helped improve their lean program. Managers do daily coaching observations. In addition to making sure best practices are being followed, part of their job is to keep their eyes open for barriers to worker productivity. Are there empty pallets in aisles? Do workers need to make extra key strokes to complete a task? At the end of the coaching session, the manager gets feedback from employees concerning the barriers they perceive and their ideas for making the job easier and more efficient. Jim believes this has helped improve employee and management relations, while the data from the LMS has been critical in creating a culture of accountability.

(Note: RedPrairie is an ARC client)

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