How to Stay Relevant in the Age of Supply Chain

: A big paycheck is not what is driving this [Millennial] generation, although no one will turn it down. What we've found that employees are searching for is: no stress, hassle-free, limited pressure, days off, vacation, no shift work, no overtime, 8 to 5 Monday through Friday with benefits and cell phone use! Sound familiar? Our advice is to keep up the search—there is a light at the end of the tunnel, and there are good ones still out there. Workforce shortage is not the problem; talent, commitment to work and pride in workmanship seems to be the discussion of the day!

Electronic system improvements and technology advancements within our industries has created another storm—a shortage of talent. Although the workforce is out there, as one client said, "I don't want to hire someone who wants to work; I want to hire someone who knows how to work." We can understand his pain, but we may not understand his suffering unless we spend time at his workplace. It goes without saying each industry is unique and some are similar in their core business, but not when it comes to the task and methods used to train the workforce.

Workforce talent on the floor is one thing, but workforce talent to design and implement needed training is a cost many companies do not see as an investment. Remember: Poor performance is a direct result of poor training, therefore you must evaluate performance and decide: training or job knowledge training (site-, equipment- and task-specific).

One initiative that is on the increase among firms in private industry is to develop "supply chain consulting projects" for students at universities to conduct for the firm. These projects typically are "wish list" type projects that are not high enough on the firm's priority list to merit hiring a professional consultant, but are projects that ideally a firm's supply chain organization would like to tackle.

Supply chain majors at universities, typically working under the guidance of a faculty member, will conduct these projects and in return receive academic course credit from their university. There can be benefits on both sides (i.e., the firm and the students) from these arrangements.

In addition to having a wish list project completed, from a firm's perspective, these consulting engagements also represent one more additional avenue to explore (and test out) potential future employees (i.e., supply chain students). This type of exploration is more commonly achieved through formal internships and co-ops that firms hire students to perform for 3 to 6 or more months. However, these consulting engagements offer a less traditional method for firms to enhance their relationships with, and to provide support for local university supply chain programs, and at the same time, for firms to "find" future supply chain talent.

Talent Development and Training

I recently attended MHI's Career & Technical Education (CTE) Educator's Summit, which was held near Allentown, Pa. The program is designed for those involved in workforce training, specifically material handling, logistics and supply chain skills. George Prest, CEO of MHI, discussed "MHI's U.S. Roadmap for Material Handling & Logistics" report ,which predicts by 2018 there will be 1.4 million new jobs in material handling and supply chain. This is positive news for those interested in employment and careers in material handling and supply chain, but it also highlighted the need for training programs to prepare people for these positions.

The host organization for the summit was the Lehigh Career & Technical Institute (LCTI), which utilizes a training laboratory with 18,000 sq. ft. of warehouse space and many of the different types of equipment found in the modern warehouse. LCTI offers material handling training programs to high school students, adults interested in certificate training and also students in the special education category. Students engage in practical applications involving the many warehouse tasks, including receipt, stow, inventory, pick and shipment of materials to actual customers. LCTI's staff works closely with local industry to ensure their program gives students the skills employers in their geographic area are seeking.

Using LCTI's example, employers and local workforce development boards need to work closely with their regional educational institutions to meet future workforce requirements.

SHEPHARD: For years we have shared with clients the need to ratchet up their training programs to assist employees in understanding the company's safety goals and objectives, the job, the task, and their responsibilities. For the most part employee training methods have been and are being developed to do just that, and I must say that I am impressed with some of what I am seeing. Not only are the new trends training the group, many are beginning to identify and work with an individual's weaknesses.

As we find in many industries, they are still struggling to find, design and/or develop comprehensive training programs that target their operational needs. Few have found resources that have assisted them in customizing their training. For those that are customizing their training programs, I applaud their efforts. You will find this investment will be a positive asset for your company to retain talent.

MILLER: There are two "polar" cases that describe a firm's philosophy towards developing and retaining young supply chain talent. On one end of the spectrum is the approach of rapidly rotating relatively young supply chain professionals through a series of positions in different areas so that the employee quickly develops a broad-based perspective. On the other end is focusing on developing deep, functional expertise by allowing young supply chain professionals to work in particular functional areas (e.g., demand planning or warehouse operations) for longer periods of time.  Under this approach, an employee may receive several promotions within a functional area; however, he/she stays in that functional area longer and obtains an in-depth understanding of the operation or function.

Particularly, in medium to larger firms, the current prevailing approach seems to be the rapid rotational method that facilitates a faster, broad-based perspective for the employee. And I believe most would agree that this rapid rotation approach generally represents the path that is most likely to lead to senior executive supply chain positions for an employee later in their career.

In my opinion, the best supply chain organizations have a mix of colleagues, some with broad-based supply chain experience and some with deep functional expertise.

Both of these skill sets are important and both should be highly valued. Further, supply chain practitioners similarly have a mix of interests—some enjoy general supply chain management while others find specific functional areas of particular interest. Blended together, a combination of supply chain generalists and functional experts can facilitate an organization which efficiently and effectively plans and executes supply chain strategies.

This is not "new" thinking, needless to say. Firms for decades have had "managerial tracks" and "technical tracks" that employees may follow as career paths. The reality, however, is that the managerial track is typically the valued track in most firms, while the deeper functional expertise track (i.e., the technical track) is less highly valued.

Firms and supply chain organizations that create environments where broad managerial capabilities and deep functional capabilities are both recognized and valued (i.e., firms that create a diversified organization) position themselves to better develop and retain talent. Further, and most importantly, this approach and environment facilitates stronger, more balanced and knowledge-based decision-making. And it fosters a culture that can stimulate and cater to the many different types of personalities and interests that one finds in supply chain employees, thereby contributing to the development and retention of valued employees.

MELLER: From a talent perspective, many of our clients tell us that they are challenged on two fronts:

1. Finding and hiring supply chain talent with the experience to meet today's challenges. There's lots of demand, but only a small segment of the market has experience with highly automated environments and the more complex demands of e-commerce, which is critical for today's distribution and supply chain leadership.
2. Labor availability is a limiting factor in how a company can staff and where they can locate distribution centers. The network analysis might say one thing, but the labor availability might point you to another location. Analyzing the network from this perspective is difficult, yet essential.

Additionally, we think distributors will have to rethink both the DC and the work because the current generation of new workers will require it. Millennials view work-life balance differently than their predecessors and embrace technology as a means to work smarter, not harder. Today's leaders will need to figure out how to create a workplace that will appeal to Millennials' values as well as leverage the insights and expertise of these workers. Clients are simultaneously implementing automation and robotics to decrease their reliance on a dwindling labor pool, but also to use the tech skills of younger workers and make the DC an appealing place to work.

Robots / Automation

For any distribution and fulfillment center design, the major challenge revolves around developing and integrating processes and operations that are flexible enough to effectively meet all of the characteristics and requirements to deliver the service levels that today's customers are driving. These challenges will be more commonly bridged through automation, driven by improved technology and the migration from controls systems to execution systems.

It is no longer unusual to implement automated solutions in which the facilities and material handling equipment are strongly leveraged across multiple channels such that the user maximizes return on investment made in automation.

MELLER: Driven largely by the need to solve the challenges of each picking for omni-channel and to enable companies to effectively compete with Amazon (i.e., shortening cycle time), investment in distribution technology like robotics has grown significantly for the last several years. At the same time, a shrinking labor market and higher labor costs reinforce the investment calculus. Silicon Valley and venture capital funds have taken notice and are pouring resources into the development of robotic solutions to meet the challenge.

So far these have been more "point solutions"—there is still a need for highly scalable automation. One way I think about scalability is in terms of automation where you can add storage capacity and throughput capacity (nearly) independently. This allows designers to think about the distribution center at a system, rather than a component, level.

The Internet of Things

TOMPKINS: A growth in machine automation, devices and sensors and an overall increase in volumes and complexity in this age of e-commerce will require the design of a connected facility. People and technology will co-exist in fulfillment centers, embracing a design that integrates all aspects of operations.

Technology will be connected and integrated with cyber-physical systems in such a way that workers will operate in an environment that optimizes facility throughput at the lowest per-unit cost while providing a physical environment that is comfortable, safe and secure. The Internet of Things will make this connected facility a reality.

MELLER: Taking advantage of the IoT to think about manufacturing differently is being thought of as the 4th Industrial Revolution (Industry 4.0). I like to think about it as: Can product effectively route itself through a manufacturing plant—moving from workstation to workstation in a way to fabricate its components and have them assembled? And can an order do likewise? That is, can we move to a greater level of decentralization with the increased level of sensors (and therefore, information) in the system?

Drones / Autonomous Vehicles

MELLER: The subject of drones continues to fascinate me. As an academic over 10 years ago, two colleagues and I wrote a proposal to the National Science Foundation where we laid out a vision for the future of logistics (and what research would be necessary to achieve this future), and drones (although we called them UAVs—unmanned aerial vehicles) were part of this future. As you might guess, based on the reaction to drone delivery even today, the research wasn't funded (with explanations such as, "We only fund research that has some chance of success.")

What's different about what we proposed and solutions that have been put forth so far is that we never envisioned the drones being down at "street level." In our concept, drones would deliver to the top of your house. I like seeing that similar concepts are being tested (I believe DHL is testing drone deliveries to lockers at the top of buildings).

Now that I'm in industry, I realize that many question the business case around drone delivery, but if we are willing to move from a delivery system based on both asset costs (trucks) and labor costs (drivers) to a delivery system with virtually no asset costs (like Uber and Lyft), then my instincts tell me there's a business case for some segment of deliveries based on all asset costs.

And an even more compelling case can be made for autonomous vehicles. I don't think there is any question of "if"—it's only a question of "when."

I have been involved in cycle counting parts for over 40 years; it's boring, sometimes physically challenging, costly and often as many new errors are created as being resolved. But they're a necessary evil for anyone serious about parts planning and balance sheet accuracy.

Now comes the stunner: the evolving employment of drones in warehouses for eliminating the labor input in the cycle counting process and significantly reducing its duration.

One of the first companies off the starting block to employ drones for cycle counting will be Walmart. I read in Business Insider that it will be in collaboration with the Federal Aviation Administration [FAA] and NASA in developing internally autonomous drone technology that allows a quad-copter drone, roughly 3'x3', to take 30 images per second from a top-mounted camera, to be employed in 190 US distribution centers. The camera scans tracking number and locations and matches them to their inventory records; mismatches are then physically reviewed. [Editor's Note: Walmart's drone development team is led by Shekar Natarajan, a former member of MH&L's Editorial Advisory Board.]

Walmart says that the technology is six to nine months from being implemented. The company also notes that employees who currently serve as cycle counters will be given new job opportunities.

Who would have thought even five years ago that such technologies would be employed in the block-and-tackle world of cycle counting?!

Blockchain

GIUNTINI: Quoting from The Wall Street Journal, a blockchain "is a data structure that makes it possible to create and share a digital ledger of transactions. It uses cryptography to allow anyone granted access to add to the ledger in a secure way without the need for a central authority. Once a block of data is recorded on the blockchain ledger, it's extremely difficult to change or remove." In effect, a blockchain is a third posting to the traditional two postings of all transactions.

So picture the blockchain platform as a way to track the transactional activities of the multiple segments of the supply chain.

One area of great value for will be the ability to more easily identify products that are: fakes (e.g., non-authorized use of a brand, coupled with poor quality), non-approved items (e.g., regulatory approval not traceable), not applied in a recall program (e.g., embedded software that needs to be changed in order to avoid a potential fire), inaccurate in condition classification (e.g., identified as "new" but actually had been used), and much more. With some manufactured products' supply chains being 6-10 chains deep, blockchain will be a big assist for all concerned.

Now comes an interesting aspect of embracing blockchain: How will China and other "rogue" suppliers deal with a blockchain platform? If they resist to "conform," what will be the impact upon the global trade of products when buyers will require supply chain transactional transparency via blockchain?

Warehouse Technology

MELLER:  Today's distribution environments are more complex than ever. Never has there been more pressure on the DC to fulfill orders faster and with greater efficiency and flexibility. There's a lot of talk about warehouse execution systems (WES) as an answer to the growing demand for speed and agility. Warehouse management systems (WMS) have traditionally been the enterprise "system of record" for managing the planning and transaction processing of major activities and workflows in the warehouse. Warehouse control systems (WCS) often sat between the WMS and the material handling equipment, translating business-oriented instructions and directing all the material handling automation—the conveyors, photo-eyes, sorter, printers, etc.

For years, the lines governing the divisions between WMS and WCS capabilities were clear and straightforward. But as business requirements evolved—specifically the rise of Amazon and the demands for faster fulfillment and the need for continuous-flow processing—it left gaps between the WMS and WCS for things like: expediting orders; waveless order processing; assigning labor dynamically to the highest priority orders and moving labor to congested areas; and visibility into everything that's going on in real-time.

So, WMS providers started adding logic and algorithms for wave planning to optimize efficiency in critical areas like picking. And WCS providers started adding capabilities like order-release logic that is optimized based on the real-time status of work being processed in each area of the warehouse. Thus, WES was created to fill the gap, serving as optimization software that sits between the WMS and the machine and equipment controls (WCS).

However, true optimization goes beyond software, and is more than just how you release orders. It looks at things like slotting, order planning, optimizing labor, balancing work, dynamic sortation, etc.—in short, what work to release to where, and in parallel, where to assign the labor in the facility. The correct approach is very specific to facility and business requirements. It depends on how many pick modules, the size of the building, order profiles, and more. When you take all that into account, you have the ultimate solution—"intelligent fulfillment"—that drives much better productivity and flexibility overall.

3PL Strategies

TOMPKINS: Organizations need to move away from the traditional and outdated view of engaging 3PLs to deliver low capital solutions over short term contracts. 3PL's contracts should be viewed as an opportunity to deliver more than just the unnecessary evil of distribution services. They should be approached as partners that can deliver opportunity to provide improved technology, automated solutions, better customer service, leverage delivery infrastructure, and most importantly, increased market share.

Along with 3PL's partnerships come a significant improvement in core competencies in distribution and logistics.

Legal Challenges Associated with Inventory Management

CHRISTOPHER: Inventory management is a critical component of every warehouse operation. Inventory accuracy is not just a goal, but a requirement. However, a party's ability to ensure inventory data accuracy is predicated on many variables, including:

• what entities have access to the inventory management system;
• what access is provided (full access vs. view-only access);
• user error; and
• the potential for equipment malfunction.

Traceability within the WMS is critical in order to memorialize which entity has performed inventory transactions and may even be required by applicable regulation depending on the product being stored (e.g., food grade product). As such, many entities restrict system access and have identity requirements for those utilizing the WMS.

Companies that outsource logistics functions often ask their third-party logistics provider for system access in order to monitor inventory. However, such access raises concerns regarding the integrity of the inventory data. What if inventory data is compromised as a result of such access? What if such access results in a security breach? How is the 3PL protected? Certainly, it is in the best interest of both parties to define specific parameters as to the respective parties' system access and functions and to incorporate legal language within their contractual agreement addressing such access and disclaimers as appropriate.

Next-Day / Same-Day Delivery

TOMPKINS: There has been a lot of energy spent debating the pros and cons of next- and same-day delivery. The reality is that most organizations cannot profitably provide these services at the price points that customers are willing to pay. Most retailers and consumer goods providers are burdened by centralized distribution networks that can only profitably deliver top-shelf services to a limited population, thus leaving the impression with consumers that they must go to Amazon to receive the desired service level.

Retailers and consumer goods providers need to find ways to match or best Amazon's distribution network, else they continue to lose control of their brands and have their margins eroded.

Omni-Channel Distribution

TOMPKINS: Today's consumers crave a flawless experience—the ability to order exactly what they want, when they want it, and how they want it, regardless of where they are located. To take full advantage of this, traditional retail and wholesale distribution and fulfillment centers will need to evolve into flexible, personalized distribution centers, fulfillment centers, and/or combination distribution and fulfillments centers (FC/DC). This has many challenges to overcome.

Traditionally, facilities are designed with the ability to efficiently serve only one channel, lacking the flexibility to expand into other channels. They are either effective in their ability to ship cases to wholesale and retail customers, or they are effective in fulfilling smaller, mixed case shipments directly to consumers. Any new facility underdevelopment today must provide full FC/DC capabilities.

MELLER: As they undergo an omni-channel transformation, five things are top-of-mind with executives:

The Need for Flexibility. Omni-channel customer expectations and the need for speed are driving change and challenges how we think about implementing change in a distribution center. Tipping-point analyses are more important than design-year considerations. This leads us to recommend phased approaches to ensure that we aren't building a distribution center based on growth that may or may not occur and living with a sub-optimized system for very long.

Heavy Legacy Systems Load. Technology drives systems requirements that legacy systems struggle to carry. Systems are complex. Integration is key, but challenging. Projects require long lead times to implement. A roadmap is needed to help navigate change.

Inventory Deployment. Omni-channel is primarily an inventory play. Demand has always been hard to predict, but with omni-channel, optimizing a distribution center around fulfillment, replenishment and returns processes are also a challenge. Omni-channel capabilities require greater inventory accuracy and visibility to see the benefit.

Companies struggle here and lack the confidence in inventory counts necessary to enable stores as distribution nodes. As a result, retailers run the risk of not realizing the predicted gains from an omni-channel strategy.

Labor Availability and Cost. Growing competition for a shrinking labor pool coupled with higher wages and healthcare costs are putting pressure on operations with high labor requirements. A growing generation gap in the workforce (Boomers working alongside Millennials, with a marked difference in work ethic, expectations, tech skills, etc.) demands both cultural change and labor training methods.

Risk Management. Transformational projects are once-in-a-lifetime, make-or-break-your-career kinds of projects. As such they are fraught with risk. The organization has to be prepared for the change from leadership all the way down to the floor of the warehouse to ensure success.

Warehouse Safety & Liability

CHRISTOPHER: When one thinks of racking, one does not often think of potential liabilities associated with the use of such racking despite the fact that racking is an integral component of most warehouse operations. Unfortunately, significant damage may occur to product stored in racks and/or individuals can potentially be seriously injured in the event racking is not adequately designed, properly installed or maintained. The last thing you want is for racking to collapse, tip or shift while in use!

As such, it is critical to assess the anticipated load capacity prior to designing the racking layout and in evaluating the required strength and integrity of the fixture. In addition, it is prudent to periodically inspect racking for potential structural weaknesses and/or damage, including that which may occur as a result of forklift bumps and collisions. The following are all potential types of racking exposure: footplate damage; overloaded beams or frames; anchor damage; column damage; horizontal and diagonal strut damage; beam damage; damaged decking; and missing components.

It is also beneficial to verify the warranty provided by the racking manufacturer as well as the experience, integrity and warranty provided by the installation entity.

Additional thoughts: If you are leasing the facility you will want to confirm that the landlord does not preclude installation of racking. In addition, you will want to verify who maintains the ownership interest in the fixture—remember, dismantling of racking can be a significant expense.  

David Sparkman also participated in the Editorial Advisory Board Roundtable, but his contribution will appear in next month's 2016 Election Preview.