Software Teams Up for Assault on 9-11
Here’s how warehouse, manufacturing and maintenance software vendors are responding to the rippling inventory and logistics problems created by September 11. Learn how to minimize the downside of supply-chain disruptions and the economic recession.
by Christopher Trunk, managing editor
“After 9-11, logistics will never be the same,” says Scott Rishel, vice president, market development for Irista. “There’s going to be tighter security on the movement of goods across borders and throughout the country. Companies must move from a just-in-time mentality to a just-in-case attitude toward inventory,” he predicts. That translates into more inventory and higher carrying costs, but it’s not an excuse to just stock 10 percent more of everything.
“A company has to evaluate the most critical SKUs and hold those SKUs in a lowest-common-denominator state, postponing value-added services and manufacturing until the last moment,” says Rishel.
But you won’t likely be building a new warehouse to store this extra safety stock, so that means squeezing more out of your available cube with help from warehouse and slotting software. These examples are just the beginning when it comes to the creative mindset you’ll need for distribution after 9-11.
New strategies for global distribution
There’s a huge fallout from the slowing traffic at international borders, and it’s demanding new approaches for business survival. Safety stock springs to mind. “It’s our belief that companies won’t want to buffer their own safety stock. Rather, they’ll insist their vendors locate safety stock close-by to deal with unforeseeable disruptions,” says Chris Heim, CEO, HighJump Software. “This will lead to more satellite warehouses being located near key customers. These tiny warehouses will likely be connected via the Internet to the main distribution hub, becoming extensions of warehouses in many respects,” adds Heim. You’ll need warehouse software that effectively manages multiple-warehouse sites.
An unintended consequence of shipments stuck at the borders for hours or days is its impact on your warehouse staff. “One of our clients had critical inbound shipments of overseas raw material and components languishing in customs,” says John Clark, marketing manager for Provia Software. Upon release from customs, the client had to quickly increase warehouse staffing to meet the pent-up demand from customers to distribute that material. “Another unintended consequence of the situation is that this customer, and others, are now looking for import/export compliance software to speed customs paperwork,” adds Clark.
Now is the time to list your most critical parts, where the vendors are located, and re-examine how sensitive your operations are to those parts being delayed. “Issues raised by sourcing from Mexico are very different from those in Canada. Companies should consider sourcing critical parts from domestic sources, and even regional suppliers, to minimize the chance for border delays,” reports a recent study by Mercer Management Consulting.
The report emphasizes that most truckers are allowed to drive 10 hours a day, so if truck drivers spend half those hours idling at the border, it can easily add another day to delivery.
Minimizing transport, information bottlenecks
The grounding of all planes and shutting down critical air transport pathways was enough to convince every shipper that it’s time to broaden shipping options, says Mercer. Transportation delays by air and on the ground at international borders are inextricably linked with your company’s style of managing production and spare parts inventory.
Companies now realize after September 11 that shutting down an entire transportation system for more than just a couple of hours is far more likely than before. “In the past, such shutdowns were the work of Mother Nature. If a storm dumped snow in the North, truck shipments could be rerouted around the storm. But the possibility of again shutting down the entire shipping system requires everyone to carry more inventory for safety’s sake,” says Clark of Provia.
Jan Young, director of business development for Catalyst International, sees hope for improvements to warehousing and retail data as a result of 9-11. “The issue of universal electronic data interchange [EDI] standards has been around forever. Many of our consumer products goods customers have been frustrated by negotiating ANSI EDI standards with each trading partner. Now that business is down in the retail sector, in part because of 9-11, retail may be more proactive about resolving this problem and finally get some real value out of EDI.”
New rules for managing stock
The first new 9-11 rule for inventory management is: “The Uncertainty Principle.” Future disruptions, like those of September 11, will rarely be uniform, points out Leo Schmidt, senior project manager and marketing strategist for HighJump Software. “Only some shipments will be affected, and a two-day delay on shipments of raw material may or may not create a crisis. If you buy the kind of supply chain event management software available today, you can pinpoint actual crises in the making and arrange for reallocation or substitution from another warehouse or another vendor,” suggests Schmidt. He says the solution is not filling your warehouse with excess inventory, rather to improve your inventory visibility through software that delivers better monitoring, control and decision support.
Old solutions just won’t work anymore. “For example, picking waves were once released in the warehouse, and changes were practically impossible,” relays Irista’s Rishel. “Post September 11, warehouse software must be event-driven, taking into account unexpected exceptions that occur from beginning to end during the fulfillment process.”
And don’t lull yourself into thinking your company can single-handedly protect itself from supply chain breakdowns. Rishel warns that you need real-time data from your supply chain partners and more closely integrated e-commerce information sharing with your business-to-business partners to overcome September 11-type disruptions.
“Mind-Altering Handling Opportunities” is the second new 9-11 rule. Sophisticated warehouse management software allows you to take into account capacity, capabilities and crossdocking opportunities across multiple warehouses. This shows managers the condition of inventory, its availability, cost of various shipping options and possibility for substitutions. “In a world of unpredictable shipments, global distribution will demand more flexible approaches to inventory, crossdocking and multinational warehousing. That’s the only way to keep inventory on the low side and service levels high,” says Rishel. In fact, creative approaches to crossdocking and increasing your facility’s order fulfillment velocity may be your only options for staying ahead when shipments are delayed.
Maintenance software as front-line defense
9-11 instantly retooled all thinking about spare parts inventories, says John D’Anna, public relations coordinator for Eagle Technology Inc. “Our customers have recast their ironclad just-in-time and zero-inventory policies. Carrying inventory costs money, but not nearly so much as a plant shutdown forced by a lack of spare maintenance parts and assembly parts,” reports D’Anna. He finds that customers who left fallow their computerized maintenance management software (CMMS) are now activating it with bar code scanning and interfacing maintenance parts data with their ERP software. These companies are trying to fend off disruptions common to today’s jittery supply chain.
Manufacturing software takes charge
Manufacturing software has become even more critical as your company looks for new business while keeping current customers supplied with on-time product. You can bet that companies will be competing to take a slice out of the government’s pie of overseas and homeland security money. To pursue those contracts, you may need some of the many resources that manufacturing software provides, including:
• Managing the complex requirements of government paperwork and inventory tracking (See “Aerospace/Defense Software Targets Defense Dollars”;
• Simulation that can predict the impact of several scenarios to eliminate bottlenecks before they occur, and increase your current production and handling methods to allow for sustainable increased capacity;
• Scheduling and transaction tracking to give managers real-time access to production status, raw and finished goods inventories and work-in-process reporting.
Rockwell Software is offering its RSBizWare that improves communication between the shop floor and business management software. It helps manufacturers manage the day-to-day flow of orders and is useful for handling rush orders and the kind of unexpected schedule changes that 9-11 has wrought. “Our Automation Arena simulation software helps demonstrate, predict and measure your system’s performance. It can reduce the risk of adding new business,” says Mark Moriarty, director of marketing for Rockwell Software.
“September 11 proved that companies have to be vigilant over food, pharmaceutical and chemical contamination,” says Moriarty, “and these public safety issues are pushing companies to electronically document their manufacturing control and maintenance processes.” He maintains this is one way to ensure that products have been processed safely and cleanly.
Rockwell also offers Maintenance Automation Control Center software that gathers and manages information needed by maintenance engineers to track maintenance tasks and to predict machine failure. This software is helpful in keeping manufacturing machinery up and running.
Buy stock in human decision-making
Mercer Management Consultants warns that an over-reliance on software and other technology can be a downfall in unpredictable times like these. The consultants find that logistics and business software typically makes forecasts based on historical averages, making it unable to accommodate every unforeseen shock to the post-9-11 supply chain. That is why human decision-making remains an important partner with software for global distribution.
Success requires better personal ties among manufacturers, retailers and distributors as they collaborate with information about logistics problems and changes to customer demand. Better communication between your company’s staff of risk management, procurement, production, warehousing and sales workers can afford the best decision-making possible when the next upheaval strikes. MHM
Resources
Clark, [email protected]
D’Anna, [email protected]
Heim, [email protected]
Manhattan Associates, www.manh.com
Mercer Management Consultants, www.mercermc.com
Moriarty, [email protected]
Rishel, [email protected]
Schmidt, [email protected]
Young, [email protected]
Aerospace/Defense Software Targets Defense Dollars
Due to the September 11 events, the U.S. defense budget for 2002 was ratcheted from $295 billion to $330 billion. That’s a big stack of money, and it’s bound to attract a great deal of attention from companies looking to add paying customers like the U.S. government to their existing customer portfolio.
Lilly Software Associates now offers the Visual Enterprise Aerospace & Defense software module. “This software is targeted at Tier 2 and Tier 3 manufacturers, helping them break into the government marketplace by managing complex requirements for tracking components, labor, manufacturing processes and compliance reporting,” says Scott Rich, vice president of marketing for Lilly Software Associates. As the software is geared to the small- to medium-size manufacturer, it can have from 10 to hundreds of concurrent users, with radio frequency data communications and bar coding.
When it comes to the changes wrought by September 11, The Visual software can be key to scheduling and delivering goods quickly and on time to our overseas military personnel and to homeland security forces, says Michael Matechak, senior manager and a consultant for T.A. Carlson & Company. Lilly and T.A. Carlson have joined forces to help manufacturers adjust to the kind of cost accounting, contract administration, manufacturing and distribution processes the government requires.
“With the mountain of funding that’s been released for military purchasing, a vendor’s promise of delivery and the ability to schedule effectively will be key to obtaining those contracts,” he adds. You need to minimize the effect that delayed components, labor or tooling might have on timely delivery. The software’s scheduling capability can also allow defense and aerospace contractors to increase the number of orders they can take while still servicing their existing customer base.
Matechak says that tracing parts is a key factor in aerospace and defense contract work. “The FAA requires extensive lot-tracking capability by work order, by purchase order, by worker. Government requirements dictate an accounting of all labor and material information, including raw material needed for a subassembly. This makes a complicated business of tracking work orders, buying and purchasing components for defense projects,” he says.
These contractors typically use government-furnished equipment or GFE. GFE can be subassemblies that other contractors have sold to the government. The Visual Enterprise Aerospace & Defense software tracks the GFE and makes those parts available only for certain projects and not others. “GFE creates interesting requirements for the defense contractor because the physical inventory and work done to handle and install the GFE has to be tracked while keeping the value of the GFE off the contractor’s books,” says Matechak. Software to manage this tracking is especially important for goods that are progressively assembled by various contractors.
Reach Rich at [email protected] and Matechak at [email protected].
Preparing for the Economic Upturn
“When the economy was booming, companies could ignore inefficient or ineffective maintenance operations and spare parts management. But when companies move into the recovery mode, undoubtedly maintenance improvements will top the list,” says John D’Anna, public relations coordinator for Eagle Technology Inc.
He says that the last time the country went through a major recession, maintenance software was in its infancy. But now the software has proven itself to manage and minimize spare parts inventories and coordinate maintenance tasks across warehouses, across borders.
“In this recession, reducing machinery downtime and consistently producing at capacity will be key to being ready when business improves,” says Mark Moriarty, director of marketing for Rockwell Software.
“Despite September 11, most of our customers have a positive outlook,” says Jan Young, director, business development for Catalyst International. “In fact, if their warehouses are relatively quiet, companies are seeing an opportunity to fine-tune their material handling and supply chain strategies.”
Young says that Catalyst’s Cat-Sim simulation software is helping customers reconfigure their warehouses and picking strategies with equipment upgrades and more efficient throughput in mind.
Warehouse software will play a big role in a recovering economy, says Chris Heim, CEO, HighJump Software. “Warehouse software helps manage the problem of a shrinking pool of qualified skilled warehouse workers as the recession ends. The software helps make each worker you have more efficient, cutting the number of laborers you need overall,” predicts Heim.
In a resurgence, it’s common for interest rates to rise, making carrying costs for 9-11-related safety stock more expensive. Heim says you’ll need warehouse software to help determine where that excess inventory is and how much should be cut when the recovery arrives.
And, of course, as any economy strengthens, competitors emerge. Having a well-managed warehouse is a great tool for keeping current customers happy and reducing overall costs. That’s the kind of competitive software edge you’ll need.
Help in Selecting Warehouse Management Software
Eskay offers a new, interactive software worksheet to put together a checklist of those features you’ll need for a future warehouse software purchase. Armed with this checklist, you can more easily compare among various WMS packages. The software also helps you determine whether an automated or manual handling system will work best for your warehouse.
The worksheet lists 19 warehouse functions, offers a description of that function and tells when you would need it.
Here are some examples:
• Feature: Full Pallet Picking. Description: Used if SKU is designated for full-pallet delivery only. Quantity can be overpicked to the next full palletload. Otherwise, pick quantity is a mix of full pallets, cartons and pieces to fill the quantity requested. Needed if: Customer wants only full pallets of an SKU.
• Feature: Paper picking. Description: Workers pick items from a printed list, noting completed picks and any quantity of changes on the list. When the pick list is completed, it is passed along to key entry operators who update the computer’s database. Much less efficient than RF-directed or pick-to-light picking. Needed if: Picking low volumes and when RF-directed or pick-to-light picking is impractical.
To use this software for free, visit www.MaterialHandlingInfo.com. For questions, contact Gary Dulude at [email protected].
