R&FF Retailer: Can You Be ‘Too Just-in-Time?’

Discussion
Jan 10, 2008

By Dan Raftery, President, Raftery Resource Network

Through a special arrangement, what follows is an excerpt of a current article from Refrigerated & Frozen Foods Retailer magazine, presented here for discussion.

The good news: New technology allows third party logistics (3PL) providers to be incredibly efficient. The bad news: potentially not enough docks, or hours in the day.

Warehouse management systems that connect between supply chain partners’ systems are the cutting edge of inventory efficiency improvements. For example, the internet front-end system at United States Cold Storage (USCS), provides access into all 30 of the company’s warehouses, down to the SKU level.

“Most of our major customers are connected into our proprietary WMS for real-time access to all information about orders, shipments, billing and inventory,” said Jerome Scherer, VP of national sales, marketing and government affairs at the company.

USCS is not alone. Another 3PL provider, RedPrairie, is working on a new program for a retail customer that focuses on improving management of slow-moving items. The program involves consolidation and storage at the 3PL to ship slow-movers and seasonal products closer to “just-in-time.”

“Buyers can see as much detail as the manufacturer allows in this glass pipeline,” observed Dan Grimm, VP, solution consulting for RedPrairie,

Although companies have invested in increasingly sophisticated information systems, a big opportunity remains: to “bridge these islands of automation and move toward more coordinated solutions,” according to Mr. Grimm. The USCS integrated system is one example, and a few others exist as well. However, the bulk of the supply chain still operates and protects its information system islands.

“Transportation traffic congestion is another big supply chain opportunity,” observed Mr. Scherer. Traffic congestion is so bad in major metro markets that USCS is building new facilities far outside the traffic jams so it can at least keep cross-country trucks moving.

“Receiving dock practices such as appointment scheduling is another area of opportunity,” according to Andy Janson, EVP of business development, Hanson Logistics Group.

He pointed to a disconnect that can occur between what the buyer wants and what the DC can handle. As inventories deplete, buyers set delivery dates timed close to the theoretical shipment of the last case. Trouble is, other buyers do the same thing, and the warehouse has only so many doors and so many hours in the day.

Mr. Grimm’s “glass pipeline” sounds like the solution here, because Mr. Janson thinks the industry as a whole does a great job with labor functions at the dock. The real problem is coordination throughout the supply chain with all the players who need receiving docks to function smoothly.

Tony Lucarelli, EVP at Henningsen Cold Storage Co., would like to see fewer last-minute change orders, and Mr. Scherer thinks manufacturers might be under-producing somewhat. Both observations, from people positioned firmly in the middle of the supply chain, indicate the industry could be approaching a critically sensitive level of inventory reduction. As companies work to lower their requirements for operating capital by increasing inventory turns, among other tactics, they run the risk of increased out-of-stocks without one of those “glass pipelines” Grimm espouses.

Certainly, it’s important to continue improving efficiencies. Comments by these industry players indicate that the next big wave could come after bridges are built between the islands of information automation.

Discussion Questions: What do you see as the biggest challenges within the retailing industry when it comes to achieving more efficient warehouse operations? What particular warehouse management solutions have you seen to address traffic congestion, receiving dock bottlenecks and/or managing last-minute orders?

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11 Comments on "R&FF Retailer: Can You Be ‘Too Just-in-Time?’"

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James Tenser
Guest
9 years 11 months ago
Supply chain efficiency has progressed to the point where systems are tightly tuned and therefore very sensitive to variables. We are learning that the practices which optimize the supply chain may de-optimize the shelf, and vice versa. Case pack sizes for slower movers are a good example. An item that merits a single facing based on sales rate may have room for just eight units on the shelf. But supply chain criteria call for 12 units per case, forcing merchandise into back stock, with resultant double-handling at the shelf and other undesirable effects. A shift to a six-unit case pack,… Read more »
Nikki Baird
Guest
9 years 11 months ago
Five years ago I worked for a company that sold glass pipeline-type solutions and the retail industry just wasn’t ready for it. It’s interesting to me that as a solution, it’s coming back in vogue–and solution providers like RedPrairie and Sterling Commerce are selling it exactly the same way it was sold 5 years ago. Inventory levels are at a point where the only way to decrease them any further is to reduce uncertainty around what those levels are and are going to be–and you need visibility and exceptional management to do that. I’m also glad to see the problem… Read more »
Dan Gilmore
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Dan Gilmore
9 years 11 months ago
“Lean” thinking is great, but in almost every industry, there has and continues to be some pushback that at times the pendulum has swung too far. The supply chain runs out of inventory somewhere along the line and impacts customer service, manufacturing, etc. It’s easy to say grocery manufacturers have taken it too far, but this of course depends on overall strategy and a detailed analysis that compares the cost of increasing service versus the increased inventory costs. Some will err on the side of cost, some will err on the side of service. Let the market decide. “Visibility” is… Read more »
Susan Rider
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Susan Rider
9 years 11 months ago
The biggest challenge for the retail industry involving warehouse efficiency is finding and retaining people. The average turnover rate per month for distribution centers is about 40%; some have much more turnover. Therefore, training and employee retention is a major issue. A retailer can have the best automation and best software in the industry but if you can’t find good people and have programs to keep them, you still have a mediocre facility. There are some great industry associations that offer solutions for improving operations, CSCMP (Council Supply Chain Management Professionals) and WERC (Warehousing Education Research Council). There are many… Read more »
Len Lewis
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Len Lewis
9 years 11 months ago
I would suggest looking ast what Tesco has done with the concept of “lean” production in its distribution facilities. They have taken a page from Toyota’s playbook and made lean the underpinning of its global expansion program and a key to the recent launch of the Fresh & Easy convenience concept in the U.S. But when you get down to it we’re talking about creating real partnerships between retail and manufacturing in the entire supply chain–from raw materials to finished product son the shelves. it a combination og ECR, Six Sigma, inventory management, automated replenishment and quality control circles and… Read more »
jack flanagan
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jack flanagan
9 years 11 months ago
Sol Price coined the term “intelligent loss of sales” (w/ particular emphasis on the word–and therefore thought process–“intelligent.” Toyota has spent nearly 60 years in ascendancy in terms of both market share and profitability by selling more while making less. GM, Chrysler and Ford have seen decades of decline by making (and making a lot of it) first and only figuring out how they’re going to sell it later. There’s a lesson here for many FMCG companies and retailers. It starts with a basic, consistent and well-understood philosophy of doing business. If you’ve got such a philosophy, customer expectations are:… Read more »
Dave Allen
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Dave Allen
9 years 11 months ago
This is a fascinating discussion. Having worked in the food industry for a number of years, and aiding in “leaning” out manufacturing following the Toyota model, I have seen mistakes made in simply reducing or eliminating “surge bins” to take the “non-value added” activities out of the process. And really, what are warehouses and distribution centers but primarily “surge”? The mistakes made were that if the rest of the process is not reliable and efficient, the process just shuts down more frequently, and you can’t reduce costs doing that. So the comments above regarding out of stocks and knowing what… Read more »
Bill Bittner
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Bill Bittner
9 years 11 months ago
The challenge with most receipt scheduling systems is that they are not sophisticated enough to consider all the variables. Is the load palletized, slipsheeted, or handstacked? Is the trucker going to unload or is it a backhaul? Are lumpers required or will pallets be removed by hand jacks? Is the trailer double stacked, what are the heights of the various receiving doors, what other constraints exist at particular doors that prevent certain types of loads from being received? And then, of course, there is always the short lead time vendors that pop up with emergency delivery requirements that exceed the… Read more »
Julie Parrish
Guest
Julie Parrish
9 years 11 months ago
I had an interesting experience at Target today, and I think it ties to this topic. Throughout Christmas, the store near me was consistently out of things and there were lots of empty spaces on the shelves. Today, here and across the nation, Target’s toys went 75% off (an annual thing this time of year for them). But I was astounded at how many pallets of toys they were offloading, not because they had over ordered, but because it hadn’t moved through the process in time for Christmas distribution. I spent $300 for $1200 worth of toys this morning that… Read more »
Mark Lilien
Guest
9 years 11 months ago

Everyone in retailing has seen this problem: too many trucks trying to deliver the first day of the month. Most retailers budget their stock receiving by month, so buyers all want their merchandise to arrive the first day. What would happen if inventory receipts were budgeted weekly instead of monthly? And eventually, daily instead of weekly, assuming the budgets smoothed the major peaks and valleys? Retailers and suppliers would all save money and reduce their stress.

Dave Allen
Guest
Dave Allen
9 years 11 months ago

I may be too late, but I have to jump back in…. That 1st day of the month phenomena shows evidence of financial control dictating operating logic in a very narrow way. I’m surprised (but not shocked) there are still companies out there that haven’t learned this lesson. Keeps the consulting business thriving.

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