July/August 2010 $8.00
Cold chain change Publication mail agreement #40070230.
The scoop on NestlÊ Canada’s new ice cream distribution plan
Plus: Cool supply chain software What to do when racking collapses Order-picking: should you automate? Why communication skills matter
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Taking Stock
What’s your burning platform? T
he economic catastrophes of the past few years have made many shippers leery of predictions. With so much uncertainty out there, forecasting your own company’s business patterns is tough. Knowing where your partners in the supply chain are headed is even tougher. But it’s crucial to do it anyway. In our cover story on the transformation of Nestlé Canada’s ice cream supply chain (see page 12), vice-president of physical logistics Mike Owens talks about the big internal and external changes affecting the company. Slowly but surely, a significant portion of its grocery client base is adopting a new flow-based way of doing business that isn’t necessarily compatible with the way the ice cream maker has traditionally managed its distribution. And within the company, a commitment from head office to acquire more lines of business makes reliance on static bricks-and-mortar less than ideal.
The company’s leaders realized what was going on and are working on altering operations to accommodate the new reality. They’re currently shaping the transition. At first glance, this appears a simple cause-and-effect response. But there’s a key differentiator. Nestlé Canada’s leadership team—gathered at an off-site strategy meeting away from the distractions of daily work—was able to preemptively identify what was changing and see how those changes would affect the company. With that understanding, the way forward became clear. Owens likens inactivity to standing on a burning platform. Had the company not recognized the need to move forward, it would have soon found itself in a very problematic situation. In the shifting dynamics of today’s intertwined supply chains, you should be watching for such burning platforms. It doesn’t have to be something your clients are doing. It could be poor technology or misalignment with a vendor. Situations change. Companies change. If you don’t take the time to critically evaluate the situation, you might get burned.
July/August 2010 | Volume 55 | Number 5
Features
Contents
12 Cold chain change Nestlé Canada is transforming its ice cream distribution operations to be more responsive to its evolving business demands. We get the scoop on how it’s happening. 17 • A new way to transport live lobsters by ship; • What food shippers need to know about pallets; • What smarter food chains will look like; and • New products for temperature-controlled shipments. 24 Cool software An update on some of the latest supply chain programs, plus a list of questions to ask when choosing a WMS.
Columns 28 29 30
Learning Curve Why communication skills matter. Materials Handling How to take on threats to data security. Firefighter What to do when racking collapses.
Departments 3 5 6 8 10
Taking Stock Supply Chain Scan Global Focus Movers + Shakers Done Deals
26 Order-picking showcase The case for going paperless, plus innovative new order-picking tools. MM&D | July/August 2010
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Canso update Big step forward for Melford’s greenfield container hub, page 10
Supply Chain Scan
Inside | New tunnel? Page 6 www.mmdonline.com Publisher/Editor-in-Chief: Emily Atkins (416) 764-1537 emily.atkins@rci.rogers.com Group Editorial Director: Lisa Wichmann (416) 764-1491 lisa.wichmann@rci.rogers.com EDITOR: Deborah Aarts (416) 764-1538 deborah.aarts@rci.rogers.com MANAGING EDITOR: Deanna Rosolen (416) 764-1533 deanna.rosolen@rci.rogers.com ART DIRECTOR: Stewart Thomas (416) 764-1547 stewart.thomas@industry.rogers.com SALES MANAGER: Dorothy Jakovina (416) 764-1550 dorothy.jakovina@rci.rogers.com SENIOR ACCOUNT MANAGER: Catherine Martineau (647) 988-5559 catherine.martineau@rci.rogers.com PRODUCTION MANAGER: Kristen Hrdlicka (416) 764-1692 kristen.hrdlicka@rci.rogers.com CIRCULATION MANAGER: Celia Ramnarine (416) 932-5071 rogers@cstonecanada.com Rogers Publishing Limited President and Chief Executive Officer: Brian Segal Rogers Business & Professional Publishing Senior Vice-President: John Milne Vice-President, Financial Publishing, Brand Extensions & Online Services: Paul Williams Director of Audience Development: Keith Fulford (416) 764-3878 keith.fulford@rci.rogers.com Executive Publisher, Industrial Group: Tim Dimopoulos (416) 764-1499 Corporate Sales General Manager, Corporate Sales: Sandra Parente, (416) 764-3818 Web General Manager, Online Operations: David Carmichael, (416) 764-3820 research Senior Director, Rogers Connect Market Research: Tricia Benn (416) 764-3856 tricia.benn@rci.rogers.com events General Manager, Conferences & Events: Stephen T. Dempsey (416) 764-1635 steve.dempsey@mtg.rogers.com How to reach us: Materials Management & Distribution, established in 1956, is published 8 times a year by Rogers Media Inc. Rogers Publishing Ltd., One Mount Pleasant Road, Toronto, ON, M4Y 2Y5. Montreal Office: 1200 avenue McGill College, Bureau 800, Montreal, QC, H3B 4G7 Subscription Price: Canada $62.00 per year, Outside Canada $120.00 US per year. MM&D is published 10 times per year except for occasional combined, expanded or premium issues, which count as two subscription issues. Subscriber Services To subscribe, renew your subscription, change your contact information or address, please visit us at www.rogersb2bmedia.com/mmd Publications Mail Agreement #40070230, ISSN: 0025-5343. Return undeliverable items to: MM&D, Circulation Dept. 8th Floor, 1 Mount Pleasant Ave., Toronto, Ontario M4Y 2Y5. Mail Preferences: Occasionally we make our subscriber list available to reputable companies whose products or services may be of interest to you. If you do not want your name to be made available please contact us at rogers@cstonecanada. com or update your profile at www.rogersb2bmedia.com/mmd MM&D receives unsolicited features and materials (including letters to the editor) from time to time. MM&D, its affiliates and assignees may use, reproduce, publish, re-publish, distribute, store and archive such submissions in whole or in part in any form or medium whatsoever, without compensation of any sort. MM&D accepts no responsibility or liability for claims made for any product or service reported or advertised in this issue. MM&D is indexed in the Canadian Business Index by Micromedia Ltd., Toronto, and is available on-line in the Canadian Business & Current Affairs Database. MM&D acknowledge the financial support of the Government of Canada through the Canada Periodical Fund (CPF) for our publishing activities. Our environmental policy is available at www.rogerspublishing.ca/environment
Big thinking in Regina PMAC conference stresses strategy By Deborah Aarts
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here were plenty of big ideas thrown out at the annual conference of the Purchasing Management Association of Canada (PMAC), held in Regina, Saskatchewan in June. The conference—which attracted nearly 500 delegates—opened with the formal launch of the association’s new designation, Supply Chain Management Professional (SCMP), which replaces the Certified Professional Purchaser (CPP) accreditation. For the next two days, industry experts shared some of the leading-edge supply chain strategies they’re deploying to thrive in this uncertain postrecession economy. For Walmart Canada, it’s product flow. Jeff Kelly, general manager of food and consumables, west at Supply Chain Management Inc—Walmart Canada’s 3PL—explained to delegates how its inventory-light distribution model for perishables is dramatically reducing the cost of goods sold. The secret, he said, is to shake up traditional sourcing patterns. “Local sourcing is vital. It gives us the ability to react.” For contract manufacturer Celestica Inc, the next big thing is measuring total cost of ownership. To get the best read on it, the company—which spends $4.8 billion on supply chain activities—has created a proprietary scorecard for its 5,000 active suppliers. The detailed scorecard has allowed the company to lower overall costs in surprising ways. “There have been times we’ve bought from more expensive suppliers, but the cost is less overall,” explained Jim Simpson, the company’s senior director of supply chain management and engineering services. “But we had to develop metrics in order to do that.” Conference chair Leah Bach summed up the spirit of transition dominating the conference. “PMAC has truly embraced the winds of change,” she said. Delegates were left with no doubt that everyone in the profession must do the same.
Make www.mmdonline.com your homepage Here’s a sample of recent daily headlines from our website: CareGo revamps steel facility for containerized cargo Lockout ends at Port of Montreal The Rx for healthcare supply chains Aéro Montréal launches new supply chain plan Cargojet sells regional business TransForce buys 52-door cross-dock Ontario truckers call for better livestock transport regs We’d like www.mmdonline.com to be your first stop for Canadian supply chain news. Please let us know what you think by emailing Deborah Aarts at deborah.aarts@mmd.rogers.com.
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MM&D | July/August 2010
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Supply Chain Scan
New rail tunnel for Detroit-Windsor?
The 101-year-old under-river rail tunnel linking Windsor, Ontario and Detroit, Michigan might be up for replacement. Earlier this summer, the Windsor Port Authority (WPA), Canadian Pacific Railway (CP) and Borealis Infrastructure (a division of the Ontario Municipal Employees Retirement System) formed a public-private partnership to pursue opportunities for the development, funding and construction of a replacement rail tunnel under the Detroit River. The new entity is called the Continental Rail Gateway (CRG) coalition. The current freight tunnel opened in 1909. It handles approximately 350,000 railcars each year and remains, in the words of the CRG, in excellent condition. But the tunnel cannot handle double-stacked nine-foot, six-inch containers or some new generations of multi-level railcars used by shippers and auto manufacturers. The tunnel clearance was enlarged in 1994, and cannot be expanded further. According to the CRG, replacing the tunnel will make the region more competitive as a logistics hub for manufacturers, agricultural shippers and other importers, since it would allow double-stacked container trains to travel all the way from the Port of Montreal to Chicago. The CRG has submitted a project description to Transport Canada as the first formal document submitted under the Canadian Environmental Assessment Act. If given the go-ahead, the project would take three years to complete and create over 2,200 direct and indirect jobs. Each member of the CRG has agreed to work to raise awareness of the project’s value among government and industry stakeholders on both sides of the border.
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Global Focus
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Automated food warehouse in Mexico Mexican food producer Congelados de la Hacienda opened a new freezer warehouse near Leon, Mexico and contracted Westfalia Technologies Inc to design, manufacture and install an automated storage and retrieval system (AS/RS) running on Savanna.NET warehouse management software. The facility includes nine-level-high racks storing six pallets deep, with a total of 4,524 pallet positions. The warehouse will process fresh produce and then quickly freeze it in a storage area set at -20 degrees Fahrenheit. The Westfalia logistics equipment in the new building includes the AS/ RS, in-feed conveyors leading from the receiving docks to the frozen storage area and out-feed conveyors to the shipping docks. What do Brazilian shippers outsource? For companies in Brazil the total landed cost of importing products is a massive challenge. In fact, in a recent study of Brazilian supply chain executives, seven out of 10 respondents said so. The study, which was conducted by BDP International in Brazil, found Brazilian companies recognize the impact of the total landed costs of imports on their profitability and competitiveness. Many of them are transferring the process—and accountability for import documentation and compliance penalties—to third-party service providers. In addition, more than 60 percent of the respondents are increasingly outsourcing their transportation-related functions, with nearly half reporting greater outsourcing of global logistics and lead logistics provider management support as well.
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MM&D | July/August 2010
Professional Development Directory Advertorial
Mount Royal University’s Supply Chain Management Certificate Accredited by the Canadian Supply Chain Sector Council
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n June 2010, Mount Royal University Faculty of Continuing Education and Extension’s Supply Chain Management Certificate program was accredited by the Canadian Supply Chain Sector Council through its National Accreditation Program (NAP). As Calgary continues to grow as a hub of supply chain activity, the demand for well-trained accredited personnel is increasing. Ken Banting and Amanda Mercado recognized the demand and registered in the Supply Chain Management Certificate program where they explored the fundamental topics and components of working within supply chains, including distribution, inventory control, e-business and procurement. Banting, an employee at Big Rock Brewery, says “I have learned many things to apply to my present job and am presently implementing much of the information obtained.” The Supply Chain Management Certificate consists of nine required courses and a final paper.
“The Introduction to Supply Chain Management course was excellent. It covered all aspects of the supply chain. It was great having teachers who worked in the field bringing life experience into the classroom,” says Amanda Mercado. Mount Royal’s program teaches students to treat supply chain management as a business approach that focuses on integration and partnerships in order to meet customers’ needs in a timely manner, with relevant and high-quality products, produced and delivered in a cost-effective manner. So if you are a supply chain professional, consultant or seeking a career in this growing field, you might want to acquire a broader knowledge of how different parts of supply chains fit together as well as your accreditation. For more information, please contact Business Education & Training at cebusiness@mtroyal.ca, 403.440.7785 or http://conted.mtroyal.ca/supplychain
ACHIEVE A CIFFA CERTIFICATE IN INTERNATIONAL FREIGHT FORWARDING! Topics include: understanding exporting and importing; transport geography; terms of trade; land transportation; air freight; and ocean freight.
e-Learning or evening Classroom www.ciffa.com/index_education.asp
Attend a free information webinar to receive a $50.00 DISCOUNT off the Non-Member Program fee
Contact: education@ciffa.com, (416) 234- 5100, ext. 225 CIFFA Freight Forwarding Programs have been validated and are recognized by FIATA, Switzerland and the Canadian Supply Chain Sector Council.
Can you imagine... mastering the supply chain Take our Supply Chain Management Certificate program. Information: 1.888.392.3655 or cebusiness@mtroyal.ca Registration: 1.877.287.8001
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Supply Chain Scan
How couriers stack up Shippers having difficulty deciding which courier is best have a new tool created to make the job easier. Breininger & Associates Inc has released its annual “Major Canadian Courier Company Organizational and Service Comparison Report,” a document meant to help shippers compare the top eight courier companies working in the Canadian market across 150 different operating and service-related variables. The report compares Canada Post, Canpar, DHL, FedEx Express, FedEx Ground, Purolator, TNT and UPS. The report reveals some noteworthy disparities in the capabilities and practices of these companies.
CSCSC elects new board Dwayne Hihn is the new chair of the Canadian Supply Chain Sector Council (CSCSC). Hihn—who is president of Manitoulin Global Forwarding—succeeds Don Borsk, chief operating officer at Metro Retail Supply Chain Solutions, who has held the position since the council’s inception in 2006. Borsk will remain on the board as past chair for two years. “The needs of employers, along with those of current and future employees, in the supply chain sector are constantly evolving,” Hihn said. “The CSCSC, working together with all of our partners, provides a great opportunity to unite our sector to ensure we have an energized, talented and sustainable labour force today and in the future.” The CSCSC elected its new executive committee at its annual general meeting in Halifax, Nova Scotia earlier this summer. Vice-chairs of the executive include David McCormack of Pivotal Action Force Industrial Staffing Solutions, Darren Christle of Manitoba Infrastructure and Transportation’s Motor Carrier Division and Maria Lindenberg of Chevron Global Downstream LLC. In total, the board now includes 20 directors, two observers and one ex officio member. >
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The Industrial Designers Society of America recognized New Bremen, Ohio-based Crown Equipment with an International Design Excellence Award (IDEA) for its Crown ESR 5000 Series of narrow-aisle reach trucks.
For instance, five of the eight companies offer US drop-shipping program. Six of the eight provide freight forwarding services and Customs brokerage. All but one provide supply chain design, consulting and management services. And only one provides temperature-controlled services. The report also compares standard rates, surcharges (for things like oversized packages or dimensional weights), geographical reach and service hours. For more information, please visit www.breiningerassociates.com.
Movers + Shakers Vera Friedrich has been appointed CEO and vice-president, sales for Dematic’s Canadian operations. Before joining Dematic, Friedrich held senior sales and management positions at ABB in Canada and Switzerland and the Otto Group in Germany. Dematic is has also appointed Dominic Caranci, PEng, territory sales manager for the Toronto and Eastern Ontario region. Caranci brings with him over 14 years of progressive experience including technical support and application engineering, product portfolio marketing and business development. Rob Segsworth has been named operations manager for North America at Mississauga, Ontario-based logistics provider The Ranger Group of Companies. Segsworth comes to Ranger from FedEx, where he most recently served as senior logistics manager. Damco, the combined brand of AP Moller-Maersk’s logistics activities, has hired Mark Michaels as the new chief commercial officer for North America. He will be based in the company’s head office in Madison, New Jersey. Connecticut-based real-time location and supply chain visibility solutions provider Precyse Technologies has named Andy Mullins its CEO. Mullins brings more than 25 years of executive experience in leading software and wireless communications companies. Donald Neville has joined enterprise software company Reddwerks of Austin, Texas as senior vice-president and CFO. Neville brings more than 25 years of financial management experience in the technology sector. Supply chain software provider RedPrairie Corporation has shaken up its senior management by hiring Joe Juliano as president, Americas, and Doug Braun as president, global operations. Waukesha, Wisconsin-based warehouse equipment provider Wildeck Inc has appointed Michael Galezio quality assurance/ safety manager for its North American operations.
MM&D | July/August 2010
Supply Chain Scan
Canso container terminal takes big step forward Melford and Maher partner to manage greenfield site Melford International Terminal (MIT) has achieved a significant milestone “Maher’s experience makes them an ideal in its effort to develop a container terminal on the mainland side of the partner for Maher Melford Terminal,” Martin Strait of Canso in Nova Scotia. said. “This terminal will, in many ways, be an New Jersey-headquartered Maher Terminals has signed an agreement East Coast version of Prince Rupert.” MM&D to become a shareholder in and provide services for the new terminal, which will now be called Done Deals Maher Melford Terminal. Melford first announced plans for the terminal MOL has selected Waterloo, Ontario-based Descartes Systems in May 2007. Over the following year and a half, Group to help manage its container division’s European Union it secured funding and recruited staff. In October import control system Customs filings. Descartes will help 2008, it received environmental assessment manage import security filings into Belgium, Germany, the approval for the project. Netherlands, UK, France, Spain and Italy. The scope of the project The centre will include a 315-acre container terminal, intermodal on-dock rail capabilities and a 1,500-acre logistics park. It will also include deep-water berths of 60 feet at mean low water, an ice-free 100-foot deep channel and no air draft restrictions. The terminal will connect to interior North American markets through CN’s East Coast Mainline intermodal rail service. When phase one of the US$350-million terminal is complete, it will include two berths and an initial capacity of 1.5 million twenty-foot equivalent units (TEUs) per year. Organizers aim to commence commercial operations by 2013. Maher is expected to bring significant expertise to the endeavour—as the operator of the three-year-old container terminal in Prince Rupert, British Columbia, it has been involved in developing such an enterprise before. President and CEO John Buckley said the Canso container terminal presents a great opportunity to build a “comprehensive and highly efficient” container gateway on a greenfield site. “Such opportunities are rare and the increased capacity and efficiencies realized from a modern terminal are substantial,” he said. Paul Martin, president of MIT, said Maher’s work in Prince Rupert makes it a good fit as a contributor to the venture. >
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In Transit Personnel, a Mississauga, Ontario-based recruitment and staffing firm for the transportation industry, celebrated its 15th anniversary in June.
Montreal, Quebec-headquartered SNC-Lavalin has awarded Kuehne + Nagel a contract for global logistics services related to its 785-million Euro project with Sonatrach, Algeria’s national oil and gas company. The agreement covers the complete logistics services for the construction material and equipment in connection with the project. Kuehne + Nagel is delivering the services in cooperation with its Tunisian partner SMTI Transport & Logistics. Plug Power Inc and Ballard Power Systems Inc have extended their existing supply agreement. Ballard will remain the exclusive supplier of fuel cell stacks for Plug Power’s full suite of GenDrive power units. Plug Power will become the exclusive systems integrator for Ballard’s fuel cell stack into solutions addressing the material handling market in North America. Plug Power Inc has also announced that its GenDrive fuel cell units will power Walmart Canada’s fleet of electric lift trucks at the company’s sustainable refrigerated distribution centre in Alberta. TransForce Inc has entered into a definitive agreement to acquire an equity interest in EnQuest Energy Services Corp of Calgary, Alberta. The deal includes all of the oilfield transportation assets of EnQuest’s operating subsidiaries, including Speedy Heavy Hauling Inc. Con-way Freight of Ann Arbor, Michigan has expanded its relationship with Caterpillar Logistics Services Inc. Con-way will now provide all less-than-truckload (LTL) freight carriage for Caterpillar from 27 US states, as well as service into and out of Canada and Mexico. Con-way has provided LTL services to Caterpillar since 2009. APL Logistics and Japan’s Sumitomo Warehouse Co have formed an alliance to jointly market global supply chain services. Under the agreement Sumitomo will offer its logistics capabilities in Japan to APL Logistics customers. In turn, APL Logistics will make its global services available to Sumitomo customers.
MM&D | July/August 2010
Cold chain change
The scoop on Nestlé Canada’s new ice cream distribution plan
Managing an ice cream supply chain is a delicate balance of expertise, diligence and responsiveness. Over the years, Nestlé Canada Inc has mastered it. So why is it tweaking the formula now? Deborah Aarts digs in.
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t’s a scorcher of a day. The sun is pounding down through the heavy air; Keeping it cool its heat reverberates off the sidewalk. Walking down the street, sweat It’s hard to overstate the complexities of Nestlé beading on your forehead, you decide you could go for some ice cream. You Canada’s ice cream distribution processes. enter the corner store, make your choice, pay and tear into the frosty treat. It starts out simply enough: everything is made Suddenly, the stifling weather doesn’t seem so bad. in large batches at the London plant. Variations on this scenario take place across Canada every summer. “We might run one product—like pralines and Millions of people depend on ice cream to be there when the need to cool cream, for example—for two straight days,” down takes hold. explains Mike Owens, the company’s vice-president Getting it there is quite a job. of physical logistics. Once it’s made, the product Ice cream supply chains are uniquely complex. There are few food does not stick around for long. “We have no commodities more demanding of pure cold during storage and transport— distribution capabilities in our factory; it’s just a and few more intolerant of any deviation from it. Like most frozen products, holding facility. As soon as the ice cream has cleared ice cream is subject to rigorous quality control checks. Topping it all off, quality, we disperse it to the DC network.” demand can spike or plummet as quickly as the weather changes. Once a product is manufactured, a supply Over time, Nestlé Canada has mastered the nuances of this process. As planner decides where in the network it should the maker of such brands as Parlour, Häagen-Dazs, Real Dairy, Drumstick go. This is when the trickier elements creep in. and Dibs, it makes more than 500,000 deliveries each year, most of which In order for ice cream to be sellable, it can go directly to stores. Its logistics network was built to support such a model, never sit in temperatures warmer than -20 with one factory in London, Ontario supporting five distribution centres degrees Celsius. To minimize any risk of spoilage across Canada: three owned by Nestlé (near Toronto, Montreal and during transport, Nestlé Canada mandates that Edmonton) and two run by third-party logistics provider VersaCold (near all trailers must run at -25 degrees. In the DC, Vancouver and Winnipeg). -28 degrees is the standard; for long-term storage, But the established ways of doing business are changing, and so is Nestlé it’s even colder. Canada. The company is currently in the middle of a major overhaul of its “There’s no other category that needs this depth distribution strategy. The question is: why? of cold,” Owens points out.
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MM&D | July/August 2010
These ultra-frosty standards are crucial to Nestlé Canada has a number of strategies in place to avoid compromising successful delivery, and the company fastidiously the DC environment. If needed, it can reschedule activity; during a holds its supply chain partners to them. particularly humid period about three years ago, for example, it moved Virtually all of the transportation is outsourced. workflow at its Toronto-area facility so that workers were only loading and A full 100 percent of factory-to-DC or DC-to-DC unloading trucks at cooler times in the day. transfers are conducted by third parties. Any ice It also chooses facilities carefully. Most freezer DCs are built to handle cream going to Western Canada is sent via normal frozen food temperatures (which hover around -18 degrees), not intermodal railcar, a measure designed to reduce -28 degrees. If a building isn’t engineered properly, that 10-degree drop in both the carbon footprint and the cost of shipping. temperature can be disastrous. The rest goes by truck. With the exception of a “In some facilities, the engineers will crank down the temperature of the very small portion, distribution from the DCs to room. Frost will travel through the room and end up down in the flooring. stores is handled by outside parties as well. Next thing you know, the floor starts to crack and heave,” Owens explains. In the past, the company required that all To prevent this, the company chooses facilities with features like trucks be pre-cooled to -26 degrees before picking ammonia systems to pull down the temperature and floor spacers to prevent up any load at the factory or a DC. It’s since the spread of cold. changed the rules because trucking companies had difficulties maintaining that baseline in high A changing business humidity without a load. Instead, the trailers must Nestlé Canada’s ice cream supply chain practices have been, and continue to be chilled to the temperature of the loading dock— be, effective—they’ve helped the company hit fill rates of between 98 and 99 typically a few degrees warmer—but running at percent—but they are not cheap. Nor have they allowed the company much -25 as soon as the load is on. flexibility; in maintaining three very specialized bricks-and-mortar DCs, the All trailers on trips longer than 12 hours are company has been bound to expensive assets with limited potential for now equipped with Bluetooth-enabled temperature scalability. monitors. That allows the company to download With a changing business environment, the company has become less temperature readings as frequently as it likes—and and less comfortable with this situation. The problem was not the
“ There’s no other category that needs this depth of cold.” to know as soon as something drops out of spec. “We really have solid, end-to-end tracking of temperatures, from the time we produce it in the factories to the time we receive it in the DC,” explains Greig Jewell, director of national warehousing and inventory control. Within the DCs, temperature control is equally strict. Each facility is equipped with carefully calibrated monitors and alarms, with a team of on-site engineers in charge of the refrigeration system. At least once a year, the company will do a full test to make sure it’s all in good order. In the unlikely event that part of the freezer system fails, the engineers would first investigate the situation. If the problem is big enough, workers will isolate the effects by closing doors and restricting traffic. If there is a major failure, the whole facility will shut down. Thankfully, the company hasn’t had to resort to such a drastic measure. One of the more frustrating aspects of distributing ice cream is that the time when business is busiest is also the hottest season of the year. The more activity in a DC, the more dock doors have to open and close; the more outside air sneaks in, the tougher it becomes to maintain freezer temperatures. MM&D | July/August 2010
temperature-controlled standards, the locations of the DCs nor the transportation routing, but the rigidities created by keeping its own facilities. Approximately three years ago, it became clear that a change was in order. Two trends in particular made this necessary. The first was the shift among customers—principally grocers—to move to flow-based inventory models. With Loblaw leading the way, many companies are cutting off direct-to-store deliveries made by manufacturers (including Nestlé Canada) in order to move product through their own DCs. As part of the process, these retailers are pressing to pick up shipments at the factory. Because of Nestlé Canada’s lack of factory storage capabilities, this isn’t an option, but there are more requests to pick up product at the DC. This is expected to greatly affect Nestlé Canada’s transportation operations. When grocers take over much of the hauling, the company will find itself with far less to move—which Owens says presents a problem in certain geographies. “Suddenly, we’d end up with trucks running a lot of air. We can do some route engineering and draw back on the number of trucks, but if I’m somewhere like Sudbury, Ontario with one truck, I can’t cut that down to half a truck.” Things will have to change within the DCs, too. When grocers move to flow-based models, their suppliers cannot continue to manage inventory as they did before. More frequent orders must be picked and staged differently. “We had to take a look at our DCs and how everything was laid out within them,” Owens adds. “Our bricks and mortar weren’t going to support what was coming at us in the ice cream category.” The second trend signalling a need for change was within Nestlé Canada’s parent company. The global company has been very open in its plans to
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spend two to three billion Swiss francs each year on bolt-on acquisitions. Some of these will likely fall into the frozen foods category; in fact, earlier this year the company purchased the Delissio line of frozen pizzas from Kraft. It’s possible these items could end up sharing delivery and storage space with ice cream. With new categories of food coming in, it has become increasingly difficult to justify owning dedicated facilities for ice cream alone. Time to outsource With these two trends building, Owens and his team sat down to reconsider Nestlé Canada’s approach. They talked about the challenges on the horizon and what the business would look like three to five years out. “We needed to look at the shifting marketplace, our customer’s strategies and the company’s strategies. We thought that all through,” he recalls. “Originally, this was a project to help us manage variability, not only of our supply based on seasonality but as our customers reorganize their own supply chains,” adds Jewell. The team’s plan kept the cold chain best practices cultivated over the years more or less as they were. The biggest change involved who would be doing the work. To become more flexible, Nestlé Canada would pull out of its own facilities once the leases expired and hire a third-party logistics provider to handle its warehousing services. “With ice cream, we realized that in order to have the infrastructure necessary to support the future business, we’d have to move to a 3PL,” Owens explains. “We wanted to partner with someone who could provide full visibility or, at the very least, move us into some type of shared-user facilities.” Of course, outsourcing was nothing new to Nestlé Canada—its Vancouver and Winnipeg facilities had been third-party run for years. But handing off the whole business would require some serious thought. Owens and his team developed a high-level scope document for the project and clearly defined the deliverables. They then formed a steering committee and got executive sign-off to proceed. From there, it was time to choose a partner. The team submitted the scope document to a consultancy—Montreal, Quebec-based KOM International—which agreed to help with the request for proposals (RFP) process. Taking the time to do this right was crucial, Owens recalls. “The more you put up front in the RFP and the cleaner your data, the more accurate feedback you’ll get from the vendors. There will be fewer surprises down the road.” Working with KOM, the committee created a list of potential vendors and made contact with them to let them know an RFP was coming. Attached to the correspondence was a letter of confidentiality; if the vendors wanted to proceed, they would have to sign it. Those who did sign off were given a copy of the RFP.
To make the process as fair as possible, Nestlé Canada answered all questions submitted by vendors during a set period and shared the answers with all bidders, a measure intended to level the playing field as much as possible. Once the bids were in, the committee called on three shortlisted vendors to make presentations. After evaluating the data and running through a series of ‘what if’ scenarios, the team selected VersaCold—the same company it was working with in Vancouver and Winnipeg. Nestlé Canada drafted a letter of intent and went on a tour of some other VersaCold facilities. One DC in California offered a glimpse of what Nestlé Canada wanted at its Canadian facilities: things like an in-house WMS, voice-picking and task management. Versacold’s willingness to invest in such technology was a big draw. “They needed to be leading-edge with warehouse management...
“ It’s a long-term relationship. They’re not looking for a quick profit, we’re not looking for quick cost savings.”
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MM&D | July/August 2010
to play with the large companies, and that’s exactly Making the switch what they’ve done,” Owens says. Nestlé Canada is currently right in the middle of switching its warehousing The committee set out a contract that included activities over. Running off a transition plan with some 1,200 action items, not only the terms of the agreement, but the intent all parties are working to make the transition as seamless as possible. VersaCold behind each of the terms as well. “In the event has been working to upgrade the five DCs—which are located in the same that one of us gets hit by a bus or moves on to five cities as before—with WMS and voice-picking technology. another company and new managers come into The two companies have held weekly meetings to talk about the place, we’ll have a document that says ‘this is the knowledge transfer involved in the transition—everything from electronic intent of the clause,’” says Owens. data interface to SAP integration to route accounting, inventory control He adds that Nestlé Canada’s familiarity with and customer service, to name just a few factors. Versacold has helped, but he’s under no illusions “Now we’re drilling down into how we learn it, how we teach it, what it that the transfer will be flawless. “We’re in with takes and who owns what,” Jewell says. “We have [VersaCold] on site at our a partner we’re familiar with; it’s not like we’re site, and our supervisors are working with them at their sites.” working with an unknown entity. But even so, The actual cutover is slated to take place later this year, but the plans are we’re looking for areas where there might be issues already set out. “That’s very technical, because it involves moving customers’ and identifying them upfront.” goods from one site to another, changing route numbers for our distributors “It’s a long-term relationship,” adds Jewell. and switching all the handheld communications infrastructure,” Jewell adds. “They’re not looking for a quick profit, we’re not “It’s not just a case of picking ice cream from a different location.” looking for quick cost savings.” There’s one area of the transition the company has taken extra steps to manage proactively: staffing. The closure of three of Nestlé Canada’s DCs will mean that most employees at the facilities will find themselves out of a job once the changeover takes place. The team wrestled with how to handle this. Should they keep quiet and risk workers finding out through the grapevine? Or should they let those affected know immediately, which could unleash a torrent of bad morale? “We thought long and hard about whether we should try and hide it from the employees. But that would have created a ton of rumours, and it really didn’t adhere to the values Nestlé espouses,” Owens reflects. So the company told all affected employees that they had 13 months left on the job. That’s 13 months of regular work; to make the situation as fair to workers as possible, severance payments will not start until the DCs close. To prevent morale and safety standards from slipping in the final days In order to be sellable, ice cream must be transported at of the DCs, Nestlé Canada launched a new bonus structure for 2010: every temperatures no warmer than -25 degrees Celsius. quarter, employees with no incidents or health and safety violations are Photo: Nestlé Canada being issued a $500 bonus. “Safety is a concern when you’re closing facilities,” says Owens. “We’re putting a very strong focus on it. The money makes it easier for them to focus on safety; it’s a nice chunk of change that goes to their pocket.” All eyes ahead Knee-deep in a project that has kept the whole team very busy, both Jewell and Owens are fairly confident that the tremendous amount of work to transform the network will make the ice cream supply chain nimble enough to handle whatever’s next. The need for such agility has been reinforced this summer: the company has experienced an unforeseen double-digit spike in ice cream orders. It’s just another example of how volatile the business can be. Had the committee not taken the time to identify and really consider the ramifications of changes looming on the horizon, Owens is not sure how the ice cream business would be faring today. “Our customer’s strategies were in direct contradiction to where we were going,” he says. “Sometimes you need that burning platform.” And he and his team are constantly looking forward to make sure the company is ready to take on the next sea change. “It’s not just me that has my head up, it’s my leadership team. Having that many eyes on the business, we’re more likely to catch a trend sooner rather than later.” MM&D MM&D | July/August 2010
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Lobsters return to the ocean New technology removes reliance on airfreight
By Shaina Luck
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hippers supplying lobster to lucrative overseas markets no longer have to shell out for costly air cargo services. Halifax company Aqualife North America announced recently that it has developed a new shipping container technology that will allow live shellfish to be shipped by sea to its partners in the Netherlands. The containers are standard refrigerated shipping units equipped with a circulation system that moves aerated and filtered water through a series of 20 smaller tanks. Within the tanks, lobsters are packed onto trays. The circulation system keeps the tanks at a temperature of one to two degrees Celsius. The lobsters become dormant and stay that way for the 12-day journey across the Atlantic. Because of this, they are still alive when they arrive at their destination. “It provides a dark, cold, quiet environment that the lobsters like to be in,” says Gordon Neal, president of Aqualife North America. “It simulates the bottom [of the ocean], where they hide out.” Lobster is Atlantic Canada’s most valuable shellfish export. Some 18,000 tons of it are consumed in Europe each year, Neal says, and all of it is currently shipped by air. A water-based transport option holds plenty of
potential advantages. Aqualife says that the price of ocean-shipped lobster can be half that of lobster shipped by air. Furthermore, when measured in carbon emissions, container shipping is pegged as 30 times more environmentally friendly than air. Other types of shellfish Aqualife and its suppliers believe that the lower cost and better ecofootprint will be very attractive to European consumers. Jim Kennedy is the president of Louisbourg, Nova Scotia-based Louisbourg Seafoods, one of the suppliers working with Aqualife. His company processes many species of shellfish, mostly for domestic consumption. “The other products just aren’t valuable enough to fly,” he explains. Kennedy says that he and other suppliers are watching with interest what Aqualife is doing. The goal is to open up new markets for live mussels, clams, oysters and crabs, as well as lobster. Within two weeks of harvest, he believes live shellfish could arrive at most European and Asian ports. “We’re hoping that you’ll be able to ship almost anything live,” adds Derrick Kennedy, senior controller at Louisbourg Seafoods. “If you can ship anything live to the market, that’s what the customer wants—the fresher, the better.” The first Aqualife shipment—two containers containing Louisbourg Seafoods lobster—left the Port of Halifax on May 18. The Kennedys say the ocean shipments still form a relatively small percentage of their lobster exports, but they look for that business to grow in the future.
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MM&D | July/August 2010
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A needed alternative The need for an ocean-based shipping alternative for shellfish came into stark relief when the Icelandic volcano Eyjafjallajökull erupted in April 2010, closing most of the airspace in Northern Europe and grounding hundreds of flights. The eruption left fresh food shippers all over the world scrambling to find alternative ways to get their extremely time-sensitive cargo to market. Clearwater Seafoods, one of the largest seafood processors on the Atlantic coast, estimated that about 10,000 pounds of lobster were stranded by the eruption. If it had occurred a few weeks later, at the height of lobster season, the losses could have been much worse. In general, most in Atlantic Canada’s lobster industry were frustrated by their lack of shipping options. For Aqualife’s Neal, who was preparing to launch the container service, the eruption was something of a blessing because it forced many producers to review their contingency plans. “Thank goodness for that volcano,” he says with a laugh. Currently, Aqualife is packing its lobster containers at a fish plant located
New rules for tomato exporters Canadian companies shipping tomatoes to the US will now need to include an industry-issued certificate of origin with their cargo. The US Department of Agriculture (USDA) has instituted the requirement in an effort to prevent tomato leafminer (Tuta absoluta)— a tomato-damaging insect originating in South America and common throughout the Mediterranean Basin and Northern Europe—from entering the US. According to the USDA, tomatoes produced in Canada may continue to be exported to the US as long as they’re accompanied by a certificate verifying the country of production. Tomatoes produced in the Dominican Republic, Mexico or the US may continue to be re-exported to the US from Canada as long as they are accompanied by this same certificate. Tomatoes originating from any other country, however, are not permitted to enter the US from Canada. This new certificate of origin for tomatoes is very similar to the certificate of origin that has been required for peppers exported to the US since last October. The certificate must be completed and signed by the exporter. Truckers are also required to have a copy of the certificate of origin with an original ink signature or the load will be rejected. The Canadian Food Inspection Agency (CFIA ) is not involved in issuing the certificate of origin. However, blank certificates of origin for both tomatoes and peppers are available from local CFIA offices and grower associations. If a shipment contains both tomatoes and peppers, a separate certificate of origin must be provided for each commodity. Exporters should keep copies of all their certificates of origin and associated documentation (invoices, packing slips, etc) for verification.
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about an hour outside of Halifax. The containers are then transported to the Port of Halifax, where Maersk vessels pick them up for the trans-Atlantic journey. Aqualife has already built a receiving facility in the Netherlands, which it calls an Aquaport. Now it has its eyes set on Halifax. “Our next step is to build a facility here, which we hope to have operational by November 1,” Neal says. The Halifax Aquaport will consolidate inbound shipments from shellfish producers. “That will enable us to step up our production, because working in this facility is not ideal,” he adds. “We can do a lot more from a properly built facility.” Shaina Luck is a freelance writer based in Halifax, Nova Scotia.
How to pinpoint and reduce vulnerabilities “Securing of food safety along the whole food chain is for consumers as important as ever before.” So begins “Vulnerabilities in the Food Chain – A Stakeholders’ Guide.” With food outbreaks making headlines and causing serious illnesses and deaths worldwide, consumers’ faith in the safety of their food supply, in food manufacturers and in the food chain is being chipped away. The guide—which is part of an EU-funded project called Sigma Chain and was put together by 11 partners from the EU, Norway and Brazil— aims to help stakeholders identify and address problem areas throughout the supply chain. It includes a set of recommendations for stakeholders on how to proceed when they identify vulnerabilities and provides advice on how to control food-borne hazards. It also reinforces the point that since animal feed, human food and ingredients are distributed globally, a more global approach to safety is warranted. As the guide says, “A united approach with consistent standards based on sound science and robust controls is required to ensure consumers’ health and consumers’ confidence is adequately protected.” The guide was published last year in print form, but has now been made available free online at www.sigmachain.eu. MM&D | July/August 2010
What would a smarter food chain look like? The world’s food supply chain, according to a standardized data. The benefits include better co-ordination, storage, recent whitepaper from IBM Global Business routing and traceability. The result, according to authors, would be “more, Services, is a marvel. Fresh produce, for instance, safer, higher-quality food delivered when and where it is needed, and with can be shipped around the world only hours after reduced waste and an extended shelf-life.” being picked. But several major stresses are appearing in the system that feeds roughly six Entropy wins award, sells Greenbox line billion of the Earth’s 6.8 billion inhabitants The whitepaper, “An appetite for change: Entropy Solutions Inc has sold its Greenbox line of sustainable How an interconnected approach to food supply temperature-controlled shipping materials to ThermoSafe Brands, a management can help food growers, producers, division of Tegrant Corporation. Entropy says the reusable, eco-friendly sellers and consumers—and planet Earth,” thermal system will have a broader reach under ThermoSafe. explores how technology can mitigate those Eric Lindquist, Entropy’s CEO, says the partnership allows Entropy stresses and paints a picture of what a smarter to focus on applications for PureTemp, the renewable phase-change food chain would look like. material used in the Greenbox. According to Entropy, Greenbox is According to the authors, the global food the first temperature-controlled shipping container to incorporate supply chain is strained on several levels. At PureTemp technology, which can control temperatures ranging from a participant level, consumers want more dry ice (-65° Celsius) to hot coffee (103° C). information about product sources and contents, Just before the sale, Entropy was awarded top-level Diamond while retailers wrestle with stubborn levels of honours for Greenbox at the 22nd annual DuPont Awards for Packaging out-of-stocks and thin margins. Manufacturers Innovation. Greenbox was recognized for “demonstrating excellence struggle to accurately assess demand and in innovation, sustainability and cost/waste reduction.” synchronize plans with retailers while farmers and growers must contend with pernicious weather, rising input costs, uncertain demand and volatile market prices. Then there are chain-wide issues related to food security and sustainability, including things like contaminations and recalls, population growth, wasted food, changing consumption patterns, water sources, the amount of energy consumed by the food fleet equipment leasing and sales industry and climate change. The authors of the whitepaper don’t temperature control sales and service expect technology to solve all these stresses. But used globally by all stakeholders in the scheduled fleet maintenance chain, it can, for one thing, enhance overall supply chain visibility. Stakeholders throughout the chain can reduce waste and spoilage and create more efficient production methods by adopting sensing and tracing technologies (such as satellites, RFID, barcodes, heat and moisture monitors and global positioning systems). Disparate ranches, farms, packers, feedlots, storage providers, processing plants, warehouses, distribution centres and retail sites can all use such technology to share 905·670·8958 data and insights into food consumed far from where it was grown or raised. we sell simplicity. A smarter food chain will allow participants to capture, leverage and share
Temperature control fleet management starts with the basics.
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MM&D | July/August 2010
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Know your pallets
Panel talks cost, technology and plastic vs wood By Deborah Aarts
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ost food shippers rely on pallets at some point in their supply chains. Whether used to transport raw materials to the production plant or packaged fare to grocery stores, pallets play an important role in the efficient movement and storage of food products. Traditionally, the average supply chain professional working in the food sector has spent relatively little time thinking about pallet use. But with food safety a top-of-mind concern and a host of technological and regulatory developments in the works, the time for apathy is over. This observation emerged from a group discussion at the annual general meeting of the Canadian Pallet Council (CPC) in Toronto, Ontario earlier this year. Taking part in the conversation were Brad Henderson (national director of business technology – logistics at Sobeys Inc), Belinda Junkin (president and CEO of the CPC), Todd Kostal (director of purchasing and logistics at Atlantic Packaging Production Ltd), Brian Parteno (vice-president of logistic services at Maple Leaf Consumer Foods) and Clint Sharples (president and CEO of Paramount Pallets Inc). RFID update One pressing issue—particularly among grocers and their suppliers—is the status of RFID adoption. A few years ago, many expected major grocery chains to mandate the use of the technology to track shipments, a prospect that some suppliers viewed with trepidation. So far, there has yet to be any widespread adoption of RFID in grocery supply chains. Henderson shared his thoughts as to why. “The technology is just not there in the grocery industry,” he said. “We’d have to put in portals at our distribution centre docks and install forklift readers and other readers. And we’d have to install portals at our stores. For that investment, the gain is really not there for us at this point.” Until equipment comes down in price, Junkin added, adoption will likely continue to be slow. “It’s not a question of when the tags will be ready to go on the pallets, it’s when the supporting infrastructure will be in place,” she said. Plastic fantastic? The group also waded into the contentious debate over whether wood or plastic pallets are better for food shipments. Given the increasing regulatory requirements wood pallets are subjected to—most notably, International Standards For Phytosanitary Measures No 15 (ISPM 15), which requires all wood packaging materials to be heat-treated or fumigated to stem the spread of invasive species—most on the panel agreed that plastic pallets do hold some appeal. And with burgeoning players like US-based Intelligent Global Pooling Systems (iGPS) aggressively targeting the Canadian market, there may soon be lots of choice on the market for pallet users. There are dozens of arguments and counter-arguments circulating about the sanitary properties of plastic pallets. In the absence of any clear industry
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consensus on the issue, the panelists focused on the dollars and cents. In that respect, they aren’t sure that plastic is the answer. While plastic pallets can be reused multiple times, Sharples said that the higher upfront cost is a deterrent for many potential users. Parteno added that there would have to be solid proof of broad, industry-wide adoption before most food manufacturers shell out the extra cash. “If we’d move toward a plastic pallet, it would have to be very widely accepted.”
iGPS receives safety certification While the jury is out about whether wood or plastic pallets are safer for food shipments, iGPS has achieved a ringing endorsement of its plastic pallet’s sanitary properties. The pallet has received Food Equipment Certification from NSF International, a US notfor-profit public health and safety organization. The certification indicates that the pallet complies with the highest established food protection and sanitation requirements for materials, design, fabrication and construction of food handling and processing equipment. To receive certification, food-related equipment is required to be designed to prevent the infestation of pests and the accumulation of dirt and debris. It must allow for easy inspection, servicing and cleaning. The NSF undergoes rigorous testing and conducts production facility audits to verify a piece of equipment’s compliance with its requirements. Going forward, NSF will perform annual audits of iGPS’s production facilities to ensure the standards are met. “NSF International examines the materials that come in contact with food and reviews the construction design against the standard requirements to ensure cleanability and prevent the [growth] of bacteria,” explained Joe Phillips, general manager of the Food Equipment Program at NSF. “The NSF Certification Mark on iGPS’ pallet confirms that NSF has assessed and certified its conformity against these requirements.”
MM&D | July/August 2010
4:00 P.M. A major blackout affects the Eastern Seaboard Our freezers’ emergency generators need fuel
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New products Find your food! Purfresh has announced a new release of Intellipur, the company’s informatics service for food shipments. Intellipur was designed to include enhanced tracking of shipments, additional notifications and intelligent traceability. A notable change is that the service now supports geo-fences, which set electronic borders around specific longitude and latitude locations. Subscribers can request to receive automatic notifications throughout a container’s voyage and stay apprised of location-based events from anywhere in the world. Another feature is the extended menu of on-trip notifications and automatic notifications for events such as power outages, open doors and communication failures. With on-trip load monitoring, Intellipur says users can minimize damage and loss by resolving issues, such as incorrect vent settings or unplanned power-off events, in port or out at1 sea7/16/2010 before the9:20:46 cargoAMis compromised. QuarterPageAd_Food.pdf
Chill in a box Coolrbox Inc now offers refrigeration units for transporting temperature-sensitive products. The company says the units are designed to meet the needs of the cold chain distribution and logistics systems market. The units are insulated containers that are actively cooled or heated using battery or electrical power. The unit’s location and operating status can be monitored remotely in real time, providing complete end-to-end monitoring and verification for shippers and receivers. The units come in several sizes and are mounted on an aluminum skid. They are manufactured from a rugged insulated fibreglass box and can be loaded and unloaded from standard highway trailers, trucks and vans. MM&D
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th
Annual Conference on Transportation Innovation and Cost Savings On Thursday September 23rd, 2010, you are invited to attend a one-day conference that has become the largest educational event for shippers and supply chain practitioners in Canada. The Allstream Centre, 105 Princes Boulevard, Exhibition Grounds, Toronto
www.transportconference.net Featured Speakers: James Allen,President, JDA Consulting SUSAN ALT, Mack Trucks, Inc. and Volvo Trucks North America, North Carolina Alister CAMPBELL, President and CEO, Zurich Canada WESLEY S. CHUSED, Looney & Grossman LLP PETER HALL, Vice President and Chief Economist, Export Development Canada DR. MARY HOLCOMB, Associate Professor of Logistics, University of Tennessee RICHARD KUNST and MARIELA CASTANO, Kunst Art of Solution ROBERT LANDE, CFO, Forex Capital Markets, New York Dr. Paul Larson, Professor, Supply Chain Management, University of Manitoba Roger McKnight, Senior Petroleum Advisor, En-Pro International Inc. CHRIS PROVOST, Author of “Grow Your Profits!� PAUL WAITE, Vice President, Canadian National
Featured Moderators: CHRISTINE BROWN, (Shipper-Carrier Breakout) JOHN FIORILLA, Attorney at Law, Capehart and Scatchard, New Jersey DARSHAN KAILLY, President and CEO, Canadian Freightways DOUG MUNRO, President, Maritime Ontario LOU SMYRLIS, Editorial Director, Canadian Transportation & Logistics
Focus Workshops: Lean Logistics Workshop Transportation Law Workshop Shipper-Carrier Breakout Last year, over 300 companies attended the event in order to learn and exchange views on logistics innovation and cost savings. Manufacturing companies from the consumer goods, automotive, grocery industries, as well as trucking, railways and intermediaries, receive an overview of the solutions to a number of current problems in the transport industry. This year we shall be focusing on Canada/US currency exchange, developments with regards to trucking insurance and the economic recovery. For more information please visit our website: www.transportconference.net. To register, please contact Dr. Richard Lande at (905)319-1244 or email at rlande@cogeco.ca. The cost of this event is $825 for 1 person or $1600 for 2 persons (plus GST). For information on the Allstream Centre: www.allstream.com.
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l software
The latest options for changing supply chains
By Deanna Rosolen
which can alleviate the confusion caused by storing multiple files in different locations. oday, there’s software out there to manage pretty much everything in a supply And if for some reason the network does not chain. From inventory monitoring to demand forecasting, from route plan- detect the key, the program will continue to run ning to delivery scheduling, from supplier management to load building, hundreds for seven days—so long as it is not closed—while of programs exist to give shippers better control of their business processes. the problem is corrected. Such software has become an invaluable—often essential—component in getting products to end users in the most timely and efficient way TMS gets technical possible. Consider for a moment what would happen if your warehouse With rigid delivery schedules to meet and management system (WMS), transportation management system (TMS) fluctuating fuel prices to contend with, a good or enterprise resource planning (ERP) program was taken away from you. TMS can be a shipper’s best friend. It’s a nightmarish proposition. Keeping track of transport activities when Thankfully, providers continue to work hard to create robust, reliable multiple partners and multiple destinations are and innovative software. Keeping in mind the constant need to build ever- involved is tough work. This challenge informs more-streamlined supply chains, they are perpetually releasing new programs, the newest version of Excelerate Live, Virtual updates and enhancements to help all stakeholders improve the process. Dispatch’s web-based TMS. Here are a few highlights from the latest crop of offerings. The Stouffville, Ontario-based company says the new version comes with an enhanced trip Feature-rich WMS options detail screen with tabs for handling multi-stop, On the WMS front, vendors continue to create programs that can handle multi-drop load consolidations and distribution, the multitude of functions occurring in a modern distribution centre. as well as off-route miles. For example, Automation Associates of Mississauga, Ontario has updated It also comes with an enhanced order browser its RF Pathways WMS software. Referred to as version 300, it’s packed with screen, which helps users to pre-split or dozens of new features. They include a new platform (built for the Microsoft deconsolidate shipments at a click. Also new with .Net 3.0 and 3.5 frameworks) and an updated console user interface. this release is a set of online training videos to help The new RF Pathways also includes the ability to use multiple fi lter users become acquainted with the changes. capabilities for queries and an option to view header and detail information Another web-based option is the new PLS Pro simultaneously. It also has embedded controls for on/off functionality and System from Pittsburgh, Pennsylvania-based PLS simplified system administration. Logistics Services. From Accellos Inc of Colorado Springs, Colorado, there’s a new iteration of PLS Pro expands the scope of the company’s its WMS. This latest version is called Accellos One Warehouse Version 6.2. eflatbed.com, its previous web-based TMS. The new What’s new about Version 6.2? Accellos says it offers supervisory control program allows users to plan a vast array of transfor miscellaneous adjustments, integration into NiceLabel label printing portation needs—van, truckload, less-than-truckload software, enhanced key performance indicators, better slotting capabilities, (LTL), barge and rail—through a single interface. and integration with Accellos One Slot and One Workspace. It also allows To make deliveries more efficient, Milwaukee, users to set labour standards for functions like picking, receiving, material Wisconsin-based RedPrairie Holding Inc has added handling and cycle counts. appointment sharing capabilities to its TMS. The software’s 2010.1 release enables LTL carriers to Budget-friendly label software schedule a single appointment for multiple For organizations looking to build better inventory control on a modest shipments. The functionality treats a delivering budget, Brunswick, Ohio-based Tharo Systems Inc has released a new trailer as a single unit and allots it one dock door, multi-user version of its EasyLabel barcode and RFID label software. regardless of how many shipments are involved. The new version allows users to print from multiple workstations on a This is meant to avoid the common problem warehouse or DC network using a single licensing key. of scheduling a separate appointment for each Designed to be more cost-effective than the Platinum version of EasyLabel, LTL shipment in a load. RedPrairie says the new the multi-user option allows users to share files on a network using that same release should improve the receiving process for licensing key. All files stored on the network become accessible to all users, shippers and carriers alike.
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Track and trace Given the risks involved in global supply chains, it’s especially important for shippers to keep tabs on exactly where their shipments are. New York-based Jaguar Freight Services claims to be upping the traceability ante with CyberTrax2.0, the new version of its web-based program. The company says the application goes beyond standard track and trace by managing and directing international freight shipments to help customers achieve the most efficient supply chains possible. Users are given direct access to the status of mission-critical factors affecting their shipments. The software generates alerts about possible disruptions and lets customers query shipments online. It provides data on all factors identified as essential while maintaining an archive of historical data. For shippers in the oil and gas industry, Orlando, Florida-based Savi has updated its SmartChain solution specifically for the needs of stakeholders in that sector. SmartChain is enterprise-level software designed to improve operational readiness, increase asset use and minimize unplanned events by providing actionable information on the location and status of assets such as cargo-carrying units, railcars, tools and drill pipes. It also monitors the integrity of mission-critical equipment— such as pipeline—and gives updates on the status of products and personnel in refineries. A way to record trade compliance The constantly changing roster of regulations involved in cross-border shipping requires some organization. One new offering helps shippers make sure everything went smoothly after the fact. Management Dynamics has released its End-Use Manager, an on-demand solution that generates end-use surveys for parties involved in any cross-border transaction. It allows a trade compliance team to survey and collect end-use statements from customers, suppliers and employees, establishing a standardized process for managing and ensuring compliance with international trade regulations. Users can deploy it as a web-based portal across any global enterprise and configure it to meet the specific requirements of different business units. The program allows users to configure surveys, screen restricted parties and critical countries and review audit trails. It’s designed to give shippers clear and uniform record that the correct procedures have taken place—an increasingly pertinent need, especially among global companies. MM&D MM&D | July/August 2010
The peer effect Ask the right questions to make the best WMS choice Choosing the right WMS software is a major investment. There is a dizzying array of options out there for prospective buyers. Finding the right fit involves a series of steps, from researching needs, to issuing a request for proposals, to reviewing submissions, to shortlisting and ultimately choosing a vendor. But before you sign a contract, taking a few extra precautions can really pay off. One especially valuable step is talking to current users of the WMS. Getting the inside scoop from those using the program can be very revealing. WMS provider HighJump Software has published a list of questions you might want to ask of a current user of your prospective software. Find out what they wanted when choosing the WMS. Which other vendors did they consider, and why did they choose the offering they currently use? • How important was total cost of ownership in their vendor evaluation? •
Ask how the implementation went. Was the product delivered as designed, including any functional enhancements chosen in the design phase? • How elaborate were those enhancements, and how did they affect the cost and implementation time? • How satisfactory was the system implementation overall? Why? • W hat would you have done differently during the implementation? •
Ask about the go-live. Was the go-live phased in or launched all at once? • How visible and attentive was the vendor during go-live? • Were staff properly trained for the go-live? • Did any major issues arise during the go-live process? • How satisfactory was the go-live experience on a scale of one to 10? •
Ask about technical and maintenance issues. How is the system administered? Is there a dedicated person running it? • W hat platform does the WMS run on? Is it the same as the vendor recommends? • How many servers are required to support the program? •
Ask about upgrades to the system. How many upgrades have taken place since go-live? How long did they take, and how much did they cost? • Were previous company-specific enhancements brought forward in the upgrade or did they need to be re-applied? •
Ask about the user’s plans for the future. Have any functionalities been added since the go-live? Who made them? • Have new functional requirements been identified since the go-live? If so, who will make the necessary enhancements to meet those new needs? •
With these answers, you’ll be better equipped to make a truly informed buying decision—and less likely to run into surprises down the line.
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Order-Picking Showcase
The case for going paperless When productivity and accuracy are in question, automation might be the answer By Lance Reese
T
oday’s distribution centre manager faces a host of business pressures that hinder the ability to achieve increased productivity and higher accuracy. There is a strong need for flexibility to adapt to the ups and downs of growth, economic influences and increased seasonal demand curves. Since mistakes can cost a company valuable customers, companies are placing a high value on accurate pick, check and pack processes. Other variables add to the pressure, too: company growth, concerns regarding labour turnover and the need for a higher degree of real-time management insight, to name a few. To meet these challenges, many DC managers are looking to automated order fulfillment solutions including pick-to-light and pick-to-voice. But is it for everyone? And what should be considered before making the move?
Start where you are The best place to start is with a thorough analysis of the current DC operation to establish a baseline and identify points of weakness. This includes gathering at least six months of data for non-seasonal operations or at least 12 months for seasonal operations. Most automated material handling integrators have detailed operational analysis questionnaires that they can help the DC management to complete. It is recommended to have data on the following variables: • Location (the types of racks and shelving, the number of SKUs, etc); • Labour (the number of shifts and the number people working as pickers, checkers and packers); • Costs (of both labour and returns); • Current pick methods; • The typical order profile (the number of orders, lines, pieces, shipping data, error rates and error costs); • The warehouse management system (WMS) and any other software in place; and • The key problem areas in the DC. Calculating ROI The most common variables that fuel the return on investment (ROI) of a paperless system are productivity and accuracy. When making the move from paper to pick-to-light, companies can realize productivity increases of 50 percent or more; companies that move from paper to RF or voice picking tend to achieve increases of approximately 25 percent. Most automated fulfillment systems include software to monitor the productivity of workers on an individual or zone basis. Many also provide tools to help managers right-size the workforce, structure shifts and get more out of an existing facility. Gleaning this data from a paper picking and reporting system can be very difficult.
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Because of these factors, if there is increased demand in the DC, applying automation to increase productivity may turn out to have a higher ROI than adding an additional shift. Then there are accuracy rates, which are the foundation of success for the company, as they affect customer satisfaction and reduce the cost of returns. Pick-to-light and voice picking systems often yield accuracy rates nearing 100 percent. Some manual operations with experienced workers get similar rates, since such employees tend to be more accurate order-pickers. But with the labour force changing, it’s harder for companies to rely on veterans. Furthermore, with resources in short supply, it can be tough to find the time and funds to bring a new recruit up to speed. Automating can help, since most workers can learn how to use a pick-to-light or pick-tovoice system in a few minutes. Flexibility, insight and integration Companies opting for automated processes may also be able to reap greater flexibility, management insight and WMS integration as additional perks. Users often cite dynamic demand curves and seasonality as reasons for replacing a paper-based pick system. Automated systems can quickly accommodate accelerated orders—a significant challenge in a paper pick environment—without requiring the addition of emergency staff. Then there is management insight. With senior leaders demanding increased quantities of data from every aspect of the enterprise, it’s important for management dashboards to be populated with accurate, real-time information. Many of today’s pick-to-light systems can deliver total labour force transparency—including worker location, pick rates and accuracy rates—to the DC manager instantly. That is next to impossible with paper-based systems. Of course, another benefit of automating is the ability to integrate to the WMS, ERP or other legacy management application. Lance Reese is technical solutions director at Intelligrated. MM&D | July/August 2010
Order-Picking Showcase
Picks of the litter
New technology to get the right orders at the right time
Pick-to-light goes mobile There’s a new way to make picking from temporary storage locations more accurate. Germantown, Wisconsin-based Lightning Pick Technologies has released a new wireless pick-to-light system. Called the NW Series, the system is for users who want the speed and accuracy of a light-based order-picking system but lack the infrastructure for mounted lights. It was designed for temporary or mobile product locations, including totes, bins, shipping containers, and pallets on open floors, to name a few. The system includes a portable light module, which can be placed on or near any storage location. It’s built using the same electronic paper technology used by devices like the Amazon Kindle. Unlike traditional LCD pick-to-light displays, it presents data with combinations of text and fully-functional barcodes. The latter feature eliminates the need for paper barcode labels on shelf or bin locations, since the lights themselves can be scanned. The wireless lights run on a low-power radio system and are compatible with traditional track-based pick-tolight systems. www.lightningpick.com Powered by hydrogen The Raymond Corporation has engineered what it says is the first hydrogen fuel cell-compatible orderpicker fork truck. Raymond has redesigned the battery compartment of its Model 5500 order-picker to run on hydrogen fuel cells; the revamped model includes a specially built 21-inch battery box to contain a cell. The first installation of the new truck took place at the Sarasota, Florida distribution centre of United Natural Foods, Inc (UNFI). Raymond worked with a team of its authorized sales and service representatives and fuel cell unit manufacturer Plug Power Inc to convert UNFI’s fleet to accommodate the hydrogen cells. (The team also converted Model 7400 Reach-Fork trucks and Model 8400 pallet trucks.) UNFI estimates the move will reduce its carbon output by 132 tonnes annually. www.raymondcorp.com MM&D | July/August 2010
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A new way to label The Kennedy Group of Cleveland, Ohio has expanded its line of products meant to keep rack labelling neat and tidy. The company’s rack placard system includes a pressure-sensitive adhesive that affixes to the rack and acts as a label holder. A variable information label identifying the contents of the rack can be placed on the placard; when the content on the rack changes, the label can be pulled off and cleanly replaced, eliminating the need to scrape off permanently bonded sticker-based labels. The placards come in several colours, which can mask nicks and scuff marks on racking without painting. They can also be used to apply colourcoded logistics layouts and operation flows. The placards come in rolls with four standard widths and a standard length of 100ft. They may be cut to any length to fit various rack sizes and can attach to a variety of surface materials. www.labelplacard.com
Learning Curve | Tracy Clayson
Pass it on
It’s time to make good communication a core competency
G
ood communication is serious business for Peter Weiss, head of worldwide logistics and Customs for Chrysler. Weiss was the keynote speaker at a recent meeting of the Detroit Transportation Club. He discussed several issues on Chrysler’s radar, including the advantages of having shifted from a push system to the new ‘order-to-delivery’ supply approach. The meeting was attended by carriers and 3PLs whose livelihoods rest on automakers’ decisions. Naturally, the crowd knew it’s tough going for vehicle manufacturers these days. They must do more with less—and do it faster and more efficiently. All players know that keying into the intricacies of streamlining a complex job takes concentration and creativity on the part of supply chain professionals. Everyone there was eager to find out what to expect from one of the titans of the industry. Weiss rounded out his report with Chrysler’s promising recent results and a dynamic presentation that cleverly marketed the company’s newest production process. He is a masterful speaker. He gave a clear outline of what Chrysler has done to bring itself back from near-disaster. The delivery was upbeat, comprehensive and engaging. He worked the crowd. We can learn a lot about communication styles from Weiss. It takes skill to distill all the necessary information, convey changes to procedures and break down each item while ensuring all stakeholders understand the message. And Weiss is not a professional speaker, but rather a supply chain professional responsible for carrying out a huge vision with global reach. Also impressive about Weiss’s message was what he said about the importance of sharing information. Folks who are responsible for making radical changes to avert corporate demise are also expected to communicate what they are doing to suppliers, customers and other business partners. This is why it’s so important for supply chain managers to learn effective communication. Not traditionally considered a core competency of the profession, it is now a crucial component of day-to-day business. Inside a company, nothing gets done well unless there is a strong, clear message of goals, tactics, processes and responsibilities coming from the top. The same is true of relationships with external partners. As part of improving working relationships between manufacturers and supply chain service providers, a better dialogue is needed between all parties—suppliers, distributors, manufacturers, carriers and 3PLs—around visions, expectations and results. This can address most potential risks and help people identify important opportunities. A timely issue Weiss’s presentation underscored the timeliness of good communication in the current context. For many in the automotive sector, order-to-delivery is the new supply chain way of life. This method brings new meaning to just-in-time, starting with a drastic reduction in inventory across the board. Weiss said that by running a leaner operation with more consolidation, Chrysler will be able to reduce inventory from 150 to 53 days.
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Making this happen in a supply chain as broad as Chrysler’s will depend on better co-ordination of and communication between production and delivery processes. The challenges of reduced inventory and tighter delivery timelines demand clear lines of communication if the many parties involved are to identify potential bottlenecks and develop strategies to offset delays. There is a much smaller margin of error, so there is a greater need to increase communication between suppliers, assemblers and carriers. So Chrysler has started dialogues with its stakeholders. Companies can truly benefit from having supply chain managers who clearly communicate process improvement plans. Doing so engages stakeholders to participate collectively, exchange ideas, present enhancements and share results. Thanks to technology, shippers do have the tools to give partners access to information, but shoveling over data does not give the full picture. Those responsible for managing the information have to learn how to clearly discuss processes and provide the big picture. They also have to explain why each step is taken and what the results should be. And they must increase their interpersonal skills if they hope to improve dialogue and get a receptive audience. It’s true that the job gets done better when the whole team is engaged. When leaders believe in fostering lively discussions, open lines of communication and a transparent approach to problem-solving, it produces more positive working relationships. Trust and open discussion translate to genuine collaboration. Good communication isn’t just the job of the C-suite spokespeople. Supply chain managers have an obligation to convey pertinent information clearly and concisely to all affected stakeholders. They would do well to follow the example of Weiss. Part supply chain expert, part brand spokesperson, he is a complete communicator and an example of what the professional of the future will look like. MM&D Tracy Clayson (tracy@in-transit.com) is managing partner, business development, of Mississauga, Ontario-based In Transit Personnel. MM&D | July/August 2010
Materials Handling | Dave Luton
Information overload
Protect yourself against data-sharing risks
I
t’s been said that companies in the supply chain can use three things to break down the silos that traditionally separated their differing functions: transparency, time and trust. The first of the three, transparency, is a tricky thing to foster. And it’s getting trickier. Over the past few decades, many companies have worked to create systems and processes that allow them to share information on basic business activities—such as the status of shipments—without tipping their hands too much about sensitive business objectives. Historically, the flow of information between parties in a supply chain was limited to whatever was crucial for carrying out an effective and efficient transition of shipments from supplier to customer. That included things like purchase orders and basic in-transit information. That is changing. Now 3PLs and other supply chain service providers are asking shippers to divulge deeper strategic data in an effort to optimize service. There are several reasons behind the drive for more data. Much of it has to do with mitigating risk. Offshore sourcing, smaller supplier bases, inventory reductions and volatile demand have greatly increased the risks involved in supply chains. This ups the possibility of disruptions. By increasing the transparency of information within the supply chain, potential issues can be collectively managed on a collaborative basis or avoided altogether. This results in better performance. So shipments today carry far more information than those of the past. If the multiple parties involved are to conduct operations in an efficient way, transparency of information and smooth data flows are crucial. Technology supports One reason companies are able to share data more securely is that the technology used to exhange information has improved immeasurably. Once upon a time, before internet use became widespread, companies relied on electronic data interchange (EDI) transmissions to share data with their trading partners. They often did this using a modem with a value-added network (VAN) hosted service as an intermediary. MM&D | July/August 2010
The rise of the web resulted in the development of internet-friendly data-sharing tools, which made EDI much faster and easier to do. Today, many companies are pushing things further by using cloud computing. This pay-as-you-go model removes the obligation for companies to invest in built-in software, making it easier for them to update capabilities as required. It also allows all parties to access a centralized hub of information with little more than an internet connection and a password. One of the many promising things about this technology is that it creates the potential for pre-shipment data-sharing among multiple participants in the supply chain. For example, on the demand side, a retailer could share sales data with vendors, 3PLs and carriers in real-time as it occurs. And on the supply side, a shipper could share its inventory levels with customers. The risks Ironically, while data-sharing is intended to reduce supply chain risks, sharing more data can expose companies to unwanted consequences. The main risk is of an unauthorized access caused by a security breach. A common commercial information breach is the disclosure of proprietary company information to competitors and/or the public at large. This can include sensitive customer information, supplier data or internal intellectual property. A related problem is the misuse of financial information to facilitate fraud. If someone from a competing firm gains unauthorized access, he or she could delete or alter data relating to orders, pricing or products. It’s important to note how such data thiefs get as far as they do. Often, they will hunt down passwords using “sniffer” or “cracker” software—one of the simplest and most common methods of attacks. Many will also engage in spoofing attacks by forging the “from” address so that a message appears to have come from a colleague, co-worker or another trusted source. Most people don’t think twice before sending information—possibly confidential—right back. One of the problems in sharing information is that data security is often only as strong as its weakest link; all it takes is one mistake email to give someone access to an entire network of information. From here, he or she can modify order, shipment or billing information to his or her own benefit. In today’s ethics-driven business environment, it may seem unlikely that a competitor would resort to such measures, but it does happen. It is therefore essential to carefully plan and implement the necessary security measures to protect points of communication and to ensure that key information is not compromised. Needless to say, it is important to have a good firewall around confidential data and experienced staff on hand to maintain it properly. If you can protect yourself, you’ll be able to share information effectively. That will put you one step closer to a truly collaborative supply chain. MM&D Dave Luton (dluton@cogeco.ca) is a consultant in the greater Toronto area.
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Firefighter | Tony Mulholland
Picking up the pieces How to recover from a rack collapse
C
RASHHH! “What was that?” someone asks. “It sounded like it came from the warehouse!” cries another. When you hear something like that, myriad chilling thoughts swirl through your brain as you race toward the source of the crash site. Bursting through the door, your worst fears are confirmed: a rack has collapsed. What next? Perhaps contrary to what some may think, rack collapses are not usually a result of overloading or under-designed racking. Typically, they occur under circumstances where damaged and/or modified racking is subjected to a trigger or impact force from a lift truck driving error. The cause is important—and must be dealt with later—but in the immediate aftermath, your team should have other priorities. First, you should trigger your company’s emergency response procedures, with firm adherence to the corporate health and safety policies. Take stock of the situation. Call emergency response teams immediately if an employee has been hurt. If everyone is fine, it’s time to begin recovery. Take some time to properly assess the damages so that you can develop and initiate a safe cleanup plan. Where justified, you should notify insurance companies of the incident, as they will want to assign a person to the claim. They may direct you to certain forensic investigation, emergency response and demolition services. But it’s worth noting that not every collapse involves injury or losses that justify an insurance claim. You may want to assemble your own team to or hire a rack installation company to clean up the debris, unload pallets and dismantle the damaged rack. Depending on the commodity, you may need to call in specialists to remove hazardous materials. If there has not been an injury, most companies handle the matter internally without involving labour inspectors. But that doesn’t mean you don’t have to do anything; you must make sure the remaining racks are compliant with structural design standards (CSA standard A344) and, importantly, that the cause of the collapse is fully understood. A lingering or inadequate response to a rack collapse will inevitably conjure concern from employees about safety. So how do you identify the direct cause of a collapse? Interviewing those working in the area of the collapse does not always tell the full story, as a fear of repercussions might cause people to present a modified version of the truth. This is when an engineer’s eye can help. An engineer can also identify potential problems in racking adjacent to the collapse and to the overall structure as well.
Prevention, prevention, prevention Once the crash has been cleaned up, it’s important to put measures in place to prevent another from happening. Start by making sure you are using good design practices and are compliant with all labour regulations. Most provinces require rack structures to have documentation that formally establishes their capacity. Make sure that documentation is
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available to site personnel and put procedures in place to ensure the racks cannot be overloaded. You can accomplish this by posting the load limits on plaques, but only if the person loading the racks knows the weight of the pallet. It’s a good practice to make sure the capacity of the rack exceeds the heaviest pallet that could possibly go into it; an audit of your products is a good way to help you determine how much your heaviest pallet weighs. Employees should be encouraged to report damage to racking so that corrective measures can be taken immediately. Workers must know what to look for. CSA offers a full-day training program that teaches how to conduct proper rack inspections; various other companies offer shorter inspection courses as well. You may want to schedule annual rack inspections too, to make sure your staff isn’t missing anything. When you have rack repairs, make sure they are fully certified by the proper authorities. Remember, most rack collapses occur as a result of lift truck driver error. Make sure all drivers are fully licensed and properly supervised. High-traffic areas in the warehouse may be especially vulnerable to damage; you might want to consider adding reinforced uprights or post guards in these spaces. If you follow these guidelines you can greatly reduce the likelihood of a crash occurring. You can never eliminate the risk outright, but if a collapse does happen, it is more likely to be caused by an isolated incident directly attributable to an operational error than by a systematic problem with your facility. Moreover, you’ll be able to respond in a procedural manner because you’ll have done your due diligence. MM&D Tony Mulholland, PEng, PMM (tony@rnw.ca) is the head of Mississauga, Ontario-based consultancy Rack Net-Works. Firefighter is a forum for practitioners to explain how they helped solve an unexpected supply chain crisis. To share a story, contact Deborah Aarts at deborah.aarts@mmd.rogers.com. MM&D | July/August 2010
Tel: 905-337-5720 Toll Free: 1-800-461-6660 www.econorack.com
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