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

By Dan Raftery, President, Raftery Resource Network

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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James Tenser
James Tenser
16 years ago

Supply chain efficiency has progressed to the point where systems are tightly tuned and therefore very sensitive to variables. We are learning that the practices which optimize the supply chain may de-optimize the shelf, and vice versa.

Case pack sizes for slower movers are a good example. An item that merits a single facing based on sales rate may have room for just eight units on the shelf. But supply chain criteria call for 12 units per case, forcing merchandise into back stock, with resultant double-handling at the shelf and other undesirable effects. A shift to a six-unit case pack, more frequently replenished, would be more effective for the store, but with a resultant logistical cost.

Dan Gilmore’s excellent observation about “actionable visibility” is germane here. Firstly, visibility remains virtually non-existent at the shelf level, so the impact of store conditions on the supply chain remains unmeasured. Secondly, certain store level conditions define what is possible–ranging from the variability in turn by category and item, to the physical bulk of some items such as pet food, to in-store merchandising compliance and implementation.

So to the question posed in the headline: Yes, I believe you can be too “just-in-time”–particularly where the supply chain is tuned to inward-looking efficiency metrics while the store remains a virtual “black box.”

Nikki Baird
Nikki Baird
16 years ago

Five years ago I worked for a company that sold glass pipeline-type solutions and the retail industry just wasn’t ready for it. It’s interesting to me that as a solution, it’s coming back in vogue–and solution providers like RedPrairie and Sterling Commerce are selling it exactly the same way it was sold 5 years ago. Inventory levels are at a point where the only way to decrease them any further is to reduce uncertainty around what those levels are and are going to be–and you need visibility and exceptional management to do that.

I’m also glad to see the problem of multi-party coordination coming to the fore, because that is a big disconnect in the retail supply chain. Distribution Requirements Planning and receipt flow planning as part of the merchandise planning process helps buyers understand the distribution capacity they have to work with, but only if they know what the bottlenecks really are. Just assuming that it’s the labor at the warehouse will definitely get you in trouble.

Dan Gilmore
Dan Gilmore
16 years ago

“Lean” thinking is great, but in almost every industry, there has and continues to be some pushback that at times the pendulum has swung too far. The supply chain runs out of inventory somewhere along the line and impacts customer service, manufacturing, etc.

It’s easy to say grocery manufacturers have taken it too far, but this of course depends on overall strategy and a detailed analysis that compares the cost of increasing service versus the increased inventory costs. Some will err on the side of cost, some will err on the side of service. Let the market decide.

“Visibility” is great, but what we need is actionable visibility. That has been the problem–defining what makes it actionable.

Susan Rider
Susan Rider
16 years ago

The biggest challenge for the retail industry involving warehouse efficiency is finding and retaining people. The average turnover rate per month for distribution centers is about 40%; some have much more turnover. Therefore, training and employee retention is a major issue. A retailer can have the best automation and best software in the industry but if you can’t find good people and have programs to keep them, you still have a mediocre facility.

There are some great industry associations that offer solutions for improving operations, CSCMP (Council Supply Chain Management Professionals) and WERC (Warehousing Education Research Council).

There are many warehouse management solutions available, which presents another problem. Many times, retailers decide to handle their own software solution selections and end up with something the salesman promised but cannot be delivered. If you don’t know the industry, it’s best to use a consultant. The biggest company with the most revenue may not have the best solution, they just have the best sales people.

To avoid traffic congestion, it is best to have a visibility tool with appointments connected on line so the trucks arrive and depart seamlessly. If the facility has total visibility of arrivals, they can gear up associates available to work with flex schedules. Receiving dock bottlenecks can be avoided with good software, processes and management.

An example of selecting the wrong software in a high volume facility follows: To receive an item with a RF (radio frequency) gun it may take six steps per item with one software package or two with another. Doesn’t seem like a big deal right? Unless…you multiply that by 150,000 cases received for the day by the additional seconds per box.

Last minute orders can be processed effectively if there have been provisions in the software to handle “hot” orders. But it takes more than the software, the process needs to be defined, the automation equipment needs to have a work-around and the people need to be trained on the proper steps to assure the order gets out the door on time.

Len Lewis
Len Lewis
16 years ago

I would suggest looking ast what Tesco has done with the concept of “lean” production in its distribution facilities.

They have taken a page from Toyota’s playbook and made lean the underpinning of its global expansion program and a key to the recent launch of the Fresh & Easy convenience concept in the U.S.

But when you get down to it we’re talking about creating real partnerships between retail and manufacturing in the entire supply chain–from raw materials to finished product son the shelves.

it a combination og ECR, Six Sigma, inventory management, automated replenishment and quality control circles and it boils down to three words—don’t waste time!

jack flanagan
jack flanagan
16 years ago

Sol Price coined the term “intelligent loss of sales” (w/ particular emphasis on the word–and therefore thought process–“intelligent.”

Toyota has spent nearly 60 years in ascendancy in terms of both market share and profitability by selling more while making less.

GM, Chrysler and Ford have seen decades of decline by making (and making a lot of it) first and only figuring out how they’re going to sell it later.

There’s a lesson here for many FMCG companies and retailers. It starts with a basic, consistent and well-understood philosophy of doing business. If you’ve got such a philosophy, customer expectations are:

– well understood,
– nearly always met or exceeded and,
– in those very few instances when there is a service breakdown there is incredibly quick recovery and customer loyalty actually heightened.

Let’s not lay at the feet of the Supply Chain (or any other large system within the enterprise) a failure to be clear on what the organization will do and–just as importantly–what it won’t do.

Dave Allen
Dave Allen
16 years ago

This is a fascinating discussion.

Having worked in the food industry for a number of years, and aiding in “leaning” out manufacturing following the Toyota model, I have seen mistakes made in simply reducing or eliminating “surge bins” to take the “non-value added” activities out of the process. And really, what are warehouses and distribution centers but primarily “surge”?

The mistakes made were that if the rest of the process is not reliable and efficient, the process just shuts down more frequently, and you can’t reduce costs doing that. So the comments above regarding out of stocks and knowing what is coming in the order process are critical to shrinking warehouses and distribution centers. But eventually, you would have to read customers’ minds to be perfect.

However, much of “demand” is created by the Marketing and Sales forces and the effects of their resources CAN be predicted, if only the manufacturing entities were aware of them before they happened. This is a time sensitive communication problem, much of which can be solved by the interactive software between companies and businesses–suppliers, manufacturers, and customers.

Bill Bittner
Bill Bittner
16 years ago

The challenge with most receipt scheduling systems is that they are not sophisticated enough to consider all the variables.

Is the load palletized, slipsheeted, or handstacked? Is the trucker going to unload or is it a backhaul? Are lumpers required or will pallets be removed by hand jacks? Is the trailer double stacked, what are the heights of the various receiving doors, what other constraints exist at particular doors that prevent certain types of loads from being received?

And then, of course, there is always the short lead time vendors that pop up with emergency delivery requirements that exceed the daily capacity.

Having said all that, the only successful receiving dock approach I have seen is pre-assigned appointments combined with agreed upon detention penalties for not getting the trailer into a receiving door in time.

Julie Parrish
Julie Parrish
16 years ago

I had an interesting experience at Target today, and I think it ties to this topic. Throughout Christmas, the store near me was consistently out of things and there were lots of empty spaces on the shelves. Today, here and across the nation, Target’s toys went 75% off (an annual thing this time of year for them). But I was astounded at how many pallets of toys they were offloading, not because they had over ordered, but because it hadn’t moved through the process in time for Christmas distribution. I spent $300 for $1200 worth of toys this morning that I’ll pull out and use all year.

Similarly, Toys R Us is moving mountains of toys this month, many of which also weren’t there in time for the holidays. Since I’ve only ever bought and warehoused truckloads of food items, I can’t speak to retail warehousing, but I can’t imagine today’s mass clearance in the toy department across the country didn’t come without a hefty price tag. In this case, better training for the person doing orders might have prevented such a deep loss.

Mark Lilien
Mark Lilien
16 years ago

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

Dave Allen
Dave Allen
16 years ago

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