Creating Supply Chain Excellence

The Tompkins International Blog

Conveyor Systems and Selection

August 5, 2015

Karl Borgman
Project Manager, Tompkins InternationalConveyor Systems

Choosing the right conveyor system is critical to the success of the rest your automated material handling system. Conveyor systems are typically used to transport materials for long distances while reducing operational costs and improving safety. Systems include various types of transport and accumulation conveyors along with: merges, inclines, declines, spirals, scanners, diverts, and sorters. Floor conveyors can be utilized for various types of products, from small and light to full pallets, while overhead conveyors are configured for specific types of units depending on the application.

The typical conveyor system is a fixed path that optimizes the labor required to move product, provide accumulation as a buffer, and protect the product from damage due to excessive handling and improved operator safety for bulky or heavy product in warehouse and manufacturing applications. Flexible conveyors can be used independently or in conjunction with fixed conveyor systems

Typical conveyor uses can be for truck unloading and loading, transporting up or down between levels, pick engines, movement between manufacturing and staging, and to sorters and automated storage and retrieval systems.

Selecting which conveyor system best fits your needs requires evaluating several factors. Some things to consider are:

  • Are full cases or single units going to be conveyed?
  • Which conveyor system will be able to handle the product throughput? I.e. How many units per hour are flowing through it?
  • What kind of dedicated space is available for the conveyor systems?
  • Are the products in format that can be handled by the selected conveyor system? i.e. cases, poly bags, units, manufacturing units, etc.

There are many types of conveyors to choose from (Selection based on product and throughput rates), including:

  • Gravity
    • Roller
    • Skate Wheel
    • Ball Transfer
    • Chute
  • Powered
    • Line-shaft Roller
    • Belt Driven Live Roller
    • Belt on Roller
    • Slider Bed Belt
    • Modernized Driven Roller
    • Line Shaft Live Roller
    • Wheel Presser
    • Overhead conveyor
  • Mergers
    • Dual Line
    • Saw Tooth
    • Multi Line
  • Diverts
    • Deflector / Plow
    • Pop Up Skewed Devices
    • Diverter / Pusher
    • Powered Pivot Diverter
    • Pop-Up Chain Transfer
    • Tilt Tray
    • Slat Shoe

While conveyors can increase efficiency in many warehouses and manufacturing facilities, each application needs to be carefully evaluated and designed to work with the rest of the automated material handling system. In addition to carefully evaluating the engineering requirements of the conveyor system, the overall business requirements for each situation need to be considered, including capital expense, future maintenance costs, and future growth requirements.

More Resources:

Leave a comment

The REAL Future of Using Drones for Delivery

August 3, 2015

Drones for Delivery

By Jim Tompkins
CEO, Tompkins International

These days, it is not unusual when reading about Amazon, to have the subject of drones mentioned. When we first heard about Amazon using drones, the mental image presented was millions of flying machines delivering online-purchased goodies directly to our door within an hour.

Of course we know that this won’t be happening, at least, not in the near future. However, soon I think we could very well see drones getting us our packages faster. No, not to our doorsteps – the costs, hazards, and regulatory environment of such flights is just not feasible. But, robotic flight can be used to deliver e-commerce orders that will be efficient, effective, and safe within the next decade. In the near future, I see drones flying fixed routes, carrying multiple packages from a fulfillment center to a manned “Click & Collect” access point for customer pickup.

The recently proposed Amazon regulatory framework and set of technical standards would support either the front porch delivery method or the delivery to an access point equally well. The front porch method will not become reality as the volume of e-commerce delivery will continue to rapidly grow and there simply will not be sufficient airspace to handle the volume of drone traffic for single packages to be delivered to an unlimited number of delivery locations, even with Amazon’s suggested regulations.

The idea of using drones to fulfill e-commerce goals is exciting. It shows that technology is moving at an unimaginable rate. However, we need to look at this from a realistic approach. For Amazon, or any retail giant, to use robotic flight to deliver packages to individual destinations would not be practical, safe, or allowed by the FAA. The best way for Amazon to use drones is to use it as a bridge between fulfillment centers and “Click & Collect” points for customers. But don’t let my grasp of reality fool you; I am very excited to see where this technology takes retail. Are you ready for the future of e-commerce?

More Resources:

2 Comments on The REAL Future of Using Drones for Delivery

Big Data and Consumer Products Companies

July 30, 2015

By Bruce Tompkins
Partner, Tompkins Internationalbig data

Big data and business intelligence are alive and real at many Consumer Products (CP) companies, both large and small. The size of the organization is not always a key indicator of the extent that big data is being used to make decisions and solve problems.

Business intelligence takes a strategic focus to determine:

  • What we currently measure
  • What data and information needs will we have in the future
  • Where are our data sources today and what additional sources will be needed in the future
  • How will we use the data and who will benefit from the knowledge and decision making capabilities that big data possesses

The world of big data is also not sitting still. There continues to be change over time from quantitative data to qualitative information. The evolution must be accounted for and changes to strategies must be made to keep pace. This creates clear and present challenges to those driving big data for  their organizations. 

CP companies will have to begin to have a strategic view of their big data and not get lost in the short-term tactical improvements that business intelligence may offer. Business intelligence is a valuable tool, but needs to be approached strategically to answer the right questions and solve the right problems. Like any kind of tool it can be misused, therefore time is wasted chasing the wrong initiatives.

To learn more about big data and Tompkins International’s approach to business intelligence please contact us directly at info@tompkinsinc.com.

The Customer Benefits Most from Wal-Mart and Amazon Prime Day – Christmas in July

July 24, 2015

By Jim Tompkins
CEO, Tompkins InternationalAmazon Prime Day

On the day before Amazon Prime Day, I published a blog entitled “Leveling Your Supply Chain or Leveling Your Competition”  that made the following points:

  • Christmas in July is a good idea as it both increases sales in a slow period (leveling the supply chain) and provides an opportunity to clear out merchandise before products begin to arrive for the holiday season.
  • Walmart and Amazon both wanted to be the champion of Prime Day (leveling your competition) but their objectives were different. Amazon wanted more Prime members and Walmart wanted to validate that they are a significant online player.
  • Neither Walmart nor Amazon will finish Prime Day in first place. First place will be the customers that got the deals on Prime day. Second place will be a tie between Amazon and Walmart both claiming to have won.

Prime Day ended 36 hours ago and we have seen a large amount of press on the results. Much of the information is preliminary and comes directly from Walmart and Amazon. One needs to be careful on how to interpret the results. Nevertheless, a very interesting time and we can learn a lot from Prime Day, such as:

  1. Volume: 
    1. Amazon promised more deals then Black Friday, 2014. They did this by offering “Deals of the Day”, “Lighting Sales”, and a lot of price reductions. Amazon delivered as promised and reported 18% more sales than Black Friday,  
    2. Walmart promised thousands of items on sale. Walmart did this by having some special deals and thousands of “rollbacks” (Walmart’s jargon for discounts). Walmart produced the highest volume of online orders in their history and had the biggest day this year for same-day click and collect.
    3. Who Won: A tie, both did as promised and achieved great results.
  1. Customer Satisfaction:
    1. Amazon’s customer satisfaction was not good. The social media was half positive and half negative, which is really poor given the magnitude of the sale. The dissatisfaction focused in on the “Yard Sale” nature of clearing out products, the speed at which items sold out, and the misunderstanding of the wait list process. But, to put this in perspective Amazon wanted to impress new temporary Prime members with the breath of products available via Prime. I believe Amazon took an unfair social media blasting. People attended a yard sale and then complained they were at a yard sale, becoming disappointed when they did not get the special deals they wanted. There were limited quantities of special deals. The wait list issue was confusing and I am sure Amazon will fix this, but Amazon did a good job with getting new folks to try Prime. For the new Prime customers satisfaction was high. Therefore, Amazon accomplished it objectives even though some long time Prime members were disappointed.
    2. Walmart’s customer satisfaction was good, but some customers wondered about the number of deals that were offered and how this stacks up with “Everyday Low Prices”. Others felt good about the rollbacks because they didn’t disappear in 10 minutes or in 24 hours like the Amazon deals, but rather the rollbacks will stay in place for up to 90 days. Therefore many customers felt Walmart’s deals were a real sale as opposed to the Amazon short term “gimmicks”.
    3. Who Won: Walmart won the overall customer satisfaction competition, but most of Amazon Prime members do not shop Walmart.com. For Amazon’s target folks (new Prime members), Amazon did accomplish its objectives.
  1. Profitability:
    1. Amazon is not interested in their short term profitability. They were not profitable with their online sales for July 15th, but this was not their objective. They wanted new Prime members. New Prime members will contribute to the long term profitability – mission accomplished.
    2. Walmart is focused on their profitability (short and long term) but this event did not contribute to either. Many of the rollbacks will not result in incremental sales, just less margin. But, they needed to respond and they did. So, probably a footnote in next quarters earning statement about this event as an investment in e-commerce.
    3. Who Won: This is a hard call because Walmart is treated by Wall Street like every other public company, except for Amazon. Last quarter, Amazon reported a profit of $92 million and Wall Street celebrated (stock went up in after hours trading last night 17%). Walmart’s profits last quarter were $3.3 billion, but it appears when the market opens today, Amazon for the first time ever will be more valuable than Walmart. So, given the positive news coming from Prime Day, one would need to conclude that although neither Amazon nor Walmart made money on July 15th, given how the market views Amazon’s long term view of profitability, Amazon won this factor.
  1. Supply Chain:
    1. Amazon has been working hard on their supply chain and so far it appears their supply chain has stood the test of Amazon Prime Day. The lack of news about capacity constraints is a positive test for Holiday 2015 – Amazon’s supply chain did well.
    2. Walmart has been working hard on their supply chains (omnichannel) and has stood the test of record online and clique and collect volumes. The lack of news about capacity constraints is a positive test for Holiday 2015, Walmart’s supply chains did well.
    3. Who Won: A tie.
  1. Overall:
    1. Amazon says they have attracted “hundreds of thousands” new Prime members. They went into July 15th with 44 million Prime members and averaging a 70% conversion rate of temporary Prime members to ongoing Prime members. The 44 million is up over 41 million a quarter ago. A 3 million increase in Prime members over a quarter is about 33,000 new members per day. Given that July 15th was a mid-week, mid-summer day, I would say if they could match their average of 33,000 it would have been a good day. Not really knowing what “Hundreds of Thousands” of new temporary members really is, let’s assume the lowest number of 200,000 meets this definition. A 70% conversion rate would put the day at 140,000 new Prime members. Therefore, I must conclude that Amazon had a great day on July 15th.
    2. Walmart also had a very good day on July 15th. Their click and collect, in-store traffic, and online sales were all very good when compared to a typical mid-week, mid-summer day. Walmart clearly demonstrated their ability to hang with Amazon as an online retailer and have the supply chain capability to deliver.
    3. Who Won: As I predicted, the big winner for July 15th were the customers. They saved money and got some great deals. Tied for second place were Amazon and Walmart. In a distant third place were all the other retailers who had a Christmas in July event but who did not make the headlines. In fourth place and out of the medal presentation were all of the other retailers who did not play, but rather took a summer vacation while Amazon and Walmart continued to innovate and claim market share.

The idea of Christmas in July is a good idea. It allows for the leveling of the supply chain in the muggy days of summer and it fully supports the leveling of one’s competition. Congratulations to Walmart and Amazon. The rest of you need to develop a strategy to claw back your market share.

More Resources:

Customer – Competition – Company Equals a Profitable Supply Chain

July 21, 2015

 By Jim Tompkins
CEO, Tompkins InternationalCustomer – Competition – Company Equals a Profitable Supply Chain

One of my favorite times of the day is early in the morning. For me it is all about starting the day with a Chocolate Chip Cookie – CCC.

Last week, as I was preparing a keynote address for a client’s Accelerated Solutions Workshop (ASW), I got up early and started my day with a different CCC – Customer, Competition, and Company. I found this to be an effective way to think about problems, challenges, and opportunities. As my thinking on this new CCC framework evolved, it became clear that this framework was applicable to almost all organizations. To really get your arms around how your company is performing, it is useful to structure your thinking as follows:

  • CUSTOMER:
    • Who are your customers? What categories of customers do you serve? What are the desires of your customers?
    • Customers are very interested in Price, Selection, Convenience, and Experience. How are you meeting these expectations?
    • What level of customization and personalization do your customers desire? Are you satisfying your customers’ desires?
  • COMPETITION
    • How does the value proposition of your competitors differ from yours? What are they doing and/or offering that you are not?
    • What can you learn from our competition? How is their supply chain different from your supply chain?
    • What results are being achieved by your competition? How do your Key Performance Indicators (KPI) compare to their KPI? From a benchmarking perspective, where have they met the mark and you have not?
  • COMPANY
    • How are you performing on your customer promises? How high is your customer satisfaction rate?
    • What is the efficiency and effectiveness of your supply chain? Are there opportunities to reduce cost and/or improve performance?
    • Is your company adaptable?  Are you able to handle the peaks and the valleys? Are you sufficiently flexible and able to meet the needs of your customers?

By following this CCC framework you can be sure you are focusing your continuous improvement efforts on the areas of greatest opportunity and leveraging your supply chain for profitable growth. May you start every day with both a bite of a CCC and a thought about CCC.

More Resources:

Will Forecasts and/or Predictions Benefit The Alignment of Your Priorities and Your Supply Chain?

July 16, 2015

By Jim Tompkins
CEO, Tompkins InternationalThe Alignment of Your Priorities and Your Supply Chain

This morning I read an article that addressed the use of forecasts and predictions to understand the future of retail. Although an interesting read, I take exception to understanding forecasts and predictions as one in the same.

To me a forecast is a method to calculate future performance based on an analysis of varying factors and patterns.

I believe a prediction is foreseeing an outcome based on deductive logic or beliefs, rather than a calculation.

On forecasts I fully agree. The past is:

  • Past
  • Useful as a backdrop of the future, but not a predictor of the future
  • A great indicator of the future, given no breakthroughs take place

Forecasts are never going to be 100% accurate, but predictions are even less accurate. However, when predictions are accurate they can be a game changer, so I see predictions as being more strategic whereas forecasts are more tactical.

The key with predictions are:

  • The closer the prediction (what will happen tomorrow vs. what will happen in three weeks) the greater the chance for accuracy.
  • The credibility (past performance) of the predictor is an important factor in determining the accuracy of future predictions.
  • Predictions of most importance are the ones that tell us about shifts that will occur that are game changing. Predictions that “Things Will Remain the Same” (TWRS) have little value. In fact, one should not predict TWRS, they should forecast that.

As predicted, Alibaba is a big deal. To better understand Alibaba and Jack Ma The Alibaba Effect video outlines the growth and history of both Alibaba and Jack Ma. Alibaba has 80% of the online business in the largest eCommerce market in the world, China and Alibaba will introduce us all to cross border trade (XBorder) and the importance of marketplaces and it is possible to simultaneously operate B2B, B2C, O2O, and C2C. I understand that for Jack Ma to achieve his ultimate dreams he must build a major US ecommerce business. Jack understands this as well, but he also understands priorities and his priorities are:

  1. Maintaining his #1 position in China eCommerce
  2. Growing and maintaining his #1 position in XBorder trade
  3. Growing his US business

Jack Ma continues to pursue his priorities; I forecast he will stay #1 in China eCommerce, I forecast he will stay #1 in XBorder trade, and I predict he will evolve into a leadership position in eCommerce in Russia, Brazil, Europe, and the United States. But as one of Jack’s favorite quotes says, “Be fast like a rabbit and patient as a turtle.” At this point Jack is fast in China and XBorder trade, but patient elsewhere.

How clear are you on your forecasts and your priorities and what do you predict about your supply chain and your future?

More Resources:

Is A Supply Chain Infographic That Confuses Rather Than Illuminates A “Misinfographic”?

July 15, 2015

By Jim Tompkins
CEO, Tompkins InternationalIs A Supply Chain Infographic That Confuses Rather Than Illuminates A “Misinfographic”?

Last night I received a post. The headline read “Countdown: World’s Largest Ecommerce Giant Verses World’s Largest Retailer”. Well, we know the world’s largest Ecommerce giant is Alibaba and the world’s largest retailer is Walmart. So, I expected to see a comparison of Alibaba and Walmart. However, when I opened the link the headline shifted to “Countdown: World’s Largest US Ecommerce Giant Verses World’s Largest US Retailer”. With the title change I expected to read a column on Amazon vs. Walmart. What headline should I be reading and what should I expect Alibaba versus Walmart or Amazon versus Walmart?  

This continues to get worse. As I read the copy before the infographic it states “With 244 million active users Amazon is by far the largest online retailer in the world.” First of all, Alibaba is the largest online marketplace in the world and secondly Amazon is only 56% an online retailer and 44% marketplace. This is very confusing. I went to bed and did not think about this further.

When I got up this morning I had four messages from colleagues that had forwarded me the same post. They all suggested I do a more robust infographic that shows Amazon, Walmart, and Alibaba. I thought this may be a good idea, but then as I further studied the posted infographic, I found a lot of misinformation. For example:

  • Comparing the 54,100 employees at Amazon vs. the 2.2 million employees at Walmart is not relevant because the business models are extremely different.
  • Comparing the net sales of Amazon $89 billion vs. Walmart’s $482 billion is not accurate. The net sales number for Amazon is correct from an accounting point of view, but is not true as 44% of Amazon’s sales are marketplace and other. These “retail sales” are really “net service sales” that are fees from commissions generated from outside merchants that sell on the Amazon marketplace, Amazon Web Services (AWS) , and other revenue sources. Therefore, if one looks at 56% of $89 billion, they get $50 billion in retail sales for Amazon. This leaves $39 billion of which $5 billion is AWS and $34 billion of Gross Merchandise Volume (GMV). If you assume a 10% commission fee to Amazon, this would equal $340 billion in GMV and thus “total retail sales” of $399 billion for Amazon vs. $482 billion for Walmart. If you assume a 13% commission fee to Amazon the “total retail sales” would be $434 billion. The comparison of $89 billion to $482 billion is incorrect and misinformation.
  • A very funny comparison is the category “Additions” this is comparing new SKU’s for Amazon vs. new stores for Walmart. Completely worthless information.

The continued misinformation could be further discussed, but I rest my case.

Further as I considered my friends idea for an infographic comparing Walmart, Alibaba, and Amazon I decided it would not be useful as it would be comparing apples, oranges, and bananas/grapes. Walmart being a pure retailer (apples), Alibaba being a pure marketplace (oranges), and Amazon being 56% retailer (bananas) and 44% marketplace (grapes), this would not be a useful comparison. In fact, it would result in misinformation rather than information about the comparisons.  

My view is, infographics like this can be of great value and often are, but only when the information presented is accurate. Unfortunately, this is a case of good graphics but misinformation. I call this a “Misinfographic”.

More Resources:

Leveling Your Supply Chain or Leveling Your Competition

July 14, 2015

By Jim Tompkins
CEO, Tompkins InternationalLeveling Your Supply Chain or Leveling Your Competition

I like the idea of Christmas in July. July is a slow sales month (after the summer season but before the Back-To-School season) and often retail supply chains are slow. So, boosting sales in July is a good idea and a July promotion may not only increase sales, but also offer an opportunity to clear out merchandise before products begin to arrive for the holiday season, leveling supply chain operations. But, Holy cow! If you Google “Christmas in July” you get:

  • Over 100 clip art designs (Santa on the beach, Christmas stocking by the pool, sand castles of snowmen, palm trees with Christmas lights, and more)
  • Decorating ideas
  • Party ideas
  • Movie/Video promotions
  • SALES, SALES, SALES

Therefore, it is not surprising that, just like everything else, eCommerce is jumping on this band wagon. But wait a minute, Christmas is five months away! I understand that in the southern hemisphere, July is the middle of winter, and in order to preserve the “winter feel” of Christmas you find big celebrations in Australia, New Zealand, South Africa, and South America. This is not the case here in North Carolina. It is 95 degrees outside and there is no “winter feel”. I believe that is the point – to some they get a sense of relief from the heat by thinking about winter and Christmas. Here I sit in my Santa hat on my boat with Christmas lights, listening to “Frosty the Snowman” while eating my Reindeer Crunch ice cream. My boat is anchored in the Massonboro Inlet. Apparently, this is appropriate according to Wikipedia. The earliest known use of the term “Christmas in July” took place in 1933 at a North Carolina girl’s summer camp, Keystone. Then, in the movies in 1940’s, church services, advertising campaigns, WWII celebrations for service men and women overseas, and then in the 1950’s in retail sales.

Given this history, one could wonder why I am writing about this now. Well, I had not planned on it. In fact until a week ago I had never really given the topic a thought. On July 6th, when Amazon announced that it would celebrate its 20th birthday by having Amazon Prime Day, with “more deals than Black Friday”, “Christmas in July” definitely came to mind.

A few details:

  • Starting at midnight on July 15th Prime members can shop thousands of deals starting as often as every ten minutes.
  • The savings will be available to Prime members in US, UK, Spain, Japan, Italy, Germany, France, Canada, and Australia.
  • Shoppers who are not yet signed up for Prime but want to participate in “Amazon Prime Day” may take advantage of a free 30-day membership available only on July 15th.
  • Purchases made on July 15th will be eligible for free shipping.
  • Amazon’s promotion of Prime Day has been omnipresent on social media and on television.

Amazon does not use “Christmas in July” but frequently mentions “Black Friday” as the single most important day for retailers in the US. In most people’s mind Black Friday is associated with Christmas and, so the Christmas in July handle is not a stretch. Of course, since Amazon Prime Day is a self-created selling holiday, the comparisons to Alibaba’s annual Singles Day promotion on November 11th have begun as have the comparisons to the JD.com Anniversary sale on June 18th.

What made this really interesting is that on July 13th Walmart entered the game by announcing that they will also offer thousands of discounts for online purchases, as well as some “special atomic deals” on July 15th. Next, Fernando Madeira, the Chief Executive of Walmart.com, wrote in a blog, “We’ve heard some retailers are charging $100 to get access to a sale. But the idea of asking customers to pay extra in order to save money just doesn’t add up for us. We’re standing up for our customers and everyone else that sees no rhyme or reason for paying a premium to save.” Then, to really double down, Walmart announced that customers will receive free standard shipping with online purchases that cost a minimum of $35, instead of the usual $50. The shipping change will be in effect for at least 30 days and typically Walmart’s discounts last for 90 days. This is Walmart’s attempt at leveling Amazon.

Wait, it gets better. Shortly after the Walmart punch, Amazon Prime’s Vice President, Greg Greeley, took a counterpunch by saying, “We heard some retailers are charging higher prices for items in their physical stores than they do for the same items online. The idea of charging your in-store customers more than your online customers doesn’t add up for us, but it’s a good reminder that you’re usually better off shopping online.”

Of course, several other retailers are offering “Christmas in July” type of promotions, but it is not about the promotions, it is about the level of intensity between Walmart and Amazon. The question that comes to mind is, “is there more to this than the usual competitive nature of major corporations fighting for their turf?” The answer is clearly “YES”.  In fact, I suggest we all look at the deals on Walmart and Amazon on July 15th. Whatever the deals were going to be as of Sunday night, the deals will have gotten a lot better by the time the clock hits midnight on July 14th. In fact, I think the deals will get better as we move through Wednesday. Neither Amazon nor Walmart want to finish in second place on July 15th. But, herein lies one of the important facts about the Walmart and Amazon Black Friday promotions in July: I believe the Amazon and Walmart measures of success for July 15th are drastically different. Walmart wants to win the crown as having the best deals and selling the most. Amazon wants to win the crown as having the best deals and signing up the most new Prime members. So, the fact is neither Walmart nor Amazon will be in first place. The customer that shopped on July 15th will be in first place. There will be some very, very good deals. Then there will be a tie for second place with both claiming a victory over the other, but I doubt either Amazon or Walmart will have a very profitable day.

Understand, the 2015 version of “Christmas in July” has less to do with leveling the supply chain and more to do with attempts to level the competition. Neither Amazon nor Walmart will come close to matching the one day online sales of Alibaba on Singles Day (11/11/2014 at $9.3 Billion) but they both will advance their strategy. I believe Walmart’s July promotion strategy is to be a significant player online and I believe Amazon’s Prime Day strategy is to grow Prime. Both will do this, but at a cost. So, as we get into next week we will see the results of July 15th and as we begin the next quarter, we will see the impacts of July 15th on the bottom line. Then we will reflect on the bigger picture and see the intensity between Walmart and Amazon continuing to grow as the importance of supply chain continues to grow and the future of retail continues to evolve.

All of the information is the result of Tompkins International’s research of public information. There is no information being presented today that comes from any proprietary source. Tompkins International does not discuss information about their clients unless that information has been published.

How to Choose the Right Sorter for your Material Handling Automation System

June 30, 2015

By Cris Anderson
Project Consultant, Tompkins InternationalHow to Choose the Right Sorter for your Material Handling Automation System

Sorters are commonly used elements in many material handling automation systems. A sorter is basically a device that can receive inputs (usually products, in single unit or full case form) in any order and separate it into multiple, discrete channels without human intervention. The main function of a sorter is to allow the decision of what products belong together in one order to be completed without depending on people. Instead, we will need to use a warehouse management system (WMS) to know all the products that need to go into an order and a collection of machinery to automate the movement of those products. The machines need to be able to read which product it is receiving and to physically move the correct product to the correct area, together with other products that belong to the same order.

Sortation systems are most often used toward the end of the order selection and build process. This way, pickers/product selectors in the warehouse or distribution center can select many products at once, for many orders, also known as batch picking, without separating the products manually. This increases human picker efficiency as it maximizes the amount of product that can be selected in one trip without requiring the person to count out product for each order, or return to the same warehouse location multiple times for each order.

Selecting which sortation system best fits your need requires evaluating several factors. Some things to consider are:

  • What is to be conveyed and sorted? Cases? Totes? Units?
  • Which sortation system will be able to handle the product throughput? (i.e. How many units per hour are flowing through it?)
  • What kind of space is available for the sorter and order build area and how does that impact the design of thesortation?
    • What is the required angle of the divert? 30, 45, or 90 degree transfer?
    • Is sortation limited to a single side, or is a two-sided divert required?
  • Are the products in a format that can be handled by the selected sortation system? (I.e. cases, poly bags, units, etc.)

There are many types of sorters to choose from, including:

  • Shoe sorters: Movable pucks, called shoes, slide perpendicular to the conveyor and travel to certain points to gently move the products to the designated area. These are suitable for many product types because they push gently and consistently.
  • Narrow belt: Narrow conveyor belts move the product through the sorter, while rollers positioned at exits pop-up underneath the products to move them off the sorter path at the right time. These are suited for cases or totes that have a hard, flat bottom.
  • Pop up roller: Rollers move up from underneath conveyor to divert the product off of the main conveyor and on to other conveyors or gravity flow lanes. Similar to narrow belt sorters, these need products to have hard, flat bottoms for best results.
  • Tilt tray: Trays move around a circular or oval track and tilt sideways at the right moment to drop the product down a chute when it comes to the right lane. These can be run at high speed and can also handle a variety of product shapes and sizes.
  • Bomb bay: Similar to a tilt tray in that it product is placed onto a tray that moves in a circular track. This tray is split into two pieces down the middle, and when the product arrives at the correct location; both sides tilt inward and drop the product to the correct location. This must be used with product that can handle dropping.
  • Cross belt: Another type of sorter that moves along a track as one product is placed onto sections of a conveyor belt that run perpendicular to the forward movement around the track. The conveyor belt activates at the right time and moves the product off of the sorter. This has more flexibility than bomb bay and can handle heavier products.
  • Hanging Garment Sorter: This moves product, usually garments, that are hanging from hooks off of the main transport lane to either gravity down lanes or other hanging garment conveyor sections as needed.

While sorters can increase efficiency in many warehouses, each application needs to be carefully considered and designed to work with the rest of the material handling automation system. In addition to carefully evaluating the engineering requirements of the sortation system, the overall business requirements for each situation need to be considered, including capital expense, future maintenance costs, and future growth requirements.

More Resources:

Why Retailers Need To Be Using Multiple Channels

June 25, 2015

By Jim Tompkins
CEO, Tompkins InternationalWhy Retailers Need To Be Using Multiple Channels

Last week I read multiple articles regarding the closing of brick and mortar store locations throughout the US. The titles of a few articles stated “Hope” and “Dying Slowly”.  I found these words to be interesting and puzzling in regards to plans for closing one-fourth of a retailer’s brick and mortar store locations. Is there really “Hope” when closing such a large amount of locations? Is this really “Dying Slowly”?

I do not believe “Hope” is a strategy. You cannot hope that closing brick and mortar locations will bring profitability. In 2012, 56% of retailers offered a mobile application for smartphones, according to a study by Crossview. This makes it clear that the importance of multichannel retail has been in place for some years now. Retailers need to adapt to what is happening now – omnichannel. As I have predicted, e-commerce has taken a huge toll on brick and mortar stores and retailers need to adjust their supply chain. A supply chain now must accommodate the need to be omnichannel retail, omnichannel logistics, and omnichannel delivery.

I also do not believe “Dying Slowly” is correct; this is a fast death. This is not current news. I stated in my video “The Alibaba Effect” a year ago that this was coming. These times are tough, there are new complexities, challenges, and difficulties to address. “The future isn’t what it used to be,” Yogi Berra famously said. Retail is at a crossroads. In order to be profitable a company must sell through multiple channels, not just brick and mortar. A company needs to have the right strategy, right technology and right supply chain structure. A properly designed supply chain will increase capabilities, focus on target customers, create value proposition for product offerings and services, along with maximizing the economic value.

Omnichannel retail is a multichannel approach to retail that provides the customer with a seamless shopping experience. Whether the customer is shopping online from a computer or mobile device, or in a brick and mortar store, seamless inventory visibility and seamless continuous improvement must be present. Omnichannel logistics is a multichannel approach to network planning, combined distribution centers/fulfillment centers/returns centers/liquidation centers, and lean facilities planning.

The Alibaba Effect and e-commerce are fast moving trains and retailers need to jump on board or die.

More Resources:

Dimensional Weight Pricing – Shoplifting VS. Highway Robbery

June 16, 2015

By Chris Ferrell
Principal, Tompkins Internationaldimensional weight pricing

According to the National Association for Shoplifting Prevention there are approximately $13.0 billion of merchandise shoplifted each year in the United States. Perhaps surprisingly, it is estimated that almost 85% of goods shoplifted are stolen by employees; leaving only 15.2% — about $2.0 billion – worth of goods which are stolen out of stores by customers.

Both numbers are undeniably large.  Retailers and consumer products manufacturers have gone to great lengths to keep these numbers in check. For smaller items, one of the more tried-and-true means of limiting shoplifting has been through the liberal use of extra packaging material. It only makes sense: a big package is more difficult to steal than a small one.  The bigger item has the added benefit of increased gravitas on the shelf, a consumer is more likely to notice – and presumably consider purchasing – an item in a larger package. Among the most popular – and presumably effective – form of oversized packaging used as a theft-deterrent for Consumer Packaged Goods  (CPG) items is the ubiquitous “clamshell pack”, the clear plastic packaging that is almost impossible to open without a knife or scissors.

Clamshell technology first rose to prominence in the 1990’s as a shoplifting deterrent forCDs and PC software. During this time ordering from home involved looking through a (paper) catalog and then talking to someone on the phone; a selling channel that was a small niche for all but a few retailers specialized in the area. I mention these outdated products and methodologies for a reason: the packaging is still commonly used even though the items people buy and the way that they shop have almost certainly changed. This makes sense because the extra packaging is still an excellent shoplifting deterrent / eye-catcher… and until recently there was not any substantial financial reason to make a change.

Change took place at the beginning of 2015, when UPS and FedEx each decided to subject all U.S. ground parcel shipments to a Dimensional Weight (DIM Weight) calculation in addition to the traditional weight-based system, charging the higher of the two. In short, all of that extra packaging now has a cost beyond the additional raw materials. The first financial results since DIM pricing started have been released by UPS and FedEx. While pure numbers are hard to come by, it appears that the two publicly-traded behemoths are on pace for a combined revenue increase of $2.7 billion in the U.S. domestic ground service sector. Even after factoring out a substantial General Rate Increase (GRI) of 4.9% that both UPS and FedEx took on top of the other changes, it still leaves approximately $2.0 billion in extra freight charges directly attributable to DIM. This “highway robbery” is actually the necessary response for all industries due to the explosive growth of online shopping and home-delivery services; the parcel providers need to be able to charge for the space being used.

But this means consumer products manufacturers and retailers (and, potentially, their customers) are paying about $2.0 billion more in freight, on top of untold billions in additional packaging materials, to minimize the chance of shoplifting and enhance the shelf presence of a product that will never actually be on a store shelf.

While the idea of making changes that have the potential to increase shoplifting might seem unpalatable, when weighed against the certainty of increased shipping charges caused by DIM pricing, it could still be the financially prudent thing to do.

More Resources:

Are You Truly Minimizing Your Total Freight Spend?

June 3, 2015

By Gene Tyndall
Executive Vice President, Tompkins InternationalFreight Spend

There is no scarcity of information available on the practices of Transportation Management (TM) and Transportation Management Systems (TMS) along with their features and functions. The apparent purpose of all the information is to help companies (whether shippers or service providers) do better at managing their transportation (freight) expenses.

The available information on TMS is designed to help compare the over 30 systems on the market today. The standard process for carrying out this comparison is to first, develop the business (or user) requirements. Then, issue either Requests for Information (RFI) or move straight to the Request for Proposals (RFP). The company must reach a consensus decision on the preferred system or application.

Unfortunately, we too often find that this standard process misses the mark. Typically, either the business requirements have been understated or misrepresented or the comparative assessment results in a choice that is not the best match for the company. No matter how disciplined the processes and business rules that surround the TMS are it fails to deliver the true optimal spend of total transportation funds. This is only recognized when the time is taken to validate the plans vs. actual or conduct a pilot audit of “what could have been”.

Admittedly, requirements change, talent is eroded, or business needs are varied beyond what might have been predicted. We discover several factors in a TM Assessment — these as well as others. Nevertheless, when the business requirements are flawed or the TMS is incapable of adjusting to changes, it is almost inevitable that important gaps will exist in planning and managing a Transportation Management Process.

Let’s first consider the definition of a “TMS”. There are numerous systems or applications available that are labeled “TMS”. These include specialized systems such as; for brokerage, for International, for bulk, for parcels, and other specialized needs. Systems designed specifically for 3PL’s and systems designed specifically for shippers including for private fleets.   The true “TMS” does much more than handle shipments. Just as with other supply chain systems there are “Tiers” that differentiate the basics — shipment handling – from the most advanced – true total freight cost minimization with substantial features and functions in between.

One of the most critical factors for under-performance is the lack of the overall goal of achieving total freight optimization. Planning individual shipments and booking carriers to deliver at least cost is the standard capability of the average TMS. Even the best TMS may not be focused on truly optimizing the total freight spend. This is most often due to: (1) treating each shipment as an individual move only (2) focusing too much on freight rates and not on total delivered costs or (3) inadequate use of the TMS as a plan and not just as a one-by-one shipment transaction tool.

Moreover, not all TMS include modern algorithms for optimizing total spend. Transportation has become a complex process which includes multiple options thus, related issues. Operational options such as cross-docking, multi-modal choices, load building, consolidations, dynamic routing, and mixed parcel/LTL movements are all examples of what must be built into the TMS for it to reflect accurate realities. Charges for accessorials, dimensional pricing schemes, contract vs. spot rates, size and weight packaging, hazardous materials, etc., are further examples.

Minimizing the particular cost of 100 individual shipments does not achieve total optimized freight spend. The many options available and pricing complexities make this business objective more challenging than ever.

Even further, as TMS move to the cloud and away from traditional on-premise delivery models, while this provides for faster deployments and lower up front investments, many users are not taking the time to think about future plans, TO-BE Visions, or innovations. Simply improving on-time delivery, reducing individual shipment costs, and enhancing visibility does not assure the minimization of total freight spend.

In many cases companies have outsourced TM to service providers assuming this method is preferable in resources, time, costs, and energy. Yet, one of the top three complaints with outsourcing year after year is that there is no gained innovation, consideration of new ways to do business, or actual achieved true total freight cost minimization. Reducing the costs of service providers by itself will not result in innovation or leading practices any more than will selecting the least expensive TMS.

What is needed for total freight cost minimization vs. just achieving the lowest cost of each individual shipment? Consider the following questions as you think about your total freight expense:

  • Routing and scheduling: are you certain these are being done well every day?
  • Integration with your WMS: how tightly is this connection such that load building is optimal and multi-stops are planned effectively?
  • Consolidations and load-building: is order integrity being maintained while deliveries are being consolidated or is consolidation even considered?
  • Omni-channel customer satisfaction: are each of your customers pleased with their service and deliveries?
  • Freight expense linked to the financials: is the process integrated to the general ledger and the financial budgets such that order management and shipment planning practices are being adhered to?
  • Increasingly complex networks: as the company re-designs its networks to better serve with DC’s, FC’s, Cross-Docks, Hubs, etc., are transportation plans re-done to achieve lowest costs?
  • Dynamic pooling: are your freight pooling points updated regularly to achieve minimum costs?
  • Backhauls and dynamic routing: are you assured that your total costs are being reduced by smart routings and your carriers are taking advantage of backhauls to reduce your charges?
  • Horizontal collaboration: are you taking advantage of possible load sharing on major lanes?
  • Total cost management: do you examine your total freight expense regularly to evaluate its accuracies as well as use freight management dashboards to identify opportunities?

There are other important questions to be asked as well in managing total freight expense. Without the right TMS in place and it being used properly these are challenging to answer. Yet, we know that companies are too often spending more on freight than necessary. This is due to limited knowledge, tools, visibility, business processes and practices, and restrictive business rules.

The smart evaluation, selection, and execution of the right TMS for the company’s true needs and opportunities has progressed beyond the standard process of defining today’s user requirements and projected shipment volumes. Too many options exist for improving freight moves and too many complexities exist in changing logistics networks. Only a few TMS have the capabilities to plan and execute shipments considering all the options and total costs.

In summary, we recommend all shippers and service providers take a fresh look at their overall freight spend. Apply relevant benchmarks for the various modes used. Examine the processes and practices used to manage not only individual shipments but the overall spend. Evaluate the system being used to support freight management or the need for one. Define the barriers that exist – cultural, organizational, and other – that limit the ability to achieve total cost minimization. Design a roadmap to move forward. Substantial cost savings are almost always there even while not sacrificing any customer service levels.

More Resources:

How Today’s E-commerce Requires the Evolution to NEXT

May 26, 2015

By Jim Tompkins
CEO, Tompkins Internationale-commerce Requires the Evolution to NEXT

Retailers need to adapt to next and next and then to next. As I have predicted, e-commerce has taken a huge toll on brick & mortar stores and retailers need to adjust their supply chain. A supply chain now must accommodate the need to be omnichannel retail, omnichannel logistics, and omnichannel delivery.

Some of the retailers that are being affected by e-commerce this year are:

Retailer Brick & Mortar Store Location Closings
Abercrombie & Fitch 180
Barnes & Noble 223
Children’s Place 200
Dollar Tree/Family Dollar 340
Fresh & Easy Grocery Stores 50
JC Penney 40
Office Depot/Office Max 400
Pier One 100
Radio Shack 1,784
Sears 77
Walgreen’s 200
Wet Seal 338

 

These have not and will not be the only retailers affected by the changing marketplace. Some of the globe e-commerce titans include; Alibaba, Amazon, Apple, eBay, Finish Line, Google, JD.com, Lyft, Otto, Rakuten, Tesco, Uber, and Walmart. These titans have been able to adapt to the new omnichannel world of retail and have recognized the importance of moving onto Next. Because of this recognition they have been able to grow, transform, innovate, and be on the offense.

Omnichannel retail is a multichannel approach to retail that provides the customer with a seamless shopping experience whether the customer is shopping online from a computer or mobile device, or in a brick and mortar store, seamless inventory visibility and seamless continuous improvement. Omnichannel logistics is a multichannel approach to network planning, combined distribution centers/fulfillment centers/returns centers/liquidation centers and lean facilities planning. Omnichannel delivery is a multichannel approach of selecting the most efficient and effective mode and carrier for multichannel transportation while addressing the personalization expectations of each individual channel/customer.

It is clear e-commerce is changing retail, consumer products, and distribution. These changes are having huge impacts throughout the supply chain. Your evolution to omnichannel requires that you move on to Next. And, the rate of change is acceleration. HANG ON TO YOUR HATS!

More Resources:

Adopting a Program Management Office in Your Supply Chain Organization

May 1, 2015

By Gene Tyndall
Executive Vice President, Tompkins Internationalproject-management-office

Learn more about the importance of the Program Management Office (PMO) as viewed from the Chief Supply Chain Officer (CSCO) level and how it is best organized, staffed, operated, and value-based. I will briefly describe leading practices and provide guidelines for supply chain leaders seeking transformative improvements in their operations.

The standards for the Program Management (PgM) process have evolved over the past 10 years. (Spell this out?) PMI has only within the past few years provided guidelines and certifications for the Program Management Professional (PgMP). The PM role is to manage an individual project, the PgM responsibility is to manage in an integrated and synergistic manner, multiple-related projects (sometimes referred to as the “portfolio of projects”). The PMO sets the common language, establishes the project links, and provides the basis for management decisions.

Just as the PM role is now supported by project management support, the PMO has evolved with the introduction of technology and its ability to enable a more virtual process, and not necessarily within a physical entity. The principles of the PMO have not changed, it remains the preferred process for managing multiple initiatives or projects in an integrated and synergistic manner, and provides the platform for related management decisions.

The use of PMO for supply chain management is also relatively recent in its adoption. A few leading companies undergoing supply chain transformations or adding new important programs have adapted the PMO for managing the multiple-related projects that impact the supply chain processes, practices, and organizations (not only technologies). They have “located” the PMO outside of the IT organization. PMO has been placed at the center of the CSCO level or with another C-level, depending on the scope of the program and the corporate organization.

What you need to understand in order to improve the use of the PMO and how to gain the most value from its effective operations are the following:

  • The Organization of the PMO
  • The Project Manager (PM) vs. the Program Manager (PgM)
  • When the PMO for Supply Chain Programs is Preferred
  • The PMO and Knowledge Management
  • How the PMO Affects Change Management
  • The Tools for the PMO

Following the principles of strong PMO development, organization, planning, and execution, the PMO will add value and the value will be recognized.  The companies that make effective use of the PMO end up being more efficient and reach higher levels of performance. Due to the rate of project success increasing, fewer mistakes or do-overs are necessary, and the program achieves benefits faster and longer.

Each supply chain organization needs to decide for itself whether or not the use of a PMO will add value to its goals and objectives.  Once that decision is made its planning and execution needs to be consistent with any other well defined process.

While these requirements may seem daunting, the value of the PMO can well exceed the effort required. The benefits of time, costs, and quality are possible. This can be achieved by a well-planned and a well-executed PMO.

To better understand the details on how to implement a successful profitable PMO, read our white paper: Program Management Office: Its Objectives, Methods, and Value for Supply Chain Management

Calculating the True Return on Investment on Your Material Handling System – How ROI Calculations are Evolving

April 29, 2015

By Thompson Brockmann
Partner, Tompkins InternationalCalculating the True Return on Investment on Your Material Handling System

We have a long history of focusing on solutions that maximize supply chain performance and value creation. A large part of that is ensuring that recommendations consider both qualitative and quantitative analysis of multiple alternatives that are designed to best meet clients business strategies.

One of the final steps in distribution and fulfillment center material handling design efforts is to determine the return on investment (ROI), a tried and true method of ranking the economic benefits of multiple alternatives. However, translating the results of economic analysis is not as easy as just ranking the key indicators.

More and more, we are seeing today’s leadership looking beyond the simple ROI, Net Present Value (NPV), and Internal Rate of Return (IRR) calculations. Company leadership is more interested in a holistic look at how the economics of the proposed solution impacts the profitability, growth, and success of the company as a whole. Consider these key components of any economic analysis that aren’t always included in a cash flow analysis:

  • Does the age and condition of current equipment put the mission of the business at risk?
  • What are the costs of acquiring and maintaining labor pools?
  • What are the ongoing maintenance costs?
  • What solutions address increased business continuity concerns?
  • What is the impact to EBITDA? How should depreciation of equipment be accounted for in the economic evaluation so that the EBITDA impact is accurate?
  • What are the true costs of not investing? Are all cost avoidances being correctly accounted?
  • Are one-time expenses and operating costs fully captured?
  • Has the strategy been properly developed so that the structure of the material handling system is designed to meet the strategy? What are the costs of not being able to meet the strategy?
  • Will the material handling system enable new distribution channels, product lines, improve customer service, or have other benefits?
  • Are you looking at the correct economic indicators, i.e. should the NPV be given more weight than IRR as it better addresses other opportunities for available capital?

To meet today’s trends in economic evaluations Tompkins International takes a “More Thought, Less Steel” approach to material handling system design. Our designs keep the value of our client’s capital in the forefront of the entire process. Coupled with a focus on strategy first, ensures solutions that are truly geared toward maximizing value creation within the supply chain.

More Resources: