Smoothing the supply chain

10 Mar 2008

The latest technologies allow warehouse managers and logistics experts to have complete in-stock accuracy and save millions in the process.

For any businessman who operates a warehouse, here’s a simple exercise. Take a close look at your supply chain and try to see where lost or missing items end up. Thought they were just swallowed up on the balance sheet? Think again.

Ronan Clinton, managing director of Heavey RF, which supplies IT systems to the logistics and retail sectors, makes a persuasive case for investing in technology to improve efficiency and visibility in a supply chain. “Take a company shipping out 10 million cases of products every year. With a paper-based system the typical accuracy is 99pc.

“That’s historically been considered a high figure, whereas if people look at the 1pc, they’re looking at 100,000 cases being inaccurately picked. Let’s say the cost of dealing with the administration and the loss of each case is €10-€15. Then the cost of mistakes is in excess of €1m per year. What was considered a high level of accuracy is inefficient in real terms,” he says.

Systems to track stocks are no longer the preserve of large retailers or multinational distributors, Clinton argues. “The pricing of stock systems is coming down. Any company with more than five people responsible for moving stock in and out of a warehouse should have a system for tracking,” he says.

The message appears to be getting through to Irish businesses. But Clinton believes this can’t happen quickly enough. “At a small business level, there’s a worrying lack of technology in the supply chain, but it is beginning to turn around,” he says. Return on investment can often be very fast, with stock systems typically delivering payback within six to nine months, Clinton adds.

The foundation stone of any technology system for supply chains is the barcode. “Barcoding is by far the most stable, reliable and quickest way to deploy technology there is,” says Clinton. “It’s your only man – it allows you to track and trace and gives you accountability of your stock.”

A significant change in the market has been the use of voice-based picking systems. “It is really changing how companies are running their warehouses,” says Clinton, who claims this area grew by 50pc last year for Heavey RF.

“Voice technology is the single biggest thing that’s having an impact on supply chain management,” adds Barry Long, sales manager with Zetes Ireland. With these systems, the pick operator wears a headset and the system tells them what item to pick by means of a voice command.

“It’s hands-free, eyes-free and gets rid of all that fumbling around with paper or even with computers,” he says. Voice-based systems can typically offer a 25pc increase in warehouse staff productivity along with a 35pc drop in picking error rates, Long claims. One retail distributor in Northern Ireland had paid back the total cost of their voice system within a year, he reports.

Ultimately, the message of improving business through technology is a simple one: “Voice systems improve accuracy and the knock-on effect of increased accuracy is improved customer service,” says Long.

“The hardware and software integration is very mature, prices have come down and it’s a market where we’re getting a lot of interest from smaller companies. It’s not just in retail environments any more, that’s the low hanging fruit, but any pick-intensive warehouse environment.”

Radio Frequency Identification (RFID) has been touted as a revolutionary technology but Clinton and Long agree its merits are far from certain in typical warehouse environments. “In the supply chain, RFID is struggling to find a place, it’s not a viable vertical market for RFID,” says Clinton, who points to the absence of widespread adopters apart from a few initial test clients like Wal-Mart.

Long says the expense of implementing systems may not give the kind of payback that logistics firms need. “I would liken RFID to 3G – you have this promise but to my mind it still hasn’t delivered. RFID is not new, but it’s a solution trying to find a problem.”

The next step in improving supply chains will be to make the in-house data available to customers, who will be able to track their orders via the internet. Many of the building blocks for this are already in place today and you don’t have to look far to find examples of how the technology works in practice.

DHL’s Dublin office, which operates a large logistics facility in Dublin, acts as a ‘test bed’ for various technology projects within the company as a whole. The company’s Intraship application, which lets customers log on to a password-protected webpage to check the status of their shipments, was piloted in Ireland before anywhere else, according to Derek Monahan, IS director with DHL.

DHL recently opened a purpose-built facility in Dublin, using state-of-the-art technology in a number of areas, including a highly sophisticated automated sortation system, which speeds up the processing of cargo. The system has more than 700m of conveyors and, when at maximum capacity, can sort up to 7,000 parcels per hour.

The hub sports a range of technology, one of which is a video-coding system which takes an image of the side of each parcel as it passes through. The site is also completely wireless, Monahan reports.

Whenever courier staff come within a 1km range, their equipment gets uploaded automatically with all the data about the shipments they have to make. DHL may have the advantage of scale, but its undertaking shows what is possible and it offers a glimpse of what the warehouse and logistics facility of the future could look like.

By Gordon Smith