Automation: E-commerce, software and maintenance at SELF15

E-commerce fulfillment, supply chain software and system maintenance. Those three topics were top of mind earlier this week at SELF15, the executive logistics forum put on in Las Vegas for the past nine years by SDI.

E-commerce fulfillment: You don’t have to be a retailer to know that e-commerce is changing distribution activities and the broader supply chain in profound ways. Consider this: while online sales accounted for just 6.6% of all retail sales in the third quarter of 2014, fulfilling those orders is driving the majority of most retailers’ investments in materials handling equipment, software and automation. And, while many brick and mortar retailers have found efficient ways to pick and pack those orders, few have cracked the code and figured out how to make money in e-fulfillment, according to Brian Gibson, a professor of supply chain management at Auburn University and one of the authors of an annual look at the retail supply chain. “Most of the retailers in our study aren’t making money from omni-channel yet,” Gibson told attendees – many of whom were retailers. Or as one retailer put it, they were willing to not make money on omni-channel for now; they just wanted to stop losing money. As a result, Gibson added, retailers are forced to find ways to do more with less of just about everything. Going forward, Gibson said, retailers are focused on moving from dedicated e-commerce inventory to one set of virtual inventory that is shared across the supply chain. “It’s powerful, but not easy to do,” Gibson said. “Retailers need new technologies, they need better control, and the inventory has to be accurate before they commit to an order.” Couple that with less labor willing to work in retail distribution centers, less time to fill and ship orders, smaller store and DC footprints, transportation constraints and less margin for error, and you get a sense of the challenges in front of the industry. “Add them all up,” Gibson said, “and retailers must find ways to reduce the complexity and costs of managing their supply chains.”

It’s all about the software: At Modern, we’ve been writing for some time about the growing importance of software compared to materials handling equipment in today’s warehousing and distribution operations. That was the theme of a presentation by Greg Bannister, the chief operating officer of Sport Obermeyer, a specialty clothing manufacturing of ski and snowboarding outdoor wear headquartered in Aspen, Colorado. The company had a stellar reputation as a quality manufacturer when Bannister was brought into the organization a few years ago; at the same time, it was losing money and struggling for survival. The reason: it was running the company with outmoded software with very little reporting capability. Sport Obermeyer had little visibility into what it actually cost to manufacture its line; less visibility into inventory levels, which resulted in several million dollars worth of old inventory on the shelves; and challenges getting orders out the door to meet customer delivery dates. Last but not least, the warehouse operated with rudimentary processes. The solution, however, wasn’t automated materials equipment. Instead, Bannister and his team implemented a new ERP system; reorganized the warehouse with pallet racking, shelving and up-to-date but conventional storage and picking processes; and, finally, implemented a WMS to manage inventory management and order fulfillment. The result: Not only is the company back on firm financial footing, it just experienced its best sales and profits in the history of the company.

Maintenance is coming to the forefront: At dinner last Sunday night, I was seated to the maintenance manager of a 1 million square foot distribution center in the western United States. When I asked him how his business was changing and what was his biggest pain point, his answer was short and to the point: “I can’t hire and keep enough skilled technicians.” Talking to manufacturers of materials handling automation and lift trucks, it’s pretty clear that our solutions are becoming more complex, that maintenance is becoming more important than ever and that finding the technicians to keep those systems running is going to be more important going forward than ever.