Warehousing is no longer simply about storing product, says industry guru Kenneth Ackerman. Instead, today's warehouses must focus on supporting the corporate mission and creating value for customers and shareholders.
Author and consultant Kenneth B. Ackerman has a reputation for being a bit of a skeptic. A veteran warehousing man, Ackerman does not easily fall for the latest management fad or technology craze. Instead, his levelheaded advice focuses on time-tested, real-world practices that are grounded in common sense and basic business principles.
Ackerman knows warehousing inside and out. Before becoming a consultant, he was CEO of Distribution Centers Inc., a warehousing company that was later acquired by the third-party logistics service provider Exel. After selling the warehousing business, he joined the management consulting practice of Coopers & Lybrand. A year later, he started his own management advisory service.
Over the course of his long career, Ackerman has often picked up the pen to educate his fellow professionals. He co-wrote his first book on warehousing, Understanding Today's Distribution Center, with R.W. Gardner and Lee P. Thomas back in 1972. Other works include Warehousing Profitably and Fundamentals of Supply Chain Management, co-authored with Art van Bodegraven. He also edits and publishes Warehousing Forum, a subscription-based newsletter. This year, he updated Warehousing Profitably for its third edition.
In a recent interview with Editor James Cooke, Ackerman discussed the current and future role of warehousing in the supply chain.
Name: Kenneth B. Ackerman Title: President Organization: K. B. Ackerman Company Education: Princeton University, Harvard Business School Business experience: CEO of Distribution Centers Inc.; Coopers & Lybrand; Founder, K. B. Ackerman Company CSCMP member: since 1966 Professional affiliations: past president, Council of Supply Chain Management Professionals; founder, Warehousing Education and Research Council; Ohio Warehousemen's Association; International Warehouse Logistics Association; Young Presidents Organization; Opera Columbus
You write in your book Warehousing Profitably that "warehousing is destined to move from a product-centric business to an idea-centric activity." Could you explain what you mean by that statement and give an example of an idea-centric activity?
An idea-centric warehouse manager is one who recognizes ... [that] the role of the warehouse is to support the corporate mission. If that corporation is dedicated to rapid growth, the warehouse must be prepared to support that growth. If the emphasis is on superior service, the warehouse must be managed to achieve zero defects and perfect orders. If the company intends to be a low-price leader, the warehouse must be dedicated to reducing costs.
Has globalization changed how supply chain managers view warehousing?
The warehousing function is not really portable, so globalization has less influence here than it does in manufacturing. However, those supply chain managers who have to establish warehouses overseas must look at how cultural distinctions could change the way the facility is managed. For example, some years ago in Colombia, I saw a rest break where a woman in a starched uniform carried a tray of coffee cups to the workers.
You talk about the information revolution in your book. Would you say it's necessary today for even the smallest warehouse to have warehouse management software in place?
Yes. If you don't have [a warehouse management system], you probably don't have a workable locator system. If you don't have one, you may have US $30-per-hour warehouse workers writing shipping documents with pen and ink. If you don't have directed putaway, decisions about storage location will be made by lift truck drivers rather than by management. So without a WMS, your warehouse would be operating at a higher cost and lower efficiency than it would otherwise, and you will find it more difficult to compete.
Do you expect to see more or fewer warehouses built in North America in the next few years?
It all depends on where you are in North America. In Columbus, Ohio, [USA] the surplus of attractive empty space has pushed pricing down to a point where it is more economical to rent an existing building than to build a new one. This is not true in every city, but unfortunately it is true in many markets.
You note in your book that that many companies today find it difficult to retain warehouse workers. What can companies do to keep their best workers?
The labor situation is not really different for warehousing than for any other job. It starts by picking the right people. Once selected, they must be motivated and receive proper recognition for jobs that are well done. Management should recognize that an order selector in a warehouse has a job that is more rewarding than working on an assembly line or driving a truck. It has more variety, and it requires judgment as well as skill.
You write that the emphasis in warehousing should be on "creating increased value for customers and shareholders." Can you give me an example of how a warehouse can increase value?
Here's one example: A leading apparel retailer has grown its company by providing logistics services that are vastly superior to the competition. When a new fashion is discovered in France, a sample is taken to China, where it is rapidly manufactured, then moved by air to a central distribution center, priced, and reshipped by air to the retail stores. The ability to use superior logistics services has contributed to the value of the retail corporation. Fast-response retail chains combine premium transportation and efficient warehousing with flexible manufacturing. The result is that a buyer can turn a new fashion concept into goods on the store shelves in a matter of weeks while competitors may take months to accomplish the same thing.
Editor's Note:Warehousing Profitably (ISBN# 978-0-9829940-0-9) is available from Ackerman Publications in Columbus, Ohio, USA. For more information or to order, visit the website: www.warehousing-forum.com.
We may be living in a world full of technology, but strategy and focus remain the top priorities when it comes to managing a business and its supply chains. So says Roberto Isaias, executive vice president and chief supply chain officer for toy manufacturing and entertainment company Mattel.
Isaias emphasized the point during his keynote presentation on day two of EDGE 2024, a supply chain conference sponsored by the Council of Supply Chain Management Professionals (CSCMP), being held in Nashville this week. He described Mattel’s journey to transform its business and its supply chain amid surging demand for Barbie-branded items following the success of the Barbie movie last year.
Isaias discussed the transformation on two fronts: Commercially, through the revitalization of its brands that began years ago, and logistically, through a supply chain strategy focused on effectiveness and cost leadership.
Today, Mattel makes millions of toys and is steadily moving beyond the toy aisle with its franchise mindset, becoming a major entertainment company as well. Isaias told the audience Mattel currently has two films in production and 14 others in development, and its television studios business has 13 series’ in production with more than 35 in development.
And as for those supply chain gains? The company has saved millions, increased productivity, and improved profit margins—even amid cost increases and inflation. For the full story on Mattel’s transformation, see our feature story from this past summer.
And Isaias left the EDGE audience with five lessons he learned from his experience in leading change:
The business is our boss;
Don’t delegate complexity;
Take bad news well;
Be fair and take care of people;
Lead the execution.
CSCMP’s EDGE 2024 conference runs through Wednesday, October 2, at Nashville’s Gaylord Opryland Hotel & Convention Center.
Confronted with the closed ports, most companies can either route their imports to standard East Coast destinations and wait for the strike to clear, or else re-route those containers to West Coast sites, incurring a three week delay for extra sailing time plus another week required to truck those goods back east, Ron said in an interview at the Council of Supply Chain Management Professionals (CSCMP)’s EDGE Conference in Nashville.
However, Uber Freight says its latest platform updates offer a series of mitigation options, including alternative routings, pre-booked allocation and volume during peak season, and providing daily visibility reports on shipments impacted by routings via U.S. east and gulf coast ports. And Ron said the company can also leverage its pool of some 2.3 million truck drivers who have downloaded its smartphone app, targeting them with freight hauling opportunities in the affected regions by pricing those loads “appropriately” through its surge-pricing model.
“If this [strike] continues a month, we will see severe disruptions,” Ron said. “So we can offer them alternatives. We say, if one door is closed, we can open another door? But even with that, there are no magic solutions.”
Turning around a failing warehouse operation demands a similar methodology to how emergency room doctors triage troubled patients at the hospital, a speaker said today in a session at the Council of Supply Chain Management Professionals (CSCMP)’s EDGE Conference in Nashville.
There are many reasons that a warehouse might start to miss its targets, such as a sudden volume increase or a new IT system implementation gone wrong, said Adri McCaskill, general manager for iPlan’s Warehouse Management business unit. But whatever the cause, the basic rescue strategy is the same: “Just like medicine, you do triage,” she said. “The most life-threatening problem we try to solve first. And only then, once we’ve stopped the bleeding, we can move on.”
In McCaskill’s comparison, just as a doctor might have to break some ribs through energetic CPR to get a patient’s heart beating again, a failing warehouse might need to recover by “breaking some ribs” in a business sense, such as making management changes or stock write-downs.
Once the business has made some stopgap solutions to “stop the bleeding,” it can proceed to a disciplined recovery, she said. And to reach their final goal, managers can use the classic tools of people, process, and technology to improve what she called the three most important key performance indicators (KPIs): on time in full (OTIF), inventory accuracy, and staff turnover.
CSCMP EDGE attendees gathered Tuesday afternoon for an update and outlook on the truckload (TL) market, which is on the upswing following the longest down cycle in recorded history. Kevin Adamik of RXO (formerly Coyote Logistics), offered an overview of truckload market cycles, highlighting major trends from the recent freight recession and providing an update on where the TL cycle is now.
EDGE 2024, sponsored by the Council of Supply Chain Management Professionals (CSCMP), is taking place this week in Nashville.
Citing data from the Coyote Curve index (which measures year-over-year changes in spot market rates) and other sources, Adamik outlined the dynamics of the TL market. He explained that the last cycle—which lasted from about 2019 to 2024—was longer than the typical three to four-year market cycle, marked by volatile conditions spurred by the Covid-19 pandemic. That cycle is behind us now, he said, adding that the market has reached equilibrium and is headed toward an inflationary environment.
Adamik also told attendees that he expects the new TL cycle to be marked by far less volatility, with a return to more typical conditions. And he offered a slate of supply and demand trends to note as the industry moves into the new cycle.
Supply trends include:
Carrier operating authorities are declining;
Employment in the trucking industry is declining;
Private fleets have expanded, but the expansion has stopped;
Truckload orders are falling.
Demand trends include:
Consumer spending is stable, but is still more service-centric and less goods-intensive;
After a steep decline, imports are on the rise;
Freight volumes have been sluggish but are showing signs of life.
CSCMP EDGE runs through Wednesday, October 2, at Nashville’s Gaylord Opryland Hotel & Resort.
The relationship between shippers and third-party logistics services providers (3PLs) is at the core of successful supply chain management—so getting that relationship right is vital. A panel of industry experts from both sides of the aisle weighed in on what it takes to create strong 3PL/shipper partnerships on day two of the CSCMP EDGE conference, being held this week in Nashville.
Trust, empathy, and transparency ranked high on the list of key elements required for success in all aspects of the partnership, but there are some specifics for each step of the journey. The panel recommended a handful of actions that should take place early on, including:
Establish relationships.
For 3PLs, understand and get to the heart of the shipper’s data.
Also for 3PLs: Understand the shipper’s reason for outsourcing to a 3PL, along with the shipper’s ultimate goals.
Understand company cultures and be sure they align.
Nurture long-term relationships with good communication.
For shippers, be transparent so that the 3PL fully understands your business.
And there are also some “non-negotiables” when it comes to managing the relationship:
3PLs must demonstrate their commitment to engaging with the shipper’s personnel.
3PLs must also demonstrate their commitment to process discipline, continuous improvement, and innovation.
Shippers should ensure that they understand the 3PL’s demonstrated implementation capabilities—ask to visit established clients.
Trust—which takes longer to establish than both sides may expect.
EDGE 2024 is sponsored by the Council of Supply Chain Management Professionals (CSCMP) and runs through Wednesday, October 2, at the Gaylord Opryland Resort & Convention Center in Nashville.