Paperless Warehouse Not Yet a Reality

The paperless warehouse is the great unfulfilled promise, says Bill Schlatterer of Part Warehouse Inc. in Arkansas.

The problem is, he says, that to make it really pay off, every process up and down the supply chain has to be integrated into the paperless environment. Manufacturers and warehouses can get their technology up to speed, but it’s not enough, he told attendees at the Aftermarket eForum, held in Chicago, Ill., in August.

“Then you get to the jobber and he wants a printed price list and invoice, so where’s the payback?”

Kirk Swarbrick of Federal-Mogul says that from the perspective of a manufacturer the return on investment from a paperless approach has not been what they had anticipated. And the pathway to getting the organization’s nine distribution centres moving ahead has not been an easy one.

“We couldn’t really operate without [radio-frequency identification] capability, but it has been a journey full of potholes and mines to get there.” It was surprising, too, said Swarbrick, just where some of the benefits flowed from. Federal-Mogul did not, for example, realize the increases in productivity that they had anticipated, but there were other improvements that had not been expected.

“For us, inventory accuracy was the best benefit. We know exactly where our inventory is, and we know it is accurate. In the old days, you were hoping it was there,” he added wryly. “The other thing was the quality, minimizing the picking errors. Those were the two main benefits.”

Paul Agather, Automotive Jobbers Supply, in Spokane, Wash., is still struggling with the transition to new methods.

“I think that the paperless warehouse is an oxymoron. You always need a certain amount of documentation, so you are always going to need a certain amount of paper.” However, he says moving down the road has had benefits.

“I read somewhere that one of the definitions of insanity is doing the same things over and over again and expecting different results. We have been writing programs to take advantage of bar codes. I have a good friend who was involved in the grocery industry and was sent to [a convention] in Chicago in the late 1970s to ask about why they should use the bar codes.”

He was, says Agather, laughed out of town. “I think we all know where the grocery industry stands on that today.

“We are not paperless and wireless yet. Currently we do use barcodes at the receiving end. We have noticed a significant improvement just by doing that. We used to get two pallets of gaskets every week. It took six hours to receive that. We cut it down to an hour and six minutes.” Additionally, he says, the warehouse is a much tidier place; product does not wait as long to be put away, so there is very little sitting on the floor.

“We aren’t a large operation, but you can walk through our warehouse and you will not see product sitting on the floor, and that is simply from making that one change.”

Chris Tessier, of Part Depot in Roanoke, Va., oversees 20 DCs and 100 company-owned stores. The company struggled with implementation of paperless warehouse software. Loading efficiency plummeted initially, going from 1.5 hours for a truck to more than four. “It took us two weeks to develop an effective bulk handling style,” says Tessier. Over time, however, the benefits began to roll in.

“We have realized an error reduction of 35%, we can now pull 200 lines per hour, and line item throughput is up 11% with almost no payroll increase.”

In addition, he says, there have been some significant benefits in terms of customer relations. “Our customers are extremely pleased with the elimination of reconciliation with the pick tickets. I cannot imagine returning to the paper ways of pulling and packing.”

All participants on the panel agreed that regardless of the specifics of an individual organization’s implementation strategies, they all underestimated the amount of emphasis they should have placed on training warehouse employees. They also failed to realize the impact that the changes would have on them.

“It was me personally not understanding the scope of validating every single piece,” says Tessier. “You cannot do enough training. Everybody needs to understand what the changes are going to be and what the results of those changes are going to be.”

Expecting the unexpected is, however, part of the process, said Schlatterer.

“When we configured our system, we got 32 [inventory] guns to work with and 32 thermal printers. That should have been a clue,” he laughed. “We were going paperless, but we were buying 32 printers. We needed to print bar codes to put on the totes. That turned out to be a $4,000-a month expense.

“Then, we have the first hot day, close the door on the truck and when they opened it up at the other end, all those labels had fallen on the floor. You couldn’t identify which totes were for which orders.”

Live and learn.

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AFTERMARKET MUST ADOPT STANDARDS FOR SUCCESSFUL E-BUSINESS FUTURE

Standards and perfect data will pave the way to aftermarket efficiencies and profits, attendees of the opening session at the Aftermarket eForum were told.

“There is emerging a critical mass of standards and best practices. The time has never been so right for us to leap forward,” said Luckett.

It is critical to understand what the individual pieces are and how they fit together, said Luckett. “And most important of all, we want you to leave here and do it in the aftermarket. We must grow market share, and we must increase efficiency. We must be lean in all our practices.”

Luckett told attendees at the Hyatt Regency O’Hare that there is an unprecedented collaborative spirit in the aftermarket, which will lead to some exciting progress for the industry, but adds a cautionary tale that in the electrical industry, fixing data is estimated to cost $1.7 billion U.S. per year.

In a world filled with acronyms and initials such as XML, EDI-MEMA X.12, IPO, PIES, HTML, DAC, PCFS, ACEC, etc. the technology roadmap is marked with signs that may not be so easy to decipher for most in the aftermarket.

“So often we get hung up on jargon, and that is not good,” says Bob Moore of Bob Moore and Partners, a technology consulting company. “E-commerce and e-business are two terms often used interchangeably, which is wrong.”

E-commerce is about using the new technology to automate our transactions. E-business is about using the new technology to find new markets or paths to market.

“I think there are three reasons [technology is so important to the aftermarket],” says Moore. Those are the mature nature of the aftermarket, the reckless pursuit of the false god of market share, and the need for improved inventory management.

“Sure, we have a lot of the more complex things–like ABS–but the simple fact is that the car is not a heck of a lot different than it was 100 years ago. This is not a business where the better mousetrap is a big thing for marketers.” This drives competitors to look for small incremental differentiating factors.

It also drives them to seek other ways to grow, mostly through growing market share.

“Gaining market share is really a euphemism for buying market share, which is really about collapsing prices.”

In contrast, says Moore, supply chain technology improves accuracy, eliminates waste, and saves time.

“It is much more realistic than trying to force through a price increase or stealing market share.

Problems resulting from collective inefficiency, says Moore, include stagnant inventory turns, overstocks, depressed markets, as well as sagging prices, mounting inventories, increasing warranty claims, and increasingly unreasonable customer demands.

“The place we get started is all about the data. Everything related to supply chain technology starts with data. And nothing is more important than standards. Machines are stupid, so it is absolutely essential that we have standards to put into these machines.”

“We are in a phase of our industry where the infrastructure is building out,” says Luckett. “There are dozens, or hundreds, of data warehouses, and the reality is that the
quality of the data in those data warehouses is largely very poor.

“Computers have to agree on everything, right down to every bit. Otherwise there are exception reports and kick-outs. Collaborative e-commerce requires bit-perfect data.”

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DATA THE KEY TO NEW OPPORTUNITIES

When the data is right, a data warehouse can unlock opportunities and efficiencies for everyone up and down the distribution chain.

Speaking at the Aftermarket eForum in Chicago, Ill., Dick Morgan, president of Aftermarket Auto Parts Alliance, said that his organization stumbled into the data warehouse world as a result of the company’s merger with the Bumper-to-Bumper/All Pro group.

While initially the value of the project was not fully understood, it soon became clear just how important the project was to become.

“The objective of our data warehouse is strengthening our piece of the automotive aftermarket. The fundamental objective is to make faster marketing and stocking decisions, and enhance the success of each shareholder.

“We recognize the data warehouse as a powerful new competitive tool.” Morgan says that he believes that the data warehouse can help them take approximately four weeks of inventory out of the system, though all parts of the system.

Steve Marks, vice president of marketing for the distribution group, says that the project, which was in progress when the merger happened, was not easy.

“There were a lot of challenges. We have a lot of members with a lot of needs and a lot of different expectations. Another reality is that our shareholders have a variety of systems. We are fortunate to have business executives that embraced this project. They were willing to share their successes and failures with the data warehouse and that was important in getting the other members on board.”

The data warehouse currently has 40 shareholders and 30 manufacturers participating. Each has its own desires, which can complicate the process.

“You can see that the wish list can become pretty cumbersome in the office, so we end up having to prioritize, but from that wish list came the ‘Category Adviser.’ As the people were using the data, the guys in the trenches knew what they were looking at, but the upper management didn’t really know the benefit of the data warehouse.”

The reporting interface allows manufacturers, and now warehouse distributors, to illustrate simply how well or poorly a given line might be doing.

“So if we have a category that is growing quickly and we have a manufacturer that is not, then they can change their plan. At a glance, the manufacturer can see what percentage of his inventory is moving and what is not moving.”

The kinds of decisions about what to do with reporting and data capture are made by two committees, one made up of the group’s five largest members, and another of eight manufacturers.

“We have been clamouring for a long time for more visibility down the supply chain,” says Michael Cardone III. “That is what the data warehouse has given us. And it has also given us a common set of data for talking with our customers.”

He says that project resulted in the reduction of inventory by about 30%, with no loss in order fill.

“We see incredible possibilities in terms of gaining flexibility in our manufacturing processes. All in all this has really given us the view that we have been looking for about what is happening down the supply chain.”

“Our project goal is that we wanted to learn more about what our customers were buying, and what our customers should be buying,” says Corey Bartlett, Automotive Parts Headquarters, an Alliance member WD.

“That doesn’t sound all that revolutionary. The data warehouse is now providing us rollup sales information across our company-owned stores and independent associates, including sales information that we weren’t able to yank out of our J-Con system alone. That was one of our goals.

“Things that we do that we want to measure, and we were able to measure pre-data warehouse but it was a struggle to do so efficiently. Now we can yank that information out whenever we want.”

The added functionality allows them to track the detailed success of promotions and put into place remedies if a promotion falters in a region. Bartlett says they also use it to highlight opportunities.

“Sometimes our salespeople get wrapped up in thinking that they have really great customers, but forget that there are a couple of lines that they are not being supported on.”

He says that it is exciting for smaller players being able to see a larger sample drawn from the entire network to help them make inventory decisions, which can only help individual locations be more efficient and effective.