Page 1

MHD Supply Chain Solutions MARCH / APRIL 2018 COVER STORY

Automotive challenges

SSI SCHAEFER partners with this complex industry

SPOTLIGHT ON…

The ten most common pallet racking systems

SPEED UP!

Designing supply chains for faster clockspeeds

IN FOCUS:

WAREHOUSE & DC EQUIPMENT, AUTOMATION AND SYSTEMS INTEGRATION


AGVS DELIVER THE GOODS FOR BICKFORD’S GROUP Bickford’s Group Warehouse Manager, Rhett Glanville, says he would be lost without his AGVs. For the past five years, the Adelaide-based manufacturer has been using a fleet of AGVs to distribute its iconic beverages. Working around the clock, the AGVs collect finished goods from production and then transport, store and stage loads for despatch in the DC. The AGVs communicate with each other to optimise efficiency, charge themselves when batteries run low, facilitate a rolling stocktake, have virtually eliminated damage to stock and storage systems, provide a safe working environment, and delivered an ROI of just 2.5 years.

Ask us. +61 2 9486 5555 www.dematic.com.au/bickfords Logistics Solutions

|

Storage Solutions

We Optimise Your Supply Chain |

Software & IT

|

Voice Picking

|

AGVs

|

Conveyors

|

ASRS

|

Service & Support


MHD FROM THE EDITOR

MHD Supply Chain Solutions CONTACT MHD Supply Chain Solutions is published by The Intermedia Group Pty Ltd ABN 940 025 836 82 41 Bridge Road, Glebe NSW 2037 Telephone: (+61) 02 9660 2113 Fax: (+61) 02 9660 4419 Email: mhd@intermedia.com.au

THE TEAM Managing Director: Simon Grover Editor: Charles Pauka Sales: Ralph Merry Production Manager: Jacqui Cooper Graphic Designer: Alyssa Coundouris Head of Circulation: Chris Blacklock

FOR ADVERTISING OPTIONS Contact: Ralph Merry rmerry@intermedia.com.au

SUBSCRIBE Australian Subscription Rates (inc GST) 1yr (6 issues) for $78.00 2yrs (12 issues) for $120.00 – Saving 20% 3yrs (18 issues) for $157.50 – Saving 30% To subscribe and to view other overseas rates visit: www.intermedia.com.au or Call: 1800 651 422 (Mon – Fri 8:30-5pm AEST) Email: subscriptions@intermedia.com.au

DISTRIBUTION Average Total Distribution: 6,924 AMAA/CAB Publisher Statement Period ending 30 Sept 2017.

CONTRIBUTORS MHD Supply Chain Solutions magazine is recognised by the Australian Production and Inventory Control Society, the Chartered Institute of Logistics and Transport Australia, the Supply Chain and Logistics Association of Australia and the Singapore Logistics and Supply Chain Management Society.

LEARNING FROM THE MASTERS

W

hen it comes to operating a warehouse, I am constantly amazed by not just the new and innovative technology going into today’s facilities, but the amazing feats those on the frontline of customer order execution (picking, packing and dispatch) are able to achieve. For the demands of modern commerce, whether traditional or even more so in the case of online retail, are such that order preparation windows are getting increasingly smaller, and it is no longer a question of pacifying an unhappy customer if things don’t click; it’s a case of goodbye for good. And so all retailers, physical or in the cloud, must meet the demand, and the demand can be great. For example, take this automotive parts supplier from the cover story (pages 16-19), describing its newly commissioned warehouse equipment installation: “The new system needed to be designed to grow and still has the capacity to accommodate up to a 30% increase in order output. At this DC, Preston Motors holds 50,000 SKU and handles 2,500 picks per day, including accommodating 200-300 emergency orders per day.” Not bad, is it.

FORKLIFT SURVEY: HAVE YOU ENTERED YET? DON’T DELAY! Our bi-annual Forklift Survey is on again, and this time around we have decided to boost the prize to encourage more of our readers to enter and give us their valued opinions. The MHD/Transport and Logistics News Forklift Survey is an important facilitator of practical information between those who invest in and use the materials handling equipment and the suppliers of said equipment. Your purchasing and usage patterns allow suppliers to fine-tune their machines, services and supply options, which will inevitably result in benefitting those who matter most: you. Highlighting the importance of our readers’ opinions on the finer details of forklift purchase, ownership and use to our publication and partners is the fact that this year, the prize offered is bigger, better and offers more choice. The winner will not only get a $1,000 travel voucher to spend on business or pleasure travel, but we will also donate $1,000 cash to the charity of the (same) winner’s choice. The winner will be drawn at random from the list of those who have completed the survey and elected to take part in the draw. So enter now! Visit www.TandLnews.com.au and click on one of the Forklift Survey ads.

Charles Pauka Editor charles@intermedia.com.au

DISCLAIMER: This publication is published by The Intermedia Group Pty Ltd (the “Publisher“). Materials in this publication have been created by a variety of different entities and, to the extent permitted by law, the Publisher accepts no liability for materials created by others. All materials should be considered protected by Australian and international intellectual property laws. Unless you are authorised by law or the copyright owner to do so, you may not copy any of the materials. The mention of a product or service, person or company in this publication does not indicate the Publisher's endorsement. The views expressed in this publication do not necessarily represent the opinion of the Publisher, its agents, company officers or employees. Any use of the information contained in this publication is at the sole risk of the person using that information. The user should make independent enquiries as to the accuracy of the information before relying on that information.

All express or implied terms, conditions, warranties, statements, assurances and representations in relation to the Publisher, its publications and its services are expressly excluded save for those conditions and warranties which must be implied under the laws of any State of Australia or the provisions of Division 2 of Part V of the Trade Practices Act 1974 and any statutory modification or re-enactment thereof. To the extent permitted by law, the Publisher will not be liable for any damages including special, exemplary, punitive or consequential damages (including but not limited to economic loss or loss of profit or revenue or loss of opportunity) or indirect loss or damage of any kind arising in contract, tort or otherwise, even if advised of the possibility of such loss of profits or damages. While we use our best endeavours to ensure accuracy of the materials we create, to the extent permitted by law, the Publisher excludes all liability for loss resulting from any inaccuracies or false or misleading statements that may appear in this publication. Copyright (c) 2018 - The Intermedia Group Pty Ltd.

MHD MARCH / APRIL 2018 | 3


*AITA Statistics Ytd December 2017.

DELIVERING MORE THAN JUST FORKLIFTS. THAT’S THE TOYOTA ADVANTAGE.

At Toyota Material Handling we recognise that choosing the right supplier is just as important as choosing the forklifts and warehouse equipment

CE

LEBRATING

that will meet your needs. As Australia’s number one forklift company,* it doesn’t matter whether we are supplying you with a single spare part, a rental forklift, or helping

19 6 8 - 2018

you manage your entire fleet, our objective and commitment remains the same – adding value to your operation. That’s the Toyota Advantage.

1800 425 438

www.toyotamaterialhandling.com.au

S O L U T I O N S F O R E V E R Y PA L L E T ®


MARCH / APRIL 2018

ISSUE #2 VOLUME 48

THIS ISSUE NEWS

COVER STORY

06 The 2018 MHD Forklift Survey is on – enter now!

COMMENT 08 Last-mile headaches 10 Connect for efficiency 12 3 in ‘18

TECHNOLOGY 14 GS1 expands photo services

IN FOCUS: WAREHOUSE & DC EQUIPMENT, AUTOMATION AND SYSTEMS INTEGRATION

16

20 Spotlight on… The ten most common pallet racking systems 23 Keep safe 24 Sistema 27 The benefits of exclusivity 28 4 for voice 30 Cut the risk 33 Go further

SUPPLY CHAIN

24

34 36 38 40 42 44 47 48 50

Raise the glass Speed up! Fear flexibility not Digitisation => advantage The Big 3 Systems of record Tech is good Automate x 3 One Belt One Road

THE LAST WORD 55 New e-laws

DEPARTMENTS AND REGULARS 56 ASCI – contacts, courses, news. 58 From the Supply Chain and Logistics Association of Australia. 59 Subscription information.

ON THE COVER SSI SCHAEFER proves complex automotive challenges can be solved. See page 16

27 MHD MARCH / APRIL 2018 | 5


MHD NEWS

THE FORKLIFT SURVEY IS READY FOR YOU

And the $2,000 prize package is waiting

T

his year for the fifth time, MHD magazine in conjunction with Transport and Logistics News (www.TandLnews.com.au) is conducting the biannual forklift survey. The results have helped major suppliers such as Crown Equipment, and Toyota Material Handling Australia to better gauge the needs and wants of Australia’s forklift users. We are once again asking you, our readers, to give us your opinions and insights into what you look for when you decide on a new forklift, what you need, what is important for you. All forklift users will benefit from your responses, as the responses will no doubt result in better forklifts in years to come. And to celebrate our fifth Forklift Survey, we have an amazing $2,000 prize package for one randomly selected winner from the respondents. The lucky winner will not only receive a travel voucher package worth $1,000, but will also have the opportunity to nominate their charity of choice, to which we will donate the other $1,000 of the prize package. That’s right, by entering the survey, you will have the chance to win $1,000 for the charity of your choice plus a $1,000 travel voucher!

6 | MHD MARCH / APRIL 2018

The 2018 Forklift Survey is open now. Simply visit www.TandLnews. com.au and click on the forklift survey button to participate.

WHAT WILL 2018 BRING FOR THE FORKLIFT USER? Crown Equipment has developed technology that allows users to extract more performance and efficiency from manual lift trucks, such as Auto Positioning System (APS) which can be built in to the Crown TSP Series

VNA trucks, and Quick Pick Remote (QPR) order picking technology which works with our MPC, GPC and TSP Series lift trucks. The Auto Positioning System combines with TSP Series turret trucks to power them to the next racking location using the most efficient route. It has the potential to improve productivity by up to 25 per cent depending on the application. Crown is also celebrating its 20th year of selling internal-combustion forklifts by updating its CG and CD Series models in 2.0 to 4.5-tonne capacities. Meanwhile in recent years, Toyota Material Handling Australia (TMHA) has adapted itself both to deal with industry change and to take positive advantage of the changing environment. One of the most challenging issues include the rapid change in product technology being requested by corporate account clients, who equal close to fifty per cent of TMHA’s new MHE volume. Looking ahead, TMHA has some exciting new products due for release in 2018 including a new range of warehouse equipment, new battery electric counterbalance forklifts, plus a range of new reach trucks. Another exciting milestone is that TMHA will this year celebrate a century of forklift sales in Australia with a series of events commencing in April.

DON’T DELAY Visit www.TandLnews.com.au and click on one of the Forklift Survey ads to enter the survey. Do it today! ■


ColbyRACK’s unique diamond slot profile provides a stronger and more efficient interlock between rack uprights and beam connectors.

SIGNIFICANTLY STRONGER THAN CONVENTIONAL RACK


MHD COMMENT

LAST MILE HEADACHES PAUL GREENBERG

Statistics show that the e-commerce experience for customers is falling over at the last mile.

I

write this piece as I prepare for the Retail Fulfilment Summit in Melbourne at the end of February. I have the good fortune of chairing this summit again this year, now in its fifth year. My key message that I take to the summit, and I include in this article, is that supply chain and logistics remains the ‘uncracked code’ in my view, in e-commerce retail. Retail in all its forms is not a simple business. As the old well-worn saying goes, ‘retail is detail’. And never more so than today. A multi-touch, multi-channel retail means that good retailers are meeting their customers where they want to be met. Online, in-store, on marketplaces, and increasingly on social media. While the multi-touch customer spends more than the uni-channel shopper, nonetheless it is a rather atomised environment. There is no longer a nice river of shoppers, rather there are rivulets. Customer expectations are rising, they are tech-savvy and hyperconnected, and are demanding the frictionless experiences they are getting in other verticals. Consider how easy it is to pay for an Uber ride. Customers want this in retail, too. And end-mile delivery expectations are increasing. Certainty around delivery windows are being demanded, in tighter delivery bands. Short on-demand delivery – within three hours or less – is on the rise, and click and collect demands inventory integrity at the store level to name a few.

Cross-border trade still stands as the big opportunity for Australian retailers to grow their global customer base, and although the digital ‘umbilical cord’ connects Australian brands with global shoppers, the delivery experience is undoubtedly the weakest link. I am still very optimistic and enthused about the ‘new retail’ environment, a term coined by NORA and since ‘borrowed’ by our friends at Alibaba. A technologyled, customer-centric and global retail. But innovation in payments, marketplace platforms, digital user experience and digital marketing have outstripped innovation in supply chain and logistics. I am not taking anything away from the massive efforts and significant investments our big carries have made. Collectively in the billions. Similarly, I have huge respect for the advances made by our younger entrepreneurial start-ups. Businesses like Zoom2U, Shippit, Shipster, Sendle, Cohesio Group, iCumulus, Passel, to name a few, have done an amazing job. But we are not there yet, far from it. I sense that there is still a disconnect at some levels between the infrastructure-rich carriers and the technology solutions that arise to enable, support and enhance them. The tugs and the tankers are not connecting at the right level just yet. And statistics show that e-commerce is falling over at the last mile, somewhere between pick up and the customer’s front door. Again, we should acknowledge the progress and efforts made, but encourage and support ongoing innovation. I am also keen to see more alliances, and as I have written before, open minds to ‘ frenemy’ opportunities. Competitors working together for mutual gain and to help the customer experience along. We have another big year ahead in retail, with Amazon starting to flex its muscles in our domestic environment. We overestimated them in the short term, it seems. Their Christmas launch was soft, but we dare not underestimate them in the long term. They will change the landscape. I sense a renewed vigour in rising the opportunities in this exciting ecosystem we all inhabit, and look forward to seeing many of you at the conferences coming up, and in the year ahead. Paul Greenberg is the founder of NORA Network. For more information visit www.nora.org.au. ■

8 | MHD MARCH / APRIL 2018


MORE STORAGE IN LESS SPACE SSI SCHAEFER’s extensive range of shelving systems and plastic storage containers enables you to optimise your space requirements and increase your order picking efficiency. ssi-schaefer.com


MHD COMMENT

CONNECT FOR EFFICIENCY JAMES MCPARLANE

To become efficient, your supply chain has to be connected

D

espite the rise of sophisticated planning tools in the enterprise software market, organisational ability to connect the supply chain remains one major, persistent gap that causes huge inefficiencies across the globe. This incredibly prolific problem is one of the most prominent reasons for inventory issues, long planning cycles, and costs due to organisational churn. It sounds simple at first: connect the network of suppliers, customers and trade partners that are the driving forces of success. It’s actually something that’s been tried before. The first efforts made to connect multiple organisations were undertaken in 50 A.D. when the Roman military implemented a system for disseminating bi-directional communications between Rome and its colonies. The system was based on standardised and efficient messages – usually only containing the number of words needed to convey critical information. Fast forward to 1968, and the Transportation Data Coordinating Committee created ‘Electronic Data Interchange’, or EDI. EDI was created to be essentially a digital version of the Roman Empire’s bi-directional communications. Adopted first and fairly quickly by highly standardised industries, grocery and automotive companies were in an excellent position to leverage the technology because of the minimal variance across multiple enterprise when it came to operating processes. Keep in mind, this was before cloud software, so standardisation was not just beneficial for these companies to possess, it was a necessity. On-premise databases needed to speak ‘apples to apples’ when communicating

10 | MHD MARCH / APRIL 2018

with other companies’ systems. Transactions could easily flow if this was the case, but nearly 50 years later, this technology is still not as widespread as one might have thought. Despite attempts from Microsoft, SAP, Oracle, IBM and countless other software companies, the potential of EDI narrowed continuously, eventually acting as a mere vehicle for delivering transactional data to parties that it might benefit. These transactions were delivered after the fact, or too close in time to necessary response execution from which to truly benefit. This is not to mention the difficulty of interacting with trade partners across multiple industries and operating models that became ubiquitous during the industrial revolution and intensified in the internet age. The flexibility was simply not present, and the information being shared was inadequate. Business was moving much faster, and companies needed more than just a few transactions: they needed to let one another know what they were planning to do. Over the last couple of decades, many businesses have hacked together a delicate and error-prone solution to this problem: they use a combination of Excel spreadsheets and emails to communicate rich datasets, filled with short-, mid- and long-term plans with plenty of context — enough that their trade partners can begin to formulate plans. However, at the scale of which business operates today, a single error or misstep in the process can send everything haywire, costing millions — even billions of dollars across an entire supply chain before being caught. Most individuals in today’s workforce live with this reality every day. Their world revolves around sending these high-risk files that may or may not be biased in fact to their unsuspecting trade partners.

In many cases, when something goes wrong, their counterparts at other companies will simply stop listening, turning off the flow of information and operating in a complete silo. This is surely one of the most significant causes for reactive, inefficient planning and business performance in our global economy. Growing data security concerns have only intensified these trends and it has become clear that something must give.

ACT NOW Today, there is an opportunity to solve one of the most ubiquitous business problems of the last millennia: making collaborative planning secure, flexible, contextual, and incredibly fast. With the rise of the cloud, detailed plans can be shared not only within companies, but also outside of them. A simplified web interface that can deliver any size, shape or type of information across supply chain trade partners can enable diversified corporations to share information and collaborate on living plans as they must to achieve the best results across each and every product line. Finally, advances in security have graced the industry with ways to share data in unprecedented privacy — sharing only the information that must be shared without needing to standardise. As the world begins to align with the trend of connecting the supply chain, we will again start to see benefits not just of lower inventories, reduced operating costs and lower churn, but we will also find new and innovative ways to collaborate with our networks at scale that were previously thought impossible. James McParlane is the managing director APAC of Anaplan. For more information call +61 2 8415 9743 or visit www.anaplan.com. ■


MHD COMMENT

3 IN ‘18 “ These are the three supply chain trends to watch in 2018 TOM CHRISTODOULOU

the ‘3A’ - analytics, automation and artificial intelligence. The ‘3A’ will be critical in helping supply chains provide more granular and detailed tracking and tracing of people, process and assets.

A

2/ RELY ON CRITICAL, REALTIME DATA AND ANALYTICS SOFTWARE TO GAIN VISIBILITY FOR THE BEST NEXT ACTION

s 2017 has passed us by and we have entered the new year, we reflect on what we learned last year and what to look forward to in the year to come. As supply chains continue their digital transformations and become more intelligent, they are expected to adopt these three trends:

1/ EMBRACE THE ‘ON-DEMAND’ ECONOMY BY LEVERAGING THE ‘3A’ Against the backdrop of the on-demand economy, supply chains are struggling to adapt to changing fulfilment models that would enable customers to get more of what they want, when they want it and how they want it delivered. As a result, supply chains are being challenged to better manage inventory levels and anticipate operational needs in near real-time processing capabilities. This is why accelerating technology deployments to gain visibility of assets, people and products to understand specific demands is key. Because of this, there is a strong need to modernise operational and operating procedures by leveraging

12 | MHD MARCH / APRIL 2018

Supply chains have shown a willingness to invest in their own systems to take advantage of better and faster data.

3/ OPTIMISE LOCATIONING TECHNOLOGY FOR BETTER VISIBILITY INTO SMART DECISION-MAKING

analytics. According to Zebra’s recent Manufacturing Vision Study, manufacturers are recognising the value of real-time location tracking technologies and will expand their level of usage from 38 per cent to 61 per cent by 2022. Over 55 per cent of companies will implement RTLS by 2022, providing the much-needed transparency across their supply chain operations. RTLS allow supply chains to collect critical data about assets, including location, stage, and condition. Today, only eight per cent of manufacturers have realtime monitoring in place throughout the entire manufacturing floor, but this number will soar to 35 per cent by 2022. Supply chains have started leveraging ties between the physical and digital worlds to enhance visibility and mobilise actionable insights that create better customer service, drive operational efficiencies and enable new business models. Some are still in the middle of the transformation, but 2018 will be the year they begin aggressively deploying solutions.

Real-time locationing systems (RTLS) are key to providing effective tracking data with higher accuracy to perform advanced/predictive

Tom Christodoulou is ANZ sales director at Zebra Technologies. For more information visit www.zebra.com. ■

The world has become more and more data driven – businesses rely on real-time data to run their operations efficiently and beat the competition. With data becoming more of a requirement, supply chains have shown a willingness to invest in their own systems to take advantage of better and faster data. An example of a smart supply chain that takes data capture to the next level and integrates it with analytics is the SmartPack, which uses cutting-edge 3D vision sensors with powerful software to track trailer loading efficiency in real-time, allowing maximum levels of efficiency in transport applications.


Crown SC 6000 Series

4-Wheel

Stability 3-Wheel

Manoeuvrability Contact Crown now to trial the new SC 6000 Series. Call 1300 283 390 or e-mail us at crowninfo@crown.com. To learn more, visit crownforklifts.com.au/sc6000 to see a video of the SC6000 in action.


MHD TECHNOLOGY

GS1 EXPANDS PHOTO SERVICES G S1 Australia has acquired DLibrary, a digital product photography, online hosting and distribution services company from PMP Digital Pty Ltd. GS1 Australia’s executive director and chief executive officer Maria Palazzolo said: “The acquisition is aligned with GS1 Australia’s mission to provide suppliers, retailers and industry with a state of the art solution to manage and share high quality product images and accurate consumer facing product data with trading partners. “Our strategic mission statement also reflects the vision of GS1 Global to establish the GS1 Cloud as the largest source of trusted product data in the world, making it possible for businesses to meet the expectations of today’s digital world.” The DLibrary customer base and digital asset library will be merged into GS1 Australia’s Smart Media platform, providing retailers and many other Smart Media subscribers with a wider range of data and digital content at one central location. Ms Palazzolo added: “The acquisition of DLibrary also complements the recent Smart Media enhancements to meet Country of Origin Labelling (CoOL) requirements, as well as the expanded Smart Media Content Creation service powered by Brandbank, a Nielsen Group company, to bring local legal compliance and international best practice within the Smart Media service. “An enhanced Smart Media is for the benefit of GS1 Australia members of all sizes, from the small local brand owner right up to large multi-nationals. We believe that the acquisition of DLibrary, together with the other enhancements, will position Smart Media as the leading solution for providing digital content to Australian industry.” For many years GS1 Australia and DLibrary have worked collaboratively to drive industry standards in digital photography, and beyond the acquisition both companies will continue to work in partnership

14 | MHD MARCH / APRIL 2018

on digital content projects. This collaboration will provide GS1 Australia members and Smart Media customers with a range of value-added services around creative content and production including stylised photography, CGI, video, social, digital and print. General manager of PMP Digital Stephen Cuthbert said: “We are excited about the sale of DLibrary to GS1 Australia and will work with GS1 to transition all of our customers to the Smart Media service over the coming months. We also look forward to continuing our strong relationship with GS1 Australia and combining our expertise to deliver expanded digital solutions for the Australian industry.”

PRODUCT IMAGES ARE A VITAL COMPONENT OF THE DIGITAL SUPPLY CHAIN ERA Businesses in the print and online world today continue to face the challenge of providing trading partners with instant access to visually engaging product information, digital product images and other productrelated digital content at all times. Smart Media is a complete digital marketing package for sharing digital content and photography with major retailers and online marketplaces. It is a high quality digital content creation, hosting and distribution service for GS1 Australia members. As efficiency continues to be the pulse of the supply chain, having high quality digital images of products using Smart Media will deliver an outstanding online and print presence.

WHAT DOES THE ACQUISITION OF DLIBARY MEAN FOR SMART MEDIA? This latest acquisition of the DLibrary customer and content base continues the exciting growth and development of Smart Media. In 2016, GS1 Australia entered into a long-term agreement with Brandbank, a Nielsen-owned company, to mobilise Brandbank’s expertise in content creation to complement the

existing Smart Media product data and self-managed digital content distribution service. Soon after, many of Australia’s largest suppliers and retailers adopted the Smart Media Content Creation service. Many more Australian suppliers and GS1 Australia members will now be able to provide high quality digital content because of the acquisition. Here’s a snapshot of some the additional benefits of Smart Media today: • Create new users with access to product library (self-manage). • Control access to content via public, private or restricted access. • Smart Media supports the Country of Origin Labelling (CoOL) data requirements of all major retailers. • Subscribers can leverage the same Photography and Content Creation services used by Australia’s leading retailers for their own home branded products. • Nutritional and other on pack product information can be automatically populated from the National Product Catalogue, where available, keyed directly into Smart Media, or the team at GS1 Australia can do it on behalf of the customer using the Smart Media Content Creation service. • Reports can be run by users directly identifying who’s accessing content. • Enhanced search functionality. • Mobile tablet compatible - perfect for mobile sales teams. “An enhanced Smart Media is for the benefit of GS1 Australia members of all sizes, including the small local brand owner right up to large multi-nationals. We believe that the acquisition of DLibrary, together with the other enhancements, will position Smart Media as the leading solution for providing digital content to Australian industry,” added Ms Palazzolo. For more information call the Smart Media team on +61 3 8581 5959, email SmartMedia@gs1au.org or visit www.gs1au.org/Smart-Media. ■


Dexion RDS LT WMS The Warehouse Management System developed for small and medium sized businesses

The WMS has been designed to streamline warehouse processes with the objective of improving overall efficiencies in warehouse operations. The Dexion RDS LT Warehouse Management System delivers: Traceability and visibility of all tasks in real-time Control of warehouse inventory and operations Simple system integration Hosting in the Cloud or on-site Server Locally developed and supported solutions Dexion has extensive experience in implementing and deploying WMS systems across all types of business so you can rest assured we’ll deliver a solution that meets your expectations with a rapid ROI.

1800 100 050 www.dexion.com.au


SOLVED Automotive challenges

Material handling and logistics management challenges and solutions for the automotive aftermarket DC

THE AUTOMOTIVE INDUSTRY IS A POWERHOUSE

The automotive manufacturing industry is one of the most important global economic sectors. Having grown from a nil base at the start of the 20th century to an industry that produced 72.11 million passenger cars in 2016, plus 22.5 million commercial vehicles(1) is remarkable. In revenue this is a global turnover of over €2 trillion(2), which equates to the 6th largest economy in the world, if it were a country. The industry globally employs over 9 million people(2) directly in making vehicles and parts, with each direct auto job supporting another 5 indirect jobs. But the automotive industry can also top lists in relation to customer quality expectations, variety of products available, and process complexity. It is also an industry that continually must manage change. Since the invention of the modern car in 1886 by Karl Benz, personal vehicles have enabled people to live, work and spend their spare time in ways not possible before.

AUTOMOTIVE INDUSTRY IS HERE TO STAY Today, according to the NRMA(3), private car-based mobility is the preferred form of transport for most Australians. Owning and using your own car is primarily seen as safe, comfortable and peaceful, compared to public transport. This ‘auto mobility’ is so entrenched in the Australian mindset that it can be difficult to see a time where you may not own a vehicle. The overall vehicle population continues to grow. Registration in Australia has seen 16 | MHD MARCH / APRIL 2018

steady growth from 14 million vehicles in 2006 to 18.8million in 2017(4). Even considering some predictions of a tapering off of private car ownership, car sales are not expected to decline in the foreseeable future, with fleet ownership, including car sharing, anticipated to fill any deficit. In a 2017 NRMA report, Matthias Mueller, CEO Volkswagen outlined: “In the future, many people won’t own a car. But they can all be a customer in one way or another, because we will serve a much broader concept of mobility than today(3).”

THE FUTURE OF AUTOMOTIVE AFTERMARKET LOOKS BRIGHT Within the general automotive industry, the aftermarket and spare parts sector can be identified separately and treated differently, and currently it is experiencing steady growth. Revenue for this sector in Australia stands at $5.2 billion with annual growth of 2.5% in the five years to 2018, and the industry is expected to outperform the overall economy over the ten years to 2023(5). The global aftermarket industry should reach $722.8 billion by 2020(6). One contributor is the increase in the average age of cars on the road. According to the Australian Bureau of Statistics 2017 car census(4), in Australia the average age is 10.1 years, with campervans the only category to record a decrease since 2010. In the USA, the average age of passenger vehicles is 11.6 years, which has continually risen. As people keep their vehicles longer and are placing more importance on preventative


MHD COVER STORY maintenance to maximise vehicle life, demand for aftermarket parts is increasing, making it important for spare parts suppliers to become smarter and more efficient with their supply chain and stock management(7).

WHY AUTOMOTIVE AFTERMARKET LOGISTICS IS UNIQUE

PM AUTOMOTIVE GROUP The PM Automotive Group (formerly Preston Motors), is one of Australia‘s leading automotive and spare parts suppliers, trading since 1912. It operates two DC sites in Melbourne to provide better geographical coverage and customer service, and the new Campbellfield DC was commissioned in 2015. The new system needed to be designed to grow and still has the capacity to accommodate up to a 30% increase in order output. At this DC, Preston Motors holds 50,000 SKUs and handles 2,500 picks per day, including accommodating 200-300 emergency orders per day. Orders are despatched three times daily, with guaranteed same-day Melbourne delivery. Warehouse manager Lou Micevski explains how the SSI SCHAEFER system caters well for the ebbs and flows of the automotive spare parts industry. “Winter is a busier time, with more crash orders in the bad weather. One of the appealing aspects is that this new high-end system is efficient and quick, and it delivers significant noise reduction and power savings on the previous system.” Slotting of items is performed on a dynamic basis. Incoming stock is automatically assigned a storage location based on its dimensions, movement and available storage locations. The system, designed and installed by SSI SCHAEFER includes VNA and selective pallet racking, special parts storage racking and shelving, R3000 shelving and mezzanine, plastic containers, and zone divert conveying and sortation system.

The automotive aftermarket sector is a very different industry, with unique logistical and stock management characteristics. One such characteristic is the massive variety of items that are stocked. Parts can vary from replacement parts, lubricants, accessories, cosmetic improvement items, tyres, tools and repair equipment. The required SKU can be both small and large, from a bolt to a door panel; can be both simple and complex, from a floor mat to a clutch assembly; and can be heavy or light, from a short motor to a headlight bulb. This is supplemented by the larger range of vehicle models and options now available, especially with new technologies such as gas/electric hybrids. One single model series of a premium German automobile brand can reach over 1,000 possible automobile variations(8). The number of distinct SKUs handled by the automotive aftermarket has grown enormously: operators can have anywhere from 60,000 to 125,000 SKUs in their supply chains(7). As well as a massive number of SKUs on hand, each can have different stock turnover rates. Some SKUs turn over fast, while others might only be ordered annually. Not only is keeping the right parts in stock an issue for the automotive aftermarket DC, but they also need to consider storage options that make fast-moving SKUs easier to access and handle. Automotive aftermarket industry members have also recently managed the introduction of fast, easy delivery options for ordered parts, and the growth of the online retail market for parts and accessories. All this paints a picture of the automotive aftermarket industry as being one dealing with significant growth and change, and one that needs to be nimble, adaptive and have flexibility built into their DC and logistics management practices. Automotive supply chains need to become more responsive and flexible to remain competitive.

SOLUTIONS FROM AN INDUSTRY SPECIALIST SSI SCHAEFER is recognised worldwide for delivering customised solutions that offer maximum efficiency, no matter the complexity. SSI SCHAEFER has been a partner to the automotive industry for MHD MARCH / APRIL 2018 | 17


MULTISPARES Multispares is the largest independent supplier of aftermarket truck and bus parts in Australia and New Zealand. Its products are sourced worldwide from leading manufacturers and specialist suppliers. At its 7,000+ m2 facility in Greystanes, NSW, more than 20,000 pick lines and 500 pallets of truck and bus parts are distributed monthly. The system installed by SSI SCHAEFER was purpose-built for Multispares’ national and local branch demands. It maximises pick efficiency and was configured to current requirements but allows expansion to support future growth. It also delivers improved operating efficiency and employee safety. “Our warehouse operations are critical to customer service delivery. SSI SCHAEFER’s broad range of high-quality storage solutions improved our warehousing efficiency and accuracy, giving us the opportunity to allow for expansion in the future,” said managing director of Multispares Geoff Stewart.

BMW In the first decade of this century, BMW Group Australia had seen its sales increase by 85% with vehicle numbers nearly doubling. To ensure good customer service, BMW built a new 12,600m2 PDC in Moorebank, Sydney, while retaining its Melbourne Parts Distribution Centre. SSI SCHAEFER installed selective pallet racking and R3000 modular shelving, configured as a three-tier mezzanine system with integrated lighting, goods hoist and sprinkler systems. This twin-warehouse strategy with the introduction of the Sydney PDC is a demonstration of the commitment that BMW Group Australia has to its business partners, the dealer network and to vehicle owners. It means that BMW dealers across the country now receive optimum speed of delivery and customer service. With the success of this project, BMW Australia has this year chosen SSI SCHAEFER to manage further expansion and development of the Sydney PDC. This project is due for completion by the middle of this year.

18 | MHD MARCH / APRIL 2018

many years and has delivered countless world-class solutions for some of the biggest industry names both in Australia and globally. The comprehensive range of its industry-focused products and solutions provides total logistics systems for automotive spare parts DC operations, which can be tailored precisely to each site’s requirements and focused on those attributes of particular industry importance. For flexibility to cope with growing demand and changing SKU ranges, SSI SCHAEFER offers an extensive and diverse range of racking, shelving and mezzanine systems for all storage tasks for automotive SKUs; from small parts storage to tyre, bumper bar, glass, and exhaust systems to name a few. Every solution is optimally and individually configured to meet specific requirements and can include a large variety of accessories to meet all storage needs. Highest quality, modular configuration, diverse combination options and the greatest flexibility are key features of SSI SCHAEFER solutions. The R3000 shelving system developed by SSI SCHAEFER is ideally suited to small parts storage. It is a boltless shelving system that can also be used to build multi-tier mezzanines up to four levels high. This fully integrated and customisable product is complemented with a full range of accessories designed to provide almost unlimited options for the automotive industry. SSI SCHAEFER’s plastic shelf containers are designed with the R3000 shelving system


MHD COVER STORY

VOLKSWAGEN GROUP AUSTRALIA Facing strong automotive parts and accessories growth for the Volkswagen, AUDI and SKODA brands, the NSW-based NDC for Volkswagen Group Australia constantly reviews its in-house storage capacities to manage the orders for its dealer network of commercial and passenger vehicles. In 2009, SSI SCHAEFER installed an automated two-storey small-parts shelving system in a new Melbourne DC to manage the Southern dealer network in Australia. This incorporates a conveyor system on both floors, narrow and wide aisle racking, and storage areas. An integral part of the fit-out is the R3000 shelving system that has been built as a two-tier mezzanine for the storage of awkward products and medium volume SKUs. The system is designed to optimise storage options while minimising the space required to handle these specialist automotive parts. With the success of this project, Volkswagen Group Australia has this year chosen SSI SCHAEFER to manage further expansion and development of both the Sydney and Melbourne DC. Both these projects are due for completion by the end of the year.

in mind. They create order, no matter the size and complexity of the operation and product range, and the RK series shelf containers achieve maximum cube utilisation within the shelf. Each container can also be separated into multiple compartments with dividers, which can be individually labelled for improved classification of small items. A rear lip is incorporated allowing the container to hang off the shelf for handsfree picking and replenishing. For the larger items that are a natural part of the auto-parts product range, SSI SCHAEFER offers a variety of sturdy, robust, safe and expandable pallet rack systems that include pallet racking, cantilever racking and drive-in racking storage as a starting point.

IMPROVING PICKING PRODUCTIVITY Picking is central to warehouse logistics. SSI SCHAEFER has developed a range of picking systems that incorporate conveyor and software solutions. SSI SCHAEFER’s WAMAS software manages and controls all the intralogistics processes and encompasses efficient and flexible order processing functions. WAMAS is configured and implemented on customer sites by the 1,200-strong global software team, and a highly experienced contingent of Australian-based software engineers. For more information call +61 2 8799 3600 or visit ssi-schaefer.com. ■

Each container can also be separated into multiple compartments with dividers.

References 1. www.statista.com/statistics/262747/worldwideautomobile-production-since-2000 2. www.oica.net/category/economic-contributions 3. The future of car ownership August 2017 report by NRMA and www.bcgperspectives.com/ content/articles/automotive-whats-ahead-carsharing-new-mobility-its-impact-vehiclesales/#chapter1 4. www.abs.gov.au/ausstats/abs@.nsf/mf/9309.0 5. IBIS World Motor vehicle Parts retailing in Australia Aug 2017 6. www.v12data.com/blog/a-look-at-trends-andstatistics-in-the-automotive-aftermarketindustry-2017 7. ‘The Nuts and Bolts of the Automative Aftermarket Supply Chain – Merrill Douglas 20 September 2013 8. “  Supply Chain Management in the Automotive Industry” from www.advantech.net.au

MHD MARCH / APRIL 2018 | 19


SPOTLIGHT ON THE TEN MOST COMMON PALLET RACKING SYSTEMS

MAL WALKER

P

allet racking systems pervade the logistics landscape. Scattered across the country in distribution centres, sheds and stores, racking fixtures of all shapes and sizes store goods for our nation. But, if you look carefully you will see that not all racking systems are the same. For those in the industry this is well known, but for the novice, it’s not so

easy to spot the differences, let alone understand why you would use one type of racking versus another. To help understand what types of racking are available, when to use them, and when to avoid them, I briefly list each type below with an explanation, estimate of utilisation and an indicative budget price to purchase (exclusive of GST). There is a sketch of each as well to assist in seeing how they operate.

There are additional types of storage racking and order picking equipment. These will be outlined in subsequent issues. The author wishes to thank racking suppliers Schaefer and APC who advised budget prices for each racking mode. Mal Walker is the manager, consulting, at the Logistics Bureau. For more information contact Mal on 0412 271 503 or email mwalker@logisticsbureau.com. ■

Racking Mode

Features

When do you use it?

When not to use it?

Budget Price

1/ Selective

• Clear Aisles of 3 to 3.4m for reach trucks or 3.5 to 4.5m for counter balanced fork lifts.

• Where you have a relatively low number of pallets per SKU

$46 – 60

• Supports First In First Out (FIFO)

• When you want totally free access to any pallet, any time.

• When you have a high number of pallets per SKU and you are constrained for space

• Most common mode of racking • Unfettered access to any pallet • Allows order picking at lower levels

• When you need to pick from pallets at lower levels

• When you need to pick from more pallets than the lower level pick face will allow

• When you have more pallets per SKU and want to gain greater storage density

• When you need to perform order picking from pallets

• When order picking is not required from pallets within push back racking

• When pallets are accessed frequently for picking and are then put away again

• Storage Utilisation: 90%

per pallet

• I.e. for every 100 pallet places available, you can fill 90.

2/ Push Back Racking

• Clear aisles of 3 to 3.4m • First in last out (FILO) for each slot • Can be three or four pallets deep, but commonly only two pallets deep. • Pallets are pushed back from aisle by fork lift trucks • Pallets are placed on low friction carts • Used for full pallet storage only • Forklift drivers need to be careful when loading in an out to avoid pallet damage • Utilisation: 85-90%

20 | MHD MARCH / APRIL 2018

• Where pallet to pallet contact is can cause damage to stock

$275-295

per pallet


MHD FEATURE

Racking Mode

Features

When do you use it?

When not to use it?

Budget Price

3/ Double Deep Racking

• Clear aisle of 3.0 to 3.4m

• When you have more pallets per SKU

• When you need to perform order picking from pallets

$55-65

• FILO for each slot • Pallets at lower levels must be on beams, and guide rails are used at upper levels

• When greater storage density is required

• Need a fork lift truck with extendable reach and camera to assist the operator. • Generally used for placing two pallets of the same SKU in each double deep slot.

per pallet

• When pallets are accessed frequently for picking and are then put away again • When you have lots of SKUs with single pallets in stock

• Can be serviced by reach and counterbalanced fork lift trucks and order picking machines • Storage Utilisation: 85-90%

4/ Pallet Live Storage

• Clear aisle of 3.0 to 3.4m • FIFO for each lane • Pallets are placed on gravity roll tracks and move from entry to exit via gravitational pull • High use of cube • One lane per SKU • Separate load in and load out aisles

• When you need FIFO 0preation and stock is moving at relatively fast rate • When you have a high number of pallets per SKU • Where you need high space utilisation

$400-420

per pallet

• When you need to perform order picking • When you cannot tolerate pallets encountering others due to line pressure • When you cannot tolerate occasional snags caused by pallets stalling on the roll tracks

• Full pallets only • Utilisation: 85-90%

5/ Drive in Racking

• When you have few pallets per SKU

• Clear Aisles of 3 to 3.4m for reach trucks or 3.5 to 4.5m for counter balanced fork lifts • FILO for each bay. • The fork lift drives down the lane of each racking bay to deposit or pick up pallets. • Drive in racking emulates the operation of block stacking, but with the racking there is reduced damage to pallets and stacking can be higher • Can be up to 10 or 12 pallets deep and up 6 or 7 pallets high.

• When FILO is not a problem • When you do not wish to mix SKUs within each bay/lane of drive in racking • When high density storage is required, (but be careful of the honeycomb effect) which reduces utilisation

• Where order picking is required from pallets

$165-180 per pallet

• When you are planning for greater than 60% space utilisation

• When staging of received or picked goods is required in a high-density format

• Utilisation: 50-60%

WHY: Shuttle

Carousel

• • • •

Small Unit Footprint High Speed Operation Dedicated Inventory Control Minimise Manual Handling with ‘Goods to User’

• Storage 500kg per Tray • Clean Stock, Reduced Shrinkage • Great ROI, Local Service and Support

USES: • Small Item Distribution • 3rd Party Logistics and Inhouse Facilities • Work In Progress and Buffer Storage

• Maintenance Spares • Tool Storage

www.kardex.com.au Contact: 1300 555 101 Kardex VCA Pty Ltd, Wodonga VIC 3690

MHD MARCH / APRIL 2018 | 21


Racking Mode

Features

When do you use it?

When not to use it?

Budget Price

6/ Narrow Aisle Racking

• Clear aisle of 1.8 to 2.2m • Emulates characteristics of selective racking,

• When you can’t afford to two machines operating

$50-60

(Turret Truck Operation)

• When you have a high SKUs with relatively small quantities per SKU • Where you want good space utilisation

• When you have limited budget

• When you have large amounts of goods moving and out • When you want to improve the storage density within your warehouse

• When you have a high movement velocity and need two machines working in the same aisle at the same time

• When you have a high SKUs with relatively small quantities per SKU

• When you want one machine servicing the racking

• Where you want good space utilisation

• When you have a high movement velocity and need two machines working in the same aisle at the same time

• Turret trucks retrieve and put away pallets from pick and deposit (P&D) stations at the end of each bay of racking • Turret trucks require wire or mechanical guidance down the length of each aisle • A separate forklift delivers and picks up pallets to and from the P&D stations • Order picking machines may pick from pallets, but not at the same time as turret trucks

per pallet (not including wire or angle guidance system)

• Only one machine in an aisle at a time • Utilisation: 90%

7/ Narrow Aisle Racking

• Clear aisle of 1.8 to 2.2m

(Articulated Truck)

• Emulates characteristics of selective racking, • Articulated reach trucks can move from truck unloading to rack without the need for (P&D) stations or guidance

• Order picking machines may pick from pallets, • When you have large amounts of goods moving and out but not at the same time as turret trucks • When you want to improve • Only one machine in an aisle at a time the storage density within • Utilisation 90% your warehouse

8/ Mobile Racking

• Clear aisle of 3 to 3.4m • Mobile bases with wheels support selective racking. • Operates like a powered compactus • Mobile racks move to allow access to pallets • One aisle opens at a time • Ideal for high density storage, with maximum selectivity

• Use when there is a high amount of storage, but with modest movement of pallets

• When space is not at a premium

• When you are handling full pallets only

• When you need to perform lots of carton picking from pallets

• When building and operating expenses are high e.g. cool and cold stores

• When you need operate in more than one aisle at a time

• Used when there is a high volume of products moving through of each SKUs.

• When you need to pick from the pallets

$50-60

per pallet (no guidance required)

$700-800

per pallet

• Often used in cool and cold stores • Utilisation: 90%

9/ Satellite Racking

• Clear aisle of 3 to 3.4m

(deep lane pallet racking) • High density storage system, which utilises a mobile shuttle (remotely controlled) to move the pallets through the racking.

• Can be 10 to 40 pallets long per lane • The shuttles are placed and retrieved from the racking by fork lift trucks.

$185 – 250 per pallet

$50,000 per shuttle

• One SKU per lane. • Used to overcome the poor space utilisation of drive in racking

• Can operate in FIFO and FILO modes • Often used as an alternative to drive in racking, because the utilisation is much higher. • Utilisation: 90 to 95%

10/ High Rise Racking

• Clear aisle of 1.8 to 2m

(Automated Storage and Retrieval Systems)

• High density storage system usually serviced by automated cranes. Can be single or multiple pallets deep, open or closed face. • Needs dedicated building, rack clad or free standing • Utilisation: 90 to 95%

22 | MHD MARCH / APRIL 2018

• Used when land space is limited, and/or if there is a high volume of products moving in and out of the system. • The number of pallets per SKU becomes irrelevant as the system is automatic and all pallets are accessible

• When budget is limited

$350-400

• You do not need to pick from pallets. (If you do these can be done elsewhere in the distribution centre)

But don’t forget the price of the building $9501000/sqm.

per pallet


MHD FEATURE

KEEP SAFE

The GateKeeper and RacKeeper arrive in Australia

A

rbon has introduced the GateKeeper Mezzanine Safety Gate, a reciprocating barrier that creates a controlled access area in which workers can safely load and unload from the edge of a mezzanine, pick module or other elevated work platform; and the RacKeeper Safety Gate, a reciprocating barrier that creates a controlled access area for multilevel pick modules or any other elevated workspace that requires fall protection within a racking system. The GateKeeper is designed with a dual reciprocating gate that is interconnected and can’t be open at the same time. It is installed on the edge of a mezzanine, pick module or elevated platform where pallet loads from the floor level are regularly deposited for pick-up. When the outer gate opens to allow pallets to enter the mezzanine level, the inner gate automatically closes, keeping workers out. After the pallet is received, the mezzanine-level workers open the inner gate to remove the material from the work zone. During this time, the outer gate is securely in position on the edge of the mezzanine. After loading/unloading is complete, the inner gate is closed to allow the forklift to remove any items in the work zone. The GateKeeper’s link bar design ensures that both gates always work in unison, without relying on the chains or cables that are commonly used on other mezzanine

gates. The GateKeeper also features a Saf-TLatch, which prevents a worker from raising the outer gate while inside the work zone. In addition, the unit’s unique ‘toe board’ design prevents material from accidentally being pushed off of the mezzanine.

THE RACKEEPER

TOP RIGHT: The Gatekeeper. BELOW: The RacKeeper.

This reciprocating barrier ensures full-time safety on an elevated platform. While many facilities with industrial mezzanines have implemented handrails and gates around all edges, these gates need to be opened during a loading/unloading process, creating the potential for a serious or even fatal injury in the event of an accidental fall. In fact, falls to a lower level are amongst the leading causes of workplace fatalities and injuries from those falls result in a median of 15 days away from work. The RacKeeper is designed with a dual reciprocating gate that is interconnected and can’t be open at the same time. It is installed on the edge of a pick module or elevated platform where pallet loads from the floor level are regularly deposited for pick-up. When the outer gate opens to allow pallets to enter the raised level, the inner gate automatically closes, keeping workers out. After the pallet is received, the upperlevel workers open the inner gate to remove the material from the work zone. During this time, the outer gate is securely in position on the edge of the raised platform. After loading/unloading is complete, the inner gate is closed to allow workers to remove any items in the work zone. For more information call +61 3 9349 6800 or visit www.arbon.com.au. ■ MHD MARCH / APRIL 2018 | 23


SISTEMA Design and installation of a world-class integrated warehouse

24 | MHD MARCH / APRIL 2018


MHD FEATURE THE BUSINESS CHALLENGE To meet rapidly growing global demand for its plastic food storage and cooking containers, including from leading European and United States retail chains, Sistema commissioned a new multi-million dollar manufacturing and distribution facility to be built at The Landing Business Park at Auckland International Airport. Sistema’s site is New Zealand’s largest privately owned manufacturing facility covering 25 hectares. Kerrect Logistics consultant Scott Kerr, who was appointed to manage the supply and installation of an integrated material handling system for the new facility, says the challenge was to design a distribution system capable of handling future throughput requirements, predominantly driven by increased export volumes. Kerr said the material handling system was critical to Sistema’s future success as it would drive the whole distribution operation, from receiving products from production to dispatching product at the container docks. The project also had specific business and technical requirements, including: • Urgency. Sistema had to move from its existing premises into the fully operation new facility in 12 months. • Integration. The new material handling system had to be integrated to a new Enterprise Resource Planning (ERP) software system Sistema was concurrently implementing.

THE DESIGN

D

exion has designed and installed what is believed to be New Zealand’s most advanced integrated warehouse system to enable the world-leading Auckland-based plastic food container manufacturer Sistema better service retail contracts in Europe and the United States. Sistema designs and makes high quality, stackable, food-safe storage containers in its Auckland manufacturing and distribution facility and supplies these products to millions of customers in 82 countries around the world. The company is one of New Zealand’s leading export manufacturers. Founded in a garage 30 years ago by managing director Brendan Lindsay, Sistema is now famous for its ‘Klip It’ collection of storage containers with their distinctive blue clips. That range has been added to with the ‘Microwave’ and ‘To Go’ families of products.

The new material handling system was critical to Sistema’s future success as it would drive the whole distribution operation.

Dexion’s proposed material handling installation for Sistema started with a careful analysis of the company’s current business and future plans. “We wanted to ensure our solution would enable Sistema to achieve its current goals and also its future growth targets by proposing a fully automated, scalable solution,” said Dexion regional sales manager for integrated systems Dan Austin. “We submitted a formal proposal in response to Sistema’s request for proposals along with a presentation and then conducted workshops with the company to refine concepts. We demonstrated our capability by showing Sistema through sites with similar systems to that proposed.” At the heart of the Dexion’s proposal is an automated storage and retrieval system (ASRS) for storing and despatching pallets of product bound for export markets. The system features: • Over 15,000 pallets of ASRS racking in multi-deep configuration. MHD MARCH / APRIL 2018 | 25


• Five storage and retrieval machines (SRM). • A pallet conveyor system, including four pallet elevators and two high-speed transfer cars. • Over 15,000 pallets of Dexion’s Speedlock single-selective racking. • Dexion’s Real-time Distribution System (RDS) software comprising Warehouse Control System (WCS) for control of the automation, and Warehouse Management System (WMS) for control of warehouse inventory and associated processes: receiving, put-away, replenishment, picking, dispatch, cycle counting etc.

BREATHE EASY Mr Austin said Dexion had a dedicated and highly experienced project management team who developed the overall program to ensure go-live at the required time. With the ASRS installed, Sistema’s manufacturing and warehousing operations are now fully integrated. Products come straight off the manufacturing line into assembly and storage – a process managed by Dexion’s RDS software. The system enables 24x7 operations – it is high density, high throughput, accurate and has the flexibility allow for growth of the business. “Sistema uses technology to design and build its products, and now with this system it has a world-class material handling installation designed to meet its specific requirements,” said Mr Austin.

Sistema now has a world class material handling installation designed to meet its specific requirements.

Dexion’s material handling system is meeting Sistema’s throughput and storage requirements exactly as planned with the required capacity for the future. And the software implemented by Dexion has worked seamlessly and manages all processes as planned. Mr Austin said the key reasons for success are: • A strong local Dexion presence and solution development team. • Strong experience in the implementation of ASRS systems. • High-quality product from Dexion and strategic partners. • An experienced and professional project management team. • An experienced software engineering team. • A strong relationship with Sistema and a team approach to delivering the solution. On completion of the project, Sistema founder and managing director Brendan Lindsay and CEO Drew Muirhead summed up their appreciation: “We wish to acknowledge the tremendous efforts of Dexion and the project team to deliver this solution as promised under some very demanding circumstances and challenges. “Sistema has learnt much from this journey and, more importantly, we have collectively delivered a world-class facility of which we should all be proud, in full and on time. Well done and thanks.” For more information call +61 421 689 072, email damir.pletikosa@dexion.com.au or visit www.dexion.com.au. ■

26 | MHD MARCH / APRIL 2018


MHD FEATURE

THE BENEFITS OF EXCLUSIVITY

N

ational Toyota forklift distributor Toyota Material Handling Australia (TMHA) has signed an exclusive longterm agreement with national fresh produce company LaManna Premier Group (LPG). LPG has the largest forklift fleet in the Australian fresh produce sector, with units in 17 locations and all five mainland states. The new agreement was signed in December 2017 and covers LPG’s entire national fleet, which became a combined fleet when LaManna and Premier merged in 2016. It is aimed at raising safety, energy efficiency, maintenance and service standards. Initially, it will see TMHA supply more than 50 new forklifts in April-May to upgrade the LPG fleet, as well as retrofitting additional safety equipment to all existing machines. LPG’s COO Dean Gall said the new agreement will bring world-class health and safety standards to the forefront through the group’s national fleet and hence will benefit all LPG’s employees. “Working on the new agreement together, TMHA has supported LPG in providing safety features that will assist both our drivers and all warehouse employees,” he said. “LPG has enjoyed enormous growth over recent times and TMHA has been with us throughout the journey, providing extremely reliable service and support to our national operations.” Mr Gall also highlighted the importance of quality and reliability in a time-sensitive industry where early starts are the norm. “The early morning starts in all markets and farming operations means we must have safe, reliable equipment at all times. TMHA has always ensured machinery is ready to go prior to the day’s work starting. “TMHA’s parts and service network has provided the support for many years, ensuring that the LPG business continues to provide on-time service to our customers with well-run machinery.” TMHA COO Steve Takacs said the agreement with LPG highlights the worldclass safety of Toyota forklifts. “Toyota leads the world in research and development investment on forklift trucks, and that shows in world-leading safety features such as our System of Active Stability,” he said.

“We’re very pleased with the LPG partnership, because we’re delivering on key LPG needs – providing market-leading equipment that is safer and more efficient – backed by a comprehensive preventative maintenance plan and world-leading service.” TMHA Melbourne branch area sales manager Scott Bocksette has managed Victorian operations for LaManna and Premier for five years, and has now been appointed National Account Manager for LPG. “In addition to the new forklifts, one of the key initiatives in the new agreement is retro-fitting all the existing units with interlocking seatbelts and a Blue Safety Light,” Scott Bocksette said. “The Blue Light beam increases safety by appearing on the ground, to inform pedestrians and other forklift operators of a forklift’s presence.” Mr Bocksette said the majority of the new forklifts to be delivered in April/May are 1.8-tonne payload Toyota 8FG18 models – the favoured forklift in produce markets nationally – and also uses Toyota BT powered pallet movers. Toyota has been selling forklifts in Australia for 50 years and has enjoyed a strong presence in major fresh-produce markets. For more information call 1800 425 438 or visit www.toyotamaterialhandling.com.au. ■

Scott Bocksette of Toyota Material Handling Australia (left) with LaManna Premier Group COO Dean Gall.

In our fast-paced supply chain, reliability in our equipment is vital. TMHA has consistently provided reliable equipment.

MHD MARCH / APRIL 2018 | 27


4 FOR VOICE BRIAN LANG

Four DC technologies that compliment voice

T

he aims of distribution are the same today as they were 100 years ago: the general process of placing the order, shipping the right product, in the right quantity, at the right time, and to the right destination, hasn’t changed. However, the distribution centres (DC) themselves have changed dramatically, particularly over recent years. Today’s DC are dealing with the increasing complexity of proliferating products and channels, late-stage customisation requirements, more temperature-controlled environments (cold chain, frozen, etc.), and higher warehouse employee turnover. Customer service expectations have also increased and as a result, a greater percentage of products are picked by either the ‘each,’ the ‘case’, or the ‘layer’ in the modern warehouse. Order cycle times are shrinking at the same 28 | MHD MARCH / APRIL 2018

time as there is pressure to reduce costs, while not affecting customer service levels. This need to meet customer expectations, along with the complexities in the order fulfilment process, means that having the right technologies in place to ensure the accurate and efficient movement of goods through the supply chain is more important than ever. Voicedirected picking is of significant benefit to DC seeking shorter delivery times and improved accuracy. If your DC could benefit from accuracy rates up to 99.995 per cent, along with productivity increases of around 10 to 25 per cent, then voice-enabled processes will be of considerable benefit to your business.

A COMPLEMENTARY VOICE Voice-directed systems make it easier for fast-moving DC to adapt to change, add new warehouse capacity and adjust working patterns quickly. Wearing a headset and microphone, each worker

receives ‘spoken’ instructions delivered from a wireless, wearable computer, and verbally confirms the completion of tasks back to the system, via a WiFi network. As workers speak to the headset they wear, the speech is converted to data and the back-office warehouse management system is automatically updated. Importantly, voice technology brings a number of benefits to business, particularly due to its high flexibility, adaptability and scalability. No two warehouse operations are the same, therefore the ability of voice to be tailored to a specific business operation has led to it becoming one of the leading warehouse technologies capable of meeting current and future industry needs. Voice technology’s inherent flexibility allows it to be easily integrated with other common warehouse technologies and software to deliver an end-toend solution. Here we outline the four technologies and software that make up a complete voice technology solution.


MHD FEATURE WMS/ERP SYSTEMS Voice technology integrates with all major WMS, ERP, material handling and maintenance and inspection systems. It streamlines processes and the flow of information not only within one facility, but potentially across a company’s national or global network of facilities. It allows for benchmarking and comparison from one operation or location to another. Language flexibility is another feature of a voice-based solution, which supports any language, dialect or accent. Voice operates in real time, resulting in a constant flow of data generated by the system. When running in conjunction with a WMS, all tasks can be tracked to better manage the productivity of the workforce or to locate workers where they are needed most. Automated data also assists in meeting increased government regulations, for example around the traceability of food, beverage and pharmaceutical products throughout the supply chain. At the same time, businesses can better respond to customer demands through real-time visibility of the history and status of the products they order.

BARCODE SCANNERS For mobile workers who occasionally need a barcode scanner for tasks such as order induction or long serial and lot number capture, voice can be accompanied by purpose-built scanners, such as Honeywell’s

Voice technology is a flexible choice for warehouse managers who want to choose the mix of devices that best fit their operation.

Vocollect A730 device. The Vocollect device contains an integrated short-range scanner, which allows workers to use Voice and scanning in tandem to fully optimise their workflow processes. The device doesn’t need to be carried in worker’s hands at all times and can be un-holstered for scanning, or can scan hands-free.

MOBILE COMPUTERS Today’s DC teams are more mobile than ever. An additional technology that can complement voice is mobile devices, which are often the best fit for optimising the performance of warehouse operators. Originally, voice-directed working was applied to order picking processes, but as the technology has developed, warehouse processes such as goods receiving, putaway, replenishment and dispatch can all now be co-ordinated by voice systems when coupled with mobile computing technology. The use of voice, coupled with mobile computers, has delivered solutions that can be applied in multiple workflows in the warehouse. This has enabled operators to transfer quickly and seamlessly from one workflow to another, but has also resulted in the development of a new generation of rugged mobile computing devices for use in freezer environments, on vehicles and light industrial equipment for warehouses, where a fully robust tool is less critical.

VEHICLE-MOUNTED COMPUTERS Vehicle-based workers can also benefit from voice-directed work using the same voice appliance in a vehicle-mounted configuration. Voice technology can be combined with vehicle-mounted computers, software and hardware to reduce damage, improve safety, reduce costs and enhance productivity, for operations that use industrial vehicles such as forklifts. Drivers log onto the vehicle, and complete vehicle inspection checklists. Supervisors can also access real-time vehicle performance data, including detailed accident information and driver performance assessments. Voice technology is a flexible choice for warehouse managers who want to choose the mix of devices that best fit their operation. Voice is designed to work with a wide range of warehouse software and mobile devices, allowing businesses to equip workers with the tools that suit their individual tasks and working styles. Brian Lang is the regional director of Real Time Logistics ANZ/ASEAN for Dematic. For more information visit www.dematic.com/en-au/. ■ MHD MARCH / APRIL 2018 | 29


CUT THE RISK SEAN RYAN

Using modular warehouse equipment to mitigate long-term business risk

W

ith technology rapidly advancing and evolving, now is the time asses the available options in intralogistics management solutions that use Industry 4.0 technology, are modular, and mitigate long term business risks. Intralogistics is evolving from large, rigid systems into modular, flexible, and softwaredriven solutions – robot-supported and self-optimising.

CARRYPICK: A FLEXIBLE SOLUTION FOR E-COMMERCE BUSINESSES When it comes to deploying automation technologies, although intriguing to many supply chain professionals, many do nothing, but end up spending more and ultimately lag behind in investing in state-ofthe-art technology. The warehouse and picking system CarryPick was developed to boost employee productivity, provide scalability and drive substantial cost reductions. Even though highly automated, this goods30 | MHD MARCH / APRIL 2018

to-person system delivers the desired flexibility and adapts quickly and costefficiently to future business growth, thus being a completely scalable and forward-looking system. Unlike traditional warehouses with fixed racks, the modular CarryPick goods-to-person system completely organises the picking warehouse using mobile racks. Low-profile robot vehicles drive underneath the mobile racks and deliver them to workstations, where the requested items are picked and placed in the shipping boxes provided.

FLOOR SPACE SAVINGS OF 30 PER CENT OR HIGHER To maximise the picking rate per mobile rack, each picker is able to process a larger number of orders in parallel, assisted by lasers that illuminate the appropriate picking compartment on the mobile rack. The workstations themselves are equipped with put-to-light technology – small lights let the picking employees know to which order a picked item belongs. Compared to traditional systems, the productivity of the employees at the workstation is considerably higher. At the same time, picking errors are virtually non-existent and floor space savings of 30 per cent and higher are made possible.

LOW INITIAL INVESTMENT – MAXIMUM FLEXIBILITY The main benefit of the CarryPick system lies in its flexibility. If the product range changes, the rack structure can be modified accordingly. If the quantities to be processed change, the system can be flexibly extended. The initial equipment needed includes a basic number of mobile racks, at least one workstation, and a small number of ‘Carrier’ automated guided vehicles (AGV). As shipping volumes increase or the product range grows, the CarryPick system can be extended with additional components such as racks, carriers or workstations. There is no need to make major up-front investments in systems whose full performance capacity will not yet be needed. CarryPick is easily integrated into legacy structures that normally would not have the space to support automation. The compact storage system, consisting of a workstation and mobile racks, can be installed in buildings with a ceiling height under three meters. CarryPick is a part of the Swisslog Click&Pick portfolio for businesses. Click&Pick is a modular concept that can be flexibly adapted to changing customer needs and business models.


MHD FEATURE suitable for high-density environments and can be used in deep-freeze environments. This technology allows businesses to be at the forefront of Industry 4.0 initiatives. The modularity of the PowerStore pallet shuttle system enables storage of up to 60% more pallets compared to manual systems. It can also be individually tailored for all shapes and sizes of warehouse buildings. The PowerStore pallet storage systems can be used in a wide range of environments, from -30°C in frozen food storage to 50°C. It can be used in buildings with unusual shapes. The modular design of the PowerStore system opens completely new possibilities for automation in existing warehouses. The system is also suitable for manufacturing businesses, especially those in the fast-moving consumer goods and food and beverage industries.

UNIQUE AND MODULAR

Depending on the solution concept, companies can fulfil orders up to five times faster than with manual rack systems.

CARRYPICK SUPPORTS SUSTAINABILITY At Swisslog, sustainability is a top priority. CarryPick saves energy. Workplace regulations mandate that only the relatively small workstation areas be provided with heat and light. Any unmanned warehouse areas housing the mobile racks therefore do not need heat, lighting, or ventilation. Furthermore, CarryPick is a model of ergonomic workplace design. Employees in the warehouse concentrate mainly on their core abilities: see, touch, and pick. Pushing heavy picking carts over long distances becomes a thing of the past, leading to a significant reduction of illnessrelated absences, perhaps even extending employees’ working life. CarryPick provides a forward-looking option that improves warehouse performance is appreciably increased, and all at minimal expense that is repaid in the timeliest fashion possible.

POWERSTORE: INCREASE CAPACITY AND MAXIMISE RESOURCE SAVINGS The pallet shuttle system PowerStore provides reliable cost benefits and maximises resource savings. This innovative warehouse equipment boosts capacity, is

Even though highly automated, this goods-to-person system delivers the desired flexibility and adapts quickly and cost-efficiently to future business growth.

PowerStore is backed by over 40 years of global experience in optimising systems with high throughput and reliability. PowerStore’s control software is fully integrated in Swisslog’s SynQ suite of warehouse management software and is designed to work seamlessly with customers’ WMS and host systems. Furthermore, lowheight carriers save storage space while still enabling industry-leading lift heights. This allows for normal pallet deflections and minimises the need for troubleshooting within the rack. The PowerStore is a compact pallet shuttle system that is used in conjunction with vertical conveyors to utilise virtually every square metre of available space. The compact system supports storage depths of up to 20x and beyond per channel within a rack design. This rack design can have ten or more levels and adapts to virtually any building topography, accommodating existing support walls as well as multi-level and barrel roofs. At Pepsi Bottling Ventures (PBV), for example, PowerStore increased storage capacity by as much as 60%. Row and aisle carriers are used for pallet storage and retrieval. Vertical conveyors allow these carriers to be used on any rack level. At PBV, PowerStore’s high dynamics support 580 pallet operations (storage and retrieval) per hour. At the same time, customers benefit from state-of-the-art software control and energy-saving operations, thanks to advanced mechanical and electrical components from a manufacturing process that meets ISO 14001 and emphasises environmentally friendly product design. MHD MARCH / APRIL 2018 | 31


Store-friendly pallets are automatically built in distribution centres using the combination of proven technology.

32 | MHD MARCH / APRIL 2018

PowerStore is integrated into an advanced software landscape and can be connected to Swisslog’s SynQ software platform, or used in conjunction with virtually any other modern warehouse management system. PowerStore displays great flexibility when used across industries and can be deployed in deep-freeze environments with temperatures as low as -30°C.

A FULLY AUTOMATED WAY FOR CREATING MIXED PALLETS ACPaQ will automate one of the most important areas of intralogistics operations: creating customised mixed pallets for individual stores from single-SKU pallets. ACPaQ is universally applicable for fully automated order picking of mixed case pallets. Store-friendly pallets are automatically built in distribution centres using the combination of proven technology, such as the CycloneCarrier light goods shuttle system, conveyor systems and high performance de-palletising and palletising robots. It is configured using modules and scalable for small, mid-size and large distribution centres handling up to 500,000 cases per day. This innovative palletising system has a highly modular design and enables a fully automated process controlled by the SynQ warehouse management software which, compared to traditional methods, doubles or even triples the speed of picking cartons in distribution centres based on store layout, item groups or item classes. The palletising software allows you to customise the palletising order to increase efficiency during in-store replenishment. ACPaQ can be used in ambient temperature and chilled warehouse zones, and can handle

almost all types of cartons, shrink wrapper or foiled packages, and pallet types used in retail & beverage industries. At the core of ACPaQ is the RowPaQ cell featuring a state-of-the-art 5-axis jointedarm KUKA robot. It is equipped with a flexible gripper with adjustable forks that allows it to pick up as many as four cartons at a time, even if they don’t have the same dimensions or weight. A RowPaQ cell is capable of setting down up to 1,000 cartons per hour in the exact location predefined by the palletising software. It is completely scalable and additional RowPaQ cells can be added to the system to increase throughput as required.

NETWORKING NEW AND PROVEN TECHNOLOGIES Robot-based palletising builds on an intelligently organised process. Before cartons can be palletised in sequence, they are first separated, loaded into trays and stored temporarily in the highly dynamic CycloneCarrier shuttle system. Even before the warehouse management system issues the palletising order, Swisslog’s software autonomously performs a complex calculation process based on product parameters to determine the best way to load the pallet. The cartons are then transported in the exact sequence from storage to the RowPaQ cell. After palletising is complete, it is shrinkwrapped and transported via conveyor directly to the right shipping station. Sean Ryan is the head of sales and consulting at Swisslog Australia. For more information call +61 447 771 933, email sean.ryan@swisslog.com or visit www.swisslog.com/wds. Swisslog is a member of the KUKA Group, www.kuka.com. ■


MHD FEATURE

GO FURTHER Crown’s continual improvement boosts Coffs Harbour freight company’s output

A

n agent for a well-regarded express freight company on the New South Wales mid-north coast is benefitting from rolling improvements to Crown Equipment’s internal combustion forklifts. David and Lara Berry, who operate their business up to seven days per week performing over 600 deliveries per day, have recently added a Crown C-5 Series internal combustion forklift to their company’s fleet. The company’s C-5 Series forklift is replacing another Crown 2.5-tonne internal combustion forklift that was purchased earlier and provided a decade of reliable service.

Comfort, ease of use, lifting capacity, reliability, low emissions and quiet running are important factors when choosing a forklift.

” Get real-time visibility into

David and Lara Berry said that comfort, ease of use, lifting capacity, reliability, low emissions and quiet running are important factors when choosing a forklift. “We bought our first Crown forklift 10 years ago and the machine has performed well over the years. It’s been a great truck,” Mr Berry said. “Compared to our previous forklift from another brand it was faster, nicer to drive and capable of lifting heavier freight cells. “Its capacity was about one-and-a-half times higher yet it was noticeably more economical. Running on LPG it made less fumes than the old truck, too. “Its addition to the business gave us a 20 per cent time saving over our previous forklift,” he said. Mr Berry said the new C-5 Series forklift has taken these improvements a step further. “Our C-5 is faster again, more economical and quieter than our previous Crown. “It has soft-feel tyres and is less fatiguing to drive, with no thumping while going over the dip in the driveway.” Mr Berry said service is another positive aspect of dealing with Crown. “Crown staff are easy to deal with. They make the buying experience easy with good communication,” he said. “Their service technicians are on the ball, they know when it’s time for servicing and they contact us to organise it. “The forklifts have been reliable between services. I’d definitely recommend Crown to other businesses.” The Berrys have run their business since 1999. The company delivers freight between Woolgoolga and Dorrigo and also operates its line-haul freight operation between Coffs Harbour and Grafton. For more information visit www.crownforklifts.com.au. ■

Get real-time visibility into your warehouse activities for super speed action!

VISIT JDA.com/super-anz OR CALL US 02 80351119

SCAN HERE!


RAISE THE GLASS Casella Family Brands raises the glass to its new global distribution management system

C

asella Family Brands has grown from a small family-owned business in 1969 to become Australia’s largest family-owned winery, based in Yenda NSW. The inception of the [yellow tail] label in 2001 propelled the business to new heights and it is now the most powerful Australian wine brand in the world. Twenty-seven per cent of bottled table wine exported from Australia is yellow tail, and it holds the record for the fastest growing imported wine in the United States’ market history. Today, Casella Family Brands ships over 12.5 million cases of wine to more than 50 countries around the world every year. Casella sources fruit from 37 of Australia’s 59 premium wine growing regions including Coonawarra, Wrattonbully, Padthaway, Barossa, Clare Valleys in SA and Mornington Peninsula. It has over 6,000 acres of vineyards, producing over 27 varieties. Following a sustained period of rapid growth, including the acquisition of Peter Lehmann Wines, the company recognised a need to improve inventory visibility across its business, including two distribution centres. It also wanted

34 | MHD MARCH / APRIL 2018

to enhance its scalability to ensure it is set up for future growth. To fulfil these needs, Casella Family Brands engaged Manhattan Associates for a dedicated global distribution management and order fulfilment system. Distribution manager at Casella Family Brands Sam McLeod said: “We have the fastest bottling line in the world, capable of processing 36,000 bottles an hour. Bottling at this speed and managing the volume of inventory associated with this scale of operation requires a strategic supply chain solution.” The ongoing expansion of the [yellow tail] range and the integration of Peter Lehmann Wines led Casella Family Brands to look to Manhattan’s SCALE to address its demanding distribution management and supply chain execution challenges. Casella faced a number of supply chain challenges prior to integrating the solution, due to the fact that many of its warehouse processes were manual, time consuming and prone to human error.

INCREASING WAREHOUSE EFFICIENCY AND VISIBILITY Casella Family Brands chose to implement the SCALE software in order to optimise order fulfilment processes across its various brands. By streamlining distribution and enabling ongoing business growth, the company was able to realise a number of key benefits:

• Increased warehouse utilisation by 22 per cent. • Reduced labour costs. • Improved traceability throughout the supply chain. • Revolutionised planning whilst automating many of the associated processes. • Enabled the transition from a paper-based delivery system to a completely digital one. Mr McLeod added: “Previously we were only able to track our stock by total production lot, for example in a run of 30,000 cases, we couldn’t distinguish the difference between the first and last pallet once the stock had shipped. With the introduction of Manhattan SCALE, we can now track stock to the pallet level due to the unique ‘license plate number’ (LPN) placed on every pallet prepared. In the event of a product recall this could save a significant amount of money. “As a planning tool, SCALE is incredibly powerful,” he said. “We can now arrange as many as 300 shipping containers of stock in as little as half a day. This enables us to release orders for picking at the click of a button as opposed to manually keying in the contents, picking the location of each order and then manually updating once loaded, every day. “All of our 750ml wine is produced in two different pallet heights. Manhattan SCALE allows us to quickly


MHD SUPPLY CHAIN differentiate between these and if an imbalance is detected, we can produce the required pallet heights from our production line. Previously, these would have been manually restacked,” explained Mr McLeod. Since implementing the program, Casella Family Brands has also worked closely with its export distributors to ensure they are ordering stock in optimum quantities (full pallets) to ensure it maximises the efficiencies the system provides.

MAKING AN IMPACT ACROSS THE ORGANISATION By working closely with Manhattan Associates’ consultants, Casella Family Brands was able to efficiently weave the solution into the fabric of the business, making the entire operation stronger. For example, the distribution teams (both export and domestic) were able to plan weekly loading into ‘waves,’ picking of all orders and the allocation of multiple SKU with differing pallet dimensions into containerised loads. The Planning and Inventory Team was also able to utilise SCALE for confirmation

We can now arrange as many as 300 shipping containers of stock in as little as half a day.

Easy with

of production run quantities and obtain real-time status updates on production progress. The Production department now receives advance notification of incoming stock from the production line; and the Export Administration Team retrieves lot numbers for export orders for select customers. Additionally, with the combination of the unique LPN and lot numbers, the Compliance Team now has detailed traceability for audit and potential recall purposes. “The combined effect of all these advancements enabled by the Manhattan technology has had a tremendously positive impact on our bottom line and has really set us up for future supply chain success. All of which has enabled us to focus on what we do best, producing industry-leading wines to share with the world,” said Mr McLeod. Based on the success of its engagement with Manhattan Associates, Casella Family Brands is also looking to implement the system across its dry goods portfolio in the future. For more information call +61 2 9454 5400, email info@manh.com or visit www.manh.com/en-au. ■

inventory

Inventory Management System Real-time stocktake, receiving, picking, dispatching & reporting Cross dock & transfer capability Multi-warehouse management/3PL

Find out more about MC3300

Find out more about Drive

Android & Windows devices Peacock Bros DRIVE inventory solution has been developed with operator ease-of-use in mind and is customizable to your needs.

Contact us today to discuss your needs or for a free demo:

1300 723 282 www.peacocks.com.au


SPEED UP! Designing contemporary supply chains for faster clockspeeds to cope with the increasingly volatile operating environment DR JOHN GATTORNA

I

n 1998, Charles Fine published his ground-breaking book, Clockspeed. He based much of his research on the observation of fruit flies, which he called a ‘fast-clockspeed species’, evolving from eggs, through adulthood to death, all in under two weeks! Much of his research was concentrated on the industrial equivalents of these fast-evolving fruit flies. One of the companies that he focused on was Intel, which in turn had fastevolving customers such as Compaq and Dell, whose products inevitably had short life cycles in the marketplace. Clearly, then as now, the real pressure was coming from the customer end of the chain, and that pressure has increased significantly in the two decades since Fine wrote his book. Fine studied whole industries, noting the different rates at which they evolved; he called these rates industry clockspeed, which he defined as resulting from a combination of product, process, and organisation clockspeeds, respectively. Fine drew the conclusion that any differences in clockspeed between businesses is manifested in the size/ length of the decision-making window, and I agree with that. When it comes down to basics, enterprises under pressure from their customer base and/or competitors must by definition find ways to make faster decisions if they are to survive. Indeed, given that competitive advantage is now regarded as only ‘temporary’, the enterprise must continually re-invent itself to stay ahead. The old concept of locking in a ‘sustainable advantage’ is not possible in fast-moving industries and markets. Fine defines a company as “its chain of continually evolving capabilities”, and by that he includes its own 36 | MHD MARCH / APRIL 2018

capabilities and those along the entire supply chain. In our terminology, he is referring to the extended supply chain. Of course, the old maxim of the weakest link applies.

CLOCKSPEED: FAST Fine cites Dell as a great example of a fast clockspeed company, mainly due to its early supply chain design that placed it in direct contact with consumers and users. This advantage receded in subsequent years as Dell was forced to engage in different distribution channels involving intermediaries. Interestingly, with the coming of the e-commerce era, and the direct access that this affords suppliers to their consumers/end users, coupled with digitisation and the disintermediation effect of Blockchain, we are likely to see many more disruptions across industries that are dragging their feet on clockspeed. Fine comments on the dynamics of extended enterprises, and in particular nominates two laws that he sees as pivotal: volatility amplification (or bullwhip effect by another name), which moves upstream in the chain; and clockspeed amplification, which moves downstream towards the final customer. So, in Fine’s thinking, clockspeed is defined as the summation of capabilities along the extended supply chain, to which I would add the time taken for each element, across the full breadth of the total lead time, from supplier(s) through to end user/consumer. Further, he postulates that in order to improve the clockspeed in an enterprise or indeed an industry, products, processes, and capabilities have to be designed concurrently; he coined the phase for this as 3DCE, or 3D Concurrent Engineering.

TODAY Time has moved on and we now understand the dynamics of supply chains a lot better than in the 1990s. For instance, the idea of ‘onesize-fits-all’ has been banished forever, and we have a clear guiding principle that supply chains must by definition be designed from the ‘outside-in’. This is consistent with Design Thinking, and consistent with Fine’s stated view that ‘clockspeed amplification’ emanates from the customer end of the chain. We also know that supply chains are not inanimate beasts, but are living ecosystems, propelled by people situated all along the chain, making decisions, for better or worse. Hence the need to incorporate the study of ‘culture’ and leadership style in our analysis of supply chain performance. So when we talk about clockspeed, we are not suggesting that the enterprise has to suddenly accelerate to meet volatile conditions. Instead, we are convinced that the entire organisation has to lift its tempo and operate at that new higher level, ALL THE TIME. Once this is achieved, the internally generated clockspeed will hopefully match and indeed nullify the effect of volatile demand emanating from the customer end. Because we are now talking about achieving faster split times in each element of the overall lead-time, the time buckets are shorter, and this has the effect of reducing the risk of forecasting errors. As in the case of Zara, they are never more than three


MHD SUPPLY CHAIN

weeks away from the next cycle of product launches to stores, so markdowns become much less of a problem, and stock-outs become something of a virtue. How the world has changed! In the end, it all comes down to developing and nurturing a defined range of capabilities, and then combining these in different recipes to underpin the engagement with customers (and suppliers) according to their preferred way of buying our product/service categories.

TIME TO TRANSFORM The important point here, especially for executives with a mandate to ‘transform’ the business, is that we are dealing with a ‘whole-of-enterprise’ phenomenon. In other words, in the process of transforming your enterprise supply chains, it is in fact necessary to transform the entire organisation in order to achieve the faster rhythms inherent in faster clockspeeds. What this means in fact is that defaulting to lean processes in our enterprise supply chains is no longer the correct option, because a new default has arisen in the form of speed and agility in order to cope with the faster, more volatile operating environment. Companies operating in FMCG, Hi-tech, and Fast-Fashion markets are already experiencing this change in modus operandi, and similar conditions are heading in the direction of older, more established ‘bricks and mortar’ industrial companies – their challenge is to embrace the change and, in the process, raise themselves to new, higher levels of competitiveness. The enterprise-wide capabilities required for success in the new faster clockspeed world are briefly described below:

Their challenge is to embrace the change and, in the process, raise themselves to new, higher levels of competitiveness.

1/ New organisation designs that promote speed of decision-making. 2/ Process mapping and re-engineering along all supply chain types. 3/ Adoption of appropriate KPI to measure performance, free of conflicting demands. 4/ Install IT systems that are genuine Decision Support Systems (DSS) in order to speed up decision-making. 5/ Install appropriate Sales & Operations Planning (S&OP) regimes to focus the entire organisation on agreed priorities to meet customer demand. 6/ Shape a number of different ‘subcultures’ inside the business to underpin the different supply chain types. This will involve all of the above plus additional effort in areas such as defining roles; defining incentives; methods of internal communications; recruitment of specific types of personnel; introduction of a range of T & D programs; and role modelling. 7/ The resilience to recover from a major unplannable disruption in our supply chain network. 8/ Conscious development of an IoT strategy and corresponding analytics capability, including customer/supplier sensing. 9/ A blended combination of ‘business as usual’ and search for new innovations. 10/ Managing capacity at all points in our supply chain network as all times. 11/ Channels selection. 12/ Requisite collaboration with appropriate network members. These internal capabilities should be supplemented by supply chain-specific capabilities as follows: • Product design: CAD; modular; supply chain friendly. • Manufacturing: CAM; automation/robotics; AI; 3D-printing; group technology; FMS. • Logistics: Time management / postponement; insourcing/outsourcing mix; control towers; 3PL management; network optimisation modelling. There are many moving parts in contemporary supply chains, and many external factors that can potentially impact performance. Nevertheless, if we are able to increase the clockspeed of the entire enterprise and literally get in synch with the operating environment, complexity is materially reduced and operational and financial performance correspondingly increased. The book referred to in this article is Charles H. Fine, Clockspeed: Winning industry control in the age of temporary advantage, Basic Books, Cambridge, MA, 1998. For more information email john@gattornaalignment.com. ■ MHD MARCH / APRIL 2018 | 37


FEAR FLEXIBILITY NOT DANA STIFFLER

Although both of these trends lead to work that is well-suited to a virtual workforce, the profession’s roots in factories and warehouses live on in leadership mindsets that equate physical presence with performance, with the ability to see a body as evidence of effective control of that body. From the employee perspective, it isn’t a big leap to thinking your manager doesn’t trust you to do your job, which leads to dissatisfaction and its associated negative outcomes. Supply chain leaders who want to attract and keep great people need to change these mindsets. In fact, supply chain leaders who want to attract and keep any people need to do so.

How to overcome fear of workplace flexibility

O

perational speed and agility are considered markers of maturity and excellence for leaders in high performing supply chain organisations. However, when it comes to how, where and when supply chain professionals do their jobs, the industry isn’t hitting the mark in allowing and embracing flexible work practices. It’s making careers at manufacturers, distributors and retailers relatively less attractive. The result is an adverse effect on employee engagement, inclusive and diverse teams, overall career brand and ultimately, supply chain performance. To hire and retain even average performers, leaders must embrace more flexible work practices.

SIGNIFICANT ENGAGEMENT GAPS Gartner recently asked 437 supply chain professionals about their careers and what motivates them. It appears that significant engagement gaps exist between frontline employees and senior leadership. The survey provided some insights into what is causing these gaps. 38 | MHD MARCH / APRIL 2018

DESIRE FOR WORKLIFE BALANCE In addition to a lack of career path visibility, workplace flexibility in many supply chain organisations is missing, especially for individual contributors. Sixty-nine per cent said they are required to be physically on-site every day, whether they are in a cubicle, a plant or a distribution centre. Why is this the case when many labour-intensive tasks have been automated and manual business processes pulled together onto virtual platforms? The requirement that staff be physically co-located with capital equipment for a full shift, or attached to a 9am-to-5pm paper-intensive process has disappeared for the majority of supply chain roles. White-collar, virtual jobs can be done by anyone, anytime and anywhere. Examples of proven flexible work arrangements include working from home, flex-time, four-day work weeks and job sharing. Yet, even in companies that have extended more flexibility to finance, IT or sales, supply chain organisations remain curiously resistant to embracing flexible work arrangements. This is true even as they have become more planningcentric and the physical product component of customer service has decreased over time.

After compensation, work-life balance is the top consideration across companies globally for whether a candidate will take a job or not. A recent Gartner survey found that if given a choice between two jobs, nine out of 10 respondents will take the job that offers more flexibility. Almost one-third of respondents said they would have stayed longer in their previous job if more flexibility had been offered. The good news is that many supply chain leaders have already started an aggressive push into flexible work and results-only performance management. This has been driven by a struggle to hire in a market where high-tech companies and start-ups have already changed the game. A formidable combination of more flexibility and workplace perks like food, amenities and employee support services makes the worksite a more appealing place to spend time. It’s also been driven by the ability of the supply chain organisation to take on more start-up-like qualities. Aiming for balance, they are retaining mature continuous improvement practices that are predictable and stable, but are also adding a non-linear approach involving experimentation, failing fast and learning through iteration.


MHD SUPPLY CHAIN REFRAMING THE FLEXIBILITY MINDSET If all industries are undergoing a process of digital remastering, Gartner believes the profile of supply chain professional will continue its upgrade path of the past five years. This will reflect stronger analytical and technology skills, as well as strong communications and influence skills. Startups and professional services firms are competing with supply chain organisations to hire this same talent. We know what will happen when these candidates get to choose between opportunities that offer more and less flexibility: they’ll choose flexibility nine out of ten times. If you haven’t yet reframed your flexibility mindset, we hope this provides a catalyst for a rethink, where flexibility shifts from a benefit once offered only to senior staff and high performers, to a standard starting point for the employee experience. • Start by reinventing the supply chain organisation’s perspective on workplace and schedule flexibility by treating flexibility as a primary rather than secondary consideration in role design

Encourage staff to take advantage of newer, more flexible work arrangements by having senior leadership model flexibility in how and where they work.

and job descriptions. Clearly some roles and scenarios require an on-site presence, but even in these scenarios, schedule flexibility is a top consideration for employees choosing or leaving a job. • Help managers overcome ‘presence = productivity’ mindsets by showing them how to manage by objective, and move toward a results-only work environment. • Encourage staff to take advantage of newer, more flexible work arrangements by having senior leadership model flexibility in how and where they work. Reimagine employee reward and recognition strategies to recognise great work regardless of where and when the work is done. • Finally, take advantage of established flexible work practices of other functional leaders or HR by using their playbooks, policies and performance data. Dana Stiffler is a research vice president at Gartner, focused on supply chain talent strategies, the chief supply chain officer role, as well as individual influence and effectiveness in supply chain leadership. For more information visit www.gartner.com/supplychain. ■

CUT THE RISK CUT THE RISK: WITH MODULAR AND DATA DRIVEN TECHNOLOGY

swisslog.com Cut The Risk (March MHD).indd 1

At Swisslog, our scalable solutions combined with our SynQ warehouse management software give you more throughput and higher efficiency. With proven reliability, modular designs and real-time condition monitoring, they deliver Industry 4.0-ready technology you can count on today.

2/22/2018 4:24:44 PM


MHD SUPPLY CHAIN

DIGITISATION => ADVANTAGE Win-win customer and supplier collaboration will drive supply chain digitisation success

I

n an earlier article, we looked at blockchain’s continuing uptake in Australia, discussing how the supply chain sector is poised to be a big winner from blockchain’s disruption, as its realtime access to transactions and instant payments deliver increased certainty and reduced costs for vendors. This follow-up article highlights how customer and supplier collaboration is key to fully benefitting from TIMOTHY DOWSETT supply chain digitisation. As digital technology continues to impact on industries worldwide, the supply chain sector is poised to be a strong winner from the opportunities presented by digitisation, capitalising on improved software and solutions that enhance communication, interaction, and global shipping and delivery. However, for digitisation to be successful, it will require collaboration from all participants in the supply chain. If customers want their vendors to participate in their digitisation initiatives, they will have to offer ‘win-win’ situations that see both parties sharing both the cost and benefits. The days of customers hanging onto their cash while making their suppliers carry the burden of cost-cutting measures are nearly over. Suppliers of perishable goods such as milk and bread to Australia’s major supermarket chains are no longer willing to cover these costs, as one example, A recent Kurt Salmon and the retail sector is just one report found that 78% of where attitudes are shifting. shippers are reliant on phone Business partners are calls, faxes, emails, or spreadsheets increasingly recognising the to manually identify the location of their shipping containers. Some 50% of need for two-way agreements those businesses required more than three that reduce costs and boost days to locate these product shipments. operating efficiencies for With efficient digital tracking signals, a both parties. But there is still company knows in real-time exactly considerable progress to be made where its shipping container in our supply chain sector. is at any time and can act Digital options have been on the accordingly. market for some years, but uptake has been held back by barriers to entry, including the cost involved and transferring to new technologies. Blockchain is one of the new technologies available for use in the supply chain. One of the benefits of blockchain transactions is that both customers and suppliers have access to verification of electronic data that proves the transaction as a two-way match between

40 | MHD MARCH / APRIL 2018

goods ordered and goods received, as an example. This proof of matching can lead to faster goods receipt by the customer and, in turn, faster payment to the supplier. The shift to digitisation for supply chain businesses will take some time to achieve, but the advantages are worth it and for many businesses their survival in competitive markets will depend on it. Top benefits from supply chain digitisation include: • Reduced operating costs: - Faster processing - no need to re-enter data onto computer from paper records. - Advance notice of shipment arrival (part of Advanced Shipping Notification (ASN) processes, if implemented). - Reduced goods theft due to electronic shipment documentation instead of paper. - Faster clearance with electronic documentation replacing reliance on paperwork. • Faster payments: - Electronic payment triggered by receipt of goods, not relying on paperwork data entry as with most ERP applications. • Greater security: - Digital records can be tamper-proof using blockchain encryption. - No paperwork that can be lost. • Greater transparency: - Digital records can be instantly available to authorised users

START WITH SMALL STEPS ON THE PATH TO DIGITISATION As today’s informed and savvy consumers expect high-quality experiences, realtime, prompt customer response and transparency to be met, companies and suppliers need to look hard at their traditional enterprise software. There are many elements that can be upgraded or replaced over the near-to-medium term future to meet these high customer expectations. For example: • A beginner step is identifying where your company’s processes, systems and communications channels are working well and where improvements can be made to address problems and communications shortfalls. • Look at more effectively leveraging


your existing data to optimise results, improving the collection and management of your data and upgrading analytics. • Use order-line data to build customer demand profiles that incorporate the patterns for order quantity and frequency. • Utilise demand data’s details to optimise inventories and service levels. With each upgrade, over coming months and years, new technologies and capabilities can be introduced to steadily transform supply chains to handle the needs of a more global and networked business environment.

COLLABORATION IS FUNDAMENTAL TO DIGITAL UPTAKE

With greater visibility and assessment capabilities, your business can better analyse and understand customer demand.

In an increasingly multifaceted and international operating environment, businesses are realising that to compete and succeed, collaboration As discussed in our earlier with all of its partners is not just article, Australian businesses desirable, but fundamental. and organisations see big potential in Giving all supply chain digitisation and blockchain. One example participants access to is the Australian Stock Exchange (‘ASX’) shared data enables taking steps to use blockchain to handle interactions, inefficiencies share transactions, lowering user costs and and communication to be ‘democratising’ transactions, instead of upgraded for mutual benefit. charging companies to use its proprietary New opportunities and systems: www.smh.com.au/business/ potential services can also be banking-and-finance/update-1-australiasasx-selects-blockchain-to-cut-costsidentified at this stage across 20171206-p4yxhe.html. your networked supply chain. With greater visibility and assessment capabilities, your business can better analyse and understand customer demand and its impact in areas including forecasting and planning and shipment of goods. Opportunities will arise for enhanced supplier and partner collaboration on necessary supply chain improvements, financing and agility in addressing issues and breakdowns that of all engagements inevitably arise. happen across two or more channels

87%

CUSTOMER-CENTRIC FOCUS ON DELIVERY AND SERVICE LEVELS

Better understanding your customers’ needs and expectations for delivery and performance means your company can act faster and more accurately to leverage this knowledge, often utilising advanced business intelligence solutions in tandem with improved analytic capabilities. Automating systems and enhancing your existing operations and planning software to work with your supply chain network enables your business to act constructively on these insights, break down communications gaps with suppliers and meet higher customer expectations.

Today’s customers now expect a delivery to show up on time and have no hesitation complaining online and via social media channels about real or perceived delays or delivery problems. Companies are stepping up to improve customer experiences via digital upgrades including the adoption of blockchain technology, with its enhanced transparency, security and transaction speed.

WRAPPING UP: THE WAY FORWARD Companies that have reached a more advanced phase of supply chain digitisation can next move to accurately forecast customer demand patterns and issues such as outages, excess and non-selling inventory, rather than simply responding passively to these scenarios as they happen. Monitoring and reacting to digital signals and real-time, collaboratively-shared data, they are strongly positioned to address potential issues or breakdowns before they happen, saving businesses time, money and escalation of problems. In addition, digital technologies enable Australian companies to more accurately analyse the lifetime value of a customer, anticipate customer turnover and segment their customer base. At Change Logic, we believe that if Australian businesses ignore the potential of digitisation for their supply chain, they will increasingly fall behind their competitors. Collaboration and trust between all supply chain participants will be fundamental to reaching a more sophisticated phase of digitisation, which will significantly enhance business agility, customer service and competitiveness. Timothy Dowsett is a partner at ChangeLogic. He has over 25 years’ experience in consulting and line management roles across the entire supply chain function. For more information call +61 2 9401 9152, email info@changelogic.com. au or visit www.changelogic.com.au. ■

87% of all engagements happen across two or more channels, while 43% of interactions take place over at least five, meaning the experience needs to be consistent across all channels a brand or organisation offers. Today’s consumers don’t see brands in silos. Where to from here? Improving the digital experience means steps including moving faster, utilising mobile and social to give customers useful information in real time, staying on top of changes to the market and customer desires; and analysing data in real time. Identify actionable insights and identify internal and external data sources such as social listening and partners, break down data silos, use predictive and machine learning to find patterns and leverage them to predict needs and behaviours, and make everything more accessible. Create a consistent experience that customers can access on almost any device and make the transition to a non-digital journey easy for customers who need to switch. Source: SAP Australian Digital Experience Report, 2017

MHD MARCH / APRIL 2018 | 41


THE BIG 3

BEN CARRICK

The three things supply chains need to consider transitioning from cost-centre to profit-centre

S

eeing supply chain management (SCM) as a cost centre is a thing of the past (or at least it should be). Time-sensitive deliveries, lean supply chains and shorter product life cycles demand that organisations adapt quickly to changes within the supply chain. Businesses have an increased expectation from supply chain partners to have processes in place so they can react as soon as change arises. Seizing these efficiencies can turn logistics from a cost centre to a profit centre. There is constant pressure for cutting down the annual logistical costs of companies, which are already a small ratio of the total revenue, typically around 3-5 per cent. This attitude reflects the organisation’s perception of SCM as being a cost centre. Instead, a small change in the logistics strategy could mean a 10 per cent hike in sales, thereby increasing profits.

WHY ‘COST’? When the supply chain does not work correctly, it ends up compromising other areas of the company such as marketing, sales, production, finance and innovation. Similarly, a sound SCM in place can be one of the largest contributors of the company’s success. For instance, global retailer ZARA has taken ‘fast fashion’ to a whole new level by consistently shattering industry averages for getting their designs into their stores and turning over their inventory 12 times per year (the industry average is 3-4 times per year). ZARA is breaking retailing records like getting designs to store in 15 days (industry average: 6-9 months), and unsold inventory of just 10 per cent (industry average:1720%). They have accomplished this by owning and controlling their entire supply chain that is completely customer-driven. On a macro level, the industry represents 8.6% of Australia’s GDP and adds more than $135 billion to the economy, whilst 42 | MHD MARCH / APRIL 2018

employing 1.2 million people, according to the SCLAA. There is no doubt about supply chain and logistics being an important function for the success of Australian businesses and that is why there needs to be a clearer change in orientation for supply chains, from cost to value. Here are three key factors that organisations need to consider to make the transition from cost centre to profit centre:

1/ DATA ANALYTICS Data analytics provides organisations with full transparency and insight into business operations, ultimately providing an in-depth understanding of every touch point within the supply chain. The idea is that once a central view of the data from a supplier has been identified, organisations can begin to see its influence and impact on the bottom line. For example, in manufacturing, sensors and micro-chips connected to machinery and facilities will provide real-time data of the machine’s operational status, inventory in use, and the overall production conditions such as temperature, humidity, light and motion, to name a few. Using this singleview of data, an organisation can make informed decisions for improvement quickly based on the insights.

2/ BLOCKCHAIN TECHNOLOGY One of the biggest problems faced by organisations with complex supply chains is a lack of transparency. If an organisation has multiple suppliers across multiple states and countries, it can be hard to keep track of everything. A simple application of the blockchain paradigm to the supply chain would be to register the transfer of goods on the ledger as transactions identifying the parties involved, price, date, location, quality and state of the product and any other information that would be relevant to


MHD SUPPLY CHAIN managing the supply chain. Because of the way transactions are recorded and tracked using blockchain technology, it makes it much easier to see everything happening in real time and helps keep all those involved accountable. It’s a great way to get the whole picture, as well as drill down to individual aspects of the supply chain. The technology also allows for more secure and transparent tracking of transactions, making product recalls easier and eliminating chances of counterfeit products and other fraudulent activities, by creating a permanent history of a product, from manufacturing to sale.

3/ PLANNING PROCESS Aside from using advanced technologies, organisation leaders also play an important role in turning supply chains into a profit centre. Supply chain leaders have become more significant in the development of supply chain strategies and more financially astute on how companies operate. Supply chain managers are able to contribute to the overall financial planning of the organisation and prevent any glitches in the process through a regular review of

Supply chain leaders have become more significant in the development of supply chain strategies and more financially astute on how companies operate.

supply and market data, developing systems for ‘sensing’ trends and changes, and the ability to react to them before they occur in these markets. They are also responsible for significant value additions that help the supply chain work smoothly to avoid any failures resulting tenfold increases increase in costs along with reputational damage. As a result of SCM revolutions, organisations will benefit from healthy supply chain management, such as optimised working capital and cost reduction in operations and purchases. Precision and agility in managing requests, quotes and orders ensure products are always available and high-cost emergency purchases are less frequent. While good service levels and timely deliveries make for more satisfied and loyal clients, a stronger relationship with suppliers’ yield benefits the purchasing company. It’s easy to understand why supply chains are now being called value chains. Ben Carrick is the VP business development, South Pacific at DHL Supply Chain. For more information call 1300 725 468 or visit www.dhl.com.au. ■

Li-ion power gives you the decisive advantage required to win. High performance, fast charging times, no maintenance & a particularly long service life. Win the race for top warehouse efficiency & handling capacity with Jungheinrich lithium-ion batteries.

Find out more: www.ntpforklifts.com.au * At a maximum of 10,000 operating hours in 5 years.

MHD MARCH / APRIL 2018 | 43


SYSTEMS OF

SAM WARDILL

RECORD

Systems of record are just one piece of the enterprise resource planning puzzle

D

o you ever think about the evolution of Enterprise Resource Planning systems into Systems of Record? Wonder what implications this has for supply chain professionals?

IN THE BEGINNING THERE WAS Y2K Those of us who were involved with Enterprise Resource Planning (ERP) and Advanced Planning & Scheduling (APS) systems in the late 90s will no doubt remember the scramble to implement new ERP to guard against the Y2K risk. I was involved in the transition at a major FMCG organisation from our mainframe Cincom Manufacturing Resource Planning (MRPII) system to SAP R/3 (with Manugistics). We were all told how SAP was going to unlock our data and automate planning processes, and so justifying the multimillion dollar (or in fact British Pound and Irish Punt) investment. Those of us tasked with delivering this transformation took a more pragmatic attitude. We recognised the need to establish a robust system of record to manage the business and 44 | MHD MARCH / APRIL 2018

we just needed to work to make sure that we could plan our supply chain as effectively with SAP as we had previously with Cincom.

IN THE NOUGHTIES WE FACED THE REALITY Throughout the noughties through various organisations the myth persisted that we should expect to deliver the savings that had justified the significant investments that had been made in our ERP systems. By then we realised that the myth of unlocking our data was, in fact, true in the reverse. We tried to educate our stakeholders to understand that true Enterprise Resource Planning required process capability enabled by technology. Most of us SAP users migrated from R/3 to ECC6 without really noticing. We spent our energies trying to make SAP work for us rather than us for it. We tried to help our colleagues who had given up and reverted to planning in spreadsheets. Those of us at the coalface recognised that SAP’s biggest competitor was Microsoft (Office Excel, not Dynamics). We wrote enhancement requests for SAP Business Warehouse (BW) reports to ‘unlock our data’, and they sat in a queue for delivery some time well into our more mature years. We watched as our C-suite lamented the resources we had engaged to manage data – and slashed them mercilessly.

APPROACHING OUR TWENTIES WE MATURED… Rolling into the late teenies, things are starting to look up. SAP has finally developed a significantly improved database that truly does ‘unlock our data’. SAP has stopped trying to compete, and now integrates better, with Excel and, in general, is a more user-friendly beast. For example, SAP has developed customisable Graphical User Interfaces that do not require hard coding and therefore should not inhibit in-life patches and upgrades. SAP has also announced a product roadmap that forces our organisations to stop and think about their IT strategy, rather than just going with the flow. There is now a recognition that spending on an ERP System of Record, like spending on an audit or accommodation for employees, is a necessary business expense that is unlikely to deliver competitive advantage and should not need to be justified in itself (rather, a business case should examine the various options for performing this necessary function). Even what was previously described as an Advanced Planning System is now regarded by Gartner as a ‘Planning System of Record’. The old artificial boundaries between ‘business’ and ‘IT’ supply chain professionals are blurring. We now have a pragmatic understanding of how to bridge the difference between


MHD SUPPLY CHAIN

what the software salesperson promises and what is actually delivered, and all ERP presentations start with that important disclaimer making it clear that we should not believe everything we see in the brochure. Finally, everybody is talking about Industry 4.0 and analytics, so our C-suite are now asking us how we are going to invest in big data to drive competitive advantage. So how should we capitalise on this opportunity?

HOW TO DEAL WITH OUR ERP MIDLIFE CRISIS… Leading FMCG organisations now have ERP/ APS under control and working for them to deliver competitive advantage in their supply chains. This has been a journey in which they have invested significantly. They have been able to attract and retain the most capable supply chain and ERP/APS professionals who have worked tirelessly on this challenge. For smaller FMCG organisations, and other industries where supply chain has not historically been such a differentiator, the challenge still remains. Supply chain managers are left wondering how to start to make more progress on catching up. Unlike the top global FMCG leaders, these other organisations are not going to be able to attract, retain and develop the lion’s share of the most capable global supply chain and ERP/APS talent, especially in more remote global outposts. They do, however, need to have a strategy to nurture supply chain ERP/ APS capability. This is likely to include a

Leading FMCG supply chain organisations are supplementing their APS with bestof-breed planning applications for specific functions.

mixture of organisational design, recruitment, training, incentives and coaching. Some businesses also need to have a strategy to make things simpler as an alternative to investing in capability. They also need to recognise that many ERPsupported supply chain processes may not have been well-defined or understood in the resource constrained ERP/APS deployment, or the process definition may have not evolved since the initial deployment and therefore bears no relation to what anybody actually does any more. Certain ERP capabilities that are not at all used by the supply chain FMCG leaders (notably Project System) or certain industry solutions (e.g. Oil & Gas or Defence) have not been subject to the same breadth of deployment scope or rigorous challenge from a capable user base as the core business modules (like Finance, HR, Material Management, Production, Sales & Distribution). In these areas there is still an important role for pioneering clients or user groups to push back on the ERP developers asking them to develop their functionality to properly support the industry specific requirements.

SAP HANA AS AN INFLECTION POINT For those of us who use SAP, Hana is a significant technological advance that dramatically increases the power of the ERP core database engine. It's like the difference in start-up time between an iPad and a PC with a hard drive. Data that is needed quickly is held in a microchip rather than a spinning magnetic disk so it can be read much faster. Hana is already starting to have a huge impact with SAP’s Business Intelligence (BI). The reporting capability is significantly enhanced. No longer does the BI reporting database need to be significantly limited in scope for performance reasons. Pretty much the entire global SAP database can now be made available with standard database extractors set up as memory resident queries. The increased native scope of the BI database, coupled with advances in webbased graphical user interfaces, means that business super users can be given significant freedom to enhance or build their own reports. This significantly reduces the complexity, lead-time and development overhead for BI solutions but requires a new type of skills in business users and IT support. The more powerful BI database also helps outbound interfaces, as they can now use a BI based architecture that removes constraints on the core ERP database performance. MHD MARCH / APRIL 2018 | 45


We need to refocus our attentions to ensure our System of Record better supports our supply chain.

SAP is migrating its core ERP from the current version (ECC6) to the Hana-based S/4 Hana. Like previous transitions, users will be forced to migrate away from ECC6/ APO, but it will not be such a simple choice as the previous R/3 to ECC6 transition. The capability of Hana means that some APS functionality will migrate to ERP. Although Integrated Business Planning (IBP - SAP’s APS successor to APO) will now use the same database engine as the ERP, it looks like it will only be offered as a cloudbased solution that might not suit everyone. APO is now languishing in the uncherished bottom left corner of Gartner’s magic quadrant for Planning Systems of Record and, whilst already plugging some longterm gaps in support for management level dashboards / sales & operations planning functionality, not enough is known about IBP’s full end-state functionality to even make a place in the Gartner magic quadrant. Indeed, Gartner’s magic quadrant for Planning Systems of Record certainly only tells a small part of the story these days. Leading FMCG supply chain organisations are supplementing their APS with best-of-breed planning applications for specific functions, such as demand sensing or inventory optimisation. This is much easier to do now than it ever was before. Modern technology, advances in interfaces and the simplicity of implementing cloud-based SaaS systems help all companies partner to develop supply chains that can start to compete with the industry leaders. The organisations developing these Planning Systems of Differentiation often do not have sufficient revenue or breadth of scope to make it anywhere near Gartner’s magic quadrant. Some of the Planning Systems of Differentiation are not even systems. A number of the supply chain leaders, and some of the less mature organisations that just want a simpler approach to managing their supply chains, are adopting Thoughtware instead of Software, and using DD-MRP as a radically different supply chain planning approach to the traditional APS/MRPII model.

BIG DATA… BIG DEAL? Exploiting the opportunities presented by big data may seem like a pipe dream to the supply chain manager struggling to get to grips with process compliance and poor data quality in their own ERP or APS. Indeed, I must confess coming from a similarly sceptical position when pitching an innovative analytic solution for inventory planning to a software vendor who specialised in master data management. 46 | MHD MARCH / APRIL 2018

The software vendor’s CEO was very interested but ultimately declined to support the pitch, believing that Industry 4.0 and an increased focus in master data would keep them more than busy enough in their core market. With the benefit of the passing of only nine months since that incident, I now accept that the CEO probably made a well-informed and wise decision. The lesson learnt from this is that getting the basics right with master and transactional data is also going to start being a lot more sexy than it used to be. Organisations are going to need to start crawling with data before they can walk or run, and will need to start taking action soon. The good news is that the companies that are really leveraging data now (like Google or Amazon) do not compete in all our industries. Most of our industry peers are facing the same issues that we face – we have not yet been left behind. The risk, however, is that, unless we start to get our data in order soon, either our competitors, or a more nimble startup, will be better placed than us to exploit the new opportunities. Master Data Management, Governance and Data Metrics are terms previously bandied around by data architecture geeks who were the sort of people that we avoided at work Christmas parties. We now need to understand what they do and establish strategies to address the issues that they espouse.

FINALLY… With almost two decades of experience, now we are more realistic in our expectations and regard our enterprise backbone as a System of Record rather than an Enterprise Resource Planning System. With this in mind, and taking into account wider trends in industry and society, we need to refocus our attentions to ensure our System of Record better supports our supply chain. Sam Wardill is a senior manager at GRA Supply Chain Consultants. Over the last two decades Sam has worked at both strategic and operational levels across FMCG, Pharmaceutical, Utility & Energy sectors to manage and deliver supply chain value. Sam has deep experience in supply chain inventory planning and performance management, supported by effective use of ERP, APS and BI systems (particularly SAP). He is a Chartered member of the UK Institute of Logistics & Transport and holds Masters degrees in both engineering and business administration. For more information visit www.gra.net.au. ■


MHD SUPPLY CHAIN

TECH IS GOOD How is technology enhancing supply chain management?

A

s technology evolves and reaches unimaginable abilities, new technologies are revolutionising multiple sectors, industries and processes, and the supply chain is just one of the many that is seeing a constructive change. The supply chain is responsible for the movement of goods we use in our everyday lives. The chain starts at the very beginning, with the creation and storage of raw materials, and finishes at the point of consumer consumption. But, with all of the stages in between, technological advances will see processes becoming notably faster, cheaper and more efficient resulting in savings of both time and money. But what are these technologies and how far will they influence supply chain management in the foreseeable future? We have looked at some of the key technologies that will be transforming and enhancing the supply chain process.

DRONES Drones are becoming an increasingly exciting and talked about technology in the warehousing and logistics sector, and while many of us associate them with celebrity spying, these flying vehicles are set to transform supply chain management and other industries as they are set to be heavily adopted across the next 15 years. Two consumer-goods giants, Amazon and Walmart, have recognised the significance drones are set to have in their supply chain and are at the forefront of this technology, already using them in their warehouses. Amazon has launched its own drone program, Prime Air, which is a delivery system that uses drones to safely deliver packages to customers in under 30 minutes. For Amazon, this rapid parcel delivery will improve the safety and the overall efficiency of its already fast delivery process.

Walmart is using drones at a different stage of the supply chain, implementing them internally to carry out full warehouse inventory checks. When Walmart tested image capture by drones, the flying technology captured 30 pictures per second and marked missing items in real time.

INTERNET OF THINGS The Internet of Things (IoT) is all about connecting devices over the internet, allowing for the interlinking of data and communication between us, our devices and applications. The IoT allows for the increased sharing of information, and with more information comes the ability to make more accurate decisions. For supply chain managers, IoT will increase the visibility in all processes, draw attention to potential faults in each supply chain operation, and from this enable ways to improve the systems process, accuracy and efficiency. The IoT is expected to have a profound effect on the delivery logistics element of the supply chain and estimated spending on connected logistics is $20 billion USD. According to the World Economic Forum, by 2022, 1 trillion sensors are believed to be connected to the internet. In the supply chain, sensors are used to track temperature, battery levels, driver location/route, and any potential errors that could impact goods, assets and vehicles in transit.

AUTONOMOUS VESSELS With 10 million self-driving cars expected to hit our roads by 2020, what else is in store for the future of automated vehicles? It seems that autonomous vessels are set to be revolutionised next. British luxury car company Rolls Royce has set a target to have remotely controlled autonomous vessels in international waters by 2025. Ten years later in 2035,

ocean-going ships will have the ability to travel completely unmanned, and it is aimed that these intelligent vessels will become a common sight across our seas. By introducing fleets of unmanned cargo, the ultimate goal of these huge container ships is to develop self-sailing vessels that will reduce operating costs and boost safety within the global shipping industry. Recent collisions highlight the high safety concerns while navigating the world. The most exciting thing? NYK Line plans to test these autonomous ships by 2019.

CHIPPING GPS tracking and chipping is revolutionising fleet management. Telematics allows supply chain managers to access the data of their fleets and look at how efficient, costly and accurate they are. By being able to analyse the timing of routes and exactly how vehicles are driven, intelligent decisions can be made about fuel consumption, component failure rates, reasons for breakdown and fleet training. The supply chain process can be difficult to both manage and improve. Chipping aids the visibility of the processes, which supply chain managers are not always able to see so easily, and as a result, helps decision making to reduce costs and spending. These technologies are set to have an immense impact on the supply chain. Big companies are already implementing some of the technology above and reaping the many benefits. It is clear that these advanced technologies are not only here to stay, but are set to transform the supply chain processes entirely. Looking back at what has been achieved so far, what will supply chain management look like in just a handful of years? For more information visit www.vero.solutions. â– MHD MARCH / APRIL 2018 | 47


MHD SUPPLY CHAIN

AUTOMATE X 3 ANTONY BOURNE

Three gamechangers for the manufacturing industry in 2018

T

he Internet of Things (IoT) is being built into the product design, manufacturers are adopting a more service-centric business model, and 3D printing is reaching the tipping point of realising business benefits on a large scale. These are the three game-changing predictions that will dominate discussion in 2018.

1/ BY THE END OF 2018, OVER 50 PERCENT OF MANUFACTURERS WILL BE BUILDING IOT TECHNOLOGY INTO THE DESIGN PHASE OF THEIR PRODUCTS

Economy of scale… will be an important catalyst for the success of the 3D printing technology.

48 | MHD MARCH / APRIL 2018

When you think ‘IoT’, is your first thought newly affordable, available sensors being added to products after they’ve been manufactured? If it is, well I believe 2018 will change that perception as IoT takes a decisive step forward in its evolution. If we think of IoT as a product’s nervous system, 2018 will see it grow from picking up signals at the periphery to being the brain of the product, constantly sending, receiving, growing and gathering information, from the centre of the product throughout its lifetime, in the process enabling new services and revenue streams. Manufacturing is one of the markets most heavily impacted by IoT today. According to Global Market Insights, IoT in the manufacturing market was valued at over US$20 billion in 2016 and will grow at more than 20 per cent estimated compound annual growth rate (CAGR) from 2017 to 2024. Current IoT investments that are unique to the manufacturing environment are taking place in three major initiatives: 1. Smart manufacturing to increase production output, product quality or operations, and workforce safety as well as lower resource consumption. 2. Connected products to impact product performance, including collecting detailed information on products in the field, remote diagnostics and remote maintenance. 3. Connected supply chains to increase visibility and coordination in the supply chain, tracking assets or inventory for more efficient execution. We will see IoT being included as a part of the design process in all three of these initiatives. Manufacturers are realising that

by engineering IoT technology into products and equipment already in the design process, you will be able to monitor not only the equipment’s performance to predict when it needs repair, but also how and when it is being used – which provides gamechanging competitive advantages. By the end of 2018, more than 50 per cent of manufacturers will be building IoT technology into their products from day one – already thinking forward in the design phase and asking themselves what services and revenue this product can generate throughout its lifetime. In fact, where will our revenue be coming from in the next five years? It’s a good question and it leads us to my next key prediction…

2/ SERVITISATION SPEEDS AHEAD: BY 2020 MOST MANUFACTURERS WILL EARN OVER HALF OF THEIR REVENUE FROM SERVICES With the manufacturing industry becoming more and more commoditised, the need to differentiate yourself is key to survival and profitability. We now see that a large number of manufacturers are shifting to a more service-centric business model – the buzz word is ‘servitisation’. Servitisation is a way for a manufacturer to add capabilities to enhance their overall package in addition to the product itself. One famous example is Apple, which did this a few years ago when it had gained the majority of market share with the iPod and introduced iTunes to increase loyalty, differentiate itself and generate more revenue. You may think that it will never apply to your business, but companies are now reaping the benefits of servitisation across many different sub-segments. For example, Philips provides Schiphol airport outside Amsterdam with ‘lighting as a service’, which means that Schiphol pays for the light it uses, while Philips remains the owner of all fixtures and installations. Philips and its partner Cofely will be jointly responsible for the performance and durability of the system, and ultimately its re-use and recycling at end of life. This has resulted in a 50 per cent reduction in electricity consumption without having to buy a lamp.


I see this development among IFS’s customers as well. For global furniture manufacturer Nowy Styl Group, servitisation has been crucial to its growth. In 2007, it announced, “for us, chairs are not enough”, starting a transformation from pure manufacturer to world-class office interior consulting company. Another example is a customer that manufactures cleaning products and started to offer delivery and service dosing systems. The company understood that choosing the right cleaning products was just part of its customers’ main objective, i.e. keeping its premises hygienic. Applying the products in the most effective way, choosing the right accessories, establishing the right routines – all these were crucial to keeping premises clean too. Both of these customers realised that with technology accelerating as fast as it is, no matter how beautifully designed a chair is or how effective a cleaning product may be, today’s luxury products turn into tomorrow’s commodities faster than ever, pulling prices down with them. With servitisation, manufacturers escape the corrosion of commodification. Expert services built on years of experience provide a kind of value customers will always pay for, regardless of technology trends. According to the IFS Digital Change Survey, conducted by the research and publishing company Raconteur, 68

per cent of manufacturing companies claim that servitisation is either ‘well-established and is already paying dividends’ or ‘in progress and is receiving appropriate executive attention and support’. However, almost one in three manufacturing companies are still to derive value from servitisation. These are missing out on revenue streams and new ways to develop their offerings. To be successful in their response to customer needs and increasing demands, manufacturers must look to new business models to compress time to market, taking an idea through from design to a saleable item as quickly as possible. New technology like IoT adds an additional layer to servitisation. With sensors detecting when your product or equipment needs service, this data can trigger an automated service action that will realise significant benefits to make your service organisation more effective. This type of automated predictive maintenance will become more and more common as it is a natural next step after implementing IoT to optimise service efforts.

3/ BY 2019, THE HYPE AROUND 3D PRINTING WILL BE OVER AND REAL BENEFITS BLOOMING My third prediction is that 3D printing, just like IoT, will enter a new, more

mature phase. No matter how big the ‘wow’ factor is when we first see it, apart from a smaller-scale manufacturing production like hearing aids and jewellery, 3D printing has so far failed to live up to its full potential. All this could change in 2018. We are seeing a couple of developments that point in that direction. The first one is the improved scalability of 3D printers. A new generation of 3D printing companies is moving into areas traditionally dominated by injectionmoulding manufacturers, with newer, faster, better connected automated systems that reduce some of the time-consuming pre- and postprocessing that has been such an obstacle to wide-scale uptake. One company, Stratasys, for example, has collaborated on a new printer, the Demonstrator, that combines three printers into a stack system – each printer able to communicate to its neighbours in real time. The new printer is highly scalable, meaning it can significantly increase production capacity, printing from 1,500–2,000 components a day. This means that you can achieve an economy of scale to bring costs down, which will be an important catalyst for the success of the 3D printing technology. The aviation industry is pioneering 3D printing technology today, and the manufacturing industry can learn from that. One successful example is the new GE Turboprop ATP Engine, which was 35 per cent 3D printed, taking it down from 855 components to 12 and contributing toward the engine being lighter, more compact and delivering a 15 per cent lower fuel burn and 10 per cent higher cruise power compared with competitors’ products. The expanded capacity and reduction in pre- and post-processing that new, highly innovative mid-size 3D printing companies are bringing to the field mean that, in 2018, I think we will see manufacturing companies joining in with aviation and defence, and flying high too with new 3D printing capabilities. Antony Bourne is the global industry director of industrial and high-tech manufacturing for enterprise software company IFS. For more information visit www.ifsworld.com/au. ■ MHD MARCH / APRIL 2018 | 49


ONE BELT ONE ROAD DR RAYMON KRISHNAN AND BHARGAV SRIGANESH

Is a renewed ‘Silk Road’ and other trade routes in Asia mean doom and gloom for Singapore?

T

he “One Belt One Road Initiative” (OBOR) is one of the key geopolitical and strategic developments shaping the world today. Touted as the 21st century Maritime Silk Road, OBOR aims to connect the eastern part of China’s coastal cities with Europe via the Indian Ocean and South China Sea. OBOR, officially announced by China in 2013, stretches through 65 countries that collectively have 60% of the world’s population. These 65 countries also produce around 33% of global GDP. The China Development Bank has already set aside close to $900 billion to finance 900 projects. Some commentators misguidedly add to the hype by including infrastructure projects that are not part of the OBOR initiative in their analyses. Still, regardless of the monetary figures and actual number of official projects, this trading network will deepen and broaden the country’s strategic engagement with Southeast Asia, Central Asia and Europe. Figure 1. illustrates the maritime trade routes, economic corridors, rail networks and gas pipelines that will connect these key markets. With OBOR, China is attempting a bold recreation and expansion of the ancient Silk Road. The Silk Road, first established during the Han dynasty in China, consisted of trade routes that linked great commercial cities of the past including Samarkand, Bukhara (Uzbekistan), and Merv (Turkmenistan). The Silk Road did not just connect traders. Whilst its key aim was to boost connectivity, ideas pertaining to 50 | MHD MARCH / APRIL 2018

science, technology, religion and culture also spread. For instance, Buddhism’s birthplace might have been in India but its germination and growth to China was facilitated by the Silk Road. China’s rise and involvement in the OBOR initiative is inexorable. The Euro-centric model of economic relations that have predominated discussions since the Renaissance and Industrial Revolution is beginning to be displaced. In the 1980s, China’s share of world GDP was only 2.7%. However, over the past three decades, China’s share of world GDP has risen to almost 16%. China’s investment in infrastructure has expanded its global footprint. It is currently the largest trading network with many countries and has already overtaken US GDP in terms of Purchasing Power Parity. Countries have reacted to OBOR in a varied manner. Some have welcomed it. Others have expressed suspicion that OBOR acts as a pretext for China to dominate the Asia-Pacific and beyond. Regardless, the strategic imperatives for states located along the evolving trade route and potentially affected – directly or indirectly – by OBOR are clear. For a tiny trading nation like Singapore, adapting and leveraging on these changing circumstances are key to long-term prosperity.

IS SINGAPORE DOOMED? So, how is OBOR going to impact Singapore? Leaders in Singapore have taken turns to repeatedly state that there are significant opportunities for Singapore and Singaporean businesses. Nevertheless, there are concerns, in some quarters, that OBOR will adversely affect Singapore, especially if there is a perceived deterioration of diplomatic relations with China due to a variety of reasons (e.g. Singapore speaking out on the recent tribunal ruling on the South China Sea that

ruled against China’s ‘historic rights’ claims over vast swaths of sea and conspicuous absence of Prime Minister Lee Hsien Loong at the OBOR summit in May this year). Many of these fears were blown out of proportion and have been allayed by subsequent diplomatic engagements. Still, there is a pivotal question that this article seeks to examine further: Can Singapore maintain its maritime dominance amidst the development of OBOR infrastructure projects?

MALAYSIAN PORT DEVELOPMENTS – THREATS FROM ACROSS THE CAUSEWAY? Let us also examine how port developments in Malaysia could impact Singapore’s maritime hub status. Currently, Singapore, as the world’s leading transhipment port and regional oil node, facilitates trade traffic worth almost US$5 trillion. The port, strategically located at the southern tip of the South China Sea, also ships oil in bulk valued at around US$600 billion annually. There has been some mention of how the construction of a new deep-sea port off Malacca (jointly developed by Chinese and Malaysian companies) and extensions in Port Klang will challenge Singapore’s maritime hub status. The US$10 billion project in Malacca and developments in Port Klang could position Malaysia to be a key element of China’s bold OBOR initiative in Southeast Asia. The developments of these Malaysian ports raise two primary concerns for Singaporeans. First, if these ports, positioned to the north of Singapore deliver to their full potential, fewer ships will need to pass through Singapore. Also, the deep-sea ports will have the operational capacity to serve both containerised and bulk cargo using Malaccamax vessels. While Malaysian ports have previously tried to rival Singapore, they have not had the generous fiscal backing that current maritime developments enjoy from Chinese investors. The Chinese, pragmatic and hard-headed as they are, have backed up their promises by opening up the purse strings. In light of these developments, there are four counter-arguments as to why these fears are misplaced.


MHD SUPPLY CHAIN First, it is crucial to probe deeper into why the Chinese are so keen on building a port in Malacca. For China, up to 80% of its energy needs pass through the Straits of Malacca. This over-reliance was characterised as the ‘Malacca Dilemma’ and identified as a strategic issue by former president Hu Jintao fifteen years ago. The Straits of Malacca is a vital sea lane especially since it is patrolled by the US navy and was previously used by Americans to send warships to Taiwan at a time when tensions between China and Taiwan escalated in 1996. While China and the US are searching for a peaceful modus vivendi in the Asia-Pacific, there is no guarantee that the Straits of Malacca will be devoid of flashpoints in future. Hence, while there are crucial strategic interests for China, it is questionable if commercial imperatives are foremost priorities for them. Possibly not. Additionally, a World Bank study commissioned by the Malaysian government concluded that a port in the Western coast of Malaysia is unnecessary especially whilst operations in Port Klang are currently expanding. Therefore, since there seems to be little commercial value derived from the construction of the Malaccan port, it remains to be seen if the port can rival Singapore’s maritime dominance in the region. Second, the growth in the size of container ships must be matched by the expansion of ports as well. For instance, when giant ships arrive at ports, there needs to be complementary infrastructure that enables more storage space, wider distribution channels and enhanced container gantry cranes. Currently, only twenty ports in the world can accommodate 19,000 TEU

The Port of Singapore.

With OBOR, China is attempting a bold recreation and expansion of the ancient Silk Road.

Figure 1. The map of ‘One Belt One Road’. Source: Mercator Institute for China Studies.

(Twenty-foot Equivalent Unit) cargo vessels. There are only two in Southeast Asia. One is in Tanjung Pelapas while the other one is in Singapore. While this does not give reason for Singapore to be complacent or take its place for granted, the port nation enjoys a significant head start over its competitors. Third, PSA is not resting on its laurels either. The expansion of the Pasir Panjang terminal by 50% will enable it to reach a capacity of 50 million TEU. PSA is investing S$3.5 billion to use the latest port technology and reduce the manpower needs of managing the port. For instance, there will be automated container yards and unmanned rail-mounted gantry cranes that will support intelligent systems. It will be a state-of-the-art, modern and ‘smart’ port that will stay ahead of the competition. Furthermore, when the next-generation port in Tuas is completed by 2040, it will be able to handle 65 million TEU of cargo annually. This is twice the capacity that the port is currently handling. Fourth, the port in Malacca is primarily designed to add oil storage and bunkering facilities. It does not seem to offer container handling services and could thus have a more minimal impact on Singapore’s operations. Furthermore, the planned oil storage capacity of the Malaccan port is 1.5 million cubic metres. Meanwhile, Singapore’s current capacity is 20.5 million cubic metres. Hence, the Malaccan port, due to its capacity constraints and focus on bunkering facilities, rather than on transhipment of cargoes, might not displace Singapore’s maritime dominance. MHD MARCH / APRIL 2018 | 51


PUT IT ON THE TRAIN The port in Malacca is only one of the challenges to Singapore’s hub position. The East Coast Rail Link (ECRL), as shown in Figure 2., will link ports on the Eastern and Western peninsulas of Malaysia. The ECRL, akin to the ‘Mini Land Bridge’ in the US, could alter regional trade routes that are currently used to ply the busy Straits of Malacca and the South China Sea via Singapore. The ECRL will enable China-bound goods from Port Klang to be transferred to Kuantan using freight trains without having to go south to Singapore. There are commercial factors that could deter the ECRL project from becoming a success. It remains to be seen if the economic value of shipping cargoes to Port Klang, unloading it and

then re-transporting it via another railway, unloading it again at Kuantan and reshipping from there will provide a significant cost differential. Also, there are still doubts about the projected estimates of annual freight transport via the ECRL once it is fully built. For instance, the cost justification for the ECRL is premised on the estimate that it will carry almost 50 million tonnes of freight by 2030. By 2035, it is expected to carry 60 million tonnes. However, this could be a significant overestimation since Keretapi Tanah Melayu (KTM) only carries about 6 million tonnes every year on its nationwide network. Furthermore, to complicate matters, McKinsey and Company has estimated that the

Figure 2. Malaysia’s East Coast Rail Link. (Source: Spad.Gov.My, Straits Times Graphics.) 52 | MHD MARCH / APRIL 2018

costs of mega rail projects are 45% more than the projected amount. Meanwhile, expected demand is usually overestimated by two times. Therefore, if the high expectations of this project are not fulfilled by tangible commercial gains, the ECRL will incur a significant loss that will have to be borne by Malaysian taxpayers paying back Chinese loans.

COMPETITION FROM REGIONAL MARITIME DEVELOPMENTS Even if Singapore staves off competition from Malaysian ports, regional developments could adversely affect Singapore’s pole position. First, the Kra Canal has often and repeatedly been labelled as a potential competitor to the Singapore port. As demonstrated in Figure 3., the Kra Canal, if it is ever built, would cut through the Southern Isthmus of Thailand, connecting the Gulf of Thailand with the Andaman Sea. It would provide an alternative to transiting through the Straits of Malacca, thus shortening transit distance for shipments of oil to East Asian countries by 1,200 km. In turn, this can save time and cost. Previously, China has referred to this project as part of its plans for OBOR. Nevertheless, the commercial considerations for the construction of the Kra canal do not look promising. First, constructing canals like the Suez and Panama were more feasible. They were surrounded by waterbodies that could be connected to form larger canals. Conversely, constructing the Kra canal is significantly more cumbersome and costly since builders have to hew solid mud and rock. Additionally, the benefits accrued are rather marginal. While the Suez and Panama canals cut travel distances by 8,000km and 5,000km respectively, the distance saved by the construction of a Kra Canal is only slightly more than 1,000km. Therefore, considering that that the benefits due to the construction of the canal are marginal, it remains to be seen if this project will genuinely pose a threat to Singapore’s maritime hub status. Some commentators have argued that the port in Hambantota, once fully developed, could also pose a challenge to Singapore’s port.


MHD SUPPLY CHAIN Hambantota’s port will be an excellent transhipment waypoint across the Indian Ocean, stretching to the Far East and Europe. The pendulum of trade could, in theory, swing from Africa and South Asia through Sri Lanka into the west coast of Malaysia and up into the hinterland of Southeast East Asia. The construction of the Kra canal could also expedite the movement of goods into the hinterland. Either way, with or without the Kra canal, the change in trading routes could result in ships bypassing Singapore altogether. In July 2017, a deal was signed between two state firms – the Sri Lanka Ports Authority (SLPA) and China Merchants Port Holdings – to handle the commercial operations of the loss-making Hambantota port, located approximately 240km from the South of Colombo. On top of the sale price, the Chinese firm will also invest another $600 million to develop Hambantota port and a 15,000 acre industrial zone. This is a similar modus operandi, albeit on a reduced scale, to what China has done to Piraeus port in Greece, where as much as 60% of China’s exports are shipped through to the rest of Europe. Hambantota could potentially become the gateway to expanding economies in South Asia and Africa. Still, Hambantota could be blighted by the same issues that might affect the Malaccan port. The rationale for the involvement of China in the construction and operation of the port in Hambantota is primarily strategic to counter-balance India’s maritime strength in the South Asian region. Furthermore, the operation of the port is also in the hands of China Merchant Ports Holdings. Since Colombo was not able to repay the loans of around $1.6 billion to China Merchants Ports Holdings, the Hambantota port operators were forced to sell a 70% stake to their counterpart. Therefore, it is unclear if regional developments – construction of Kra Canal and Hambantota port – can dislodge Singapore, considering the thorny issues that they would have to overcome. Meanwhile, Singapore enjoys a healthy head start over its competitors and is poised to capitalise on this.

CONCLUSION To conclude, one should be mindful that physical infrastructure alone will not be enough to displace Singapore from its prime position. Recently, Singapore’s Minister for Home Affairs and Law Mr K Shanmugam said that the Chinese understand infrastructure. Yes, this is true. However, operating a port

In Singapore, investing in infrastructure has been combined with creating a supply chain ecosystem that develops technological, financial, legal, banking and a myriad of other supporting mechanisms.

Figure 3. The Kra Canal route. (Source: Picsora.) and making it a success is not just about cranes, gantries and dockyards. This is the ‘hard’ infrastructure. The harder part is to replicate the ‘soft’ infrastructure. In Singapore, investing in infrastructure has been combined with creating a supply chain ecosystem that develops technological, financial, legal, banking and a myriad of other supporting mechanisms. These capabilities are overlaid with a stable, corruption-free government and competent workforce. In a recent article about Singapore’s hub status, the author pointed out that these capacities are interlocking and complement each other effectively. When working in tandem, it might be hard for OBOR projects to displace this ‘soft’ infrastructure. Reinventing and adapting to changing circumstances is a ceaseless strategic imperative for Singapore. It is notable that the decline of the port in most major cities has often precipitated their fall from grace. In fact, some of the commercial capitals that flourished during the ancient Silk Road period have lost their lustre today. This is a salutary warning that Singapore’s maritime dominance can never be taken for granted. Dr Raymon Krishnan is President of the Logistics and Supply Chain Management Society and Director of Corporate Advisory at the Asian Trade Centre, Singapore. He has more than 25 years of experience in logistics and supply chain management. Bhargav Sriganesh is currently a Research Assistant at the Asian Trade Centre, Singapore and will be pursuing a Masters in Political Science and Political Economy at the London School of Economics and Political Science (LSE). He recently completed his undergraduate studies in International Politics with a First Class Honours at King’s College, London. ■ MHD MARCH / APRIL 2018 | 53


THE PLACE TO GO FOR YOUR DAILY NEWS ON TRANSPORT & LOGISTICS www.TandLnews.com.au

13,500 monthly visitors

HAVE YOU SUBSCRIBED TO TandL’S FREE E-NEWSLETTER? TandLnews online offers breaking news and concise accessible coverage of current industry issues and developments. Delivered to your inbox every week!

REACH YOUR TARGET MARKET DIRECTLY BY ADVERTISING Advertise on TandLnews and reach over 13,500 monthly visitors. Simply contact our advertising manager below for more information or to request a media kit.

10,000+ news subscribers

UPDATE OR ADD YOUR COMPANY FREE OF CHARGE TO THE TRANSPORT AND LOGISTICS INDUSTRY’S NEW TRADE DIRECTORY The TandLnews team is building a directory for the transport and logistics industry that will be accessed by the 13,500 visitors who read www.TandLnews.com.au each month. In addition, every week, 10,000+ news subscribers will have access to the directory. If your business has anything to do with supply, manufacturing or procurement to or from the road, rail, sea or air transport industries, then you should take a few moments and ensure your business is included.

Ralph Merry T: 02 8586 6109 | E: rmerry@intermedia.com.au


MHD THE LAST WORD

NEW E-LAWS PAUL ZALAI

Europe follows Australia with new e-commerce laws

The council claims that around 150 million small consignments are imported free of VAT, and the current system is open to abuse.

E

ffective 1 July 2018, the Treasury Laws Amendment (2017 Measures No. 1) Bill 2017 introduces a requirement for overseas vendors, electronic distribution platforms and re-deliverers to account for Goods and Services Tax (GST) on sales of low-value goods to consumers in Australia if they have GST turnover of $75,000 or more. With members including Alibaba, Ebay and the major logistics providers, Freight & Trade Alliance (FTA) was invited to provide evidence to the Productivity Commission inquiry that reviewed the legislation and how it would impact international logistics operators. The intent of the legislation was to ensure that imported goods with a value under $1,000 face an equivalent GST treatment to goods sourced in Australia. Importantly, the legislation will also generate a significant quantum of GST revenue for our state governments. The Productivity Commission found that the e-commerce platforms, controversially defined as ‘vendors’ in the legislation, were in the best position to collect and remit GST, rather than alternative models that may have forced the express carriers to collect GST at the border. While the e-commerce platforms challenged that finding, they are now racing to comply with the new legislation before the 1 July 2018 deadline. It looks like Australia is not going alone with this approach on taxing internet trade, with the Council of the European Union also introducing new rules to comply with valueadded tax (VAT) obligations. The new rules extend an existing EU-wide portal for the VAT registration of distance sales. Following the Australian-style model, the EU is making the online platforms liable for collecting VAT on the distance sales that they facilitate. A ‘one-stop shop’ will relieve online traders of having to register for VAT in each of the member states in which they sell goods. Again, similar to the Australian model, the Council provides a concession for start-ups and SMEs. Below €10 000 in yearly cross-border online sales, a business will be able to continue applying VAT rules used in its home country.

Furthermore, the new rules remove an exemption for consignments from outside the EU worth less than €22. The council claims that around 150 million small consignments are imported free of VAT, and the current system is open to abuse. The new rules set out the following timeline: • Introduction by 2019 of simplification measures for intra-EU sales of electronic services. • Extension by 2021 of the one-stop shop to distance sales of goods, both intra-EU and from third countries, as well as the elimination of the VAT exemption for small consignments. The global developments do not end there. The World Customs Organisation (WCO) established e-commerce sub-groups that held face-to-face meetings in Brussels from 23 to 25 January 2018, bringing together more than 125 delegates to discuss and develop a ‘Framework of Standards on CrossBorder E-Commerce’. This ‘Framework of Standards’ is expected to be a comprehensive instrument for assisting WCO members in developing e-commerce strategic and operational frameworks. It will be equally useful for members who are seeking to enhance existing frameworks in order to effectively meet the requirements of new and evolving business models. Further information: • ATO website - https://www.ato.gov.au/ business/international-tax-for-business/ gst-on-low-value-imported-goods/ • Council of the European Union - http:// www.consilium.europa.eu/en/press/pressreleases/2017/12/05/vat-on-electroniccommerce-new-rules-adopted/ • WCO website - http://www.wcoomd. org/en/media/newsroom/2018/january/ wco-lays-down-the-foundation-of-aframework-of-standards.aspx The FTA and APSA look forward to facilitating a focused e-commerce session on Day 2 (11 May 2018) of the Global Shippers Forum and ICHCA International Conference & Exhibition. The session will involve international and domestic government and industry experts focusing on the future of e-commerce. Further details are available at www.FTAlliance.com.au. ■ MHD MARCH / APRIL 2018 | 55


MHD ASCI

ASCI CORPORATE MEMBERSHIP

ASCI Corporate Membership is vital to supply chains as organisations embark on the digital revolution journey.

A

SCI Corporate Membership allows your organisation to demonstrate your commitment to best practice and excellence whilst expanding your team’s proficiency in supply chain. ASCI Corporate Membership is vital to supply chains as organisations embark on the digital revolution journey. Make that trek together with your fellow executive peers and become an ASCI Corporate Member today by contacting our National Office at enquiries@asci.org.au / 1300 557 173 or visiting our website at www.asci.org.au/membership. Thank you to ASCI Corporate Members for your ongoing support. • Ansaldo STS • Beak & Johnston • Bega Cheese • Campbell Arnott’s • Cement Australia • Cincom • Cochlear • Commonwealth Bank • D&D Technologies • Doric • Eaton • Gilbarco Veeder-Root • Hella • Komatsu Mining Corporation • Liberty OneSteel

• • • • • • • • • • • • • • • • • • •

Ligentia Australia Martin-Brower Michael Page nbn co Nufarm Oliver Wight Oracle Philip Morris PPG Industries Pronto Software Prophit Systems Reece ResMed Stryker Sullair Australia Sydney Institute of TAFE Toyota Motor Corporation Australia USG Boral Woolworths Xylem ASCI could not support the industry without the generosity and ongoing commitment of its Corporate Sponsors • Adjuno • CBRE • GRA • JDA • Lexian • Logility • Oracle • SYSPRO

WHICH TIER WILL YOU CHOOSE?

Join our community by registering to our newsletter via our website, to receive valuable content, webinars, news and participate in forums or networking events. 1300 557 175 | enquiries@ASCI.org.au | www.ASCI.org.au 56 | MHD MARCH / APRIL 2018


ASCI2018 LAUNCHES A GLOBAL AND PROGRESSIVE CONFERENCE AGENDA

A

re you prepared to face the imminent shifts in global supply chain disruption? The on-demand environment is spurring fast, changing technological innovation. As digitalisation turns a spotlight on the supply chain, Operations, Logistics and Procurement professionals are tasked building highly responsive global supply chains. More than ever, supply chain operations need to be at the top of their game, working collaboratively across different functions within the organisation, and building the

capacity to respond to the on-demand ecommerce economy. ASCI and Akolade have crafted a pioneering agenda, pushing the boundaries of supply chain capability. Attend ASCI2018 and learn how to: • Transform supply chain operations to exceed customer expectations in the on-demand environment • Devise cross-global expansion strategies • Prepare for the imminent shifts in the 24/7 supply chain • Leverage big data insights to enhance supply chain agility

• Explore transformative logistic models • Gain insight on changing infrastructure requirements to meet technology driven supply chain models View the ASCI2018 programme at www.asci2018.com/programme.html Attend the ASCI2018 conference and contribute 20 ASCI CPD points towards your required 75 points over three years. This conference can also be used to go towards APICS certification maintenance. Points will be allocated at APICS discretion. MHD MARCH / APRIL 2018 | 57


MHD NEWS FROM SCLAA

CHAIRWOMAN’S REPORT

T

AMANDA O’BRIEN

The SCLAA will continue to highlight the issues that matter and important events in the supply chain both domestically and overseas.

58 | MHD MARCH / APRIL 2018

he Supply Chain Industry has been a hot topic and everything seems to be centred on block chain technology and the IOT. Not that this is unimportant but with all this technology are we getting enough rest? With information overload and the emphasis on speed and efficiency, are we all burning the candle at both ends. With different time zones and all the talk about globalisation, we all work in a 24/7 world from which there is no escape. This is the result of the technological age we live in and, more than ever, we do not dare mention the impact this is having on our humanity - are we ourselves becoming obsolete? With the phenomenal importance currently put on technological advancement, digital presence and constant innovation to advance big and small businesses, are we focussing more on IT than people? With the combination of regulation, compliance and IT becoming onerous costs to business, is it any wonder that anyone working in the industry does not get enough shut eye? But we don’t go there because we don’t want to mention our humanity in today’s cut-throat business world. We look at ourselves as perfectly efficient and turning a profit, even with the acceleration of technological advancement. Let’s race to the pinnacle of service to reach the pot of gold at the end of the rainbow - higher profits, more success, ground-breaking innovation. And let’s not forget our reputation! Consumers are all over that one. They are our harshest critics. Oh, the pressure - death by media or social media. But at what cost? Humanity! So with that introduction, I must mention the unseen issues not highlighted in the supply chain, the deprivation of humanity in modern slavery. This is hidden from the consumer for corporate greed and higher profits in our consumer-driven society. What are businesses doing to reduce the risk of modern slavery in the supply chain? There are more than 21-36 million people in slavery globally, more than the population of Australia, of which 26% are children. The current business environment is increasing both the benefits and risks of third party relationships. 65% think that the current economic climate is encouraging organisations to take risks in relation to regulations to win new business. 14% of third-party management professionals do not use the Foreign Corrupt Practices Act

(FCPA) to inform their decisions, and 13% are not even aware of this legislation. I facilitated at the ‘Modern Slavery – Hidden in Plain Sight’ events last week in Melbourne and Sydney, which were hosted by Thomson Reuters in collaboration with the SCLAA. The speakers were outstanding and included: • Vanessa Zimmerman, chairwoman of the Global Compact Network Australia for the Human Rights Leadership Group and working for Rio Tinto implementing Rio Tinto’s human rights strategy. • Jean Roux, partner in the Cyber and Forensic Team for Price Waterhouse Coopers, who was previously based in Shanghai and who has outstanding insight into the depth of the problem and the mitigating strategies business must take to ensure due diligence is met. • Mark Rigby, director for PwC, who spoke both eloquently and passionately about integrity in business, providing expertise to clients and carrying out investigations on anti-bribery, corruption and fraud, and third-party management risk. • Cate Harris, acting executive director at the UN Global Compact Network whose drive is to enhance sustainability and is the global head of the Lendlease Foundation. • Phillip Malcolm, market development manager - risk at Pacific Thomson Reuters, whose experience in the past with the Financial Crime and Compliance Division at Oracle for the JAPAC region has provided him with consummate insight into the area of the hidden supply chain and the importance of uncovering and eradicating commodity supply chain corruption. It is essential that industry understands that when it comes to both regulation and reputation, organisations simply cannot afford to risk any serious due diligence breaches. Even unwitting involvement in any form of human rights abuse will have serious consequences. There is growing intolerance from consumers and any organisation linked to human rights abuse and those organisations are likely to suffer significant reputational consequences that can be far more serious than any enforcement action. Amanda O’Brien is the national chairwoman of the Supply Chain and Logistics Association of Australia. Email amandao@xtremefreight.com.au. ■


Save 50% off MHD

Supply Chain Solutions Subscribe to MHD for only $39.00 for one year!

MHD Supply Chain Solution MARCH / APRIL 2018

s

COVER STORY

AutomotiveNormally challenges with SSI SCHAEFER partners this complex industry

$78

SPOTLIGHT ON…

n The ten most commo s pallet racking system

SPEED UP!

Designing supply chains for faster clockspeeds

IN FOCUS:

IPMENT, WAREHOUSE & DC EQU AUTOMATION AND SYSTEMS INTEGRATION

For over 45 years, MHD Supply Chain Solutions magazine has been bringing its readers leading-edge supply chain management information from the world’s leading thinkers and practitioners, together with in-depth case studies and the latest innovations in equipment and software.

To subscribe, simply call us toll free on 1800 651 422 and quote MHD18 *Available for delivery within Australia only.


PUSH POSSIBLE

It’s no trick. Far out is our standard. Jump with a technology partner that helps you grind the best path forward between “in demand” and “in stock.” Partnering with you to create seamless experiences that connect your store, your associates, your warehouse, your website, and your service center to the customer like only we can. Together, let’s deliver beyond the expected to push today, push tomorrow, and Push Possible™. – Operating in Australia for more than 17 years – In-house services team, based in Australia: implementation, training and support

Air out your software at www.manh.com.au Email anzinfo@manh.com or call (02) 9454 5400 ©2017 Manhattan Associates, Inc.

MHD Supply Chain Solutions - March-April 2018  

For over 40 years, MHD Supply Chain Solutions magazine has been bringing its readers leading-edge supply chain management information from t...

MHD Supply Chain Solutions - March-April 2018  

For over 40 years, MHD Supply Chain Solutions magazine has been bringing its readers leading-edge supply chain management information from t...