The challenge of responding to the threat of cheap offshore labor isn’t new to North American businesses. Nearly a hundred years ago, Henry Towne wrote about the need for increased efficiency and productivity in a foreword to Frederick Winslow Taylor’s 1911 paper, “Shop Management”:
"We are justly proud of the high wage rates which prevail throughout our country, and jealous of any interference with them by the products of the cheaper labor of other countries. To maintain this condition, to strengthen our control of home markets, and, above all, to broaden our opportunities in foreign markets where we must compete with the products of other industrial nations, we should welcome and encourage every influence tending to increase the efficiency of our productive processes."
Efforts to improve management efficiency over the past century have often focused on the reduction of waste, which is defined as processes and resources that represent direct costs and opportunity costs, but don’t add any value.
The elimination of muda, the Japanese term for waste, is at the core of the lean manufacturing management philosophy promoted by Taiichi Ohno, the father of the Toyota Production System, also known as “just in time." He identified the seven wastes: as defects, transportation, human motion, waiting, inventory, overprocessing and overproduction. An eighth waste, underutilized skill, was later added to the list.
Inefficient warehouse operations
At least the first four of the eight wastes are prevalent in current warehouse operations. “Many warehouse and distribution center operations continue to suffer from significant inefficiencies, as forklift operators waste time and resources hunting and digging because they lack adequate information on the location of items and the optimal route for putaway, replenish and retrieval actions,” says Michael Giuliano, president of Meridian Research and Development LLC.
Giuliano has advised automobile manufacturers and large consumer-goods producers on the application of lean manufacturing principles for warehouse logistical operations. “We all know what it’s like to lose your keys and have to search around the house for them. Imagine the inefficiencies and frustrations involved when forklift operators waste time searching around the warehouse. It’s not unusual for our analysis to determine, for example, that two-and-a-half minutes are wasted during the average retrieval cycle, and that figure is multiplied by hundreds or thousands of cycles per week.”
On the opposite end of the efficiency spectrum, newly constructed high-tech warehouses are designed from the bottom up to automate most or all operations. Elaborate cranes, conveyor belts and robotic systems are coordinated to perform putaway and retrieval operations with little or no human intervention. These operations are highly efficient, but the high capital requirements make them cost-prohibitive for most types of warehouse operation.
The more practical and affordable solution is to empower operators by installing a computer on each forklift, making the location of items and empty storage space immediately visible.
Rugged PCs with touch-screen user interfaces can connect to a warehouse management system (WMS) via a wireless local area network. Some sophisticated systems can indicate the locations from which to pick, replenish and putaway, as well as the optimal sequence of these events.
At the 900,000-sq. ft. distribution center for City Furniture, in Tamarac, Florida, all 35 forklifts are equipped with such computers. “Our forklift operators perform at maximum efficiency because they always have real-time access to the information they need,” says Chad Simpson, City Furniture’s technical support supervisor. “An optimized, step-by-step routing scheme is displayed on their screens to guide them to their destination.”
A WMS is typically interfaced with an existing enterprise resource planning (ERP) system or accounting package. This provides an integrated method of automatically tracking inventory, processing orders and handling returns. In addition, a WMS is frequently implemented with automatic data collection using barcode scanners and the increasingly common radio frequency identification (RFID) tags, now required by major retailers such as Wal-Mart.
“The implementation of a WMS along with automated data collection will likely give you increases in accuracy, reductions in labor costs and a greater ability to service the customer by reducing cycle times,” notes Dave Piasecki of Inventory Operations Consulting LLC, author of Inventory Accuracy: People, Processes, & Technology (Ops Publishing, 2003). For some warehouse and distribution center operations, more efficient processes and better utilization of storage space will also result in inventory reduction and increased storage capacity.
These benefits directly address the elimination of waste, which is the core of lean manufacturing philosophy. Equipping forklifts with computers integrated with a WMS immediately reduces the waste involved in transportation, human motion and waiting.
Shorter, more direct routing reduces travel time and, therefore, the demand for forklifts and the associated labor, capital, maintenance and energy costs. Travel time is reduced because operators always know their precise destination. After a putaway, a WMS can direct a forklift to do a pick at the closest available location.
With better information about the location of items, human motion is also reduced, because operators no longer need to get on and off the forklift to check three or four labels before finding the location of the intended item.
Japanese industrial engineer Shigeo Shingo explained that a bolt with 15 threads on it can’t be tightened until the last turn, and therefore the other 14 turns are wasted. This observation led to the development of fasteners, tools and methods designed for single-motion installation.
Similarly, forklift operators provide a necessary function only when he or she selects the correct item. Any searching activity leading up to the locating and retrieval of that item represents a waste of time and resources—waste that should be eliminated. Thom Raddatz, the warehousing manager at Seaquist Closures of Mukwonago, Wisconsin, estimates that he would need 50 percent more forklifts if he didn’t equip them with a computer tied to their SAP software system.
More efficient warehouse operations also means better response times (less waiting) for dependent production processes and for customer fulfillment. “Other departments at Seaquist Closures can request materials from a desktop PC, and that request immediately appears on the forklift operator’s monitor,” says Raddatz. “When loading a truck for delivery to a customer, the forklift operator types in the PRO number (pick up record) and confirms that all items are loaded. Immediately, the billing process is initiated. If the customer calls a minute later, our customer service representatives can respond with up-to-date details about the shipment.”
Nicholas Hanke, the MIS systems administrator at Minnesota Corrugated Box Inc. of Albert Lea, Minnesota, says that automated forklift operations using onboard computers help improve customer relations. “We have a number of customers that maintain inventory in our warehouse. By automating the record-keeping of our forklift operations, our customers can use a Web interface to instantly check their own inventory levels.”
Shorter lead time provides better service and reduces inventory and floor space requirements.
The basic principles of lean manufacturing date back at least to the 18th century, when Benjamin Franklin published his aphorism “Time is money.” In Poor Richard’s Almanack, he wrote about the direct cost and the opportunity cost of wasting time: “He that idly loses 5 shillings worth of time, loses 5 shillings, and might as prudently throw 5 shillings into the river. He that loses 5 shillings not only loses that sum, but all the other advantages that might be made by turning it in dealing, which, by the time a young man becomes old, amounts to a comfortable bag of money.”
Industrial engineer Shigeo Shingo is known for poka yoke, his concept of mistake-proofing that he developed as part of the Toyota Production System. One such behavior-shaping constraint is the design of the top-right corner of 3.5-in.floppy computer disks to ensure that the disk can’t be inadvertently inserted upside-down. Another poka yoke is the inability to remove a car key if the automatic transmission isn’t first put in the park position, thereby preventing unsafe parking.
Onboard computers connected to a WMS are poka yoke devices that dramatically reduce the incidence of retrieving and shipping the wrong item by matching the item with information on the item’s location. The use of automated data collection (barcodes and RFID) virtually eliminates such errors and significantly improves inventory accuracy.
Additionally, operators are happy to give up the tedious and error-prone task of searching for items and manually checking and recording ID numbers. Onboard computers, with barcode and RFID readers, remove guesswork and force better habits, allowing workers to achieve higher productivity. Chad Simpson of City Furniture says, “Some of our forklift operators do not use computers at home, but they really enjoy having state-of-the-art technology at work.”
A WMS also reduces defects by reducing the wasteful disposal of spoiled perishable goods. The WMS can automatically direct the operator to retrieve the particular units with the shortest remaining shelf-life in a first-in, first-out (FIFO) arrangement, without the operator having to manually check and compare dates. Some companies shipping perishable goods will use FIFO for closer destinations and last-in, first-out (LIFO) to overseas destinations with longer in-transit times.
For these reasons, onboard forklift computers integrated with a WMS provide a good return on investment for many traditional warehouse and distribution center operations. “These warehouse logistical systems produce results, especially in the area of labor savings, which are easily quantifiable and go directly to a company’s bottom line,” says Giuliano. “Giving forklift operators access to useful information technology produces success stories for lean management and Six Sigma programs, but you do not have to have faith in any particular management theory to recognize the excellent payback that can be achieved.”