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First Look of OPStakes – The Annual Magazine of Opsession, Operations Mgmt Club of MDI Gurgaon

First Look of OPStakes - The Annual Magazine of Opsession, Operations Mgmt Club of MDI Gurgaon

First Look of OPStakes – The Annual Magazine of Opsession

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Collaborative Physical Logistics

This new area is defined as the sharing of physical infrastructure such as warehouses and transport systems in order to simplify the overall physical footprint, and to consolidate flows to improve service and asset utilization. Sharing and collaboration can take place both between and across various nodes of competitive supply chains and it can apply to existing infrastructure or to newly built collaborative infrastructure.

1. Shared transport: A collaborative approach between manufacturers, between retailers, and possibly a third-party logistics provider to share transport; it involves sharing load planning and truck capacity. Carrefour, Nestle waters, P&G, Coca Cola and CHEP are participants in a program to share road transportation in Italy. This initiative has resulted in a reduction of empty kilometres by 18%. The Nestle waters project reduced empty kilometres by 45%. The Coca-Cola project has resulted in a 25% reduction. In total, this initial pilot is saving 65 tons of CO2 emissions per year, with a potential of saving 3,000 metric tons over the next 3 years.

2. Shared physical infrastructures: Manufacturers, retailers and possibly third-party logistics providers collaborate to share warehouses and distribution centre for activities such as storing goods or cross-docking.

3. Shared information: Sharing information to manage flows among manufacturers, retailers and third-party logistics providers in order to combine deliveries from more than one source towards multiple stores via a warehouse or distribution centre.

Physical Internet: Efficient Sustainable Logistics

Current logistics model will be replaced by the Physical Internet. In logistics, the Physical Internet is an open global logistics system founded on physical, digital, and operational interconnectivity, through encapsulation, interfaces and protocols. The Physical Internet Initiative’s manifesto is “Transforming the way physical objects are handled, moved, stored, realized, supplied and used, aiming towards global logistics efficiency and sustainability.”

It attempts to achieve this by applying concepts from internet data transfer to real-world shipping processes. The project found that the expected annual benefits of the Physical Internet, if adopted in the U.S., would be: up-to $100 billion savings in cost, a reduction in CO2 emissions of over 200 Tons, and a reduction in driver turnover of up to 75%.

Automated Case Picking: The next big thing in warehouse automation

After setting a firm base in Europe, Automated case picking is gaining ground in US where the number of successful implementations is growing at a rapid pace.

It all starts with Order Picking, which is a technique by which a small number of goods are extracted from the warehousing system to satisfy a number of independent customer orders. Productivity in order picking is measured by the pick rate.

The three types of picking operations are case pick; piece pick and pallet pick. Case pick operations measure no of cases per hour and no of line items per hour.

In Automated case picking, instead of individual storage, cases are inspected and loaded onto large trays, each holding multiple cases which greatly reduce crane movements and therefore the number of automated storage and retrieval systems required to handle the workload. They are automatically stored in a racking structure. The Automated Case Picker retrieves the individual cases from the trays in the sequence required to fulfill orders. The picked cases are conveyed to a robotic palletizing system, which loads the products automatically as mixed loads on either pallets or roll cages.

Automated case picking enables fully automated order picking of a wide range of products and includes a set of technologies aiming at automation of the traditional case picking process. The food and beverage industries have been the major benefactors. Moreover, ACP solutions are increasingly utilized by sectors like retail and soft goods as it answers the challenges of retail distribution.

Advantages of automated case picking over traditional case picking:

  • 40% lower costs compared to traditional picking methods
  • Lesser requirement of floor space and shorter lead time
  • Minimal ergonomic and safety risks and suitable for most types of packaging including shrink wrapped products
  • Optimized replenishment strategies leading to improved service level
  • 100% accuracy due to fully automated process and store friendly delivery

Barriers to automated case picking: It is difficult for managers to adopt this level of automation with drastically reduced labor counts. The second point of concern is the flexibility factor. The flexibility to handle different carton sizes, weights and operational changes is less. However, some approaches have targeted the problem and increased the flexibility to quite an extent.

The reasons for Europe adopting ACP solutions much before US are the high labor and land costs which make automation easier to justify. SSI Schaefer USA, one of the world’s largest total solutions provider have adopted the ACP methodology and assists in optimizing distribution logistics in the food industry, one of the sectors of primary focus of Automated case picking.

Merchandise Management for Omni-Channel Commerce

Omni-channel commerce/retailing is the evolved form of multi-channel retailing. In multi-channel retailing, companies sell through several sales channels but each channel – brick & mortar, catalogue, e-commerce, contact centre, mobile – is independent of the others. In Omni-channel retailing, a customer can use more than one sales channel to shop from a retailer for any given transaction. They can buy online and pick up in-store for example, or use mobile in-store to research or make a purchase, or they can buy in-store and initiate a return online.

An example of this is Lowes Home Improvement centres, an American chain of retail home improvement and appliance stores, which shows progress toward achieving a 360-degree view of its customers’ purchases across all channels. Lowes is able to produce a summary of its customer’s purchases – in-store, online, etc. – in one document, as long as the purchases are made using the ‘My Lowe’s loyalty program’. This makes it possible for them to:

Show the customers that they are a valued customer by helping them track their purchases and offering some special services (like easier returns).

Study what they buy and how they buy it so they can design additional offers that fit customers’ needs.

Symphony EYC, recently announced Symphony EYC Merchandise Management and Store Operations for Omni-channel commerce. It is designed to give retailers a 360-degree view of their products and inventory across all shopping channels, and today’s complex shopping environment where customers can browse, buy and collect anytime, anywhere.

With multi-channel master data and merchandise operations at its core, Symphony EYC Merchandise Management presents a real-time view of products, prices, locations, vendors and customers in order to present a consistent and seamless offer across channels. Quick and efficient order fulfillment and inventory management ensures retailers achieve profitability across all operational channels. As a result, retailers can share product information across channels for managing:

     One-to-many purchasing, pricing, promotions and order fulfilment;

 One-to-many relationships across merchandise, suppliers, network and logistics;

 Global promises;

 Imports management and inventory valuation;

 Assortments, deals and customer orders;

 Modular offers with flexible phasing;

 Speed of delivery;

 Support for all retail, wholesale and franchise complex business models.

In order to keep up with current and future changes in customer behavior, Omni-channel retailers need to have order management and assortment control across all channels. Symphony EYC Merchandise Management enables retailers to offer their customers the flexibility of shopping where they want with assurance of inventory availability linked to options for pickup, delivery or in-store product availability.

How Close to Reality is Amazon Same Day Delivery?

For the past few years, Amazon has been on a relentless pursuit to reduce the time that it takes to deliver customer sales orders. The company has invested hundreds of millions of dollars into distribution centres positioned close to U.S. major metropolitan markets to enable shipments to be delivered in hours rather than days. Ultimately, time can only tell if this strategy turns out to be a game changer that revolutionized the e-commerce market, as we know it. For the moment, it is interesting to understand how close Amazon is towards achieving their same day delivery goal within the U.S. market.

Now, to answer the question with a reasonable degree of accuracy, we need two importance sources of data:

1) Census information on U.S. population statistics by major metropolitan city

2) Information on Amazon’s existing fulfilment network

We also need to make an assumption about the maximum radius of distance that is appropriate for a same day fulfilment centre. For the purpose of this article we will assume a 100-mile radius as being the maximum distance around the fulfilment centre to realistically achieve same day local delivery service. Why??

1. If a driver can travel down a highway at an average speed of 50mph then 4 hours of time is needed to travel the return distance to/from the trading area perimeter which leaves say 4 hours to perform actual customer deliveries and 2 hours for break time, yard time, etc before a 10-hour work-day is reached

2. The “cost of the last mile” discussion is crucial to the concept of same day delivery. There needs to be a minimum “hit density” on a driver’s route to achieve a low cost per delivery. If the radius of distance gets larger than 100 miles then we spend more time driving and less time delivering which increases the cost per shipment and penalizes the viability of the same day service proposition

According to the 2010 census data for the top 20 cities in the USA, we see that the top 20 cities total nearly 117 Million people, which accounts for 37% of the 2010 USA’s population of 316 Million people.

For each of the top 20 cities, we identify the nearest Amazon fulfilment centre and its approximate distance to the epicentre of the metropolitan area. As an example, the largest US metropolitan population is New York City at 19 Million people. The nearest Amazon fulfilment centre to this megalopolis is 104 miles away, which exceeds the 100-mile maximum radius assumption that we defined earlier on, but we say that Amazon is currently in a position to provide same day service to New York City.

Within the list of top 20 cities, 8 urban centres are identified where Amazon is already within a 100-mile radius as of August 2013 and 12 cities where they are not positioned to provide same day service.

Thus, we might conclude that Amazon, in its present state, has a distribution infrastructure to reach 44.6 Million people or 14.1% of the US population with same day delivery service. In fact the percentage is slightly higher because Amazon also has existing general merchandise fulfilment centres positioned nearby other important cities. These cities total 4.3 Million in population & hence Amazon’s same day reach is currently closer to between 49 – 50 Million people or 15.5% of the population.

In conclusion, a minimum of 12 more fulfilment centres is needed for Amazon to achieve same day delivery of general merchandise to the top 20 cities that account for 37% of the US population. Assuming that the average new fulfilment centre size will be in keeping with the facilities that have been added over the past couple of years (i.e. 1,000,000 sq ft at $110 per sq ft) Amazon will need to add a minimum of 12 Million square feet at a price tag of $1.3 Billion. In reality, the figures will likely be substantially higher as some cities will need more than one facility and the buildings are getting bigger and more expensive over time. Most importantly, this forthcoming spending spree does not even begin to address the distribution infrastructure requirements of Amazon-Fresh since this will require a completely parallel set of distribution facilities that are capable of supporting perishables distribution.

GREEN MANUFACTURING: A NEW REVOLUTION

Sustainability for business perpetuity”

A unique definition assigned to sustainability by Frost and Sullivan Corporation perfectly encapsulates the concept of Green manufacturing. With rapid industrialization and increasing consumption of energy, the stress based on the concept of finding means to reduce the degree of negative environmental impact caused by the company’s manufacturing processes.

The question that comes into picture next is Why Green Manufacturing?

There has been a rising concern in the society for green initiatives primarily because of following reasons. Firstly, Global temperatures have increased by 0.74°C over the past century- the fastest warming observed in the history of earth. This can be attributed primarily to the Greenhouse Gas emissions depleting the ozone layer and increasing UV light penetration. Secondly, the consumption of natural resources to cater to the burgeoning population is rapidly on the rise, while their availability is shrinking. And thirdly, increased industrialization and urbanization have led to significant growth in waste generation and environmental population.

Here are some examples of companies and their Green Manufacturing initiatives:

Nike: While analyzing the waste produced by its footwear division, Nike found that for every pair of shoes produced an additional 3rd shoe could be produced from the materials that were being incinerated or discarded as waste. This insight and the subsequent solution led to positive impacts on the environment and Nike’s bottom line.

Dialight: Dialight offers the UL-listed, CE-compliant DuroSite® LED high-bay and low-bay lighting fixtures. The company’s in-house-developed power supply offers high lumen/W efficiency with efficiencies as high as 107 lumens/W, high power factor, low total harmonic distortion, various input supply options, and high transient surge protection. According to the company, these luminaries are easy to maintain and avoid the need for bulb changes that require permitting, scaffolding to be erected, processes to be shut down, and multiple personnel for safety and supervision.

Metalloid Corp: Metalloid Corp. has introduced Advance 6580, an environmentally friendly green lubricant approved by Nissan Automotive Corp. for stamping cold-rolled steel (unpolished), galvanneal, galvanized, and aluminum (6000 series) substrates. The lubricant is formulated with 100 percent bio-renewable, biodegradable, and bio-sustainable ingredients. It also can be used in progressive die stamping, compound die forming, and cutoff applications. The lubricant contains no petroleum oil and can be welded without post-cleaning. It leaves no residue in heat-treating operations such as annealing and brazing.

A BCG survey of 1560 executives in India reveals the following insights about the reasons driving green manufacturing:

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The same survey also revealed that 92% of companies are engaging themselves in green initiatives in some way. Such trends reveal a positive outlook of the green manufacturing concept and maintain that it is here to stay. The companies are expected to further align their manufacturing processes with green manufacturing concepts in the near future.