Preparing your operation for 2009
This year we have seen the election of a new US president, the recession of a global economy, and the come back of Take That! But how will the significant events of 2008 affect the logistics and materials handling industry in 2009, and can Logistics Directors, Warehouse Managers and Operation Managers do anything to better prepare themselves for 2009. John Barton, Managing Director of Keymas, with 21 years of industry experience with successful systems in Argos, Amazon and British Airways, talks us through the key issues and considerations for next year.
Question: What have you seen in 2008 that has significantly affected the materials handling and logistics industry?
Barton: I believe the key factor throughout the industry and possibly through all industries that has become absolutely essential is the necessity to adapt. Never before have we seen the industry shift and change at the rate it does now, through technological advancements, changing consumer demand and of course shifting global economy, there has never been a more important time to be able to adapt to the forces surrounding the warehouse.
Question: And how has this affected companies you know and work with?
Barton: Obviously the global economy has really put pressure on businesses to reduce overheads and running costs, particularly looking at cost per item. Everything we buy has a cost. This is made up from three crucial elements, the cost of the actual item, the storing, picking and handling cost, and the distribution or delivery cost. This year we have really felt the true force of external factors affecting prices. And this is why companies must focus on storage, picking and handling costs, as these are the only costs that companies have total control over. We have seen a huge rise in item production costs, especially as China and other countries also struggle with the pressure of the global economy. Distribution costs have obviously been affected by the increase in transport and fuel costs. And it is those companies we have worked with who have focused on the storage, picking and handling of their product that has given them the competitive advantage and allowed them to reduce the cost per item, keeping the selling price low and therefore allowing them to survive and even grow in the current climate.
Question: How have some of these companies you’ve mentioned altered their storage, picking and handling process to give them the competitive advantage?
Barton: Well, we’re working with one company at the moment that has just completed a project to semi-automate their warehouse; they predict already, a cost saving of around 40-50%. Another company we are working with forecast a massive saving of around £3.5 million, simply by cutting their third party off site storage. Cutting out all the costs associated with the running and operation of offsite storage, including transport costs between the two warehouses. It will require an investment of around £1 million, but by cutting the costs the company will in the not too distant future be able to seriously cut their cost per item simply by reducing the storage costs.
Question: How do you see this year’s events affecting 2009?
Barton: I see an even greater pressure on companies to compete as we see the play-out of the world wide economic issues. There will be more pressure for companies to reduce overheads, particularly employment costs. I think there will also be an increase and greater pressure for next day delivery. Customers don’t want to store products anymore because of the costs involved, therefore the pressure is on for quicker and more efficient distribution and more flexible and effective materials handling.
Question: What do you think Operation Managers, Logistics Directors, and Warehouse Managers can do to aid their operation next year?
Barton: I think it is down to Operations Managers, Warehouse Managers, Logistics Directors and others involved directly in the storage, picking and handling process to champion a change. To think outside the box, invest in order to save. There is sometimes great resistance to change. Just because things have always been done a certain way in the warehouse, we sometimes don’t look for alternative, better ways. I think these guys have the responsibility to make the warehouse as efficient as possible, sometimes this means including automated or semi automated processes other times its simply improving their data capture to be able to monitor processes and personnel in the warehouse. Whatever it is, it requires someone to ask the questions, Warehouse Managers, Operations Directors have the best opportunity to ask the relevant questions, and hopefully get the right answers for their business.
Question: Finally, could you outline some of the recommendations you would make for next year?
Barton: Analyse storage operations – so much cost is held up in the way we store things, going through a process of analysing the way we store can reveal very interesting opportunities.
Walk your picking process – slowly analyse and look into your picking process, sometimes operators are working at 20-30% efficiency, there is no way you can compete in the modern business environment with this level of efficiency.
Don’t be afraid to bring someone in from outside – we all know it’s harder to see the plank in our own eye than the speck in someone else’s. Someone outside our operation can see the floors in our processes and hopefully point us in the right direction, don’t be afraid to enlist a consultant or expect in this field.
Finally, look for opportunities for greater return on investment – it can be very tempting to hide away and simply hope the economic climate won’t affect our process. The fact is, it will. The only factor we can work with is our response. Many companies are slimming down, cutting unnecessary costs in order to ride out or even grow in some of the opportunities of the current world market. It is these companies that will survive and come out on top. Your warehouse process can play a huge part in this survival.
A bit about the interviewee – John Barton began Keymas Ltd in the 80s when automated systems were beginning to be used all over the world. Keymas Ltd has worked with companies such as Argos, Amazon and Camelot to develop and improve their storage, picking and handling processes. He also works as a consultant working with companies to improve their logistics and materials handling competitiveness.