IT for Streamlined Foodservice Distribution

Foodservice distributors have been reluctant to invest in technology that would help streamline the supply chain.

IT for Streamlined Foodservice Distribution
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Ten years ago, the Efficient Foodservice Response initiative laid out a vision of a collaborative supply chain that would allow members of the foodservice industry to move inventory faster, more efficiently and more profitably from the point of production all the way to Ten en years ago, the Efficient Foodservice Response initiative laid out a vision of a collaborative supply chain that would allow members of the foodservice industry to move inventory faster, more efficiently and more profitably from the point of production all the way to point of demand.
This would largely be accomplished by the application of advanced IT technology together with newly reengineered, more integrated business processes.
While most of that vision has yet to be fulfilled, the EFR initiative has provided guideposts for pioneering companies that want to dramatically optimize their operations.
"The whole concept of the EFR initiative was very sound. There is a lot of waste in the supply chain, and a lot of paper that could be eliminated and replaced by smoother, more truncated electronic processes," comments Sam Flannery, BFC Associates, West Chicago, IL, which provides the Dakota Series warehouse management system.
All the technologies required to accomplish the EFR vision have been available for some time, he adds. What's still lacking is will-power and the willingness on the part of enough companies to engage in real cooperation with trading partners.
Another challenge for most foodservice distributors, especially small-to-medium-size operations, is dollars.
"For the vast majority of companies in the $20 million annual sales range, mostly family businesses, the decision between granting a year-end bonus or investing in productivity is difficult. When you get to the larger organizations, you find more people who do the cost-benefit analysis and more willingness to invest in technology rather than view it as a cost," says Tim Fortier, national vice president of sales for enterprise systems provider AFS Technologies, Phoenix.
The good news is that with the ongoing expansion of computing power, new kinds of data communication devices and software that provides more capabilities and flexibility per dollar than ever before, the cost of the supporting technology is becoming less of an issue.
"Warehouse management systems are available today with very affordable pay backs of six months to a year, so that even the little guy has the ability to compete on an operational level against the big guys. Maybe a small company can't buy as well as SYSCO, but it can become an extremely accurate and low cost handler of food products," Flannery points out.
The need to invest in productivity will only become more acute over the next few years, as more companies acquire new technology, and those who have already implemented advanced systems begin to take full advantage of their capabilities.
"There's a lot of pressure on distributors today to develop a more optimized, more streamlined supply chain, to work with as little inventory as possible so they're not saddled with that large investment. There's also interest in creating the sorts of collaborative relationships with suppliers that facilitate leaner, more efficient logistics," says Craig Schertler, segment manager, wholesale distribution, for SAP America, Newtown Square, PA.
When warehouse systems are available, for example, that can enable virtually any size company to improve its selection error rate from one in 1,000 to one in 12,000, it makes for quantum differences in the playing field.
"For a company that ships 36,000 cases a night, one in 1,000 errors may not sound like much, but it means 36 problems that have to be tracked down and dealt with the next day, with all the time and expense that entails," points out Lyle Castle, president of BFC. In contrast, users of its WMS software that have decreased their average selection error rates to just one in 12,000 pieces are faced with just three headaches to resolve on a typical day.
Another factor adding pressure to the drive for optimization is a trend toward further consolidation in foodservice distribution, particularly at the lower end of the spectrum.
"When considering acquisitions, or even in terms of organic growth—expanding into new territories, for example, companies need to be able to analyze and understand whether they will actually be making operational improvements as a result," says Julian Archer of Lawson Software, a St. Paul, MN-based provider of enterprise systems and other software.
"One of the biggest barriers to growth is a lack of transparent data," he points out. "If you're looking at taking on a new customer, do you have the ability to quickly and efficiently reexamine your supply chain to see what the impact will be? If you're adding territory far from an existing regional DC to handle the account, do you know if you'll actually make money on that customer, or how you'll need to service them to do so?
"It's the agility with which management can react to changing circumstances and new opportunities that makes a key difference in success," Archer adds. "This ability, in a very short space of time, to make informed management decisions, to be agile and open so one can take advantage of the next good deal—it's all a question of how transparent you can make your data, and how you can draw information out of your systems so that you're really gaining knowledge, not just spewing out data."
For many distributors looking to optimize, the first major hurdle is installation of the basic supporting systems on which the rest of the IT structure can stand, says Fortier of AFS.
"Making sure you have a strong enterprise planning system in place is really a critical first step." He notes that companies still running old software—and especially homegrown systems—can add a lot of peripheral products to handle more advanced applications, but inevitably encounter problems with integration.
On the other hand, if a distributor implements a core set of enterprise applications, which can be extended later through the same vendor, says Fortier, "you eliminate issues with integration, support and the difficulty of managing lots of different moving parts."
With 50 percent to 60 percent of a foodservice distributor's costs concentrated in the back end, the DC is the logical place to launch the drive for supply chain optimization.
"The warehouse is where it's at," says SAP's Schertler. "That's where your big investments lie in labor and inventory. If you can get a good handle on what you have within your own four walls, and start processing it more efficiently—with fewer touches, fewer errors—then you lay the foundation for all of the more advanced supply chain processes, the exciting things like collaborative forecasting, automated replenishment, crossdocking and the rest."
Many enterprise software companies include as part of their suites sophisticated warehouse management modules with enough built-in intelligence and flexibility to provide all the data and analytical capabilities a company needs, at prices even small ones can afford.
The next hurdle is acquiring the radio frequency-based, real-time interface technology that allows a warehouse management system to direct and track every inventory-related process as it happens. This is one place where smaller companies are at a disadvantage, as there's no way around the hardware costs in equipping a warehouse staff with the hand-held or forklift-mounted smart terminals necessary for this next phase of warehouse automation.
Although hand-held scanners keep expanding their functionality, there hasn't been a tremendous decrease in price over the last several years. There are, however, some new options that can help hold down costs somewhat.
Mark Skoog, vice president of marketing at AFS Technologies, points out that it recently introduced a "second generation" RF system that uses pocket PCs operating on Windows CE, which are less expansive and easier to use than its old DOS-based units.
Another alternative cited by many in the industry now as offering huge promise for foodservice distributors in particular is voice technology. Although not necessarily a cost-saver at the front end, users and providers of voice-interface warehouse automation systems say the technology, whether combined with scanning capabilities, or on its own, can provide a host of benefits in warehouse accuracy and productivity, beyond those afforded by traditional, exclusively scan-based systems. (see sidebar)
However outfitted, a good WMS implementation should allow a distributor to track precisely where every unit of inventory is at any time, anywhere in its system, as well as each time it has been moved, from where to where, and who moved it. A very good system may also provide visibility into inventory that's still upstream in the pipeline, at the supplier's DC or in transit.
Once inventory can be handled in this kind of highly disciplined fashion, SAP's Schertler points out, distributors can then start to implement more advanced purchasing solutions, such as automated forecasting and replenishment systems.
These applications can save time by automating the bulk of the buying process, but they also help companies manage inventory much more efficiently, helping them more effectively build and decrease inventory levels for seasonal business, for example. Moreover, they lay the groundwork for future, more advanced activities, such as collaborative forecasting with vendors, which can do even more to help smooth out the bumps and wrinkles in the supply chain.
Other key capabilities afforded by a solid enterprise system include analytics that help companies be more proactive, instead of waiting for events to happen, Schertler adds.
"If an expected order is late from a supplier, for example, the system monitors the situation and alerts users so they can take action before it becomes a critical issue" he explains.
Efficiencies In Picking, Shipping Offer Biggest ROI
In applying warehouse automation to improve the quality and productivity of operations, the real bang for the buck shows up in picking and shipping, say the experts.
"That's where the operation interfaces directly with the customer. A good RF system can dramatically reduce pick errors and insure not only that the correct product is picked, but also the item with the right date code for proper rotation," says Tim Fortier, national vice president of sales at AFS Technologies, Phoenix.
It's on the outbound side where the majority of the ROI is typically derived, along with abilities to provide better customer service, he points out.
While scan-based systems provide big benefits, they also pose challenges for foodservice distributors, particularly in environments like the cooler and freezer where equipment and barcoded labels can pose problems.
A growing number of foodservice distributors are now investing in voice-based RF systems, which translate computer code into human speech to direct selectors and loaders, as well as other warehouse personnel, through their tasks. The systems also allow workers to input data verbally through their headsets, to confirm picks, for example, or record catch weights.
This entirely hands-free form of warehouse automation is especially suited to foodservice warehouses, several system vendors note, because in food service the vast majority of picking and loading is performed by hand. In receiving and put-away, on the other hand, where full pallets are involved, scanning often works as well or better.
Voice-directed systems can yield better throughput than scan-based picking, Jason Wilburn of Lucas Systems Inc., provider of a voice-based warehouse system based in Sewickley, PA, notes.
They also are as good if not better at promoting accuracy, since they are both hands- and eyes-free.
One of Lucas' customers says the voice-directed system it uses "frees them up to concentrate on their productivity." He compares working with the system to "driving without a map, and having someone give you interactive directions as you go."
Although they can't attribute it directly, Wilburn says many customers also report a decrease in accidents after installing the system. Instead of focusing on their pick sheets or labels, the selectors' attention is free to concentrate on what's happening in the warehouse around them as they drive their pallet jacks and listen to the system verbally direct them to each location and product.
Some distributors have even reported reductions in worker turnover that they believe are related, as a result of the comfort level workers quickly develop with the highly user-friendly system. Decreased training time for new hires is another plus.
At least some voice systems offer multiple operating modes, providing more detailed, step-by-step instructions and prompts to those who need them, like new trainees, and a speedier expert mode that allows more experienced workers to concentrate on upping their productivity as well as their accuracy.
But beyond these basic efficiencies, voice-based systems also enable companies to extend warehouse automation into applications where scanning simply isn't a viable option.
"Voice is truly a tool that has no limits," Flannery comments. "Hands-free picking is just the tip of the iceberg. Locating things is just the beginning."
All kinds of item- and customer-specific instructions can easily be programmed into the voice-based system as well. If a customer has very specific instructions about how they want their product—if they want green bananas, for example—the system can provide that instruction to the selector verbally as he picks the item.
"It's a tool that really for the first time allows a warehouse to become totally proactive," says Sam Flannery of BFC Associates.
Customers who've combined voice- and scan-based systems to cover picking, loading, and receiving, Wilburn adds, are reporting reductions on the order of 60 percent to 70 percent in error rates, alongside productivity gains of 5 percent to 10 percent, as well as reductions in the clerical/administrative side.—C.C.
author: By Carol Casper




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