One set of figures is not enough to make meaningful predictions against and in reality the future of the sector is still and unknown quantity.  Although some retailers are starting to make money, many are still not with notable names ye to turn a profit.  In part the industry has only itself to blame.  As with so many other cases it has gone for rapid growth on the back of offering lowest prices rather than accepting lower growth but on the basis of offering better service.  And the bit of the service that most influences the customer, but that the e-retailer is rarely in control of, is the delivery.  What most people want is free delivery at a predictable, ideally selectable, time and with plenty of choice at evenings and weekends.  There are very few e-retailers offering this, again preferring the lowest cost delivery option using suppliers that they prefer to keep at arms length to maximise flexibility.

We’ve known from the earliest days of home shopping that the biggest obstacle is the last 50 metres.  Even the catalogue home shopping companies in the pre-internet days knew this which is why many of them established large networks of self-employed local agents who had a relationship with their customers and knew what delivery times suited them.  So whilst the distribution centres and IT systems have become increasingly sophisticated the last 50m has hardly changed.  A further demonstration of this is the popularity of in-store collection.  Many shoppers find it more convenient to do this than hang around at home, possibly having to take a day off work, waiting for a delivery to arrive.

Of course there is an exception - the online grocery retailers.  Here shoppers can choose the day and time when they want their order delivered usually to within a two hour window.  The reason they can do this is that they all use their own fleets of vans managed using their own internal IT systems which are therefore fully integrated.  A far cry from the rest of the sector.

Other options have been tried or at least suggested :-

• the use of petrol stations and similar locations as drop and collect points - the company DX has recently announced developments in this area - but its only really practical for smaller non-perishable items
• drop and lock boxes outside people’s homes - this has never really taken off
• delivery to work addresses - some employers are happy for this to happen but other are not and its not going to be suitable or larger items.

None of these though are good alternatives to what customers would ideally like.

The real answer lies in integrated IT solutions.  Solutions that will allow customers to book delivery slots at the time of placing the order.   This requires delivery companies to develop systems that will enable simple integration with their customers, the e-retailers, and to develop more sophisticated planning systems to cope.

All that is then required is the offer of free delivery.

Of course losing money now as you build market share may be the right thing to do but you need to be sure that long term profit is there.  You probably also need to know at what level of turnover the number turn black. And even if you don’t its certain your investors will be taking keen interest.

This sort of financial modelling is usually undertaken by the Finance team but, particularly with Internet shopping, the key to accurate profit forecasting lies in understanding the supply chain costs and those are best understood by Supply Chain professionals.

As businesses grow, throughput and storage requirements increase and additional capacity has to be procured.  There are always different ways of doing this.  Some will be easy to manage, others very difficult.  For example if you think your storage requirement will exceed capacity it is always possible to find off site storage and usually possible to find stock to put into it without comprising service.  On the other hand if your picking capacity is likely to be exceeded you cannot just move some of this to another site without incurring additional shipping costs or double handling or order consolidation costs.  Or you may have to consider moving to a two or more site fulfilment strategy.  So an important aspect of the planning processes is to understand when capacity limits are likely to be broken and what actions are required to develop additional capacity.  The next issue is that you can rarely turn that additional; capacity on a short notice.  There are lead times.  If a new building is required or you are considering some automation for example then this could be more than a year.  A period during which you will be incurring costs without the benefit of the additional capacity it brings.  This is often overlooked.

Next you need to be aware how sensitive your business is to transport and delivery costs.  In a few cases the in-bound transport will be the main consideration and if much of your product is imported then proximity to the ports of entry may be significant.  In most cases through the out-bound transport will be much more significant.

If you are typically shipping small parcels a more centralised solution located close to the parcel courier hubs may be best but if you deal in bulkier items or have particularly tight service levels you may be better going for a more regional model where the additional stock holding cost of multiple sites is more than offset by the benefit of being closer to your customers.  These are all factors that need to be considered in a profit forecasting model.

And there are other factors to consider.  As volumes grow you should be able to achieve economies of scale.  Operational expertise is needed to understand realistically what these are likely to be.  It may be that you have opportunities to balance out peaks and troughs by adding product ranges that are counter cyclical to the core range.  It may be that as volumes grow you can do more direct sourcing that may increase your storage requirement but will reap big rewards in reduced purchase costs.  Equally a supply chain view will need to ensure that such savings are realistic and not offset by other costs.

These are just a few of the factors to take into account if you are to realistically model your future profitability.  Of course the only predictable thing about the future is that it is unpredictable so your model needs to be reviewed regularly and capable of having fresh data loaded without having to start again.  If you would like assistance in building such a model then THE LOGISTICS BUSINESS can help.

Who knows? Maybe a supply chain modelling tool will help to bring forward that day when the red numbers turn black and allow you to sit back and relax …. well until the next day anyway.

No so long ago, if you wanted to make use of the features and functionality offered by a software program or application there was only one option. You had to buy one or more licences for the software and install it on the PC or laptop of everyone who wanted access to it. This meant that someone on-site in the organisation needed to be at least capable of installing software and understanding the issues that might occur. It might also mean paying for several licences if the software was wanted by several users. To allow web access to your system things get a lot more complicated, as a server and broadband access was required.

For the smaller system the Zone Manager package makes life as easy as possible. The single licence means that however many PCs or laptops are used the cost remains the same. The included installation, training and initial set-up means that users need only basic computer skills.  However there is still the need for backups and action needs to taken if the main user moves site and takes his laptop with him.

For larger organisations there are other issues. Many companies restrict the installation of software on the standard build PCs and laptops and there are many security checks and compliance issues before new software is accepted within the company intranet. Often security and network management is outsourced so that there is a charge for any change made. The database must be managed and brought into the company’s backup regime. Bringing Zone Manager into larger organisations has meant collaboration with IT departments and compliance boards which delays the process and often adds cost.

The hosted service option offers significant benefits to both smaller and larger sites and organisations.  Whilst there will always be a place for the 1-3 laptop setup with perhaps one or two Display Systems, the hosted option opens up new opportunities for the small to medium site and brings many benefits to larger organisations.

For medium sized sites it is now possible to contemplate offering full web-based access to Trade Contractors, where previously the need for good broadband access and an on-site web server would have made this impossible.  Zone Manager including its web site can be up and running very quickly, backups are all taken care of and there is no need to worry what happens when a laptop fails or is ‘lost’.

For the large organisation the issues of security and compliance are also dealt with.  Zone Manager is not running inside the corporate intranet and so IT is no longer concerned with the detail of how it works or what it does.  Through the use of tunnelling technology it is often unnecessary to even change firewall settings.  As long as the Zone Manager site is accessible then the full system can be accessed through the standard browser (IE7 or above).

The hosted service is available on a monthly basis.  It is possible to have a web-based operation up and running within days making it viable and cost effective to have a full Zone Manager system, even for short term projects.

For further information please call us on 01527 889060 or email info@logistics.co.uk

THE LOGISTICS BUSINESS has been developing supply chain models for almost 20 years and we think we know a thing or two about it.  And one of the most important lessons we have learned is not to make the models too complicated.  They have to be easily understood by those who will make use of the output and it has to be possible to apply practical considerations and experience where the validity of the assumptions is uncertain.  What we have done is to develop a suite of modelling tools which are linked through a common database and which can be used together or independently.  The key elements are geography, network, transport, labour and cost, with further elements covering distribution centre operations. Together they can build a full picture of the whole supply chain and logistics activities with more or less emphasis on any one element, depending on data availability and the modelling objectives.  Because the elements are separate but linked, it is much easier to see the impact of any assumptions and to consider the practical implications of these.  Modelling in this way is far more cost effective than the use of some of the expensive, well known modelling tools and, what is more, it is easier to offer the user access to the models for further analysis as the business changes.

Our success has come from modelling to an appropriate level of complexity, but always balancing the output of the model with practical considerations, based on operational experience.

Many of the principles of storage and stock holding and the ways of managing the associated processes were developed in manufacturing industries. This sector was at the forefront of developing new cost effective methods of handling in the early days of logistics.

During the last twenty years far more use has been made of logistics consultancy services by retailers.  Does this mean that all manufacturers have their logistics sorted out and operating efficiency and at the lowest cost?  In fact I would suggest that the retailers are leading the way and the manufacturers are having to respond.  Does this mean that the changes being driven through are for the good of all sectors of industry?

Is what is good for one sector good for another or indeed good for all?  A consultant should get to see many sectors in the course of his career and can bring this wide experience into play on each new project.  This wide view must, of course, be focussed by the consultant to address the problem, after all he has been engaged by the client to look at and provide a solution to that particular issue.  Sometimes, however the wider view can provide a solution to that particular issue.  Sometimes, however the wider view can provide a new insight to the original problem.  In this situation the consultant can provide a different perspective.  He can bring experience of best practice  in one industry and compare with the ways of working in another.  Sometimes the concepts and ideas that a consultant deals with all the time can be applied to a completely new field or industry.

In that case the principles applied by the consultant will follow the normal procedure of understanding the current situation, by analysis of process and data.  This is then followed by addressing the solution to the problem by introducing a new process or providing suggestions for delivery of services. The lessons learnt in this situation can then be applied in other new situations or provide valuable new experience in approaching problems in more familiar industries.

Another aspect of bringing together a wide range of the knowledge of logistics consultancy can occur in multi discipline projects.  Good examples are of modern fast track projects are those involving the development of new distribution facilities.  In these projects a wide range of professionals come together to deliver a complex project in a short time.  Many of the disciplines do normally interact and so someone who understands the sometimes conflicting requirements of the team members such as civil engineers and client IT departments, can be a valuable member of the team.

From these examples it can be seen that logistics consultancy covers a wide range of activities and is well placed to be a pivotal service to clients in many industries and sectors.

THE LOGISTICS BUSINESS, a leading specialist supply chain and logistics consultancy, has experience in planning and developing supply chain, distribution and warehousing operations throughout the world. From supply chain and distribution strategy, to development of distribution operations, warehouse design and layout, as well as manufacturing logistics and IT systems design, its clients include many blue chip companies.

We have also worked on government initiatives on sustainable transport and waste minimisation.For further information please call:Helen Morris, THE LOGISTICS BUSINESS on +44(0)1527 889 060, email helen.morris@logistics.co.uk

Read THE LOGISTICS BUSINESS white paper on this subject…. construction-industry-logistics.pdf

There will be renewed interest in productivity improvements within warehouse operations, but companies will still be reluctant to release large capital projects in automation or similar.

THE LOGISTICS BUSINESS, a leading specialist supply chain and logistics consultancy, has experience in planning and developing supply chain, distribution and warehousing operations throughout the world. From supply chain and distribution strategy, to development of distribution operations, warehouse design and layout, as well as manufacturing logistics and IT systems design, its clients include many blue chip companies.

We have also worked on government initiatives on sustainable transport and waste minimisation.For further information please call:Helen Morris, THE LOGISTICS BUSINESS on +44(0)1527 889 060, email helen.morris@logistics.co.uk

THE LOGISTICS BUSINESS, a leading specialist supply chain and logistics consultancy, has experience in planning and developing supply chain, distribution and warehousing operations throughout the world. From supply chain and distribution strategy, to development of distribution operations, warehouse design and layout, as well as manufacturing logistics and IT systems design, its clients include many blue chip companies.

We have also worked on government initiatives on sustainable transport and waste minimisation.For further information please call:Helen Morris, THE LOGISTICS BUSINESS on +44(0)1527 889 060, email helen.morris@logistics.co.uk

Designing a warehouse has more parallels with cooking without a recipe.  To produce a good warehouse design a detailed knowledge is necessary of the requirements, the component parts and how they fit together. Whilst the design process is partly scientific with the data collection and analysis there are also those far more subjective issues such as the culture of the business and the ability to cope with complexity.

This is not to say that warehouse design is a black art and can’t be defined in a process, far from it and this article addresses this point.  There is however a point in all designs where the designer is faced with the blank sheet of paper (or screen) and has to start putting lines on it.  For every line drawn more questions are raised :-

• is the area large enough;
• what about peak periods;
• what about personnel and truck access;
• is the flow of goods logical.

This is the part of the process that can be most frustrating and most satisfying depending on the amount of preparation work undertaken up to this stage.  If every choice of how large to make an area or where to put it in relation to another answers one question but raises several others this is a clear sign that the early and essential design work has not been done.

Having been directly involved in warehouse and logistics design for the last 20 years and having spent a good proportion of these working as a designer or running a design department I’ve learnt to quickly spot when the design process has been followed and the people who make the best designers. One of the best indications of this is when designers bring their work to you and want you to challenge it.  The designer should have the confidence to want to explain and show what a good job they have done but more importantly they should be looking to get a different perspective on the decisions made when creating the design.  This not only gets commitment from all stakeholders but also makes the solution more robust to stand the scrutiny of other groups later in the process.  There is very rarely a single solution to the design of a Distribution Centre and others will bring different ideas and perspectives to it dependent upon their background and involvement with the project.

To stay with the philosophical theme a little longer, a good designer has to be honest with themselves.  You cannot design something well without a clear and detailed understanding of its intended use, the components from which its constructed and how it fits together.  Only by developing this clear understanding of these points for each project can a designer openly defend the decisions made in creating the design.  When questioned, if designers give defensive answers like; its down to experience, its too complicated or involved to explain or it’s a design that’s been successful for many other projects; these are clear warning signs that they may not be confident about openly explaining their work.

The Design Team

So far we have talked mostly about the designer.  A successful DC design requires a team of the main stakeholders.  The business and supply chain objectives, the operations and maintenance of the site all need to be included in the process.  The designer will include and represent these views in his solution but how these different and not necessarily complimentary objectives have been included, is best reviewed by the stakeholders.  It is the designer’s role to use and coordinate these essential inputs.

The Design Process

Let’s first of all deal with the intended function of the DC. The market, suppliers, products and inventory are usually defined during the design of the supply chain leaving the DC design to cover more practical matters.  The starting point can be the customer requirements; what they want, when they want it and how it should be delivered. Satisfying this eventually comes back to the suppliers; what they supply, when they supply it and in what quantities.  The function of the DC is to satisfy the customer requirements by holding and processing sufficient quantity of the defined products and stock.

Data Acquisition and Analysis

As many DCs are built to meet future demand criteria such as business growth, company acquisition, product growth etc. need to be defined and modelled. This is often one of the more difficult areas to accurately define and will include information from Sales, Marketing, Strategy and Management.  Hard data to support this growth is not often available and needs to be developed by factoring information from current operations. To do this effectively there is a need to understand the source of this data and to interpret it correctly.

As with all data analysis, having the technical ability to acquire, clean and manipulate large amounts of data from different sources is only half the battle. It is as important to define what information is required from the data and how best to develop or extract it.

Operational Models

With the future operations defined it is then a case of translating this into pallets, cases movements and areas. One of the most effective ways of doing this is to create an operational model of the DC.  In its simplest form this can be spreadsheet based and can define each operational area by function, size, products, stock and throughput. The key to the effectiveness of these models is to make them interactive, so by changing parameters such as throughputs, tote fills, pallet sizes, days of stock or operating hours, the total DC requirements will automatically change. This enables the model to represent many different operating scenarios that could be seen in the future.

Figure 2 - Example of a simple Operational Model

For more complex functions and data the model can be created in a database to enable more powerful data manipulation tools to be used. This allows more detailed analysis to be undertaken such as the definition of exactly what products will be defined as fast, medium or slow movers and the effects of including or excluding different products or product groups.  An example of the output from a database model called “i-flow” is shown in Figure 3. This technique is best used where existing data is used to project growth, flows and stock are required to be defined down to product levels.

Figure 3 - “i-Flow” database model

Concept Design

With the requirements clearly defined and analysed, a number of operating concepts can be investigated. Whilst this is a very creative part of the process the work done to date has often short-listed a number of possible concepts. Customer service levels can demand that each order is order picked and despatched rather than being handled more efficiently as part of a batch of orders; product shelf life may dictate that the item is not held in stock but flowed through the DC; or long lead times for supply from another country may dictate that high levels of stock are required for that product.

Working within these constraints, this is an area where the designer will use his experience to select different operating concepts that are applicable for evaluation.  At this stage we often use a combination of the operational models and simple cartoons from our library to describe the concepts to the stakeholder group for evaluation.  This way concepts can be easily evaluated and rated on how they meet the project objectives before developing full layouts.

Figure 4 - Examples of cartoons to describe concepts

Processes and Technologies

The choice of the optimum Processes and Technologies often runs hand in hand with the development of the operating concepts.

There are many options and technologies available from block stacking pallets on the floor to fully automated storage and picking systems. The choice of the most appropriate is largely down to analysis of the throughput, storage, product requirements, budget, costs and savings and the cultural fit of each potential solution.  This is an area where the experience of the designer is key in knowing which are likely to be most suitable for this particular circumstance and how to design the system using this equipment.

Depending on the technology, there may be benefits in obtaining information from suppliers during these stages. If solutions and dimensions are dependant on a specific technology or detailed pricing required for a business case suppliers can provide these details.

There may not be a single solution or technology that satisfies the objectives of the project so it is often a requirement to evaluate how each solution meets these and compare this along with capital and operating costs.

Producing Layouts

We can get to this stage in a project without putting our hypothetical pencil to paper.  This comes back to the earlier comments that the design must be built on a detailed understanding of the requirements and building blocks. If I use the analogy of painting an old window frame; if the frame has been rubbed down, filled, treated and the window areas masked; painting the frame is actually quite easy and enjoyable. Likewise if your DC design requires you to jump back to the requirements and analysis stages it can be like painting over the old flaked paint and wiping away the runs. If the preparation isn’t done its unlikely to stand the test of time.

Figure 5 - Flaking Paint

With the processes, technologies and individual areas defined the overall size, shape and physical material flow can be established within a building. It is at this point that we undertake the activity that most understand as the design process - putting the building blocks into the layout then developing the detail.  This is undertaken by CAD (Computer Aided Design) systems to give great flexibility to develop different layouts and options quickly and accurately.

Even with the preparation work complete the layout work is still an iterative process.  Only with the different elements being laid into their prospective positions to achieve the material flow can you fully evaluate the relationship between them and the effect on other processes.  External factors such as building columns and doors; operational factors such as personnel access, safety and truck manoeuvring areas are best detailed from the first layouts.

This is allowing time for more input from all the stakeholders on the team to challenge the design to ensure it meets the requirements in the design brief.  The designer should be able to provide detailed answers to questions such as :-

• How does it meet the volumes in the future?
• What if my customers want smaller orders in the future?
• How do people leave the building in the event of a fire?
• Are there any single points of failure?

Inevitably questions come up that are not in the design brief.  Whilst this demonstrates the importance of investing time in the brief, the purpose of the design process is to design and visualise the facility before its built and some requirements only come to light when the layout is reviewed. The time and cost of making changes at this stage are still minimal if compared to making these changes when the system has been built.

From an agreed layout the detail can be added that will allow any selected suppliers to undertake their detailed equipment design.

Three Dimensional (3D) Layouts

Whilst working with two dimensional (2D) layouts is fast and making changes and iterations is more immediate it takes practice to interpret these drawings.  There are therefore many benefits in producing three dimensional layouts when the design has been developed.

Designers, engineers and many others involved in the design process will find it perfectly adequate to work from a 2D but a 3D drawing will bring a design to life and provide a far better visualisation of the building and operation.  This gives a far better feel for the scale of the equipment, empty spaces in receiving and marshalling and the physical distances that operators will need to walk.  Additional time is required for 3D layouts but having already developed 2D layouts this is not a great deal of extra work.

Figure 6 - Example of 3D layout

Animation and Simulation

3D layouts bring a better visualisation of the project to technical and non-technical audiences.  For presentation purposes these 3D layouts can be both rendered and animated.  Rendering is undertaken by defining light sources that will create a shadowing effect on solid objects and animation is to have objects moving within the layout or viewpoint of the layout continually changed to achieve a walk-through or fly-through effect. Whilst this provides an excellent tool to explain the operation of a DC to the Board, Workforce or Investors it does require additional work to produce and change.

Figure 7 - Example of a rendered layout for animation

An animation does not however work from the full logic of how the system would operate behind the moving images.  As the function is to create a visualisation of the operation items moving on a conveyor can for example, be a constant stream or even a random stream.  To define the operating logic on how the final systems will operate will require a simulation.

The information that is put into a simulation is developed in the early analysis and modelling.  The different flows, peaks and bottlenecks should always be defined at the early stages of the project. The role of simulation is therefore a crosscheck or proof that the design work has been undertaken correctly as opposed to being the design tool or process.  Simulations become more useful as the complexity of a project increases.  Every part of a project should be able to be designed to the brief; where the interrelationships of different elements of the project, complex operating logic and time elapsed play a greater role, this is where a full simulation becomes more important.

An important consideration for simulation is that it will only represent the operation of a DC if the full operating logic and decision making within the DC is modelled.  If simplified logic is used and data sets are summarised or reduced, the results will reflect this.  How close the final simulation is to the eventual operation of the DC is therefore largely down to how this rationalisation or simplification was undertaken.

Summary

Whilst we have covered many aspects of the design process the following fundamental principles are required to make this successful.

• All stakeholders have to be involved in the design process;
• A clear and detailed brief needs to be developed;
• DC design is a process that starts with a detailed understanding of the requirements, concepts and processes;
• The company culture, operational methods and skill sets available need to be taken into account in the design process;
• The drawings or layouts are developed towards the end of the process where much of the work is complete;
• Open challenging of the design is essential and should be encouraged.  Good designers should not be defensive about their work;
• Tools such as 3D, Animation and Simulation are very useful to achieve specific objectives at the end of the design process but should not be used to replace the design process.

Whilst these points provide valuable guidelines on the design process they cannot be too prescriptive.  All DCs are likely to include some form of receiving, storage, picking and despatch but when you consider the complexity of different products, suppliers, customer requirements, operational constraints and company cultures, no two DCs are likely to be the same.