To put a fresh spin on an old saying, when the supply chain sneezes, pallet providers catch a cold. With this in mind, a group of material handling thought leaders discuss material handling issues ranging from automation and robotics to the importance of government policy, labor shortages and pallet trends.
Continuing the practice of bringing together top industry minds to discuss major trends, the 2018 Material Handling Roundtable Discussion covers some major trends such as automation and robotics to the shortage of qualified maintenance technicians, and the evolving role of pallets. This article explores major issues and trends with an eye to the future.
The discussion was moderated by Rick LeBlanc, on behalf of Pallet Enterprise. Special thanks go to our roundtable experts:
Dan Beer is past president of the Canadian Material Handling & Distribution Society. He is a 30-year material handling systems sales professional with a passion for workplace safety. He is a founder of Forklift Blackbelt, an innovative and holistic approach to online operator training, as well as RackSafe Canada, a pallet racking inspection and training service. Along with that he consults and sells Material Handling Systems. In his spare time Dan is an avid golfer and plays Celtic music with his band The Seabillys. He is based in Vancouver, British Columbia.
Edwin Lopez is the millennial in the room. Quick to admit that he hasn’t been involved in supply chain and logistics for long, Lopez has been doing admirable work as editor of Supply Chain Dive since 2016. He divides his time between El Paso, Texas and Ciudad Juarez, Mexico. He earned an undergraduate degree from Georgetown University.
Richard (Rich) Sherman is senior fellow of Supply Chain Centre of Excellence at Tata Consultancy Services (TCS). He is the author of the book “Supply Chain Transformation: Practical Roadmap to Best Practice Results” (Wiley, October, 2012). While his earliest career aspirations to be a professional hockey player or coach got crunched into the end boards, he had the foresight to skate into the supply chain and logistics arena, where he found plenty of open ice. With a diverse range of experiences spanning 40 years in supply chain, Sherman hangs his hat in Austin, Texas.
Pallet Enterprise: How would you describe the conversation around material handling in the corporate boardroom today versus 10 years ago?
Rich Sherman: Even 10 years ago, supply chain was a line item on the budget and a cost discussion in most boardrooms, but it was a lot better than 20 years ago, when people didn’t even talk about it. So, the profession is evolving. I think today, the thing that enters into the equation is the impact that logistics has on branding and corporate satisfaction metrics.
Dan, I’m sure you’ve seen this with Amazon, boards and executives are beginning to recognize that if you don’t provide absolutely ecstatic and exciting customer service in an e-commerce environment, you are just a click away from being out of business. They are recognizing the critical importance that effective as well as efficient logistics have not only on their bottom line but on their brand.
Dan Beer: I couldn’t agree more. Amazon could be 10% of the North American market now, pulling customers away from bricks and mortar stores onto the Internet. They have set the bar for competition, so the board room conversation certainly has changed. Amazon has forced other companies to recognize that the supply chain is an extremely important component to an overall business strategy.
One example is their experimentation with grocery. They have a retail grocery store on one side and a warehouse on the other side, serving a very small area of Seattle. A customer order comes in over the Internet, flashes up on a screen, and one guy runs over to the grocery store to pick those items, while another worker picks the more mainstream items from the warehouse. Those orders come together and an Uber is waiting outside to deliver it. The promise is the customer will get the order within two hours, but their internal goal is to try to get the order to the customer in 15 minutes. They are constantly looking for different ways to achieve that goal.
The other thing I’ve seen is the labor shortage due to work ethic. Even if the labor force is out there, they are not willing to do the heavier, more physical jobs.
Rich Sherman: A lot of the issues we face in distribution are a result of labor, culture and automation. You’ve got the whole notion of Industry 4.0 technology, and from a material handling and warehouse floor perspective, it is all about the blend between robotics and human labor. Companies are looking at the person-machine interactions. That’s changing a lot of that dynamic.
Edwin Lopez: Even though things are definitely changing, and the supply chain is more of a value added than it used to be, the big thing that I hear when I talk to people is that at the end of the day, it is still about cost and productivity. The big question is still about ROI, and one of the main reasons that people aren’t adopting new technologies seems to be the cost factor or the use case aspect.
Rich Sherman: While there are financial risks involved with investment in new technologies, there is also significant competitive risk to not investing. One of the things we are seeing in the world of advanced analytics is that new sources and types of data are becoming available, and I have to be able to start capturing history for machine training and learning from those new sources and types of data. If I’m not doing that, I could be a couple of years of historical analysis behind my competition, and I might never catch up.
The data I collect on my labor and on the performance of my assets relates to my investment strategies for the future. I have to be able to understand that if I bring in autonomous robots to work with people on my warehouse floor, what kind of performance improvement am I going to get? How will I mitigate the risk of future labor shortages? And at the same time, how will I be able to provide a level of last-mile logistics performance that can keep me competitive from a customer satisfaction perspective? So, if Amazon is able to penetrate the density of a lot of populated areas with 15-30-minute delivery time on grocery items; that changes the whole competitive dynamics of grocery retail and bricks and mortar in general.
Dan Beer: Amazon is more focused on customer satisfaction than ROI. Amazon is playing a long-term game. They bought the Kiva robots, and many, but not all of their sites have them. They continue to experiment with them and other technologies. I heard they have plans to build 100 warehouses of a million square feet in North America. Not all of them will use the Amazon (Kiva) robots. They will not put all of their eggs in the Amazon robot basket. They have found that at critical times, specifically Christmas, they do not have enough flexibility. They do not have enough power with robots. They have had, in some cases, to go back to more people than robots because they found that robots might not keep up with the demand. Robots can create a bottleneck. Amazon understands the importance of living up to a promise. When a delivery promise is made, it is kept. They have even changed systems when robots couldn’t keep up at critical times.
Rich Sherman: It is interesting that you mention that, Dan. I was doing a lot of research on Amazon a few years ago, and when they bought Kiva, that put Kiva customers at risk. One of their first customers was Quiet Logistics in Massachusetts. Bruce Welty, the founder, bought the Kiva robots as one of the first users. Being a good material handling guy, he recognized that the goods to shipping station strategy created a lot of bottlenecks from a capacity and productivity perspective, just as you have mentioned. He founded another company called Locus Robotics, which has Kiva-like autonomous robots. However, the Locus robots bring the order bins to the pickers to fill line items in the pick zone, They are able to get a lot more productivity because the humans don’t have to travel through the warehouse and neither do the storage bins and racks. The robots do all the traveling. That approach accommodates a lot more robots, and a lot more throughput. And, it’s a great example of optimizing the person-machine interaction.
It is interesting to see how new technology is implemented and then evolves. From a use case perspective, you ask, ‘Hey, maybe there is a better way to do this?’ That is another reason why companies really need to begin experimenting and sandboxing with technologies because it is going to take some time to evolve. You want to make sure you change in a way that is going to best benefit your business. Pun intended, companies need to think outside the box.
Edwin Lopez: It is interesting that you bring up Locus. I was talking to them at a retail conference. I understood that their business model is not to buy their robots but to rent them. So, you can rent more of them in peak season. You keep them for a certain period of time and then return them. If you buy 5,000 robots, you have to have them there all the time, so it creates a lack of flexibility.
Rich Sherman: That’s a really great point, Edwin. You can bring in more at peak periods, and you don’t have to make the capital investment to get there. A robot is about $40,000, so it is less than the cost of a human being, and they work seven days a week and probably 16 to 20 hours a day. It’s a pretty good value proposition. And to your point earlier, Dan, robotics helps eliminate the need for people to run around the warehouse picking from totes, etc., creating a much more attractive work environment.
Pallet Enterprise: Why should we be excited about the future of material handling?
Edwin Lopez: MHI released a report this year identifying 11 different emerging materials handling technologies that will be in place within the next five years. The question was, ‘Do you think you will adopt technology x in the next five years?’ One in two respondents say that they will have adopted eight of those 11 technologies—anything from cloud computing to sensors, to robotics and the Internet of Things. We are at a point right now where it seems like there is tremendous opportunity to try new things, experiment and sandbox projects. Start experimenting now so that in five years you can really get to that smart, exciting facility.
Rich Sherman: I mentioned that I’ve been in the business for 40 years. I was speaking at a conference recently and I told the audience that I am more excited now at the age of 68 to be in logistics and supply chain, than I’ve ever been. It’s because all of the theories that we used to talk about 15 or 20 years ago were very difficult to actually use because we didn’t have the computing power and we didn’t have the connectivity we have today. Now, the computing power is here, the Internet connectivity is here, and the cost is very affordable. I’ve been doing digital for 40 years, but 40 years ago we called it data processing. These technologies have become critical to supply chain execution. As people recognize that in the absence of execution, there is no business, it gets really exciting to be part of that process.
Dan Beer: I agree with both of you about the opportunities. It is about information sharing, automation and changing ways we are looking at things. Because technology is evolving so quickly, the rental model makes sense. Everything can be out of date in a few years.
Pallet Enterprise: We’ve talked about labor shortages already, but what are other material handling pain points you most often hear about in your work, and what’s the path forward?
Dan Beer: One of the pain points we hear about is trucking. How much of transportation is going to be automated and what are the regulatory barriers to implementing that. We are almost in a hurry up and wait scenario where the government is so far behind anything we are doing technology-wise. There are a lot of ideas out there, there are a lot of solutions that we are on the verge of launching, but then the government gets involved.
Rich Sherman: To your point, one of the biggest issues that government has is its lack of commercial insight. Government is very populist in nature. A lot of regulation is designed around the consumer and kills commercial activity. We really need to start driving for legislation that supports commercial activity. Whether you like him or not, Trump has been doing that, and the one thing he has done is to bring business thinking into Washington, and not political thinking.
Edwin Lopez: One of the main pain points I hear about relates to equipment maintenance and repair. It may not be a headline issue, but it impacts productivity in several ways. Somebody was telling me recently that one of their suppliers wasn’t able to meet their demands because their machines were breaking as a result of pushing them to the limit and not servicing them
frequently enough. I think there is a lag not only in regard to how quickly we adopt new technology, but also who is around to repair it – to make sure the technology actually helps improve productivity.
Rich Sherman: Edwin, that’s a brilliant observation that a lot of companies don’t consider – the maintenance repair and overhead side of asset management. That’s where predictive maintenance analytics really come into play. The more you can bring in preventive service scheduling versus emergency service scheduling, the lower your cost is going to be and the higher your productivity.
Pallet Enterprise: Are you seeing any material handling trends such as Industry 4.0, e-commerce or automation, for example, that are significantly changing the way companies approach the use of pallets, or would you characterize usage as being business as usual?
Rich Sherman: As more companies move to e-commerce, there is more and more home delivery volume. What you find is a lot of parcels, and the parcel is very costly when you look at it as a single unit. However, if you can consolidate several parcels onto a pallet and ship it by truckload or less-than-truckload to a last mile distribution hub, that’s going to be much more efficient. I’m going to have to deliver the parcels one at a time, eventually, but shipping the goods from the product manufacturer to that last mile hub is where the pallet becomes critical.
Dan Beer: The closer you get to the last mile, I think there is more of a need to redesign the pallet, to be honest. When it comes from the manufacturer to the larger distribution center the current pallet is fine, but for the final delivery I feel like deliveries would benefit from a change. We are talking about inner city, trying to navigate into small grocery stores.
A lot of the major retailers in Europe have gone to the roll cage model for retail delivery, and that is something we should be considering in North America. I know in Seattle they were talking about banning larger trucks over five tons. With roll cages you can push your products manually right off the truck and maneuver them into position without the need for a stacker or a pallet jack. We should consider a pallet base that you can put wheels on, or maybe a pallet that will just hover over the ground (Dan laughs).
I’m thinking that the more condensed or smaller the size of the pallet, it will also help. As well, the weight of the pallet should be considered.
Edwin Lopez: I live on the border between El Paso, Texas and Ciudad Juarez, Mexico. Like clockwork, every morning when I’m driving, I’ll see two or three truckloads of empty pallets driving between one plant and another. The reason I say this is to illustrate that at the end of the day, no matter all these changes that we are seeing, pallets are still the backbone of the infrastructure that everything runs. They are handled by forklifts; they are put in racks and on trucks.
Pallets go everywhere. People no longer think about material handling as just a cost, and pallets are also more than just a cost. They can provide visibility, data, all sorts of things. I know people are talking about smart pallets, sensors and other improvements, but to be honest, I haven’t seen enough of it to say that it is a trend. But I find it interesting to consider how we can use pallets to help enhance some of the new technologies and methods we have been talking about.
Rich Sherman: Material handling and logistics networks and ecosystems need to be reevaluated. To Dan’s point, not only do we need to reconsider the size and type of pallet that we are thinking about, but we also need to think about reusability. For example, there is a tremendous amount of cardboard waste that occurs with e-commerce. I go through my neighborhood and the recycle bins are filled with Amazon packaging materials. With e-commerce, I am creating an outer pack on top of the manufacturer’s outer pack, which is also waste. So, I am doubling or tripling the waste and adding cost to each order.
Why don’t I ship in the manufacturer’s outer pack in a reusable container? Then I can drop off the goods in a locker at the customer’s front door with a badge security system. The driver puts the goods in my locker, takes the reusable tote back to his truck, and now the goods are secure and I’ve eliminated all the waste associated with the extra packaging. That’s not a practice that will be implemented quickly, but, as I said earlier, thinking ‘outside the box’ is where people need to be putting their new operating process improvement emphasis.
Dan Beer: When it comes to pallets, I think back to a tour that the Canadian Material Handling & Distribution Society arranged for a Japanese warehouse manager group about six years ago. We took them to a warehouse that was doing fresh produce distribution for a major retailer. They were shocked to see the produce resting on wooden pallets. After the tour, through the translator, they asked, “How do you wash them?” They said that in Japan, they washed their pallets after every use. Their perspective was very much different than ours. It is important to keep our minds open to change.
