Kmart’s supply chain problems have been widely reported. What hasn’t made much news until recently were the troublesome details. Kmart’s struggle with warehouse management system (WMS) implementation was a big one. When news got out that Kmart decided to replace its EXE-supplied WMS with one from another vendor, EXE shot out a press release over the BusinessWire.
“Independent of EXE Technologies, Kmart chose to modify the system extensively during the last four years rather than adopt the best practices built into the software,” the press release read.
MHM contacted Kmart to get its side of the story. Surprisingly, our Kmart source didn’t take issue with EXE’s assessment.
“The problem was we customized a package that was good to begin with, but it soon became non-user-friendly and inflexible,” said our source, who wished to remain anonymous. “Every time we’d upgrade we’d have to go through a major ordeal to try to keep pace [with our needs]. If you have a company the size of Kmart with the breadth of systems we have, you want to keep them as vanilla as possible to maintain the effects of technology as it improves. That way you can upgrade as you go.”
EXE Technologies’ EXceed product had been rolled out, driven by PricewaterhouseCoopers (PWC), at 11 of Kmart’s 14 hard lines distribution centers since 1998. “In the final months prior to Kmart’s bankruptcy filing,” the press release concluded, “Kmart elected to proceed with an expensive, potentially risky redo of its supply chain infrastructure.”
That’s where our Kmart contact parts company with EXE.
“These pieces are being integrated and the business processes are being re-engineered so they’re seamless, and the left hand knows what the right hand is doing,” the source countered. “Our biggest lesson in all this was to make sure our business process is mapped out before we decide on the software and hardware we’ll buy to make the supply chain work. I’m excited about this opportunity to increase Kmart’s turn and cash flow.”
Whether this second chance at supply chain management helps Kmart out of bankruptcy remains to be seen.
— Tom Andel, chief editor
NA 2002 Hosts Special Industry Events
This April, industry professionals from the United States and across the globe will attend NA 2002 at Detroit’s Cobo Hall to find productivity solutions for their manufacturing, warehousing, distribution and logistics operations.
A number of special events are being planned to add even more value for NA 2002 attendees. Recognizing the importance of building community, Material Handling Industry of America (MHIA) has welcomed sister trade associations to hold their related events at NA 2002.
On April 9, the Council of Logistics Management (CLM) Eastern Michigan Roundtable will host its Annual Automotive Roundtable. This special event for CLM members and guests will include a keynote address from Ford, and a panel discussion on material handling and logistics issues.
Also on April 9, APICS-The Educational Society for Resource Management (formerly, The American Society for Production and Inventory Control) will host a workshop for its members. This event will be a collaboration between the national headquarters and its local Michigan chapters.
April 10 is MHEDA Day. The Material Handling Equipment Distributors Association (MHEDA) will host a sales training workshop for its members throughout the day. MHEDA’s action-packed day will include a Sales Boot Camp seminar, industry-specific speakers, opportunities to network with industry peers, and much more.
John J. Acerra
John J. Acerra, president and CEO, Acerra & Associates, died of cancer February 1. He formerly worked for Baker Material Handling and Linde Hydraulics before starting his own business to serve numerous clients in the material handling industry.
Intelligrated Inc. Breaks Ground
Intelligrated Inc. was formed by a management team led by Chris Cole, CEO, Jim McCarthy, COO and president (former senior executives at Pinnacle Automation) and Thomas Schulte, vice president. The company is a supplier of integrated material handling systems, services and products. It will be based in a new building under construction in a suburb of Cincinnati. The company is in the final stages of acquiring assets of Conveyors Ltd., including the Versa Conveyor product line.
Healthy Growth for Automation Products
The worldwide market for automation products and services for discrete industries — nearly $25 billion in 2001 — is expected to grow at a healthy compounded annual growth rate of 7.9 percent over the next five years, reaching more than $36 billion, according to a new ARC Advisory Group study.
The economy ran out of steam during the latter part of 2000, continued to decline during most of 2001, and is expected to struggle through the first half of 2002. “In spite of this dismal economic scenario, overall, the future of automation products serving discrete industries looks bright during the next five-year period,” according to ARC senior analyst Himanshu Shah, principal author of ARC’s Automation for Discrete Industries Worldwide Outlook, Market Analysis & Forecast Through 2006. More capital spending is projected in electronics, semiconductors, building automation and machinery industries. Further information on this study can be found at: http://www.arcweb.com/arcweb/Advisory/Studies/Auto/auto_discrete.asp.
Why Are Inventories Up?
The move to more flexible systems, lean systems, JIT, postponement and other highly coordinated relationships among organizations is supposed to lead to lower inventory requirements with the attendant savings in inventory carrying costs. Well, as the song says, it ain’t necessarily so.
Of the 14 industries studied by the Supply Chain Management Research Group at Ohio State University, finished goods (FG) adjusted inventory level increased in seven of them: apparel, chemicals, electrical/mechanical equipment, food products, furniture/home furnishings, medical products and other consumer-packaged goods. There was no trend in adjusted finished goods inventory level for the retail/wholesale industry and decreased adjusted inventory level in the remaining industries.
For the 10 sectors analyzed, adjusted FG inventory level increased in five of them: apparel sector, textiles sector, food processing sector, medical products sector and personal care sector.
There are several possible explanations. One is product proliferation. As the firm increases the SKUs of its finished product, there is a natural tendency toward higher adjusted inventory levels. It is possible that in some industries the firms have increased the number of product offerings and maintained the historical inventory levels through improved inventory management methods. Without these improved methods, the inventory levels could have increased because of the product proliferation.
A second explanation is that firms positioned downstream in the channel have forced more stringent performance requirements on their suppliers and that this has resulted in their suppliers having to carry greater inventories to meet these requirements.
Most of the industries and sectors exhibit decreased adjusted inventory level over time for the raw material (RM) and work in process (WIP) inventory categories. Conversely, the adjusted FG inventory exhibits increases for as many groupings of firms as exhibit decreases. This pattern could be a reflection of the difficulty of effective implementation of supply chain management across organizations. For the FG inventory, however, the supplying and buying firms must coordinate closely if the service level to the buyer is to remain high without a corresponding increase in inventory. These findings are consistent with an explanation that suppliers are meeting service level requirements through high levels of finished goods inventory.
One industry that seems to be the exception is computers and electronics, where practices such as postponement, channel assembly and direct selling are common. The researchers believe that it is no accident that this industry has exhibited consistently lower adjusted levels, for all types of inventory. Perhaps there is an implication that efforts to increase efficiency through the exercise of power simply change the location of the inefficiency and efforts to increase efficiency through redesign of an entire supply chain may produce the desired results.
For more information on this study, An Historical Analysis of Inventory Levels: An Exploratory Study, go to http://Fisher.OSU.edu/scmrg.
Companies Not Using Technology
The Logistics Institute at Georgia Tech (TLI) announced the results of a recent survey of companies operating private and dedicated truck fleets. The Transportation and Logistics Survey focuses on transportation costs, how companies operate their fleets, and transportation planning methods.
Harvey Donaldson, director, TLI, says, “What is clear from this survey is that the majority of companies, both with smaller trucking operations of under $10 million annually, as well as much larger operations exceeding $100 million, continue to plan truck routing and loading manually with limited use of available information and decision technologies.”
Following are some of the key findings from the survey:
• Nearly two-thirds (65 percent) of the respondents indicate that with better planning they could save their organization six percent to 30 percent in transportation costs.
• More than half (72 percent) of the respondents currently use a manual process for route planning, load building, dispatching, and tracking. The remaining companies use custom or commercial software.
• The average satisfaction rating with current route planning, load building, dispatching, and tracking processes was below seven on a scale of one to 10.
• More than two-thirds of respondents consider software the “ideal method” for truck transportation planning for their organization.
• The majority of respondents indicate their organization’s typical truck routes change either on a daily or weekly basis.
• More than half of respondents (58 percent) say less than 10 percent of outbound loads generate back-haul revenue. Thirty-eight percent indicate back-haul revenue is insignificant to their organization.
• Respondents indicate customer service (first) and route efficiency/cost savings (second) rank high in importance among factors regarding transportation planning. Driver satisfaction and back-hauls were of significantly less importance.
• According to respondents, three constraints that could prevent implementation of a better transportation planning method are complexity of environment (33 percent), organizational culture (29 percent) and overhead cost (24 percent).
For complete results, visit TLI’s Web site at: http://www.tli.gatech.edu/resource/transsurvey.
Companies Making News
ORBIS Corporation has acquired Nucon Corporation, headquartered in Deerfield, Illinois. Nucon will operate as a subsidiary of ORBIS . Also included in the acquisition are Nucon De Mexico, S.A. de C.V. and Nucon Europe N.V. Both will operate as subsidiaries of Nucon.
Nucon manufacturers structural foam plastic pallets, top frames, bulk container systems, plastic divider sheets and custom material handling products, with a manufacturing location in Pleasant Prairie, Wisconsin. Nucon serves the container, beverage, pharmaceutical, retail and food processing industries.
SupplyPro Inc., provider of automated point-of-use inventory and information systems management, has acquired Vertex Technologies, developer of automated supply chain solutions.
SyVox Corporation, a provider of speech-based solutions for industrial markets, and Ann Arbor Computer, supplier of warehouse management systems (WMS) and automated material handling control systems, announced the formation of a strategic alliance agreement. Ann Arbor, based in Ann Arbor, Michigan, will integrate the SyVox Solutions suite of speech-based applications into the Ann Arbor flagship WMS solution, pcAIM.
Bolzoni, manufacturer of specialized lift truck attachments, has acquired Auramo, manufacturer of attachments for paper roll handling, and the palletless-handling attachment manufacturing operations of Brudi.
The Glennon Group is the new name of the Glennon Corporation, Illinois Marking & Sealing and Marcraft Corporation.
Ranpak Corporation, maker of packaging material and machinery, has been purchased by First Atlantic Capital Ltd. for a reported $100 million.
People Making News
Ken Morris has been appointed president, Stanley Vidmar and ZAG, a business group and subsidiary of The Stanley Works.
Steven Selfridge has been named CEO and president for Acsis, a supplier of automated data collection and supply chain execution systems.
SupplyPro Inc., provider of automated point-of-use inventory and information systems management, has appointed Bill Williams president and CEO.