The Consumer Electronics Challenge
Finicky consumer demand and third-party manufacturers are testing supply chain integrity in this sector. Flexible material handling will help keep OEMs strong.
by Tom Andel, chief editor
T he Year 2000 proved to be as dangerous to manufacturers in consumer electronics as it threatened to be for industry in general. In fact, the chairman of the board of an electronics distribution company convened its first board meeting in January by motioning that everybody forget the Year 2000 ever happened. The motion passed.
Problems started early in the year with a shortage of electronic components, which deprived retailers of their full allotments of Nintendos, cell phones, Palm hand-held electronic organizers and Napster-capable laptop computers. Consumers had to settle for slower home PCs while leading manufacturers watched hundreds of millions in sales go down the drain.
"It was the year of absolute hell," says Jim Tompkins, president of Tompkins Associates, the international logistics consulting firm based in Raleigh, North Carolina. "Back in March and April everyone was put on quotas and we were rationing parts. Everyone was ordering more and more. Then September came, the sales fell out, and everyone and his brother wound up with a lot of inventory."
Enter 2001 – accompanied by a relatively new visitor to this market: Electronics Manufacturing Services. EMSs came out of nowhere to claim a significant share of the consumer electronics industry. As a result, Tompkins claims, the days when manufacturers and suppliers were partners in design and support are fading away. Parts suppliers can’t depend on their 20-year relationships with manufacturers to renew contracts. They must now compete for the business of EMSs who today are taking on much of the manufacturing done in consumer electronics.
According to Technology Forecasters Inc., consultant and market researcher to the EMS industry, EMS industry penetration of OEM markets is expected to reach $260 billion, or 26 percent, by 2004. Consumer electronics is pegged as the fastest-growing OEM sector for EMSs. That’s probably because EMS is a relatively new phenomenon in consumer electronics. Tompkins says this leaves plenty of supply chain kinks to iron out.
"EMSs are creating havoc in the supply chain," Tompkins continues. "The industry has seen a shift from partnerships to a dog-eat-dog business. EMSs will buy parts from some low-cost producer that meets the spec, but now the motherboard won’t work. Standards are falling and things that were simple and straightforward are now complex. We have higher rejects, less control and less traceability."
But Eric Miscoll, chief operating officer of Technology Forecasters, sees a more positive aspect to this EMS phenomenon.
"This model offers greater economies of scale in the supply chain," he says. "The EMS isn’t just buying a component for Sony but for three or four other companies. That lets them do more bulk ordering. One of the great challenges to the EMS is to manage the growth it’s been enjoying. Selectron calls itself a global supply chain facilitator. The top 10 EMSs in the industry are developing those competencies. In fact, some of the major component suppliers are selling directly to the EMSs now, where before that business always went through the distributors."
Material handling solutions
The manufacturing that consumer electronics firms continue to do is changing, as well. Unfortunately, their plants haven’t. Instead, shops that were designed to handle significant volumes of the same product are now expected to handle small lots of specialty goods. Prices on these items are forced higher because of the frequent product changeovers on the assembly line. In addition to set-up times, managers must deal with operator training challenges, staff turnover, forecast changes, and capital equipment cutbacks.
Fortunately, there’s a time-tested answer to these new supply chain woes: flexible material handling. Case in point: Mitsubishi Consumer Electronics America. Its main assembly line for large-screen TVs was often the site of production bottlenecks. Then Jeff Lebow and his colleagues from the Georgia Tech Economic Development Institute presented the idea of "bucket brigades" to management.
The idea was tested with a subassembly line feeding the main assembly line. It consisted of three people and a 20-foot-long section of portable conveyor. Thirty minutes after this operation was under way, work-in-process inventory shrank until the portable conveyor was empty and no longer needed. With the production bottleneck dissolved, the portable conveyor can be removed to free up 150 square feet for other production chores. Mitsubishi soon reorganized the workers on its packaging line for cellular phones and enjoyed similar improvements.
In fact, Mitsubishi learned an important material handling lesson: the engineered work standards used to design the original assembly lines were too inflexible to accommodate the company’s changing production flows. "Bucket brigades" enable better balances because they are self-adjusting and based on actual time to do the work, rather than on estimated or "standard" times.
Other manufacturers in consumer electronics are learning important material handling lessons, too. A few years ago they were hearing about the coming of the Factory of the Future, featuring "lights-out" warehousing, where automated material handling systems would do the work of a facility full of employees.
"That’s not going to happen any more," says Jim Bast, general manager of the Lightning Pick Division of PCC, makers of pick-to-light systems. "That kind of facility is too inflexible. We’re being asked to do more low-impact automation, things that assist people rather than replace them. A person is the most flexible material handler."
In consumer electronics, with EMSs making many similar products under several different brand names, it’s important to package the right documentation and cable sets with the appropriate equipment.
"People are using pick-to-light and carousel systems in these environments, because if you change the product line you can change the function of these systems a lot easier than you can change the function of a synchronous machine designed to assemble the product," Bast adds.
Thus, there’s a new set of rules in the consumer electronics supply chain. From the wholesaler to the manufacturer, economic uncertainty is resulting in fewer and smaller orders. The fear of holding inventory is bringing smaller batches to the shop floor. Manufacturers are looking to e-commerce for "instant replenishment." The winner in this race will have to be fast, nimble and flexible. Don’t look to last year’s solutions for help. In fact, wipe "Y2K" from memory. It didn’t happen. Your future’s on the line now. Make something of it. MHM
Motorola Automates for Consumer-Direct Sales
Establishing a consumer-direct order fulfillment operation meant developing a whole new material delivery system for Motorola.
by Clyde E. Witt, executive editor
Motorola’s order fulfillment facility in Harvard, Illinois, originally processed cell phone orders for distribution through OEM providers such as Ameritech, AT&T, Sprint and Verizon. About five years ago it decided to develop an order fulfillment system that is capable of reaching the consumer market through a variety of ways. Motorola’s engineers, working with counterparts from Alvey, an FKI Logistex Company, installed the system in stages over the past four years and have now added the capability of distributing their product direct to consumers.
Five years ago, Motorola outgrew its Libertyville, Illinois, facility. "It became apparent that we needed a more efficient and larger facility to accommodate this business," says Naresh Sethi, engineering project manager for Motorola. He adds that Motorola had the material handling expertise for receiving and automated storage and retrieval (AS/RS), but was looking for an equipment provider capable of designing maximum flexibility and modularity for future enhancements in its system for the physical delivery and kitting of orders.
Previously for OEMs, Motorola removed material from its AS/RS in palletloads and moved it to either pallet racks for forward picking operations, or directly to fulfillment lines where orders were filled by work orders.
"Doing it this way resulted in excess inventory that would either stay in the work-in-process [WIP] area, or it would have to be moved back to the AS/RS," says Sethi.
Regardless of where it went, keeping track of inventory was a challenge. Sethi adds that picking inventory by order requirements from the forward pick area was slow since fulfillment line associates were at the mercy of lift truck operators.
Convenience of conveyors
The order fulfillment center at Harvard uses a pallet AS/RS for inbound material delivery, a custom-designed pallet flow system for bulky material, and a series of carousels and robots (White Systems) for forward picking by orders and buffering for order consolidation. More than 20,000 feet of Alvey conveyors link the entire system and move the material to fulfillment areas in totes.
"The conveyors," says Sethi, "bring a consistency to the material delivery methodology. Unless the order best-fit algorithm sees the need for material delivery by palletload, everything is delivered in totes in work-order quantities."
Orders for the consumer-direct fulfillment area are taken until 2 p.m. before they are released to the order management system. Like product is batched by the custom-designed software program. When an order is released, every item on the bill of material is delivered via conveyor to a robotic auto-buffer. As soon as the last item in the bill of material arrives at the buffer, the order management system places the entire order in a queue for the next available fulfillment line.
Assembling the order
The first step in fulfilling the customer’s order is to activate the phone. The customer might want special phone features that must be programmed. Because this is a consumer-direct process, often there are additional options for phone accessories such as extra batteries, cigarette lighter cords and things not part of a standard order. These parts are kept in a pick-to-light system.
To retrieve these parts, a unique bar code label on the tote is scanned to activate the pick-to-light positions and indicate the quantity of parts needed to fulfill the order. At the end of the picking process, the label on the tote is scanned and a confirmation, or order acknowledgement, printed. The printed acknowledgement is placed in the shipping container and the completed package is run through a series of inline scanners and scales on a case conveyor system to validate the bill of material, shipping method and carrier terms.
A shipping label on the carton is scanned to direct the carton to the appropriate shipping lane in the sortation system.
Role of logistics
Sethi says it is a core belief of Motorola’s management that order fulfillment centers are the last place where anything done to a customer’s order will directly impact that customer’s perception of the company. "We believe in total customer satisfaction," he says, "and understand the critical role that material delivery systems play in the order fulfillment process." MHM
System at a Glance
This massive material handling system includes the following equipment:
Conveyor (Accuglide Plus and powered belt) Alvey, www.alvey.com;
Swivel roller sorters, Alvey;
Conveyor system software and controls, Alvey;
Horizontal carousels for manual pick operation, White Systems, www.whitesystems.com;
Horizontal carousels with inserter/extractor devices, White Systems;
Carousel and inserter/extractor system controls, White Systems;
Bar code label scanners, LXE Inc., www.lxe.com;
AS/RS, Eskay Corp., www.eskay.com;
Weigh scales, Mettler-Toledo Inc., www.na.mt.com.
Customizing Storage, Work-In-Process
Previously the Libertyville facility used a five-inch corrugated container with a thin-gauge thermoformed tray to hold assembled telephones. Unfortunately, the design lacked the strength and durability required on the new conveyor system and did not offer the precision necessary for accurate picking with Motorola’s robotic systems. There was also the issue of dust and contaminants that are inevitable when using corrugated containers.
Initial plans required each telephone model to have a uniquely designed, high-strength plastic tray to cushion and protect the telephone while maintaining consistent part orientation for automated picking. After exploring this specification with numerous vendors, it became apparent that this type of solution was prohibitively expensive due to the relatively low volume required for each tray design and the high fixed cost to manufacture a different mold required for each tray. Using unique tray designs for each telephone also increased the complexity of the operation by requiring increased storage space for the empty trays and adding the task of coordinating and tracking more than one dozen different trays.
Other issues arose when attempting to integrate trays with the new conveyor equipment. Due to steep grades in certain conveyor areas, stacked trays could become unstable and individual trays had a tendency to slide into each other.
Finding the answer
Motorola required that the solution be:
• Compatible with picking robots;
• Compatible with the conveyors;
• Superior parts protection;
• Stable when stacked.
Based on its relationship of more than 50 years, Motorola gave Orbis the opportunity to create a solution. After analyzing the situation, Todd Norman, sales representative, and Martin Lira, sales engineer, determined the best solution to fit Motorola’s price point and simplify the process would be to design a single tray that fit numerous telephone styles. Initially, Lira worked with two or three telephones to identify possible solutions that would meet Motorola’s requirements. Soon the first prototypes were developed, and issues including bar code location, automation interface requirements, material selection, load distribution, parts orientation, pressure points and maximizing the number of telephones per tray were resolved.
In June 1997, after 12 months, 28 versions, numerous material trials and uncountable transit tests, the "Richards" tray was completed.
The initial order of 60,000 trays was delivered on time and moved immediately into production. This order was soon followed by an order for 40,000 more. The new tray met all requirements and securely stored and transported any of six unique Motorola telephones. And since the tray facilitated more accurate picking, cycle times in both assembly and packaging improved considerably.
Although the trays are easily stacked and can be used by themselves, they are designed to fit into a standard ORBIS 24" x 20" x 10" automated systems tote (AST), which is compatible with Motorola’s transceiver carousel. Bar coded totes filled with five layers of trays are conveyed from manufacturing to the storage, packaging and distribution areas. MHM
3PL Brightens Distribution
Third-party logistics providers play a major role as consumer electronic product manufacturers focus on their core competencies.
by Clyde E. Witt, executive editor
Thomson Consumer Electronics is a market leader in television, digital satellite systems and VCR sales. As a full-service distribution provider, GATX Logistics (GATXL) has become Thomson’s sole external source for logistics management.
As Thomson’s needs have changed, so have GATXL’s services. These services currently include handling 950 stock keeping units (SKUs) and more than 80 percent of Thomson’s domestic distribution activity through facilities in Walnut, California, Indianapolis, and El Paso, Texas.
Thomson’s Indianapolis facility recently expanded to 1.34 million square feet. The facility features an interior, dual-rail spur for eight boxcars, 139 dock doors and yard slots for 290 trailers.
It takes approximately 200 full- and part-time employees to handle the vast inventory that includes televisions, stereos, VCRs, camcorders, satellite decoders, DVD home theater systems and accessories sold by Thomson under the RCA, GE and ProScan labels.
Since 1998, 300,000 square feet of the newly expanded space has been dedicated to handling picture tubes manufactured by the Americas Tube Operations (ATO), a Thomson subsidiary in Marion, Indiana, north of Indianapolis. ATO wasn’t satisfied with the quality of service provided by public warehouse companies, so GATXL designed an outbound distribution and returns management process that is many times more efficient and less costly.
Now, pallets of picture tubes are shrink-wrapped in hard-plastic tray packs and distributed throughout the Thomson system. Approximately half go to Thomson manufacturing plants in Mexico, while the remainder goes to other OEMs.
The tray packs come back to the distribution center in boxcars. Empty trays are off-loaded, inspected, run through an automatic washer and returned by the truckload to the ATO plant. Significant dollars have been saved through the GATXL-designed recycling process for these plastic tray packs.
The Indianapolis center also started a new 110,000-square-foot retail support operation that picks and packs RCA multimedia and telecommunications accessories for direct store delivery to Home Depot, Montgomery Ward and several other retailers. GATXL ships the ready-to-assemble point-of-sale displays with graphics, peg boards, hooks and layout specifications. The display (24 feet wide by 10 feet high) can hold up to 300 SKUs of pre-priced, blister-packed items, including TV antennas for DSS, coaxial cables, connectors, remote controls and VCR tapes. Thomson expects this kind of after-sale support to provide an increasing share of revenue in the years ahead.
GATXL is also shipping to 800 Home Depot stores and coordinating with independent jobbers to do the setups. GATXL personnel manage the stock replenishment program.
A working partnership
Thomson and GATXL share in the investment of time and people. Training for personnel of both companies occurs on a continual basis, with much of it being provided by Thomson at its "University of TCE."
Because communication is open, all operations have the benefit of shared information via electronic mail, and access to internal memos and messages sent within and among facilities. Quarterly reviews include a meeting among cross-company personnel and a walk-through of each facility.
Shared technology is also an output of the relationship. In one case, a computer program that was developed at a GATXL facility was so beneficial that it was implemented throughout all Thomson operations. Monthly productivity reports and inventory information for all facilities are shared by all managers as a measure of how each facility is succeeding against the total. Inventory accuracy has remained constant at more than 99 percent, while order accuracy and fill rate each measure consistently close to 100 percent. MHM
Pick-to-Light: Hot-Wired for Consumer Electronics
Accuracy and speed are two essentials for picking electronic components. New pick-to-light technology delivers both for consumer electronics.
by Christopher Trunk, managing editor
E-commerce is driving product innovation and product obsolescence faster than ever, and innovation is rampant in consumer electronics. Manufacturers and distributors of computers, cell phones and all sorts of electronic devices can easily lose their shirts to competitors who can respond faster to the marketplace.
"IBM was slow in reacting to the custom-built PC market," says Tim Callahan, vice president of DCS Interactive. "The only way for IBM to get back into the marketplace was through pick-to-light technology.
No two PCs are the same, and everyone’s requirements for a computer are different. The company decided that picking accuracy was the prime factor in assembling custom computers, and pick-to-light was the answer. IBM turned to pick-to-light to assemble kits to turn out custom personal computers.
At IBM, a custom slave pallet is fitted with the shell of a computer, and the pallet is passed down a conveyor, past parts bins fitted with lights. Workers pick the correct items and put them into places on the pallet custom-molded to fit the components. IBM uses the system to manufacture custom computers in North Carolina, England, Mexico and China.
More applications for consumer electronics
Vendors offer pick-to-light technology for both manufacturing and distribution.
Pick-to-light is alive and well at Motorola. George Feigley, senior technologist for Rapistan Systems, a division of Siemens, said pick-to-light is used for kitting of electronic components used to make wireless handsets. "We’ve also installed pick-to-light in PC assembly. By scanning the computer chassis ID bar code, the order is recalled automatically, which indicates a certain size hard drive, a particular 3-D accelerator card, etc. We’ve installed this for NEC and other computer manufacturers."
Darin Danelski, president of Innovative Picking Technologies Inc. (IPT), tells of a printer and diagnostic equipment manufacturer that uses pick-to-light to assemble custom kits. Lights direct pickers to the locations that match computer cards and components to the exact device. This makes for fewer surprises at the quality control station.
Callahan says pick-to-light is suited for electronics distribution. He describes a cell phone and accessories distributor that uses pick-to-light modules fixed to gravity flow rack to pick the fastest 20 percent to 30 percent of all orders. "The host system transmits orders. Then orders are cubed so the correct number of boxes is marked with bar coded and human-readable labels. Boxes are either routed past the pick-to-light area or are filled from an RF-directed pick cart fitted with light panels.
Jeff Hedges, director of market development for HK Systems Inc., has done a lot of systems integration work, using third-party pick-to-light panels, flow rack and roving picking carts to fill orders. He knows of a music CD and video distributor that uses put-to-light on a roving cart. The worker moves up and down an aisle fitted with pick-to-light panels. The cart has its own on-board computer to direct picks.
Look, ma, no wires
In addition to meeting the demands of customizing kits, pick-to-light also solves the problems created by ever-changing electronics inventories.
"We’re making it easier for the buyer to reslot his pickfaces to adapt to changing electronics inventories and manufacturing processes without the need for tools or rewiring," says Feigley. "Products move in and out of their lifecycles so quickly that our clients have to reconfigure their pickfaces often. If the user is locked into a hard-wired pickface, he loses flexibility." Rapistan offers the new PickDirector device. It’s a lighted pick device that snaps in and out of a power rail. The rail runs the length of a pickface of electronic parts bins or gravity flow rack.
This technology lets you reslot and reconfigure your parts bin pickfaces quickly. It’s also easy to reprogram your picking software. Just scan the tiny bar code under the pick device and the bar code on the bin or gravity flow rack location. The software automatically remaps itself.
"For consumer electronics, this kind of flexibility is critical as component sizes change frequently. Sometimes parts come in orderly rolls and other times as heaps of individual parts," adds Feigley. With some parts being so tiny, sometimes you can only fit a pick device with a light at the location. Then you can install a single light panel per bay to indicate quantity to pick.
Bright, new ideas
Other vendors are offering new designs that match the small size of electronic components. "Typically the conventional pick-to-light module doesn’t cut it for electronics assembly areas," points out Danelski. "We’ve developed special Econo-Pick modules that have just one display driver that talks to individual lights placed throughout the parts bins." This design saves space in dense-storage areas. The software sends down quantity to the display and lights up just one location light while maintaining the sequence of picking for assembly.
IPT is also working on a new, smaller-size pick-to-light system. Standard products tend to be 2 inches tall by 1 inch thick. IPT’s new model is 1" tall and just 3/4" thick. It’s designed for picking small electronics parts.
IPT has also developed an interesting new pick-to-light technology it calls the Zoneless System. The system lets workers move freely throughout the picking area, eliminating bottlenecks that can otherwise overwork or starve some pickers. It requires no zone balancing. The Zoneless System uses a worker ID bracelet called Watch-Me. It communicates with the pick-to-light software each time a worker approaches a lighted panel.
As workers move freely within the picking area, they build part of a kit and then pass the tote on to the next worker. Since the system automatically identifies each worker with each pick, repeated mispicks can be traced back to both individuals and to storage locations, a great help in quality control.
Making the most of pick-to-light
When it comes to consumer electronics, pick-to-light helps workers instantly distinguish between similar looking parts, like IC chips on a roll, says Feigley. "So long as you can validate that your workers have replenished the pick location with the correct SKU, the lights permit practically flawless picking," says Feigley. It’s so important to have some system in place to verify location and the bar code on replenishment stock, otherwise it defeats the whole purpose of pick-to-light.
Deciding on whether to have a panel that displays quantity and a light or just installing a light depends on how much space there is. Having a bunch of lights and just one quantity panel slows the picking to one-at-a-time.
Feigley suggest you put just the top 5 percent of your movers in pick-to-light. "More than that just isn’t justified due to the cost of the lights." For other picks he recommends carousels or RF-directed picking. Other vendors suggested that you consider the top 20 percent to 30 percent of fast movers for pick-to-light.
Rapistan offers Golden Zone software that lights up the top 10 to 15 picks in an area. It lets you visually check spacing and placement of hot picks for bottlenecks and ergonomics.
Vendors pointed out different areas of concern for managing worker errors. Rapistan reports that its studies show worker miscounting is the smallest error made, while the most common error in paper-based picking was omitting an item.
Danelski points out that you’ll always have to deal with the human element. "The light says pick seven, and she picks six. This is a human problem that affects every picking system out there. A weighing scale or a quality control station with a bar code scanner can catch these errors," observes Danelski.
HK Systems finds one way to minimize picking errors is applying light curtain technology to the pickface, ensuring that the worker puts his hand in the right bin and that an item was actually picked.
One drawback to pick-to-light is that workers tend to rely exclusively on the lights. They soon stop checking the label on an item or read the cover of a CD or video tape. That’s why it’s important to verify pick location contents and scan bar codes along the way.
Kicked off the island
Above all, don’t think of pick-to-light as an island of automation. "It is part of a systems solution. We create routing systems and manage the movement of cartons and totes throughout the picking area and then on to manufacturing or distribution. Work needs to be distributed evenly over the picking zone so that each worker has a balanced workload," says Feigley.
As your pick-to-light operation becomes more efficient, you’ll want to consider integrating it with other parts of your facility. Hedges says, "Maybe you’ll introduce pick-to-light to your kitting operation to build kits better and faster. That can generate faster throughput down the line. Then you may need to replenish bins faster and forge better communications through business software to vendors. In effect, it’s a systems approach." He adds that a systems integrator like HK Systems can bring together unit handling, software and material handling systems design and consulting to make consumer electronics operations hum. MHM
Pick-to-light technology directs workers to choose just the right parts, and do so far faster than a paper pick list can deliver. The technology uses lighted panels that indicate pick location and quantity to pick. Behind-the-scenes software keeps the tasks flowing so that pickers aren’t either overwhelmed or starved for work. The software also maintains a list of custom parts needed to build an assembly or for the items needed to fill a customer order, further ensuring a successful fulfillment.
E-mail these sources:
Danelski, [email protected]
Callahan, [email protected]
Hedges, [email protected]
Feigley, [email protected]
Also see the article Pick-to-Light: Choices, Choices, Choices on page 44 in September 1998.