Michael Torch works in one of the last vestiges of physical distribution left at McGraw-Hill. As vice president of manufacturing and operations for McGraw Hill Education, Inc., he sees to it that students from K through 12 and beyond get their text books. Apparently e-books haven’t yet killed off the distribution of hide-bound reams of paper to schools and universities—yet.
“E-books are growing in this industry and will cause business to decline on the print side,” Torch acknowledges. “The question is how quickly and which markets.”
The education division does 60-70% of its business in a three- month timeframe, July to September. Then in the higher-ed market there’s another peak from November to December for the second semester. Torch’s team is staffed with a permanent force of 100 for the non-peak then bulks up with another 100 temporaries for the peak season in the loose pick operation.
McGraw-Hill Education just closed a distribution center supporting its professional and trade markets. Those are going digital much faster than schools because most professionals have a computer. But e-textbooks aren’t as popular among students as you might think, according to Torch. He cites a recent survey by the National Association of College Stores (NACS) which found that 75% of college kids still prefer hard copy.
“In the K-12 business, until we can find a financially feasible model for putting a computer on everyone’s desk, e-books will only be part of the education solution,” he says. “Since the kids coming out of the K-12 stream really don’t learn how to study from digital product, they won’t know how to study that way at college, so we’re anticipating a hybrid answer, a combination of digital and print. That’s why we don’t know how fast [book printing] will go away, if it ever will.”
Until that happens, Torch is dedicated to making the physical distribution of books as efficient as possible. In recent years that’s meant modifying his warehouse management system (WMS) and updating their picking process, including radio frequency (RF) terminals in the loose-pick area.
But now that those terminals have several years on them, rather than purchase new ones, McGraw-Hill decided to look at other options that would improve worker efficiencies. Voice caught their attention.
Voice Keeps Hands Free
“The expense for RF terminals was very large and we wanted to see if there was a way to minimize that expense for the future,” he says. “We were looking at over half a million dollars easily in RF purchases. Then we heard that one of our competitors in the higher-ed market had gone to voice so we took a look.”
Torch learned that voice could bring productivity gains to manual or paper-driven operations, but since his were already using RF he didn’t know how much more productive voice could make his order pickers. After a bit more research he found that hands-free operations could make a big difference.
“The picker would only be voicing in, they wouldn’t have to be on the keyboard, so when they go to the location their hands are picking and putting into the box and not dealing with the RF terminal,” he says.
Ergonomics was the other benefit, since pickers would not have to be reaching or looking down as much. And because workers are online and talking they don’t have the opportunity to talk to their neighbors while working.
“So it eliminates a little lost time between actual work because they’re always responding back verbally to the system,” Torch adds.
Productive Through Peaks
Now in their third year of using voice picking, the loose pick and replenishment tasks maintain their higher levels of productivity. Critical to each operation is the improvement in the training of new associates. The system is “trained” by the picker so it becomes attuned to that worker’s speech patterns. That feature was important to McGraw-Hill, especially with the large temporary workforce for peak season.
“We have a diverse workforce in our Dallas facility, including Spanish as well as English speaking people,” he continues. “We’ve had no problems with voice recognition because of personalized training. Also, we worked with Voxware on a ‘bucket brigade’ process, which is a smoother way to pass orders from person to person in a pick aisle.”
McGraw-Hill’s team is looking at extending this system to case pick applications in the racks for workers on order picker trucks as well as on the dock for carton-sort to pallets. Another promising application is returns consolidation confirmation—which is like a reverse pick process.
Torch says voice picking paid back within a year and interfaced well with the company’s 25-year-old home-grown WMS. It also helped them through the process of consolidating their DC’s operations.
“We are always watching our volumes,” Torch says. “That’s why voice has been so critical. We have to stay productive, even with lower volumes.”
Keeping Deliveries from Dogging Veterinary Offices
Adam Boccelli is senior manager of worldwide warehousing and logistics for IDEXX Laboratories, which supplies essential medical devices, consumable products, testing materials and laboratory services to veterinary practices, water treatment facilities, dairy farms and other animal health practices. That translates to more than 2,000 SKUs, including temperature-sensitive products. This can become as much of an order management problem for the doctor’s office as it can for IDEXX.
“They have no storage in these veterinary clinics, so storage always became a problem when you ship box after box after box, which equals more packaging and more waste,” Bocelli says. “Because all of us, including vet practices, are becoming more aware of sustainability issues, when you ship three packages with foam and ice and corrugated, questions arise.”
Multiple shipments also pull staff away from servicing clients to accept deliveries. Because of the temperature requirements these shipments must be unpacked and put away immediately into the correct storage condition.
Besides the delivery challenges at both ends of the chain, logistics costs were becoming a growing problem. IDEXX has four divisions (small animal, livestock/poultry, dairy and water) and two DCs (Westbrook, Maine, and Memphis, Tenn.) in the United States. It went from a $500 million company to a billion dollar company in five years. When it started growing substantially, high logistics costs were considered just part of the necessary business of getting products to customers on time and in good condition. Then in 2008 as fuel costs started to rise, logistics costs became a new focus.
At IDEXX’s Memphis DC, the biggest challenge was managing differing temperature requirements for products and orders. Temperature-sensitive products fall under three categories of delivery: frozen (next day), refrigerated (two days), and ambient (could be three days or more). Three temperature ranges often meant three different packages for a single order. The company’s SAP warehouse management module identified everything as a separate shipment, meaning as orders crossed different zones, they were picked, packed and shipped separately. That led to the multiple-package-problem.
“Picking by zone is an inefficient process, and we would pack them up separately, and our customer always asked us why they received multiple packages on different days for the same order,” Bocelli explains.
That translated into higher logistics costs, including packaging and freight. For the customer it could mean getting an invoice after the first package arrives but possibly before the rest of the order.
DC Mounts Multi-Zone Defense
IDEXX needed to become more efficient in how it assembled and shipped orders out of this DC. It worked with the consultants at FORTE to analyze its operations. What struck Bill Tyng, principal consultant at FORTE, was the high number of single-line, single-unit orders.
“We needed to break out that single-line, single-unit process from the rest of them to provide a way to handle a specific order type more efficiently, but we also had to provide a way to expedite something out of the system rather than wait for it to go all the way through,” he explains. “Their business was so heavily skewed to that single line order that we wanted to make sure we had the capability to service that end of the business as well as the more generic order you’d see.”
The IDEXX and FORTE project teams designed a new automated material handling system with two separate packing areas: one for single-zone orders and the remaining stations for multiple-zone orders. FORTE’s conveyor software control system, Automation Director, communicates directly with IDEXX’s SAP-WM module. Now orders that crossed multiple zones are combined into one shipping container.
Another level of complexity is that manufacturing and distribution operations are co-located. That means some components included in the finished goods have to be tracked by lot, batch and serial number from manufacturing through distribution—all the way through to the end customer’s final destination.
Between 800 and 1,000 raw materials must be managed, each with different handling environments ranging from -20°F to cooler to ambient.
“When you’re dealing with products that are frozen and will be used in another area of the facility, from an operations standpoint you have to know how much of it is in the staging location waiting for someone to come and get it,” Tyng says. “So from a data standpoint that product is no longer available for allocation.”
That, combined with the degree of temperature sensitivity, determines how a product gets from point A to point B.
New Focus on Transport
Today, the logistics team wants to be recognized as a strategic and competitive advantage for IDEXX and in partnership with each of its line of businesses, the company has a new focus on transportation and distribution—to the extent that it added a transportation department to its organization.
“It used to be it was everything air and everything
FedEx,” says Bocelli. “Now we use several modes, carriers and solutions, which requires a set of people to manage. But you can see from our cost savings initiatives, we’re getting payback because of that.”
With help from the new WMS and conveyor capabilities, IDEXX went from shipping 93 percent of its orders via air in 2009 to 50 percent air this year. That led to $2.8 million in savings year over year. With the new material handling system, IDEXX increased lines picked and packed per hour by 30 percent, reduced outbound packages by six percent, and cut freight costs by over $35K per month. And on the customer side, it has reduced the number of packages arriving at their doors.
Whether customer demand for a particular product rises or falls, a successful distribution center strategy keeps efficiency high and productivity constant.