On Drugs and Distribution
Alex J. Koleszar, managing editor
Welcome to the new "Warehousing & Distribution" section of Material Handling Management. In the coming months, we'll cover topics like storage, small item picking, dock efficiency, warehouse networks and cross-docking. This month, we're featuring an update on Supply Chain Execution (SCE) systems — also known as warehouse management systems (WMS). But first, a little background.
I've spent most of my professional career writing about medicine: cardiology, dermatology, Parkinson's disease, women's health and many other subjects. I've also written about the health care industry, especially drug companies and the new products constantly being introduced through their supply chains. I always knew the handling and delivery of these products was key to the quality of health care. Now, as managing editor of MHM, I'll bring that consciousness of warehousing and distribution's vital role to every industry we cover.
However, even after several months in this job, I can't help but notice how frequently my previous specialty — health care — is mentioned in the general media in the same context as material handling. I guess homeland security has a lot to do with it.
Both industries are constantly innovating. In medicine, there's always a new drug or medical device in the development pipeline. In material handling, the challenge is to match the flow of those products with the flow of information about those products. Enter radio frequency identification. RFID is poised to be one of the great innovations of the 21st century, with applications far beyond healthcare and material handling.
In those applications, however, automatic data collection will go a long way toward establishing secure, information-rich supply chains. In the past few months, several articles have detailed the problem of counterfeit prescription drugs. (Sample headlines from the Wall Street Journal: "FDA Targets an Upsurge in Fake Drugs;" "Bogus Medicines Put Spotlight on World of Drug Distribution.") The drugs either contain phony ingredients or are actual products that have been mislabeled (thanks to new technology) to hide their origins. Among the reasons for the rise in the fake drugs, according to the articles, is the complexity of the drug supply chain.
The Food and Drug Administration (FDA) has stepped in with some proposals to address this problem. One proposal would require bar codes on all unit dose prescription drugs within the next three to five years. Another would create a better system for tracking drugs through the distribution system.
In addition, the Healthcare Distribution Management Association has submitted guidelines to the FDA to ensure the integrity of the pharmaceutical distribution system. The recommendations include obtaining "a description of every distribution facility, including square footage, security/alarms, lease/own arrangements, and temperature/humidity controls" and "onsite inspections for compliance with federal and state laws pertaining to prescription drugs," including "policies for inspecting sample product purchases and for detecting adulterated/misbranded product." As you can see, these guidelines, if implemented, would have a significant impact on pharmaceutical distribution center operations.
SCE systems will help deal with some of these issues. For example, drug wholesaler McKesson Corporation employs an SCE system called AccuMax which tracks products through the system via bar codes. These technologies are improving the safety of the prescription drugs that you and I take.
The information on SCE systems in the accompanying chart was supplied by the vendors and lists a number of systems and their capabilities, including newer applications such as warehouse simulation and yard management. We hope you find it useful, and invite you to share your own observations on SCE or distribution center project implementation. Drop me a line at [email protected]. Your input will help me shape the content of this section.
How a WCS Boosts WMS Performance
Home furnishings retailer Williams-Sonoma has four distribution centers (DCs) in the greater Memphis area and a fifth DC on the West Coast. The facilities were operating a legacy warehouse management system (WMS) that was no longer supporting its requirements. The company decided to replace it with a commercial solution, and after an evaluation process selected Manhattan Associates to provide the WMS.
At the same time, Williams-Sonoma recognized that the warehouse control systems (WCS) that were running the automated material handling systems within the facilities also needed to be replaced. Tompkins Associates, a supply chain consulting and integration firm, installed the new WCS in the Williams-Sonoma DCs.
The company has divisions in five different lines of business: Williams-Sonoma (kitchen accessories, food products); Pottery Barn (home furnishings); Chambers (bed and bath accessories); holdeverything (shelving and closet accessories); and West Elm (home furnishings).
According to John Sidell, a partner at Tompkins, a WCS allows the WMS to take advantage of automated material handling systems. "In a lot of these large world-class DCs, you'll have not only powered conveyors, but also some very elaborate sortation and pick engines such as pick-to-light or voice integration. There are all sorts of requirements related to using mechanized equipment to move and retrieve products. The WCS is the layer underneath the WMS that handles all of the communication with that equipment."
The WCS enables Williams-Sonoma to take full advantage of the capabilities of its new WMS, notes Sidell. "The WMS takes care of the inventory integrity, takes care of making sure you have the right products stored in the optimal location in order to optimize the picking process. To complete that picture and to get the maximum benefit, you want to be able to process with your material handling systems at the most efficient rate possible. In other words, you want to run the sorter at its highest speed, you want to maximize the efficiency of all the different conveyors that are coming together and dealing with all of these merges.
"The WCS is the piece that keeps track of what's where on the conveyor, and what's been inducted. It's kind of a 'traffic cop' that keeps everything moving so you don't get any backups or jams in the conveyor and you're able to maximize the throughput. The transactional inventory control comes from the WMS, but the efficiency and the optimization of the material handling systems comes out of the WCS.
"We've seen a lot of clients spend a whole lot of money to put in a commercial WMS and not deal with the control side of it. They wind up with a very nice, robust WMS but still have a dependency on a WCS that was written by some guy who works out of his garage."
In its DCs, Williams-Sonoma has 10-12 three-level picking zones. "All of the product coming out of all of these pick engines needs to magically merge together before it gets inducted into the outbound shipping sorter," says Sidell. Two of the Williams-Sonoma DCs in Memphis are using the Tompkins controller; the other two will be implementing it in the first part of 2004. According to Sidell, the system helps the company manage its large enterprise, which includes hundreds of retail stores, an outlet division, dozens of catalogs, and online sales. "We're servicing all sorts of different channels out of the same set of facilities," he says.
Since going live with the Tompkins control system, Williams-Sonoma has increased the throughput and productivity of the shipping sorter between 10 and 20 percent. "What that can ultimately translate to is a more efficient use of the facility," says Sidell. "It allows you to drive more capacity through that facility and defer the capital costs associated with having to expand or build another building."
For more information:
Tompkins Associates www.tompkinsinc.com
Manhattan Associates www.manh.com
What a WMS Can Do for You
If you haven't yet invested in a warehouse management system (WMS), or are looking to upgrade your system but are unsure of the return on investment (ROI), it may be helpful to hear the experiences of others. The Warehousing Education and Research Council (WERC) recently conducted a survey of its members to determine the scope and experiences of their WMS usage.
The survey asked about effectiveness and overall performance gains resulting from a WMS. Of the 941 surveys mailed, 131 were returned (14 percent response rate). Nearly three-quarters of the respondents worked in manufacturing, the rest in retail, third-party logistics and other storage or distribution-related functions. A majority (61 percent) of the companies had less than 100 operations workers and 31 percent employed between 100 and 1,000 workers. As for the respondents, 40 percent referred to themselves as "middle management," 33 percent came from operations management, and 24 percent were senior management.
Two-thirds of those responding to the survey had implemented a WMS in their companies. The most popular WMS applications cited were:
-- stock picking;
-- real-time tracking;
-- material handling; and,
-- labor management and planning.
The survey looked for the degree to which a WMS improved warehouse operations. According to the respondents, the number one area of improvement was accuracy of orders sent out from the warehouse. Other leading benefits related to a WMS were improved delivery reliability and a reduction in the numbers of stockouts and backorders.
In the matter of internal operations, survey participants listed reduced cycle time and better receiving counts as the top two benefits of a WMS. Other gains were improved space utilization and better cost containment. Labor savings had mixed results: 70 percent of the respondents said that having a WMS saved them less than 25 percent in labor hours. However, 12 percent claimed labor savings of more than 50 percent.
As for ROI, nearly a quarter of the respondents expected that their WMS would pay for itself in less than two years, and two-thirds anticipated payback within five years.