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Squeezing New Productivity Out of Mature Technology

Dec. 7, 2011
New industry collaborations are resulting in fresh approaches to a chronic problem both in transportation and distribution: the need for higher productivity.

The return on a technology investment doesn’t have to end. As long as there are opportunities to increase logistics productivity in a distribution center or on the road, customers will pursue them with networks of technology providers. These relationships are more partnership than purchasing.

PepsiCo ( is a prime example on the user side. When it implemented a transportation management system (TMS) a few years ago, it saw the project as more of a map in its business evolution than as the purchase of a tactical point solution to save transportation dollars.

Mark Whittaker, v.p. of PepsiCo Transportation, saw a threat to that evolution resulting from a possible 5-8% shrinkage in truckload capacity due to pending driver hours of service and safety regulations. Not only did he want visibility into the productivity of his own company’s private fleet, but he wanted a window into his other transportation providers as well.

What Whittaker learned about the business of transportation led him to establish Pepsi Logistics Co., Inc. (PLCI) as the internal logistics services division for the various PepsiCo business units. That strategic approach, which merited MH&L’s recognition as one of its innovators of the year (see pg. 15), also won the admiration of the TMS vendor PepsiCo ultimately selected.

“They created an internal 3PL before they created an external one,” says Fab Brasca, v.p. of global logistics at JDA Software ( “That’s the difference between looking at a TMS as just an execution level functional deployment that yields x% cost savings to really looking at it as a roadmap that points to each step that will evolve how the organization approaches things over time. That kind of approach will generate not only additional monetary and service value but strategic value as well.”

Indeed, it enabled PLCI to launch a strategic transportation provider network integration strategy to support a stronger alignment between its information system and its internal and external transportation providers. Whittaker expects this effort to address PepsiCo’s transportation capacity problem by driving captured capacity into the network, minimizing carrier cost and availability volatility.

Brasca says this is all part of an industry-wide move away from mere data reporting to analytics. Situational analysis is becoming the responsibility of people outside the boardroom and management offices, as well.

“Instead of treating analytics as a separate set of capabilities disassociated from your day to day execution, we see value in enabling some of those metrics as part of the operator’s user experience,” he says. “Instead of doing offline analytics which will get you longer term tactical and strategic value, there are some metrics where it makes sense to have that operationally available because it may have an impact on a user’s daily decisions—giving value to the planner on an hour-by-hour basis as opposed to monthly.”

Better Use of Labor

The strategic value of logistics software also comes into play when trying to maximize labor productivity. That’s more important than ever as companies struggle to draw skilled labor into their logistics ranks being vacated by retiring baby boomers.

Automation won’t solve that problem and logistics operations will continue to hire labor even as they automate. Making sure they’re productive requires a focus on three things: pace, utilization and process. Engineered standards are needed to help gauge those metrics. Labor management software puts those standards to work.

“We will create dashboards for clients who will track metrics around utilization, productivity, safety and accuracy,” says Peter Schnorbach, labor management expert with Manhattan Associates ( “We can summarize at that level by tracking individual employee performance. We can also track what the productivity should be, taking into account any mistakes the supplier made.”

Schnorbach says labor makes up about half the cost of most distribution operations, but it tends to be the last thing managers worry about.

“There’s a lot of bang for the buck there that companies could use to fund the automation projects they want to do,” he says.

It’s one thing to measure labor productivity, but engaging employees to be more productive has to come first. Schnorbach suggests that by giving employees access to data and enabling them to provide feedback, processes can be streamlined and improved.

Research supports his contention. Julie Fraser, lead analyst with Cambashi (, an industry research firm, is working with the Manufacturing Enterprise Solutions Association ( on a study called “Pursuit of Performance Excellence: Business Success through Effective Plant Operations Metrics.” It’s still early in this project, but findings are leading to interesting conclusions regarding the connection between labor productivity and automation. One of those conclusions is you need to give employees stewardship in any process.

“Asking employees to enter the data for measuring processes helps them to really understand the process and how to improve it,” Fraser says. “Data requires analysis, including validation and verification. Making sure the employees understand what they are improving can be critical. Manual operations can have good measurements and targeted key performance indicators, but there is a built-in challenge with the data collection in that it requires cleansing.”

Lifting Lift Truck’s Labor

While labor may represent half the cost of distribution operations, it can be 80% of the cost of operating a lift truck. With lift trucks being the most common material handling tool in a plant or DC, labor management becomes that much more important. That’s why lift truck vendors and systems providers are providing ways to automate lift truck movement and data collection.

Such solutions are not intended to replace traditional lift trucks, but to reduce labor costs by leveraging and multiplying labor across several trucks. Neither are such vehicles replacements for automated guided vehicles (AGVs), which don’t have operators. But lift truck providers are starting to offer variations of both technologies to meet their customers’ demand for higher productivity.

For example, Toyota Material Handling’s ( Automation Group offers its own line of AGVs, but the company can also help customers convert its standard lift truck tow tractors into AGVs using an aftermarket kit. The kit allows the customer to use the truck in either automatic/AGV mode or manual mode (operator). It alternates between automatic or manual mode intuitively through an operator presence sensing system. If an operator stands on the platform, the tow tractor automatically reverts back to manual mode.

The Raymond Corporation ( also offers an automated/manned combination unit it calls an Automated Lift Truck (ALT). Unlike most unmanned AGVs, an ALT has no fixed routes. An operator teaches it what to do. It “learns” routes and the actions to perform on a route while an operator drives it.

On Raymond’s ALT, a Seegrid ( multi-head camera system records image data while the truck is being driven. Then software and hardware convert image data into a travel path the truck can follow. If the truck senses an obstruction, it will slow down and eventually stop until the obstruction is removed, and then continue on its way. An operator must manually load pallets, but the ALT will automatically drop pallets at preprogrammed locations.

Frank Devlin, advanced technology marketing manager for Raymond, says one person can easily manage three to four ALTs and perhaps more, depending on the lengths of routes and what other duties the operator is required to perform. The operator also teaches actions like horn honks, stops at intersections and pallet drops while the vehicle is in learning mode. Those routes are then used when the truck is in automatic mode (without the operator) to transport material in the warehouse or manufacturing plant. These vehicles can also be operated in manual mode like a conventional lift truck.

Industry Partnerships

Lift truck providers are not only providing their own automated solutions, but they’re partnering with material handling system providers to interface with warehouse management and operations control software. Dematic (, providers of material handling automation, demonstrated this kind of partnership when it teamed up with Crown Equipment Corporation ( to develop a semi-automated picking solution. This partnership demonstrates that with the combination of Dematic’s voice-directed technology, AGV guidance and warehouse control system (WCS) software, Crown’s PC 4500 Series rider pallet truck can be used in a case-picking scenario.

In such an application an operator is directed to a location and then provided with the quantity to pick. The operator places the case on the pallet contained on the pallet truck, then the AGV controls allow the pallet truck to automatically advance to the next pick location.

“Typical operations will see a 40% increase in labor productivity, including improvements in order accuracy,” says Ken Ruehrdanz, market development manager at Dematic.

The material handling industry is evolving to offer customers a more unified approach to converting tactical bits and pieces into their strategic big picture. If this trend continues, five years from now today’s islands of automation will give way to integrated enterprises.

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