Enjoy the Ride

The economy’s been riding a roller coaster lately, but nobody’s having any fun. In fact, manufacturers have grown jittery trying to balance the need to keep inventories light while satisfying their customers’ unpredictable last-minute demands. This trend made the Wall Street Journal’s front page recently. It reported that although consumer spending has been keeping us out of recession, it’s capital spending by business that will bring full recovery.

Capital spending on what? This magazine contends that material handling logistics is the key to our nation’s fiscal fitness. The real-time management of material and data flows will help you keep up with the fickle consumer’s whims and withstand the reverberations that those whims send up and down your supply chain.

Logistics execution systems (LES) play a key role here, particularly when it comes to make-to-order. That fueled a good bit of conversation at a recent panel discussion that MHM had the honor to moderate. The panel was part of a seminar in Memphis, sponsored by the Logistics Execution Systems Association (LESA), a product section of the Material Handling Industry of America (MHIA). The economy hasn’t been kind to LESA members, either, but many of them recognize that they can play a major role in reversing the situation.

For example, some of the newer features you’ll find in LES packages include order planning and scheduling, light assembly and value-added processing. What do these have to do with storage? Nothing. That’s the point. Storage is the last thing most companies want to do. These new LES capabilities are designed to help users be more agile when it comes to inventory management. Let me share a few insightful quotes from the LESA panel:

Stanley Chew, HighJump: “When it comes to inventory collaboration, [most] U.S. manufacturers are make-to-order, and most are under $25 million. These guys don't have the money to go out and build warehouses and carry a lot of finished goods inventory. [When it comes to LES software], they’re more concerned about the costing algorithms, general ledger and quoting.”

Jim Hicks, Lilly: “Burger King had it right many years ago. ‘Special orders don't upset us.’ That's the world we're in today. This drives the need for much more efficient operations by the DC and the ability to move that final production phase as close as possible to the customer. Moving it to the DC cuts costs and improves inventory turns.”

Larry Bowar, Symbol: "We're finding companies are getting additional benefit in ROI analysis, getting beyond inventory accuracy. Clients are moving their light manufacturing from the plant into the distribution center. A good example is a cellular phone distributor. When the orders come in, they go to work. They add special handles and packaging, and they build to order. This reduces the amount of finished goods inventory they have to carry and significantly increases inventory turns."

Steve Parsley, Eskay: "Even an inside-the-four-walls WMS gives you the plant information you need so you can make a definitive commitment to your customer. Today your customer can log onto the Internet to find alternative suppliers. If you miss a commitment you generate a cancellation. As a result, you lose a piece of market share and it's harder to get that market share back."

If you want to read more about what the LESA panelists said, go to www.mhmanagement.com for a full report. And if you want more information about the next LESA seminar, contact MHIA’s Mike Ogle at msjhogle@bellsouth.net.  It’s this kind of networking that will help you ride the roller coaster — and have fun.

Tom Andel, chief editor, tandel@penton.com