Tag: logistics

Recession Leads to Survival of the Fittest

It’s Darwin’s principle of natural selection in action. In a poor economy, only the strong survive. A recession “always hits manufacturing first and hardest,” Hank Cox of the National Association of Manufacturers recently told the Minneapolis Star Tribune. According to the Associated Press, in December, “manufacturing activity sank to its lowest point in 28 years,” with indexes falling farther than expected. Some index components, including new orders, fell to historic lows not seen since the 1948-49 recession. Overall, the manufacturing index, which has been steadily declining over the past six months, reached its lowest reading since June 1980, the tail-end of the last major recession.

Major players from Dow Chemical to Ford Motor Co. to Anheuser Busch are chopping jobs and shutting down factories in an attempt to stop the financial hemorrhaging, but it may not be enough. With the global economy in a tailspin, manufacturers can’t rely on exports to save them from disaster. And when the big guys are flailing, you can bet small businesses are being hammered. From manufacturing to retail and everywhere in between, the economy is taking a toll on American businesses. No sector of the economy is proving to be recession proof. No one reported growth in December and most sectors of the economy reported declines in everything from new orders to production, employment and prices. Weak companies are going to fail. It’s survival of the fittest, but those companies that do survive the recession are predicted to emerge far stronger than before and in an arena with less competition. To make the cut, you’ll need to roll with the punches and be proactive about the changes that are coming.

The floundering economy and growing jobs crisis has given the incoming Obama administration a popular mandate to change America (see our previous two posts). Industry experts tell us to expect increased government oversight and regulation. Public backlash from the highhanded attitude of financial institutions that refused to disclose how they spent bailout money has assured that future government help will come with lots of strings attached. Add to that President-elect Obama’s campaign pledge to American workers to improve workplace safety and his pledge to the public to increase environmental protection, and American businesses should be girding for a new era of more invasive government regulation.

There are always two ways to handle change. You can rail and fight against it, or you can embrace it and use it to position yourself ahead of the competition. Time and again, history proves that those who look to the future and embrace change survive. As competition increases, the companies that are proactive about incorporating new technology, new equipment and new processes into their operations are the ones that will rise above their competition and live to see a better tomorrow.

Next time: How DJ Products can help you be a survivor.

U.S. Manufacturers Turn to ‘Insourcing’ to Save Money

Insourcing is the new buzzword in U.S. manufacturing circles. U.S. economic woes are causing many manufacturers to replace outsourcing with insourcing, an unexpected boon for American workers. The declining value of the dollar against foreign currencies, skyrocketing transportation costs caused by high fuel prices, and decreasing export demand resulting from the global economic downturn are making it more cost efficient for U.S. manufacturers to produce their products at home.

The same economic forces that sent U.S. jobs overseas are now bringing them home. Manufacturing costs in Alabama are currently running 3% below those in China, causing companies like Exxel Outdoors, Inc., which makes sleeping bags for Wal-Mart and other customers, to execute an “about face” on its production priorities. Since the Wall Street tumble, the company has hired more workers, added new equipment and beefed-up production at its Haleyville, Alabama plant, while cutting production at a joint venture in Shanghai. In 2007, 60% of Exxel’s bags were made in Shanghai. This year, the company will make more product at home than abroad and expects to produce 90% of their product at their Alabama facility by 2010.

Exxel founder and CEO Harry Kazazian is predicting a 20% increase in company revenue this year to $42 million. He credits insourcing as a major factor in his company’s success during a tight economy. Since 2005, he has seen the yuan appreciate 17% against the dollar, pushing up Chinese wages, material costs and freight costs. Kazazian says moving production from Shanghai back to Exxel’s Alabama plant just made financial sense.

“Labor is China’s advantage and our weakest link,” he said. “But they can’t compete with me on my just-in-time” production cycle. Exxel can deliver a sleeping bag from its Alabama facility within three days where shipping from China can take two months.

According to government statistics, U.S. manufacturing is contracting at the fastest rate since 2001, the last time America dipped into a recession. As countries around the globe struggle with the growing financial crisis, there has been a marked decrease in export demand. Without demand for the prodigious output that originally spurred outsourcing over the last decade, producing goods in the U.S. is becoming increasingly cost efficient. Smart companies are re-evaluating their outsourcing policies and making the switch to insourcing.

More Companies Going Forklift-Free

An increasing number of companies, particularly in the manufacturing, warehousing and logistics industries, are moving toward a forklift-free environment. Safety concerns and maintenance costs are the primary factors driving this major change in material handling application.

According to a recent study by the Hyster Company, a major manufacturer of forklift trucks, only 6% of end-users know their real forklift maintenance costs and few have implemented programs to reduce those costs. Over the 20-year life of a forklift, 80% of the total costs are operating expenses. Ownership accounts for only 20% of a forklift’s total cost. The Hyster study estimates that American businesses waste more than $1 billion per year in unnecessary material handling operating costs.

Far more expensive are the human loss and liability costs directly tied to forklift injuries each year. Each year, nearly 100 U.S. workers are killed in forklift accidents and another 20,000 seriously injured. Forklift overturns cause 25% of forklift-related deaths. Medical expenses, insurance costs, workmen’s compensation and lost man-hours associated with forklift accidents cost American businesses millions of dollars each year.

According to John Neuman and Larry Tyler, writing in American Machinist, a forklift-free program can have multiple benefits, including:

  • reduced inventory,
  • improved material flow,
  • reduced line-side handling equipment,
  • reduced floor space,
  • increased cycle efficiency,
  • increased floor coordination,
  • increased stocking efficiency, and
  • decreased operating costs.

On the human side, a forklift-free environment improves investor, worker and public perception of a company’s attention to safety. It improves worker ergonomics, efficiency and production and decreases expensive lost man-hours, medical, insurance and liability costs.

Next time: Implementing a forklift-free program.

Plenty of Jobs Available in Material Handling Fields

With the economy down and unemployment up, jobs are a hot topic this election. As industry starts to feel the economic pinch, plants are closing, workers are being laid off and some companies are facing bankruptcy. But there are jobs aplenty in the material handling industry and the associated industries of logistics, fulfillment and warehousing.

There’s a severe shortage of qualified industrial workers in America, particularly in material handling fields, that holds promise for job-seekers. The material handling industry is expected to be “50% short in terms of employees needed by 2010,” said Virginia Wheeler, executive director of the Material Handling Industry of America’s (MHIA) Education Foundation. The growing worker shortfall guarantees job security well into the next decade for people going into material handling jobs in warehouses, fulfillment centers, logistics operations, and factories.

“Our industry is begging for people,” said Dan Quinn, MHIA VP for education. He feels America’s high schools are undercutting the value of the trade jobs that built and continue to build America. “A lot of schools measure themselves on the percentage of students who go on to college,” Quinn criticized. “Schools should embrace the concept that non-college-bound students are still valuable contributors to the economy and society.”

The reality is that many high school students are not interested in pursuing a college education for a wide variety of reasons. Many simply prefer hands-on, physical work to sitting at a desk. Many are anxious to get out on their own and lack the interest in four more years of schooling. Many do not have the financial resources to consider college but must provide for themselves immediately after high school graduation. As the recession deepens, finances are expected to play an increasing role in education/work decisions. Some high school juniors and seniors, like Alaska Governor Sarah Palin’s future son-in-law, have already been forced to drop out of school to help support their families. Some employers are offering their employees the opportunity to complete their high school education through GED programs.

It’s unfortunate that many high school guidance counselors are so focused on college that they ignore the positive opportunities available in material handling industries. Raising awareness of job opportunities is one of the primary challenges facing the material handling industry, said Alan Howie, author of Fundamentals of Warehousing and Distribution. “. . . the essential problem is we have to get the message out there that . . . work in the material handling industry is much more than a manual labor job. It’s a career in a high-tech industry. Our challenge is to build awareness of all of this in the schools and colleges.”

Products to Help Your Business Go Forklift-Free

There’s a growing trend, particularly in manufacturing, warehousing and logistics environments to go forklift-free (see our June 11 & 13 posts). An increasing number of businesses are choosing to replace forklift trucks with safer, ergonomic material handling products that are cheaper to own and operate. As we noted, going forklift-free can result in considerable savings in production and maintenance costs while significantly decreasing worker accidents and injuries and their associated medical, insurance, workman’s compensation and lost man-hour expenses. DJ Products can help your business transition to a safer forklift-free work environment.

At DJ Products we manufacture a full line of electric cart pullers and motorized cart pushers and tugs. Our products are ergonomically designed to eliminate the pain and strain of manually pushing and pulling heavy carts and wheeled equipment. Smaller and more maneuverable than traditional equipment like forklift trucks, walkies and riding tugs, you’ll also find our products to be less costly to purchase and maintain. Implementing forklift-free solutions with DJ Products equipment offers multiple benefits, including:

  • Decreased operating costs, particularly equipment purchase and maintenance costs,
  • Decreased floor space needed to maneuver equipment,
  • Decreased worker injuries and attendant medical, insurance, workman’s compensation and lost man-hour costs,
  • Decreased liability,
  • Increased plant safety, 
  • Increased worker morale, and
  • Increased efficiency and productivity. 

DJ Products can help you plan your transition to a forklift-free environment. We specialize in solving ergonomic material handling applications with battery-powered, walk-behind tug and tugger solutions. Many of our motorized cart products can be custom configured for adaptation to almost every heavy cart pushing or pulling application. Click here to request a free brochure or video about DJ Products’ ergonomic solutions. We also offer a free demo trial program so you can try out a CartCaddy cart pusher at your facility before purchase. Our expert Sales Engineers can discuss the details of your particular application and suggest ergonomic products that will provide the appropriate solution. Click here to contact a DJ Products Sales Engineer and begin your transition to a safe, cost effective, forklift-free work environment today.

Tips for Ramping Up Warehouse Efficiency

The economy is forcing everyone to tighten up operations. Efficiency is today’s business byword. In a timely article posted on Supply Demand Chain, TriFactor systems engineer Greg Tuohy offered provocative tips to ramp up warehouse efficiency by improving material handling processes in distribution centers.

  1. Know where you’re at. Before you can decide where to make improvements, you have to know where you are, says Tuohy. Review operational data and break it down so you can see where your money goes and relationships between processes. Start with the big picture, but break it down to figure the cost of each element in the process. This will show you where you’re getting the best value for your dollar and where you need to tighten up your operation.
  2. Define customer service. Tuohy recommends defining your commitment to customers as narrowly as possible to allow more accurate measurement of success or failure. Defining what constitutes achievement of a perfect order, including labeling, delivery time, damage and documentation, also defines employee goals and customer expectations. Aim for realistic and achievable results that will give you a competitive edge.
  3. Touch it once. Each time an item is touched invites human error. Track the number of times an item is touched from the time the order is received until it ships out of your facility. Work to eliminate as many steps in the process as possible.
  4. Look up. When you need to expand operations, expand upward into unused overhead space instead of laterally. Elevating operations makes more efficient use of available space, allowing you to extend the useful life of your facility.
  5. Map SKUs. Gather data on SKUs in inventory, says Tuohy. Carefully map each SKU for shape, weight and velocity of use. Knowing how fast items move from demand to use allows you to slot your facility for maximum efficiency. “The data also allow you to take advantage of the cubing features of most warehouse management systems in order to calculate the appropriate-sized carton to use for a respective order,” says Tuohy, thus reducing carton and packing filler expenses.

Next time: More ways to ramp up warehouse efficiency

Learning to Think Sustainably

Supply Chain Sustainability and Green Sustainable Supply Chain are the coming watchwords in the material handling and logistics industries (see our July 7 post). A green sustainable supply chain is the process of using environmentally friendly resources to create products that when used — and also when eventually discarded at the end of their life cycle — break down into components that either benefit the environment or can be recycled to create new products without harming the environment. 

“The whole idea of a sustainable supply chain is to reduce costs while helping the environment,” explained Patrick Penfield of the Whitman School of Management at Syracuse University in a 2007 article for MHIA’s publication On the Mhove. To gauge the cost savings of a sustainable supply chain requires that businesses think in terms of the life cycle costs of a part, piece of equipment or process. It’s merely the next step in the evolution of cost analysis, argues Penfield. “In the past,” he says, “most companies were focused on reducing unit costs. Many companies later evolved into looking at total landed costs with the onset of global trade. Companies also started looking at the usage costs with a piece of equipment.” Figuring costs based on the total life cycle of a part, piece of equipment or process is simply taking an even broader view of cost analysis.

Approaching business and industry from the broad outlook of sustainability “could be a tremendous weapon for companies to reduce costs,” Penfield believes. “There are many facets of the supply chain that could be improved by looking at it from a sustainability standpoint.” Today, companies worldwide are reviewing design and production processes and redesigning those processes to use fewer resources and less energy. In one example, Interface Corporation, a leading maker of materials for commercial interiors, decreased the horsepower requirements of a pump system by 92% simply by using shorter, fatter pipes than originally called for. Their engineer’s redesigned system “cost less to build, involved no new technology and worked better in all respects,” Penfield points out.

Next time: Using sustainability to create a competitive edge

Building the Workforce of the Future

Even before the economy took a dive, material handling industry experts were warning of coming changes to America’s workforce that could have far-reaching implications for U.S. businesses. America’s population is aging. By 2015, the over 65 population will increase by more than 20%. At the same time, the number of people getting started in the workplace, those 25 to 39, will grow by only 6%. And even more alarming, the population group that has traditionally formed the core of America’s workforce, those aged 40 to 54, will shrink by 5%. Businesses need to prepare now to deal with a younger, smaller U.S. workforce.

But that’s only part of the problem, said Gary Forger, Senior VP of Professional Development for the Material Handling Industry of America (MHIA), in his keynote address at ProMat 2009 earlier this month. The fast pace of technological change and the need for constant learning and retraining may present the biggest challenge. Where it used to take 12 to 15 years for skill sets to before becoming obsolete, it now takes less than 3 years. “It is estimated that 39% of the current workforce and 26% of new hires will have basic skill deficiencies,” Forger said. Unfortunately, America’s future workforce may not have the “live to work” ethic of their predecessors. Tomorrow’s worker will be seeking a better work-life balance, placing higher value on “work to live.”

While coming changes in workforce demographics will present significant challenges for U.S. businesses, Forger said it will also present unique opportunities to improve productivity and performance for companies able to exercise flexibility. Forger suggested that those opportunities are likely to be found in unexpected places. Companies may find it productive to pair old and new workers, he said. New workers would bring advanced technological skills to the table; older workers, knowledge and experience. Automation is expected to increase to allow smaller workforces to maintain production. The need to accommodate aging workers will place increased emphasis on ergonomic equipment.

As the number of U.S. workers dwindles, the material handling industry should prepare for an increasingly multi-cultural and multi-lingual workforce. Forger said recruiters may need to target new work groups, such as “Hispanic women reentering the workforce.” Retention efforts may need to become more flexible and more creative, offering different incentives to differently-motivated groups. In the future, advancement, employee satisfaction and responsibilities may provide better retention results than basic pay. How companies address work-life balance issues is also expected to play a key role in employee retention.

Using Sustainability to Create a Competitive Edge

Being eco-friendly is increasingly considered a social, political and economic advantage in U.S. business and industry — and, therefore, a competitive edge. Forward-thinking companies are using environmental initiatives and dedication to sustainability to create advantageous public opinion. Cutting edge, eco-friendly solutions gain customers. The extreme, sometimes almost rabid, level of dedicated customer loyalty, despite sometimes higher consumer costs, has been an unexpected benefit. An increasing number of ecologically-concerned Americans are willing to pay more for products and services that protect or sustain the environment. Interestingly, consumers view this as a way of partnering with industry to save the environment.

More industries are pursuing sustainability to reduce the life-cycle costs of parts, equipment and processes (see our July 9 post). “Anything not in a product is considered a cost; it’s a sign of poor quality,” say the authors of Green to Gold in explaining 3M’s Pollution Prevention Pays program. “As 3M execs see it, everything coming out of a plant is either product, by-product (which can be reused or sold), or waste. Why then should there be any waste?” As the authors point out, 3M views waste as unrecouped expenses and something to be avoided. The company’s goal is 100% sustainability.

Sustainability is not limited to the direct costs of business and industry. Savings can also be realized in indirect costs such as packing, transportation and other logistics considerations. Eco-friendly smart packages that reduce cardboard and filler save resources and money. Replacing gas-guzzling forklifts with energy-smart electric and motorized carts and tugs is another environmentally smart way to cut costs. Optimizing shipping loads and delivery strategies can result in significant cost savings given skyrocketing fuel prices.

Implementing a sustainable supply chain also eliminates or reduces the amount of money spent on disposal of harmful by-products, scrap and adherence to regulatory issues. In many instances, by-products previously disposed of as waste are now generating viable revenue sources for environmentally-conscious companies. Sustainability is already being used to competitive advantage by many companies who have found it a profitable way to grow market share in their industry.

MHIA Funds Distribution Ergonomics Research

The Material Handling Industry of America (MHIA) has awarded a $50,000 research grant to Ohio State University researchers in Columbus, Ohio. The grant will be used to help fund creation of a research center focused on distribution ergonomics. Provided through MHIA’s College Industry Council on Material Handling Education, the grant represents MHIA’s maiden effort in direct funding of material handling and logistics research.

In their award-winning grant application, Dr Carolyn Sommerich and Dr. Stephen Lavender of OSU proposed:

  • To create a research center that develops and devaluates ergonomic methods, tools and processes that will allow distribution center workers to work more safely and efficiently; and
  • To develop partnerships between regional distribution centers and material handling equipment manufacturers to assist the distribution centers in becoming workplaces of excellence via the proper utilization of ergonomics and lean engineering.

“MHIA is proud to support this important research which will contribute significantly to the body of knowledge on ways to improve the safety and productivity of warehouses and distribution centers,” said Daniel Quinn, MHIA Vice Chairman for Education Planning & Professional Development. “Going forward MHIA is anxious to support research such as this which will benefit the safety and productivity of factories and warehouses in the United States.”

In making the grant announcement, MHIA voiced a commitment to supporting material handling and facility logistics research and teaching in the future. Increased funding will be available for such research in the 2009-10 academic year. A call for proposals is expected to go out late this year.

DJ Products applauds MHIA’s new initiative. We recognize the importance of ergonomics in the workplace and are dedicated to the design and production of ergonomic material handling solutions. Visit the DJ Products website for more information about ergonomic products that can make your plant or business safer, more efficient and more productive.