Warehousing & Logistics Magazine Vol 1

The online journal of the International Federation of Warehousing and Logistics Associations

WAREHOUSING& LOGISTICS

INTERNATIONAL

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Contents 3

4 REPORT: A number of economies are emergingand any of these could change the overall landscapeof world economies

6 A CHAMPION FOR INDIA: The UK-basedChartered Institute of Logistics & Transport is keen toexpand its influence across India

8 SUSTAINABILITY RISKS: Sustainability risksdrive US businesses and government to target thesupply chain

10 GIBRALTAR AIRPORT: Dematic will carry out thedevelopment, installation and commissioning of thenew Baggage Handling and Screening System of theNew Terminal at Gibraltar Airport

12 VESTED OUTSOURCING: The ten key ailmentsthat commonly afflict outsourced partnerships andpresents five golden rules for success

16 ECONOMY: Facing up to the reality of a difficulteconomic situation

20 FORKLIFT TRUCKS: 3PLs want to source truckfleets from organizations that can guarantee the high-est levels of service and forklift fleet managementacross several countries

24 BUSINESS: Intelligent electronic trading holdsthe key to a faster order-to-cash cycle

30 CASE STUDY: An in-depth look at Office Depot’shighly automated facility just south of Frankfurt inGermany

38 WAREHOUSING: Ron Farr, VNA and warehouse systems manager,Yale EMEA, considers the various storage and han-dling systems available

42 FOCUS ON GERMANY:

Welcome to the first issue of Warehousing & Logistics

International - a brand new electronic magazine

for the IFLWA

The companies who belong to the various trade bodies

that make up the IFWLA play a significant role in this crucial-

ly important global industry.

Warehousing and Logistics International will enable these

companies and their suppliers to communicate effectively.

Produced bi-monthly, the publication will contain a mix of

news and feature-based content concerning logistics and

materials handling related issues from around the world.

By highlighting the market conditions and experiences of

others, it is hoped that the publication will provide the best

practice information that third party logistics executives from

around the world will be able to apply to their own compa-

nies. The publication will also serve to promote the activities

of the IFWLA and raise the Association’s profile throughout

the global logistics and supply chain industries.

We are already turning our attention to the next issue of

the publication and editorial from IFWLA member associa-

tions will be very welcome. Please send your contributions to

me via email at: [email protected]

Roger Williams, Secretary General, IFWLA

The IFWLA Secretariat is based at the offices of the: United

Kingdom Warehousing Association, Walter House, 418-422

Strand, London WC2R 0PT England www.ifwla.com

Warehousing and Logistics International is an official publication ofthe International Federation of Warehousing and LogisticsAssociations It is published by Quad PublicationsPublisher: Daren Thomas; T: 0044 [0]771 9740736E: [email protected] Development Director: Richard DaviesT:0044 [0]7970101515E:[email protected]

The globallogistics community

4 Report

www.ifwla.comApril 2011

The US economy is currently the largestin the world, estimated by organiza-tions such as Peterson Institute for

International Economics, to be $14.6 tril-lion. The Chinese economy recently over-took the Japanese economy to be theworld’s number two, which is estimated tobe some $5.7 trillion. However based onthe current rate of expansion the Chinesemanufacturing base, the Chinese economyshould surpass the US economy in only amatter of years. PriceWaterhouseCoopers(PWC) published a report entitled "The Worldin 2050", which predicts that the Chineseeconomy will overtake the US in 2025 and willbe 130 percent the size of the US market by2050. The report also goes on to predict thatthe Indian economy, which currently eleventhlargest, would be the world’s third largesteconomy in 2050, perhaps only ten percentsmaller than the US.

There are a number of other economiesthat are currently emerging and dependingon their attractiveness to foreign investmentand manufacturing prowess; any of thesecould change the overall landscape ofworld economies. The logistics researchcompany, Transport Intelligence, highlighteda number of countries that are emerginglogistics markets in 2011 and couldbecome leading economies in the nextdecade.

10. MalaysiaMalaysia has become a force in the southAsian market by attracting major automo-tive companies such as VW and Mercedesto build assemble plants. Other foreigninvestment has been forthcoming from elec-tronics, solar-related and oil and gas indus-tries. This has pushed the logistics marketto grow at an estimated 12.5 percent fornext five years.

9. Saudi Arabia

Obviously Saudi Arabia is known as theleading oil exporter but surprisingly thiskingdom has suffered over the last fewyears with the global slowdown. It has theability to invest heavily in logistics and hasbuilt a number of transportation hubsacross the country. When the growth in theglobal economy does return, the Saudi’sare in a good position to benefit with theinvestment in their infrastructure.

8. EgyptBefore the recent political turmoil in Egypt,this country was well positioned to be alogistics center in the middle-east. Therewere plans for a number of industrial zonesand development in the new industrialcities. Unfortunately with a change in politi-cal direction this could all be underminedand Egypt’s predicted growth fail to cometo fruition.

7. United Arab EmiratesAs with Saudi Arabia this federation ofseven states has benefited from significantoil exports, but unlike the Saudi’s some ofthese small nations have spent their newwealth in significant infrastructure. Whenthe global downturn occurred some of thenations, such as Dubai, found them eco-nomically stretched, but based on theinvestment already made, Dubai, AbuDhabi and Sharjah are in a excellent posi-tion to grow when the economy improves.

6. TurkeyTurkey has a unique geographical andpolitical location which could produce sig-nificant growth in the coming years. Thecountry lies between the western nations ofEurope and the growing Arab states andpolitically it is very similar, with an Islamicpopulation that benefits from a westernstyle government. If the political situationremains calm in Turkey this nation could

There are a number of economies that are currently emerging and any of these could change the overalllandscape of world economies, according to a recent report by he logistics research company, TransportIntelligence

Changing the landscape


Report 5

grow significantly as it grows closer to theEuropean Union.

5. RussiaRussia is country of vast natural resourcesand could exploit these further to invest ininfrastructure. Since the country’s initiationof foreign investment the economic growthhas increased and will increase furtherwhen the current recession ends.

4. MexicoMexico is another country which could growsignificantly over the next few years. Itsphysical closeness to the US has some com-panies looking to invest in Mexico asChinese costs rapidly increase. Industry inthe country is growing but its internal prob-lems are still keeping US and Europeancountries from committing to the nation.Despite the problems Mexico’s air, rail androad freight businesses are expected to rap-idly grow in 2011 and beyond.

3. IndonesiaIndonesia has benefited from a relaxationon foreign investment and this could sparksignificant growth in the country. Previouslythe government has limited foreign invest-ment in telecommunications, logistics andhealthcare, which dramatically stifled eco-nomic growth. As China becomes lessappealing to foreign investment, countriessuch as Indonesia, Thailand and Vietnamcould benefit and see rapid expansion inthe coming years.

2. BrazilBrazil has benefited from savvy governmentinvolvement, such as tax incentives andinfrastructure investment. The nation is theeight largest economy in the world and hassignificant natural resources. Brazil is amajor exporter of textiles, aircraft, coffee,orange juice and soybean. The country hasover 2500 airports, over 114,000 miles ofpaved roads as well as 36 deep-waterports. With a population of over 190 mil-lion, the internal as well as external marketcould give Brazil a major economic boostwhen the recession is over.

1. IndiaThe Indian economy is booming even dur-ing a global recession. It has a uniquenessthat has benefited the nation due to itscolonial history. As English is the languageof the Indian government, foreign investorshave found that doing business in India iseasier than other nations. This ease ofdoing business, combined with a highlyeducated workforce, has led the world’s topcompanies making India their secondhome. However despite these benefits andsignificant government investment in urbaninfrastructure, the nation still has kept for-eign investment out of industries such asretailing, where global powerhouses likeWal-Mart andTesco are eager to get afoothold. If the Indian government relaxesits policies then the country could seeincreased investment and growth.www.transport intelligence.com

Brazil is amajor exporterof textiles, aircraft, coffee,orange juiceand soybean

6 India


India has been one of the world’s mostrobust economies throughout the globalrecession. A liberalising market, increas-

ing levels of disposable income anddynamic manufacturing & retail sectors arecombining to produce one of the best busi-ness environments in the world. Industry &commerce are growing at more than 7%per annum and anticipated to do so formany years to come.

Transport and Logistics are key to thisgrowth and major contributors to the Indianeconomy. In 2010 Transport Intelligenceidentified India as the world’s most impor-tant growing logistics market. We estimatethat at least 12% of the Indian workingpopulation are employed in these sectors— over 40 million in transport alone.Increased accessibility and connectivity isopening up new markets. The logistics andtransport sectors have huge potential forgrowth, new service development, andinvestment.

Excellence in Logistics and Transportmakes businesses more profitable, morecompetitive and easier to attract customersand investment. As Professor MartinChristopher observed “Businesses no longercompete, its Supply Chains that compete!”In 2010 the Indian logistics market will beworth $125 billion!

However Transport and Logistics in Indiaalso faces many challenges including infra-structure development, providing nation-wide distribution and linking to import &

A champion for logistics,transport & supply chainmatters in IndiaThe UK-based Chartered Institute of Logistics & Transport is keen to expand its influence across India,as Bernard Auton, Secretary General & Chief Executive Officer, CILT Interntional explains

Every improvement in logisticsand transport services increases the demand forwell trained logistics andtransport operators, supervisors and managers.But unfortunately there is limited provision of internationally accredited, professional, logistics & transport education in India.

export markets. In 2007 India scored 3.07(out of 5) in World Bank’s LogisticsPerformance Index (LPI). In 2010 the scorehad risen to 3.12 but in country rankingIndia fell from 39 to 47 (out of 155 coun-tries). Logistics performance in India isimproving but other countries are improvingfaster.

Every improvement in logistics and trans-port services increases the demand forwell trained logistics and transport opera-tors, supervisors and managers. But unfor-tunately there is limited provision of interna-tionally accredited, professional, logistics &transport education in India. One studyidentified the need to train at least 4,000warehouse managers and 25,000 supervi-


sors per year, and that's addition to morethan 10,000 new truck drivers needed eachmonth!

The Chartered Institute of Logistics andTransport (CILT) wants to be active in all themajor Indian cities and across all the trans-port and logistics disciplines. We will beareworking across India over the next 24months to help develop the CILT includingestablishing CILT Branches in the majorlogistics and transport hubs.’s services . Thiswill involve existing Members of CILT~India,CILT Members from other countries andassistance from the CILT InternationalSecretariat. We want to meet with as asmany senior members of leading logisticsand transport businesses, trade associa-tions, business organisations, professionalbodies, Chambers of Commerce & Industry,state & local government, and educationproviders as possible.

We also want close working relationshipswith other professional groups, particularlytrade associations who are seeking develop-ment opportunities for their members'employees. These will include theFederation of Freight ForwardingAssociations of India (FFFAI) [12.000 mem-bers in India, including Custom HouseAssociation members], Air Cargo AgentsAssociation of India (ACAAI), Association ofMultimodal Transport Operators (AMTOI),Asian Council of Logistics Management(ACLM) and Council for Supply ChainManagement Professionals (CSCMP.) TheFederation of Indian Chambers ofCommerce & Industry (FICCI),Confederation of Indian Industries (CII) andThe Associated Chamber of Commerce andIndustry of India (ASSOCHAM).

One of the key groups will be membersof the International Federation ofWarehouse & Logistics Associations IFWLAincluding those in UKWA.

We welcome suggestions on otherregional, sector, Indian and Internationalorganisations we should work with to pro-mote skills development & networking forlogistics and transport professionals inIndia.

Our success depends on working withthe right people - the leaders in these sec-tors, and we look forward to working withyou... [email protected]

8 USA


Arecent report by Ernst & Young LLPidentifies five climate change and sus-tainability risks that executives should

consider as they respond to growingdemand to eliminate waste from their sup-ply chains and to report on these initiatives.

The demand comes from a proliferationof large corporate supplier qualification andscorecard programs that are employed toexamine carbon footprints and resource useat every step of the product and service life-cycle - from the sourcing of raw materials towaste disposal by customers. In addition tocommercial customers, consumers,investors, analysts and other stakeholdersare demanding transparent informationabout the lifecycle of products and services.

Government engagement is also motivat-ing corporate focus on greening the supplychain.

In November 2010, the US government– the largest supply chain in the country –announced its GreenGov Supply ChainPartnership, a pilot program to cut wasteand pollution in the federal supply chain bymeasuring greenhouse gas emissions(GHG). Following this pilot, the General

Services Administration intends to developan incentive-based approach to contractingto favor companies that track and disclosetheir GHGs.

“Supply chain and environmental profes-sionals share a common goal: to reducewaste. While these supplier programs couldbe seen as a burden, they are actually greatopportunities to cut costs while reducing anorganization’s environmental footprint. Therisks –- once identified and managed for anindividual organization –- can help fostercustomer relationships and yield competitiveadvantages,” explained Steve Starbuck,Americas Leader, Climate Change andSustainability Services, Ernst & Young LLP.

The five highly charged climate changeand sustainability risks to supply chain oper-ations include:1) Strategic – The supply chain, for manycompanies, increasingly provides an oppor-tunity to improve competitive advantageand reduce cost and waste. Leading com-panies understand this link, particularly asstakeholders become more interested insocial and environmental costs.2) Compliance – Organizations that are

Sustainability risks drive US businesses and government to target the supply chain

Sustainability risks

required to comply with green supplier pro-grams now need to track data on energyuse and make the information available foraudits. On the flip side, if an organizationhas instituted a green supplier program, itwill need new processes to track and moni-tor supplier compliance and to use the datato drive decision-making.3) Financial - Supply chain issues impact anorganization’s financial strategy in multipleways, such as: opportunities to cut costs,potential cash management and liquidityimplications as a price for carbon is set indifferent jurisdictions, and new due dili-gence requirements for acquisitions.Additionally, as companies increase publicdisclosures in non-financial reports, CFOsand audit committees are exercising moreoversight.4) Reputational - Many companies areimplementing supplier qualification pro-grams to ensure they do business with sup-pliers that share their values, which helpsthem manage brand and reputational risk.As such, these companies may conduct reg-ular audits of suppliers, which might includecompliance with emissions, waste and safe-

ty guidelines.5) Operational – Spare parts inventorymanagement, manufacturing equipmentutilization, and planned maintenance arejust a few areas where the level of efficiencycould be improved. Other operationalareas to assess include: unplanned down-time, reduction and innovative uses formanufacturing waste, transportation, logis-tics and facilities.

“As organizations across the public andprivate sector decrease their environmentalfootprints by focusing on supply chain oper-ations, many find they need to influenceoperations that fall outside the directcontrol of a single business unit orenterprise. As a result, supply chainleaders need up-to-date sustainabilityinformation that meets the growingdemand for transparency and accuracyfrom customers and suppliers alike.Many companies are already taking a fulllifecycle approach to improve the environ-mental impact of their products and servic-es." explained Eric Olson, Ernst & Young’sClimate Change and Sustainability SupplyChain Leader, Ernst & Young LLP.

Recommended actionsthat supply chainoperations profes-sionals can takeinclude:1) Assess climatechange and sustain-ability reportingneeds, including eval-uating the integrityand alignment ofdata across the sup-ply chain.2) Monitor and assessexisting or potentialgovernment regula-tions on the entiretyof the supply chain.3) Review the corpo-rate risk register andrisk managementpolicies for appropri-ate inclusion of cli-mate change and sus-tainability risks asso-ciated with the supplychain.

USA 9

Combilift & Aisle-Master join forcesFollowing the incorporation of the Aisle-Master articulated range into Combilift’s portfolio, two of Ireland’s most successful materials handling brands are now under one roof, and Combilift continues to blaze the trail in the 4-way and narrow-aisle handling sector around the world. There are over 14,000 units in operation worldwide, with an extensive global dealership network spanning more than 50 countries.

Combilift recently launched its largest model to date the giant C25000with a capacity of 25 tonnes. At the other end of the scale, the “baby”of the range, the award winning counterbalance design 4-way Combi-CB, designed for handling a mix of palletised and long loads is proving to be a very popular choice across a wide range of industry sectors. “Our ability to react to customer feedback and develop handling solutions of any size is what sets us apart from other manufacturers,” comments MD Martin McVicar. “Since we launched our first C4000 Combilift – which is incidentally still one of our best sellers – we now offer models from 2.5t upwards with an almost infinite choice of options for atruly customised product. Our range encompasses 4-way sideloaders, stand-on models for extreme narrow aisle operation, thelarge cab XL series as well as the core Combilift range in varying load capacities.”

More models, more capacity, more choice

A New Look for Aisle-Master Aisle-Master is marking its eleventh year of production with the introduction of new designs, new models and a distinctive new yellow warehouse safety colour. The hallmarks of the Aisle-Master range remain the same however: excellently engineered articulated forklifts with an unrivalled reputation for quality and long life operation, which drive down the costs of storage, enable vastly increased pallet density and boost productivity. By replacing a combination of reach and counterbalance trucks with very narrow aisle operation Aisle-Masters, storage capacity can be doubled. All Aisle-Master models are designed to enable straightforward, quick access to components, reducing service and maintenance time and speeding up routine daily checks.

Co. Monaghan, Ireland Tel: + 353 47 80500 www.combilift.com www.aisle-master.com

10 Gibraltar Airport


The Gibraltar Government has signedthe contract with the companyDragados to build the new terminal

and associated facilities such as the exten-sion of the apron, aircraft parking area,new cargo handling facilities, new buildingfor airport vehicles, and new facilities forCustoms, at the airport and border cross-ings.

Gibraltar airport is located on the isth-mus that joins Gibraltar with Spain. Thisinternational airport is located only 500meters from the town of Gibraltar and asimilar distance from the village of La Lineade la Concepción (Cadiz) Spain.

The airfield was built during World WarII and officially opened in 1949 as anemergency base of the British Royal Navy.On December 2nd, 1987, an agreementbetween the Spanish and British govern-ments agreed to the civil joint use of theairport by Gibraltar and Spain. In 2006 anew agreement between Britain, Gibraltarand Spain, ended up with so far restrictionson civilian use of the facility, allowing flightswith Spain and thus ending years of con-flict.

Two years later the GibraltarGovernment announced it would build anew passenger terminal as part of theseagreements. The new terminal would have20,000 m_ on two floors, and then beingmuch larger than the existing one to bereplaced. This new terminal will be thefocus of the new road network being alsodeveloped. The Terminal will have 5 gatesand a capacity of up to one million passen-gers per year.

Dematic is implementing the installation,integration and commissioning of theBaggage Handling and Screening Systemfor the departures and arrivals circuits.

The Baggage Handling and ScreeningSystem for the departures circuit consists oftwo separate paths devoted to Gibraltarand Spain. There are a total of 16 check-inpositions and one more for Out-Of-Gaugebags. All bags from check-in are screenedby 2 automatic and 1 manual X-raymachines. Checked baggage are sent to 2inclined flight-make-up carousels for manu-al classification and subsequent transfer tothe aircraft

The arrivals circuit consists of two pierconveyors where bags are unloaded, andthen carried by two independent conveyorpaths to 2 flat arrival carousels, where pas-sengers will pick them up.

The complete Baggage Handling andScreening System is supervised by a SCADAcontrol system, which further integrates theoperation of fire doors, then providing zoneisolation in case of fire.

The deadline for the completion of theentire Baggage Handling and ScreeningSystem is 12 months, including all opera-tional tests before the New Terminal opensto the public. www.dematic.com

Gibraltar Airport: New Terminal under wayDematic will carry out the development, installation and commissioning of the new Baggage Handlingand Screening System of the New Terminal at Gibraltar Airport

Gibraltar airport is located onthe isthmus that joins Gibraltarwith Spain. This internationalairport is located only 500meters from the town ofGibraltar and a similar distance from the village of LaLinea de la Concepción (Cadiz)Spain

12 Vested Outsourcing


Outsourcing has been an establishedcommercial practice for a quarter ofa century, since the days when Peter

Drucker coined the mantra “Do what you dobest, and outsource the rest”. Although pre-cise definitions are contentious, it has beenestimated that outsourcing programmesaccount for 12 per cent of US GrossDomestic Product. Three out of five compa-nies polled in a recentPricewaterhouseCoopers survey have out-sourced at least some business processesand a 2008 Deloitte Consulting OutsourcingReport suggested that “83 per cent ofrespondents reported that their projects hadmet their Return on Investment goals ofslightly above 25 per cent”.

And yet business is littered with stories ofoutsourcing projects that fail - or perhapsmore importantly fail to stay the distance –initial gains, certainly, but followed by a rela-tionship that descends into acrimony. Somepartnerships, such as the twenty year alliancebetween Jaguar and UKWA member UnipartLogistics, just keep on delivering for bothparties; others run into the sand.

Lead author Kate Vitasek explains thatafter studying many outsourcing relationshipsin logistics and in other business processes,they have identified ten ‘ailments’ thatimpede successful outsourcing, and the five

rules that will help both sides find ‘the pony’.The ‘pony’, Vitasek explains, is the differ-

ence between today’s solution and what theoptimised solution could look like, if the par-ties only knew to look for it. (The derivationcomes from the dialogue: “Why are youexcavating that pile of horse manure, littleboy?” “Why Sir, for this amount of manurethere must be a pony in their somewhere”).The point is that, except for the outsourcingof the most commoditised services andprocesses, real and enduring success forboth parties comes from thinking and acting,not about ‘What’s in it for me?’ (WIIFM), but‘What’s in it for WE?’ (WIIFWE). In otherwords, says Vitasek, outsourcing partnershipsare not to be seen as a zero-sum game:working together, and following the fiverules, the game gets bigger for both sides.That’s the pony.

There is little surprising there. Most firmsgo into outsourcing arrangements with atleast the vague idea that they will bringinputs and resources together - capitalassets, skills, knowledge or whatever - tobenefit both sides. So what are these ail-ments that frustrate such good intentions?It’s worth noting, although not explicit in‘Vested Outsourcing’, that several of thesebehaviours are not exclusive to outsourcing.They can be found, for example, in the rela-

As a co-author of a new book entitled ‘Vested Outsourcing’, Kate Vitasek, aleading academic from the University of Tennessee, outlines the ten key ailmentsthat commonly afflict outsourced partnerships and presents five golden rules for success

Five golden rulesfor transforming outsourcing partnerships


Vested Outsourcing 13

tionships between different departments ofthe same organisation if those are workingto differing objectives and incentives. Hereare the ten key ailments highlighted byVitasek:1. Penny wise, pound foolish. A com-pany outsources purely on cost. This canlead to trade-offs in quality and service,‘beating up’ the supplier, and a viciouscycle of re-bidding, and transitioning to anew ‘cheaper’ supplier. Either outsourceproviders will refuse to work with that firm,or they may bid so low that they go out ofbusiness.2 The ‘outsourcing paradox’ isVitasek’s term for the situation where theservice buyer’s ‘experts’ attempt to define a‘perfect’ Statement of Work on how theprocess is to be performed, down to the lasttouch. Obviously, there is then no scope forthe service provider to bring their own skills,knowledge and abilities to the table.3 The activity trap. Related to the lastpoint, this is where providers are rewardedon a transaction basis - the more opera-tions they perform, the greater their revenueand profit. Clearly, there is no incentive toreduce the number of non-value-addedtransactions, because that would result inloss of revenue.4 ‘The junkyard dog factor’, as Vitasekterms it, is where, to protect their own jobsor status, employees in the outsourcing firminsist that certain processes simply must stayin house. Often, notes Vitasek, this alsomeans that the ‘best’ employees, perhapsthose who wrote the Statement of Work inailment 2, are retained in house as largelyunnecessary ‘supplier managers’.5 The honeymoon effect. Initially all ispositive, as the provider ramps up to meetthe customer’s expectations. But after atime, the low hanging fruit has beenplucked, there is little incentive for the sup-plier to try harder for the more difficultgoals, or to renew investment, and the rela-tionship deteriorates.6 Sandbagging. To get over the honey-moon effect, a buyer might offer bonusespayable on set performance improvements– perhaps a certain percentage reduction ininventory holding each year. It may in factbe possible to outperform this, especially inthe early years, but the provider will besorely tempted to ‘bank’ this potential gainagainst harder times.

7 The zero-sum game. This is self-explanatory - the belief that if something isgood for the outsource provider, it is auto-matically bad for the buying side. Almosteveryone in business school has studiedgame theory, but it seems much harder tothink ‘win-win’ in practice. Vitasek extols ‘thepower of ANDS’ – ‘can I have improvedservice AND lower cost?’ Probably, but not ifyou don’t believe in the possibility of ‘win-win’ to start with.8 Driving blind is quite simply the failureof the parties to start off with an agreed def-inition of what success will look like. Often,costs are tracked, but there is little formalgovernance devoted to the other aspects ofthe relationship, such as service levels.9 Measurement minutiae shows up in aplethora of metrics designed to captureevery single aspect of the outsourceprovider’s performance – perhaps 50 or100 metrics, requiring years of person-time,and many of which may be of little practicalassistance, if indeed they are ever reviewedat all.

10 ‘The power of not doing.’ The con-tract may, for example, specify quarterlyreview meetings around a scorecard of met-rics, but if the metrics are not monitoredand the meetings not held, sub-optimal per-formance should hardly come as a surprise.

Those are the common problems thatVitasek and her team have identified infailed or failing outsourcing arrangements.But is there an alternative approach? Howhave relationships such as that of Jaguarand Unipart Logistics managed to avoid atleast the majority of these traps?

First, says Vitasek, “You really have tobelieve that there is value (the pony) to behad by going down the vested outsourcingroute – if not, don’t go down that path. Theconventional approach treats outsourcingalmost as a commodity: I have low skills soI’m going to outsource to an expert, but theprocess is of low value to me so I’ll useAdam Smith market forces to drive down

Continued on page 14

“After a time, the low hanging fruit has beenplucked, there is little incentive for the supplier to try harder for the more difficult goals, or to renewinvestment, and the relationship deteriorates”

14 Vested Outsourcing


Continued from page 13costs. But in even a moderately complex out-sourcing model there will be a few suppliersthat are really good, that could provide ahuge opportunity to unlock value. I’m goingto outsource to you because you are smarterthan me, you’re going to unlock that valueand together we are going to share it”.

For success in these sorts of outsourcingpartnerships, ‘Vested outsourcing’ implies theadoption by both sides of five rules.• Rule 1Is to focus on outcome, not transactions. Flipthe thinking from what detailed operationsthe service provider is performing, to desiredoutcomes – how is the provider improvingturnaround or whatever your problem was.Desired outcomes are still quantifiable, buttake a different form – they may be targetsfor availability, reliability, revenue generation,employee or customer satisfaction and thelike.

For example, Unipart Logistics and Jaguarhave a joint vision ‘To support JaguarDealers in delivering a Unique PersonalOwnership Experience to Jaguar driversworldwide, ensuring industry leading ownerloyalty through partnership and world-classlogistics.’ This joint vision empowers UnipartLogistics to deliver the logistics solution thatenables Jaguar to maintain its leading posi-tion and its quality image.• Rule 2 Focus on the what and not the how. If thepartnership is going to be outcome based itcan no longer have a hundred differentService Level Agreements (SLAs) that thebuyer is going to micromanage. The out-source provider has won the contractbecause he is supposed to have the expertisethat the buyer lacks. So the latter has to trustthe former to solve problems. The serviceprovider is, or should be, constantly in themarketplace, keeping tabs on new develop-ments and processes. Performance partner-ships let each firm do what it does best –

unless you have the skills and resources tokeep up with the latest innovations, leave thedetails to the experts.

Don’t paint the supplier into a box, butgive him the flexibility to bring his skills to thejob.

In the Jaguar- Unipart relationship,Unipart Logistics invests in the creation andimplementation of unique processes andproducts to maintain a continuous improve-ment to its service - for instance, the Direct toDealer programme has increased availabilityand shortened lead-time on customer-criticalorders.• Rule 3 Be very clear on well defined and measurableoutcomes. Ideally, there shouldn’t be morethan about five high-level metrics. All parties- which may of course include users andother stakeholders that aren’t directly signingthe contract - need to spend time collabora-tively, during the outsourcing process andespecially during the contract negotiations, toestablish explicit definitions for how relation-ship success will be measured.

Given those outcomes the serviceprovider can propose a solution that willdeliver at an acceptable predetermined price.This actually constitutes a fundamental shift inthe business model, it moves risk from theoutsourcing company to the service providerand the latter is paid for the value the desir-able outcomes produce, not for the activitiesperformed.

The Jaguar Global Control Centre is thefocal point to manage, measure and controlthe complex Jaguar aftermarket parts supplychain, from scheduling orders on suppliersthrough to dealer deliveries – it brings togeth-er people, processes and systems to continu-ously improve each step of the supply chain.• Rule 4Optimise pricing model incentives for the bestcost/service trade-offs. Vitasek says, “I needto pay on incentives that encourage you tooptimise my tradeoffs, to find the ‘power ofAND’. When you achieve ‘AND’ how am Igoing to pay you?” This may imply openbook accounting although Vitasek acknowl-edges that isn’t always possible.

Vested Outsourcing does not guaranteehigher profits for service providers - they aretaking a calculated risk. But it does providethem with the autonomy and authority tomake strategic investments in their processesthat can generate a greater ROI for them

“If the partnership is going to be outcome based it can no longer have a hundred different Service Level Agreements (SLAs) that the buyer is going tomicromanage. The outsource provider has won the contract because he is supposed to have the expertise that the buyer lacks”


Vested Outsourcing 15

over time, perhaps more than a conventionalcost-plus or fixed price contract might pro-duce over the same period.

Unipart Logistics invested significantresource in reviewing compliance and reduc-ing duty payments – the benefits were sharedbetween both companies.• Rule 5A governance structure should provideinsight, not merely oversight. In the earlydays of outsourcing, the authors say, somecompanies simply threw the work over thefence, with poorly defined requirements andfew, or no, performance metrics or servicelevel agreements. Unfortunately, some havegone to the other extreme, with small armiesmicromanaging the outsource providers.

The structure that governs an outsourceagreement should be providing both partieswith real knowledge of how operations aredeveloping and improving. And, of course, ofwhere the next threats and challenges may becoming from – as Vitasek says “Contractsmay be static, but outsourcing is dynamic”.

The Unipart Logistics team work withJaguar engineers during the development ofa new vehicle to ensure a high level of parts

availability to underpin a car’s debut. Thecollaborative relationship works too to sup-port Jaguar’s expansion into new markets,such as China, where Unipart Logistics hasdelivered a fully operational warehouse inSuzhou, near Shanghai.

Jaguar and Unipart Logistics are cited byVitasek as having an outsourcing relationshipthat has in large part avoided the ‘ailments’and followed the ‘rules’, as shown by the factthat the arrangement has continued to suc-ceed for two decades, even surviving changesof ownership at Jaguar. She claims that“Jaguar say ‘we never look at the contract, webehave this way’. I advocate writing a contractthat’s right for business, but then shove it underthe table and don’t look at it. What Jaguar andUnipart Logistics have is a shared vision, as wellas one of the best ‘lean’ philosophies in theworld outside Toyota. End-to-end, total-cost, leanthinking applied across the supply chain is prettypowerful. Unipart Logistics convey their leanthinking to the supply chain which then unlocksvalue for Jaguar.

‘Vested Outsourcing’ is published by PalgraveMacmillan, ISBN 978-0-230-62317-0

About theauthorKate Vitasek is afaculty memberat the Universityof Tennessee’sCenter forExecutiveEducation, andthe founder ofSupply ChainVisions.

16 Economy


LPC International has developed tech-niques to enable logistics businesses tosurvive downturns in the economy and

help them emerge stronger and fitter whenthe upturn arrives. Though the current eco-nomic situation is severe, recovery willcome and those that have adapted theirbusiness strategy will be best placed totake advantage when the economy recov-ers.

The logistics sector has been, and willcontinue to be, hard-hit as consumerdemand falls and fuel prices and taxationincrease.

The economic downturn will createchallenges in an industry which is verycompetitive, provides high levels of cus-tomer service and works to tight profit mar-gins. Downturns inevitably affect those mar-gins and customers, who themselves suffersimilar economic pressures, look to serviceproviders to sometimes absorb more thana fair share of the costs to mitigate theirown financial position.

What action can be taken to addresscontinuing economic pressures? Unlessyour company is confident enough toinvest for the longer term then understand-ing and planning for short term circum-stances is the first course of action.Essentially this means driving costs out ofthe business in order to become “leanerand meaner” whilst maintaining revenues

and a healthy customer base. LPC International recommends that three

key areas of the business need to beaddressed: Inventory and Stockholding,Warehousing Efficiency, and NetworkPlanning and Transport.

Opportunities to streamline each ofthese during difficult economic times areoutlined below. While not all businessescan implement all measures, it is wellworth exploring all opportunities toachieve cost reductions, improve the “bot-tom line” on the balance sheet and opera-tional efficiencies.

Inventory and Stockholding Inventory reduction has several benefits,including: • reducing the direct costs of inventoryownership • llower warehousing costs

The obvious starting point is to disposeof obsolete stock which is usually easy torecognise – not least because of theamount of dust on it! The refusal to disposeof it is often driven by the unwillingness ofaccountants to “write-off” stock, withoutany apparent recognition of the warehous-ing costs incurred in continuing to store it.A simple way to identify such items is toproduce “exception” stock reports whichidentify those items that haven’t been indemand for a significant period of time. By

Preparing for futuregrowth in the logistics businessIf you’re reading this the chances are that your business has survived the Credit Crunch followed closely

by the Recession and you are now facing up to the reality of a difficult economic situation for some time to come


reviewing the reasons for the lack of move-ment it is possible to identify the SKU’s thatcan be discarded. Even if there is limitedmovement during the review period it ispossible that the SKU is obsolescent and itsstock levels can be reduced.

It is important too, to review purchaseorder quantities and order frequency.Though purchasing large quantities of aSKU may save on purchase costs, thepotential costs of obsolescence (particularlyof products which have relatively short lifecycles) and warehousing must be consid-ered. Placing smaller but more frequentpurchase orders is prudent during periodsof recession, particularly as prices can bemore competitive, and stock more readilyavailable than when trading is good.

Action should also be taken to reducethe range of stock held products. Ratherthan hold stock of all items, establishwhether it is possible to buy less popularitems from your suppliers directly againstcustomer orders, and then cross-dock theorder to customers when the goods arrive.While this may cause increased lead times,customers are often prepared to acceptlonger delivery timescales provided promis-es are reliable.

If there are multiple stockholding pointsthen the centralisation of stock can assistcost reduction. By centralising all stock of aSKU at a single stockholding point it is pos-sible to guarantee a level of availabilitythat is greater than can be achieved ifthe same amount of stock is distributed

amongst multiple stockholding points. Byway of example, if you hold stock at onelocation instead of four, the amount ofsafety stock required to support a givenservice level will halve, a saving well worthhaving. This is Maister’s Law that statesthat the amount of safety stock (which is notthe same as total stock) required to supportdemand varies according to the inversesquare root of the number of stockholdingpoints.

Warehousing Efficiency Centralisation of stock also has otheradvantages, notably in terms of warehous-ing costs. The cost per unit of throughputfrom a single large warehouse can be sig-nificantly less than the cost per unit ofthroughput from one of a network of sev-eral smaller warehouses with the samecombined capacity as the larger ware-house. The reasons for this are from theadministrative and operational benefits ofcombining and rationalising: order pro-cessing, inventory control, security andmanagerial resources. Similarly stockcentralisation may create an opportunity tointroduce more advanced storage andmaterials handling systems which wouldnot be economically viable in small ware-houses.

It may appear irrational, during diffi-cult economic times, to invest in more effi-cient materials handling and storageequipment, however it is a fact that around40 – 45% of the total cost per unit of

Economy 17

18 Economy


throughput in a typical warehouse is“space” or property related, some 35 –40% related to “direct labour”, and 15 –25% related to the depreciation, running,and maintenance cost of storage and han-dling equipment.

Investment in more appropriate types ofstorage and handling equipment canimprove productivity levels. This mightbe where customer orders are pickedin small “unit” quantities rather thanas full pallets, or where there isopportunity to “sweat the propertyasset” through the use of high densitystorage equipment to make better useof available height, or to reduce aislewidths. A financial review of alternativestorage and handling equipment can helpidentify solutions which will deliver on-goingcost savings.

The centralisation of warehousingoperations, and introduction of the righttypes of equipment and operating proce-dures can make it possible to release ware-house space, and even whole warehouses,for sale or to let, without loss of storage orthroughput capacity.

It is important that a detailed review ofthe current warehousing operation is under-taken to inform the precise process. Thisreview should incorporate the current ware-housing facilities, operational procedures,stockholding needs, customer orderdemands, productivity, performance, costsand unit cost performance. There are anumber of well published methods by whichwarehouse performance can be measuredusing balanced scorecards and other tech-niques.

Network Planning and Transport Any change in the number of warehousesin a network will, undoubtedly, affect trans-port costs. Generally the more warehousesthere are in a network, the greater thewarehousing and inventory costs, and thelower the transport costs. It is thereforeimportant, when considering any change innumbers of warehouses to also examinethe potential impact on transport costs.

There are a variety of well-establishedcomputer models available for warehousenetwork modelling. Many such modelscan be used to optimise the numbers,sizes (in terms of throughput) and loca-tions of warehouses required to serve adefined customer base. They can also help

to determine the potential impact of clos-ing one or more depots in an establishednetwork.

Computer models can be used for trans-port planning to determine economic routesand schedules and to optimise use of theavailable vehicle fleet. At strategic level,and at the same time as doing any ware-house network modelling, the optimumsize and “mix” of fleet (numbers of vehiclesof different capacities or types) can bedetermined.

Computerised routeing and schedulingcan be used for strategic planning wherebysolutions are reviewed periodically or,preferably, used on a tactical basis to opti-mise each day’s transport operations andto maximise the “fill” of delivery vehicles.

Though it may be difficult and time-con-suming to install and commission a route-ing and scheduling system, persistence willbe rewarded. Provided the computerpackage is sourced from a reputablesoftware provider, covers all the company’stransport needs and the parameters are setcorrectly, it shouldn’t take long to see realbenefits.

At a tactical level, significant savings canbe achieved by introducing telemetry sys-tems on trucks to check driver and vehicleperformance. Fuel consumption and over-all vehicle performance can be increasedthrough monitoring driving habits andengine condition.

Summary Objective and rigorous examination – usingwell-published and readily available tech-niques - to review inventory levels, prod-uct ranges, warehouse layouts andprocesses, storage and handlingfacilities, operational efficiency, distri-bution networks, and transport opera-tions can be absolutely invaluable whenseeking to reduce costs during difficult eco-nomic times.

Reviewing these areas should be a con-tinual process. LPC can assist you withdeveloping a program, conducting the ini-tial review, developing solutions, identifyingcosts and managing the whole, or parts, ofyour project.

LPC have been helping their clients opti-mise, improve and grow their businesses forover 25 years. www.lpcinternational.co.uk

Objective and rigorous examination –using well-published andreadily avail-able techniques- to reviewinventory levels, productranges, warehouse layouts andprocesses, storage andhandling facilities, operational efficiency, distribution networks, andtransport operations canbe absolutelyinvaluable whenseeking toreduce costsduring difficulteconomic times

FITTINGS 400W SODIUM 2 x 80W FLUORESCENT

TOTAL LUMINAIRES 374 330

OPERATING HOURS 24 OVER 5.25 DAYS 24 OVER 5.25 DAYS

ANNUAL ENERGY CONSUMPTION 1,053,692 KWh 273,469 KWh

ANNUAL RUNNING COST £105,369.27 £27,346.88

CO2 EMMISSIONS PER YEAR 463.6 TONNES 120.3 TONNES

CASE STUDY

TDG EUROTERMINAL, MANCHESTER

The TDG Euroterminal in Manchester is the latest warehouse in the TDG Group to bene t from a new energy ef cient lighting scheme supplied by Luxonic Lighting. The energy savings created are very valuable to any business in today s climate, but boosted environmental credentials and Government incentives further added to the feasibility of the capital investment.

New Lighting Equipment Saves 75% Energy

The lighting design was based on a direct replacement of light ttings on a one-for-one basis. However, due to the increased ef ciency of the Luxonic Aislelux 2x80W tting it was possible to reduce the total number of ttings in some areas of the warehouse, while still increasing the light level. This ampli ed the savings made, and therefore shortened the payback period for the project.

As with each project, the lighting scheme was tailored to suit the requirements of the Euroterminal. Open areas such as loading bays were equipped with Hi-Max ttings, with a speci c open area presence detector, while the aisle areas were tted with the highly ef cient Aislelux

luminaire. Each light tting includes its own integral presence detector, allowing it to operate independently and maximise energy savings.

Since the installation was completed, TDG have taken advantage of the Government s Enhanced Capital Allowance (ECA) Scheme. This enables a business to claim 100% rst-year capital allowances on their spending on qualifying equipment. Businesses can write off the whole of the capital cost of their investment in qualifying technologies against their taxable pro ts of the period during which they make the investment. This can deliver a helpful cash ow boost and a shortened payback period.

ANNUAL SAVING = £78,022.39

PAYBACK PERIOD = 1.03 YEARS

BEFORE AFTER

Warehouse Statistics

Size: 140,000 Sq ftUsage: High Racking, Bulk Storage, Loading BaysSkylights: Yes, Daylight Dimming Provided

Government Incentives

Luxonic Lighting products are fully covered under the Government s Carbon Trust and Enhanced Capital Allowance Schemes

Light Levels

Luxonic design each installation to comply with industry lighting standards. Light levels are often improved, despite the large drop in power consumption

Luxonic Service

Luxonic offer a free, no obligation site survey and design service. Our ttings come complete with guarantees on uorescent tubesand electronic components

20 Forklift Trucks


Since the formation of the SingleEuropean Market in 1993, many lead-ing retailers and third party logistics

(3PL) service providers have sought to grad-ually replace nationally based forklift pro-curement contracts with pan-European fleetdeals.

With these global changes in purchasingpractices, there has been a clear trendamong retailers and 3PLs towards sourcingforklift truck fleets from organizations thatare not only capable of supplying a fullline-up of products – from counterbalanceto warehouse machines – but who can alsodemonstrate that they have the infrastruc-ture in place to be able to guarantee thehighest levels of service and forklift fleetmanagement across several countries.

Of course, the leading forklift truck man-ufacturers have always sold and servicedtheir products either directly (as in the caseof my own company, Jungheinrich) orthrough a network of regional and, in someinstances national, independent dealers.

In the UK and across the rest of Europe,there are literally thousands of independ-ently owned forklift dealerships who willgladly supply you with a lift truck andundertake to maintain it throughout itsworking life. The majority are highly profes-sional and well-run organizations, but someof them, most definitely are not.

For logistics and procurement directorstasked with selecting a truck supplier capa-ble of providing both a quality product anda reliable service and after-sales supportpackage across several territories, the multi-farious caliber of Europe’s lift truck dealerscan be a deal-breaker. And, the enlarge-ment of the EU in 2004 and the subsequentrestructuring of the European economy hasbrought the issue into sharper focus: quitesimply, the quality of many of the dealers

operating in the countries that once formedthe Eastern Bloc is well below that which wehave come to expect in the UK andthroughout most of Western Europe. Sadly,in some cases, this is also true for dealersoperating in mature markets. For multi-national retailers and 3PLs rushing to capi-talize on the potential that the openingmarkets of the east offer, this can representa significant obstacle as they strive to estab-lish the most cost-efficient supply chains.

But, as some of Europe’s biggest forkliftfleet operators will testify, dealing with aforklift truck manufacturer that retains own-ership of its downward supply chain by tak-ing the direct route to market ensures that auniform standard of service is achievedacross the fleet – regardless of where in theworld the trucks are working.

For international accounts there are, inmy view, several clearly defined advantagesof dealing with a forklift manufacturer thateschews dealers and provides its productsand services directly. Jungheinrich, forexample, operates a direct sales and serv-ice facility in no fewer than 37 differentcountries in Europe alone. Staff at all thesefacilities – from France to Ukraine – areJungheinrich employees and, therefore, allbenefit from consistency of training at alllevels and standardized procedures andprocesses that have evolved over yearswithin the mature markets that our Groupserves. In addition each country has thereassurance of knowing that our interna-tional Key Account Management co-ordina-tion team, which, with its Head Quarters inHamburg, ensures that all facets of eachindividual business meet the exacting stan-dards of our global clientele, backs it up.

In effect, this corporate approach allowsJungheinrich to repeat the successful modelof its biggest territory anywhere in the world

With global changes in purchasing practices, there has been a clear trend among retailers and 3PLstowards sourcing forklift truck fleets from organizations that are not only capable of supplying a fullline-up of products – from counterbalance to warehouse machines – but who can also demonstratethat they have the infrastructure in place to be able to guarantee the highest levels of service and fork-lift fleet management across several countries, sales Jungheinrich’s Bill Goodwin

Global support network

22 Forklift Trucks


and means that the company can offerthe same high levels of service and cus-tomer support across international bound-aries.

The ability to replicate our successfulbusiness model in new and emerging mar-kets has enabled Jungheinrich to quicklyestablish dominant market positions inmany territories.

However, it is not just in the quality of theafter-sales offering that this ability to stan-dardize across borders brings benefits tothe international client. International pricingstructures and delivery propositions are alsofar easier to arrange if the needs and abili-ties of a disparate dealer group do nothave to be satisfied while dispute resolution(let’s be honest, as with any relationship,problems can arise from time to time) is farmore straightforward if only two parties areinvolved.

It is also worth remembering that thoseforklift truck manufacturers who sell throughdealers are wholly reliant on the quality ofeach particular dealer partner and, forinternational clients seeking to establishpan-European or even global lift truckfleets, the fact that a manufacturer has no

clear control over the way its dealers per-form can be further cause for concern. Afterall, can the client be sure that the level ofservice and after-sales support provided bythe forklift manufacturer’s long establishedGermany-based distributor will be matchedby that offered by the newly appointeddealer in Bosnia and Herzegovina!

Today, in Europe alone, Jungheinrich hasover 600 sales consultants as well as morethan 3,000 mobile service engineers whomaintain a close-knit network and providecompetent consulting and comprehensiveservice. A short-term rental fleet of some16,000 trucks, which ensures quality, avail-ability, and reliability of supply supportthem.

So far, over one hundred retailers andlogistics services providers have internation-al sourcing agreements with Jungheinrichand, as more such companies seek todevelop their businesses across continentalboundaries and, at the same time, look toachieve the economies of scale that interna-tional lift truck procurement deals canbring, we believe that this figure is set togrow significantly in the years to come. www.jungheinrich.com

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24 Business


Improving the order-to-cash cycle time isan imperative for just about every busi-ness in these tough times. When a busi-

ness fails it is normally as a result of a lackof cash.

These days, when companies trade withone another the exchange of information,such as orders, acknowledgements,advance shipping notices and invoices, canbe conducted using electronic trading tech-nology. The removal of paper and faxeddocuments from this process has cut thelevel of errors incurred significantly. Butmany companies have yet to adopt thistechnology and so are failing to takeadvantage of a reduced order-to-cash cycletime.

According to a report published thisSeptember by GS1 UK in conjunction withthe UK-based Cranfield School ofManagement, 81 per cent of companiesare still using manual, paper-basedprocesses. However, the research highlightsthe advances made in the grocery sector.Some 27 million orders are made in the UKgrocery sector every year, with 84 per centof orders by retailers and 87 per cent ofinvoices transacted using EDI technology.The ‘EDI Cost Savings’ report of the UK’stop 15 grocery retailers – covering 90 percent of the sector – finds that the sectorsaves £650 million per year in costs byusing EDI instead of manual, paper-basedprocesses for its orders, invoices anddespatch advices.

The grocery sector understands the ben-efits of electronic trading, but other sectorsare being slow to realise these savings andthe advantages the technology brings toimproved order-to-cash cycle times.

Matching an invoice to a purchase orderand checking against goods actuallyreceived creates a tricky three-way match-

ing and approval process that can result ina delay in payment due to inconsistencies,errors and poor communications. Accuracyand consistency are essential to getting paidquickly.

Pre-invoice matching can now beachieved using ‘intelligent’ EDI technologythat is able to look at the data inside eachmessage carried between buyer and suppli-er. Spotting errors or mismatches in invoic-ing becomes an automated process thatbrings direct cash benefits.

If invoices were to be pre-checkedagainst purchase orders and delivery notesprior to sending to the customer, potentialproblems and mismatches could be identi-fied and addressed in advance, so reducinghold-ups in payment and speeding cash-flow.

It may be that, say, 100 items wereordered by a buyer but under their termsand conditions it was acceptable for thesupplier to ship up to a maximum of 110.However, the invoice might fail if there werea discrepancy between the purchase orderand shipping notice. Action in advancecould allow for the invoice to be adaptedaccordingly or for a buyer to be notified.

Also, if one line item in an invoice con-taining, say, 80 line items fails, the wholeinvoice may well be halted. Under these cir-cumstances an alert would enable a suppli-er to pull out that one item and generatean invoice for 79 items instead, so ensuringfast payment of the majority of the order.

A further area where intelligent B2B inte-gration can be successfully deployed to cre-ate cash efficiencies is in the area of suppli-er performance. As next generation systemsare capable of looking at the content of themessages, and can apply intelligence to thedata carried, analysis of supplier KPIs canbe used to reveal the most reliable suppli-

Turning orders into cash - quickly ‘Intelligent’ electronic trading holds the key to a faster order-to-cash cycle, says David Grosvenor

26 Business


ers. By knowing that you can rely on a sup-plier that has a 98 per cent performancerating enables you to reduce safety stock ormay allow you to move to a vendor man-aged inventory arrangement or Direct Ship.

Direct shipment by a supplier to the endcustomer offers a retailer a distinct advan-tage in that it allows retailers to expandtheir product ranges without the need to tieup cash in inventory or expose themselvesto the risk of carrying unsold stock.

The problem for retailers is that they losevisibility and control putting the order out tosuppliers for direct delivery. Although mostretailers have pretty slick internal systemsfor the whole order-to-cash cycle, theyrevert to antiquated techniques, such asfaxes, when it comes to working outside thefour walls of the enterprise. However, anonline platform enables the live exchange

of information between retailer and suppli-er, which also links into the carrier to givereal-time updates on scheduling.

The great thing is, this allows the cus-tomer to have a very tight delivery slot givento them and offers the retailer far greatercontrol over the whole order-to-cash cyclefor direct ship operations. Jewson, the retailbuilding supplies company, has usedWesupply to break new ground in co-ordi-nating direct ship activities across multiplesuppliers for consolidated deliveries to cus-tomers.

‘Intelligent’ electronic trading technologyholds the key to reducing order-to-cashcycle times. Those with the key can openthe door to improved cash performance.David Grosvenor is Managing Director ofWesupplywww.wesupply.com

Although most retailers have pretty slick internal systems for the whole order-to-cashcycle, they revert to antiquated techniques, such as faxes, when it comes to working

outside the four walls of the enterprise. However, an online platform enables the liveexchange of information between retailer and supplier, which also links into the carrier togive real-time updates on scheduling

Services include: • Design • Consultancy• On-site training • Q.A.• Surveying and testing• Superflat laser grinding• Bespoke tolerance grinding• Floor joint repairs• Wire guidance• Re-surfacing of worn out floors • General floor surface grinding• Screed systems

www.cogrigroup.com

+44 (0) 1484 600080 The complete service from the CoGri Group

Have you got a Flooring problem?Whatever operational problems your warehouse floor is causing, the CoGri Group can provide the most appropriate solution.

Optimise floor performance in new-build or existing projects.

28 Case Study


Product availability, order accuracy andon-time delivery are critical to retain-ing customers in the highly competitive

office products market. At Office Depot,one of the leading global providers ofoffice products, attention to service hasbeen central to the thinking behind aneight-year programme of investment intoreconfiguring the company’s Europe-widedistribution network.

From Spain, Switzerland, the UK, CzechRepublic, to Germany, Bernd Schiel, OfficeDepot’s senior project manager andEuropean maintenance co-ordinator hasbeen at the sharp-end of planning and kit-ting-out the new facilities, deploying the lat-est handling technologies and bringingsites online within tight time schedules. ‘It’sbeen a tremendous programme of consoli-dation and investment in technology overthe last eight years,’ says Schiel.

The pinnacle of the programme is therecently completed Grossostheim distribu-tion centre, 30km south of Germany’sfinancial centre, Frankfurt. Here a 47 mil-lion euro facility, totalling 31,000 sq m andoffering 35,000 pallet locations, has beenequipped with dynamic carton flow racks,pick-to-light technology, automated mini-crane tote commissioners, ‘A’ frame auto-mated picking machines, 4.7km of convey-ors and two fully automated sortation sys-tems for despatch. Remarkably, this highlyautomated warehouse was completed with-in a year – foundations were laid in May2007 and the system went operational inApril 2008. Achieving such a tight targetrequired the dedication and well-honedtechnical skills of the materials handlingturnkey contractor BITO, working in closeharmony with Office Depot’s planningteam.

‘We’ve been working with BITO since2001 when they provided us with all thecarton live storage and pallet live storageelements for a warehouse in Hamburg ona subcontract basis,’ says Schiel. ‘After thesuccess of that initial project they becamethe preferred supplier for all future projects,including facilities in Madrid, Switzerland,Czech Republic and Manchester in the UK.’

‘When it came to the Grossostheim proj-ect we wanted to evaluate the option ofusing BITO as the turnkey provider for allstorage equipment and after satisfying our-selves on the quality and capabilities ofBITO being able to manage this type ofproject we appointed the company to act asthe main contractor for all storage elementsin the system.’ Bringing the project togetherwithin a tight time frame was critical to thesuccess of the project, a window of just sixmonths from 1st November 2007 to April2008.

‘Prior to this project, we had three facili-ties covering Germany and Austria,’ saysSchiel. ‘We had a warehouse that wentoperational in 2001 in Hamburg, we hadan existing facility in Grossostheim and wehad another facility in Munich. The leaseson both the Munich and Grossostheimbuildings were up, so it was either a ques-tion of renewing them or doing somethingdifferent. The decision was made that bothlocations were, from a capacity and a tech-nology view point, at an end.’

Office Depot looked at various options,but decided the best approach was to bringthe Munich and Grossostheim facilitiesunder one roof. After extensive studies intothe best location to build a new facility, asite across the road from the existingGrossostheim facility was chosen. This hadthe advantage of retaining existing staff

Time criticalAn eight-year programme of investment into Office Depot’s Europe-wide distribution network hasreached a pinnacle in the completion of a highly automated facility just south of Frankfurt in Germany.Bringing the project in on time was of major importance, which made working with reliable suppliersabsolutely essential.


from the area. The new highly automateddistribution centre serves Austria, SouthernGermany and parts of Central Germany ona next day delivery basis.

The new facility in Grossostheim was thebiggest single warehouse project in Europefor Office Depot. ‘This is the result of a pro-gressive improvement over the past eightyears, improving our facilities and integrat-ing best practices from what we’ve learntfrom other sites,’ says Schiel. ‘The lease onthe old building ending on 1st June 2008forced the pace of the project – many sup-pliers thought the time scale was too tight.’But BITO helped to ensure that the projectcame in on time and on budget.

Office Depot operates two distinct linesof business, both within the office productsmarket. Viking is its mail order brand,acquired in 1998, whereas the Office Depotbrand was originally more noted for its con-tract business. Founded in Florida in 1986the company now has sales of over$15.5bn (2007 figures).

Mail order customers tend to be small tomedium size companies and contract clientsare the large corporates, such as Porscheand Bayer in Germany. For Schiel this pre-sented some significant challenges in thedesign of the order fulfilment operations, asthere are big differences between mailorder and contract customers. ‘Order profileis one thing, and customer expectations isanother,’ says Schiel. ‘This requires differentprocesses such as the attachment of docu-ments to the outside of cartons. In mailorder nobody wants that, whereas contractcustomers do. Often these specific require-ments go against the grain of automation.’

The new highly automated Grossostheimdistribution centre stretches over 31,000 sqm and is divided into four halls. Goodsarrive on standard Euro pallets and arelogged into the warehouse managementsystem before being put away in the bulkstore, which occupies most of Hall Four.Here 14 aisles of 15m high BITO PRO rack-ing are serviced by a fleet of man-up orderpickers.

In Hall Three half the hall is given overto further bulk storage for larger and widergoods, with BITO’s PRO P6 racking stretch-ing up to 10m high and offering 2.7m widebays. This area is for full case and non-con-veyable items such as laser printers.

The order fulfilment process starts in Hall

Case Study 29

30 Case Study


3 with three carton erecting machines thatcreate six sizes of cartons over two foot-prints. For each order the warehouse man-agement system actions the creation of anappropriate size carton which is used topick to. At one of two input stations a barcode label is applied to the carton and theorder information printed and placed in thecarton. From here, the cartons are con-veyed through to the main picking area inHall 2 where they are diverted off to therequired picking loops, of which there areeight.

In Hall 2 picking activity is arranged forfast, medium and slow moving products.Along the picking aisles, operatives pickgoods to cartons using a pick-to-light sys-tem, taking items from the BITO SDSdynamic carton flow racks in accordance toinstructions generated by the warehousemanagement system. In aisles dedicated tofaster moving products the zones are short-er so that picking operatives don’t have sofar to move between picks. An ‘A’ frameautomated picking machine is used for rea-sonably fast moving small sized pack prod-ucts, with really small items being baggedup prior to being dropped into the correctcarton as it passes.

‘Split case’ picking activity takes placeover four levels, with picked items - normal-ly full packs such as boxes of photo copypaper - being placed onto a central belt

conveyor and moved to a shrink wrappingmachine for consolidation. Picked goodsmove between levels via spiral conveyors.

Cartons moving from the picking aislesin Hall 2 are conveyed to a mezzanine levelwhere they either move on to case lid appli-cation and dispatch, if complete, or areconveyed to one of three pick-to-tote sta-tions where small but slow moving itemsare picked and added to the cartons. Thepick-to-tote stations are fed by four fullyautomated TGW commissioners with eachcommissioner housing three individualTGW tote cranes and each crane serving1100 tote locations. In total some 16,000totes are accessed across the four commis-sioners.

The commissioners are responsible for18 per cent of all split case picks. At eachof the pick-to-tote stations seven orders canbe processed simultaneously, producingpick rates of 350 to 450 lines per hour,depending on the order profiles.

Completed orders are then moved on toa final weight check before being sealedand an address label applied to the carton.A further area on the mezzanine is dedicat-ed to small single line orders requiringsmaller packaging such as jiffy bags.Twenty per cent of orders go through thissystem.

Finally, goods for dispatch are conveyedthrough to one of two sorter systems. Itemsfor fluid loading into lorries by telescopicboom conveyor are routed to the appropri-ate chute by a TGW zip sorter, whereas fullcartons are sent on for sortation in hall 2for consolidation onto pallets.

The system at Grossostheim is designedto handle 15000 orders over one and ahalf shifts and enables a 9 pm cut off fornext day delivery to the customer. Having asystem that delivers this level of fulfilmentcapability gives Office Depot a competitiveadvantage in the office products marketand ensures that the highest levels of cus-tomer service are maintained, even throughpeak periods.

Bringing the project in on-time and on-budget was a tough call for Bernd Schiel’steam and his main materials handling con-tractor, BITO. But Schiel was confident itcould be done, ‘our past experience withBITO had shown that they had proventhemselves an extremely reliable partner.’www.bito.com

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32 Forklift Trucks


UK-owned Flexi Narrow Aisle Ltd hasannounced a comprehensive part-nership agreement for the distribu-

tion and support of its range of Flexi articu-lated forklift trucks in India.

The partner company, Voltas, is one ofthe world's premier engineering solutionsproviders and a leading manufacturer andsupplier of forklifts and other materials han-

dling equipment in India. It is part of theTata Group – the largest industrial group inIndia. Tata has interests a number of indus-try sectors and in recent years has acquiredJaguar Land Rover, Corus Steel (now TataSteel Europe) and Tetley Tea.

John Maguire, sales and marketingdirector of Flexi Narrow Aisle Ltd, comment-ed: “We are experiencing a significantincrease in demand for Flexi articulatedtrucks from the so-called BRIC economies –Brazil, Russia, India and China – and theagreement with Voltas in India is a reflec-tion of the growth we have enjoyed acrossAsia.”

It has long been Flexi Narrow Aisle’spolicy to market, supply and provide servicesupport for Flexis designed and manufac-tured at its UK manufacturing plant throughwell established independent materials han-dling distributors across the world, as JohnMaguire explains: “I firmly believe that spe-cialist manufacturers such as ourselves willenjoy long term success if they resist thetemptation to license out the intellectualproperty of their products.”

John Maguire continues: “We have aglobal marketing strategy. Our brief is towork closely with Flexi’s existing European,Asian and North American distribution part-ners to identify and develop business rela-tionships with potential new dealers andcustomers within emerging economies.

“The materials handling industry is nowa global business and we want to providethe highest levels of service and response toFlexi customers in our key home marketand offer the same reliability and excellentservice support in all international markets.”www.flexi.co.uk

UK forklift manufacturerannounces distribution partnership for India

34 Case Study


The new high-bay racking facility, com-plete with Schaefer’s pallet conveyortechnology, is 26 metres high, three

aisles wide and houses 3000 pallet storagelocations, for pallets with a weight of up to900 kilograms, directly connected toBudvar’s existing block warehouse produc-tion site.

Combined with the latest plant technolo-gy, Radio Frequency Identification (RFID) inte-gration and tailored WarehouseManagement System (WMS), SSI Schaeferhas significantly increased process reliabilitywhilst making maximum use of availablespace.

Pavel Panek, Head of Logistics andPurchasing at the Budvar brewery said: "Wewere looking for a solution that met ourcomplex requirements using the latest tech-nology. The key objectives included maxi-mum utilisation of existing space, 100 per-cent process control, real-time tracking andthe integration of our RFID-led block ware-house into the new Warehouse ManagementSystem, integrated again into our existingERP system. SSI Schaefer offered the bestsolution to meet these needs with an attrac-tive price/performance ratio."

Assembly work on the warehouse wascompleted in less than 20 weeks, includingtechnoloy and sheathing and the facility wentinto full operation with the first incoming pal-lets shortly after – up to 50 HGVs are loadedeach day and sent to over 50 countriesaround the world.

When selecting materials for the highbay racking system, special precautionsagainst excessive heat build-up and theeffects of frost were taken into considerationincluding fire protection criteria. Sandwichpanels with high insulation properties and a

high fire protection rating, as well as heat-dissipation flaps installed on the roof, ensurethat the required thermal conditions are met.

In order to achieve the required numberof storage positions in the three-aisle ware-house, the first row of shelves and the stor-age and retrieval devices in the first aislewere designed for double-depth storage.Single-depth storage is provided in the twoother racking aisles.

Beer crates or cartons, stacked on 120 x80 cm pallets in production using palletisingrobots, pass through the high bay warehousevia roller track and conveyor belt technologyto the transfer station. The contours andweights of the goods are recorded andentered into the WMS. The pallets are thenconveyed to a pallet lift which transfers thepallets either directly to an outgoing goodstable in the direction of the block warehouseor onto a transfer table and into one of thehigh bay racking storage and retrievaldevices. A transfer station has been set upfor inside storage into the racking systemand a rotary table ensures that pallets arealigned correctly.

"At the start of the project, Budweiserdecided to apply the same principles andstrategies for controlling the existing blockwarehouse into the new, automatic high bayracking system", said SSI Schaefer SalesExecutive Rindt. "A key feature included ware-house processes in the block warehouseprocessed via RFID. As a result, inventorymanagement and process control functionshad to be integrated into the new WMS bothfor the automated high bay racking systemand for the manually operated block ware-house equipped with RFID."

All warehouse channels in the blockwarehouse are identified using RFID tags; in

SSI Schaefer has designed, built and installed a brand new automated storage facility for well-knownbrewery Budweiser Budvar at the company’s existing production site in the Czech Republic.

The future looks bright for Budweiser


addition, RFID tags are fitted to all transferstations on the conveyor system. Display isused to assign jobs to forklifts from theWMS and equipped with RFID aerials.When a forklift drives into a storagechannel, the information is automati-cally captured on the WMS which alsodefines whether the forklift carries outinward or outward movements, and in whatvolume.

For order picking, the WMS initiates theoutward storage processes in the high bayracking system and in the block warehouse.With its speed of 130 metres per minuteand a lift of 54 metres per minute, the stor-age and retrieval devices achieve athroughput of up to 100 two-way move-ments per hour. The outgoing pallets pass

via a conveyor to the acceptance station forthe forklifts that are connected directly tothe high bay racking. At the same time, theRFID aided order picking processes are car-ried out in the block warehouse.

Panek continued: “SSI Schaefer hasprovided us with an automated storage andtracking solution that provides maximumwarehouse capacity and throughput – theintegrated process control has also resultedin the reduction of order picking errors.”

The system is designed so thatBudweiser Budvar can integrate futurechanges to business processes, for example,a rail connection is already being plannedand the conveyor will be re-designed totransport larger industrial 120 x 100 cmpallets.

Case Study 35

36 Flooring


Concrete Grinding Ltd has previouslyworked for France-based 3 Suissesin December 2008 through to

January 2009 when they were first commis-sioned to provide Laser Grinding to two ofthe client’s warehouse facilities. At that timethe client had an aging MHE system in alarge portion of their facility. However, afterseeing how beneficial the Laser Grindingsystem can be, the client then modernisedwith an extension area, resulting in therevisit completed this year.

Using the Laser Grinder®, ConcreteGrinding Ltd carried out 2 wheel tracksgrinding to 13 aisles totalling 702 metres tomeet with TR34 CAT 2 floor flatness specifi-cation. A further 197 metres were laserground in the centre of the narrow aislewhere joints in the floor were out of specifi-cation.

Concrete Grinding Ltd returned to France to provide a floor grinding solution for an existing client, 3Suisse. Working in partnership with the main contractor, Promadis, an extension to the existing VNAfacility required the floor to be ground to tolerance ready for racking installation.

Level best The VNA Fork Lift Trucks (FLT) are guid-ed within the aisle by high profile guiderails. At the client request, the LaserGrinding was set up in such a way that theFLT wheels and the guide rails both sit intothe ground paths. As the Laser Grindingpreceded the racking installation, the align-ment of the grinding was critical, particularlyas the guide rails and front wheels of VNAtruck were required to be located in the cutpath. By using a 380mm diameter cuttingblade, designing tight tolerances and alsomaintaining straight cutting lines, this wassuccessfully achieved with minimum clear-ance either side of the guide rails and theVNA front wheels. This is the bestapproach when considering ground clear-ances of VNA truck’s out-rigger wheels.

After the designated aisles had beenground, the new racking was fitted andstocked. Concrete Grinding Ltd then proceed-ed with the remaining aisles, proving that theLaser Grinder® system is clean enough towork alongside fully stocked racks and doesnot affect the day to day warehouse operation– a factor that is vital for a busy client.

Concrete Grinding Ltd specialises in theupgrading of aisles in new and existingVNA/narrow aisle warehouse units. Usingtheir patented laser guided floor grindingsystem, the Laser Grinder®, aisles on newand existing floors can be upgraded to theflatness standards required to operate VNAforklift trucks safely and at their optimumefficiency. The Laser Grinder® isdesigned to grind either the individualwheel tracks of a forklift truck or thewhole aisle width, for complete flexibil-ity. The wet, vacuum-enclosed grind-ing process is free from airborne dust andclean enough to work alongside fullystocked racks - even in food and pharma-ceutical storage facilities.

Concrete Grinding Ltd is part of theCoGri Group of companies, a consortiumof international industrial floor solution spe-cialists with over 20 years global experiencein the Design, Construction, Upgrading andRepair of Industrial Concrete floors.www.cogrigroup.com

38 Warehousing

www.ukwa.org.ukApril 2011

As a starting point, let us consider anexample of the trends in storage densi-ty utilisation. One of the most com-

mon is how to minimise the footprint (size) ofthe warehouse, while at the same time, max-imising the amount of available storagespace.

As an example, a warehouse manager isplanning a warehouse to store 2,500 palletlocations. The majority of businesses wouldhandle pallets approximately 1,200mm deepand anything from 800mm to 1,200mmwide. Typically, this would be a wooden pal-let with a load of no more than 1,500kg.The pallet would generally be handled in aconventional way, i.e. with petrol, diesel,LPG or electric counterbalance forklift trucksand a clear working aisle that would need tobe approximately 4,200mm. If the topbeam of the warehouse racking was4,775mm high, and the forklift was alsorequired to drive into the back of a lorry, athree stage (triplex) mast would be required.

This solution would provide one palletlocation on the ground and three in the rack-ing. This type of application would typicallybe a ‘single command’ system, suitable forloading and unloading trailers, racking andpickup and delivery to and from manufactur-ing areas.

A ‘single command’ system is when amachine is tasked with a duty such as empty-ing a staging lane, e.g. picking pallets fromthe staging area and perhaps taking them toa racking storage area and then returningback empty to the staging area.

The opposite to this would be a ‘dualcommand’ system, often achieved using awarehouse management system via a radiodata terminal. When dropping the pallet intothe racking, a radio data terminal wouldinstruct the operator to take a pallet from theracking and take it to the staging ‘out’ area.This means that the truck’s productivity isincreased as it has a higher percentage of itstime travelling with a pallet.

When a conventional counterbalance

forklift truck is used in such a ‘single com-mand’ system, the truck would normallyspend 80% of its time travelling and 20% lift-ing, handling around 12-15 pallets per hour.In this imaginary warehouse of approximate-ly 3200 square meters of floor space, by cal-culating the ratio between the amount ofspace used for storage, compared to theamount of space used for aisle space, wesee that an incredible 66% of the warehouseis dedicated to providing enough aisle spacefor the truck to turn.

Using a narrow-aisle electric reach truckin place of a counterbalance truck would sig-nificantly improve this ratio. This is a batteryoperated machine with a compact frame anda reaching mast and forks. The compactdimensions and increased manoeuvrabilityallow the truck to operate in a smaller aislewhilst performing the same function as thecounterbalance truck in the warehouse. Atypical clear aisle dimension for a reachtruck would be 2,700mm.

This type of truck is ideally suited to ‘Dualcommand’ systems and reach trucks, like theYale MR series, typically spend 60% of theirtime travelling and 40% lifting. With thesame number of pallets to be stored, a ware-house of 2,500 square metres would sufficewith only 51% of the space would be dedi-cated to aisle space for the machine to turn.

There is a third solution for this imaginarywarehouse; a Very Narrow Aisle system.VNA or ‘Turret Trucks’ are also battery pow-ered machines. They incorporate lateralfork movement, which allows the truck tooperate within racking aisles which are frac-tionally wider than the size of pallet.Therefore, with a 1,200mm deep pallet, asuitable clear aisle would be just over1,600mm pallet to pallet.

These machines typically travel 50% andlift 50% of their operational time. Thisimmediately delivers a significant increase intruck utilisation and productivity. However,these machines have an additional advan-tage in that they have been specifically

Ron Farr, VNA and warehouse systems manager, Yale EMEA, considers the various storage and handling systems available

Future prospects

www.ukwa.org.uk April 2011

Warehousing 39

designed to travel and lift simultaneously.This solution enables the size of the ware-house to be reduced to below 2,000 squaremeters with only 39% of the floor spacewasted as aisle space.

The VNA machine therefore delivers a40% saving in the floor space requiredcompared to a conventional counterbal-ance truck, which equates to over 1300square meters of expensive floor space.

At today’s costs this equates to over 40kEuros savings per year on a leased proper-ty.

However, there are still more potentialsavings to be made:

Most VNA applications would not be lim-ited to a 4,775mm lift height that we haveused in our example. In reality, the heightof the warehouse would be more than dou-ble this figure, so that the available storagespace can be doubled without increasingthe floor space required, generating evenmore savings. Using the Yale MTC VNAseries, a reach height of up to 17,000mm(top of forks) can be achieved.

Warehouse SimulationSimulation allows us to look at the patternof growth for a warehouse. Here is anexample to consider:

When it begins trading, a small businesswill initially only require a small warehouse,housing only 100 pallets and a singlecounterbalance forklift truck to handlethem. As the business expands, the foot-print of the warehouse needs to increase asthe number of pallet locations requiredincreases. Furthermore, an additional fork-lift truck would need to be acquired.

After ten years, the business has grownsignificantly, which has resulted in the con-struction of a warehouse with 2,000 palletlocations and the operation still uses coun-terbalance lift trucks, stacking to a height ofonly 4,775mm.

When times are good and businessesare doing well, there is a tendency to growthe business by duplicating the sameprocess but on a larger scale. It is easy tounderstand why, as this is a tried and testedmethod, however most professionals in theindustry would advise that a much bettersolution is to reconfigure the space avail-able. This is of significant importancewhen there is a downturn and the economycontracts - businesses find it difficult to

afford the excess empty warehouse spaceand are forced to operate their businesswith an inefficient warehouse design.

Businesses often find it difficult to knowwhat or how to change, in order to maketheir warehouse system more productive orto help reduce operational costs.

The Yale Warehouse Simulator allows aclient to look at various ‘what if’ scenarios,by experimenting with different layouts,configurations and timings. It is possible tovisualise the simulations on screen in bothtwo and three dimensional views, as well asanalysing the results and cost implicationson graphs and charts.

One of the main differences in using thissimulation software compared to a complexexcel document is the ability of the simula-tor to calculate throughput in conjunctionwith considering congestion. Excel can’thandle the interaction between materialshandling equipment. For example, ‘if thenumber of lift trucks is doubled, would ourexpectation be to see double the through-put?’

40 Warehousing

www.ukwa.org.ukApril 2011

There is a significant difference betweenthe Yale simulator and other systems, in thatit is built on top of a simulation engine. Thesimulation engine was originally designed tosimulate production lines for automotivecompanies. In time, consultants began touse the engine to provide additional services,however the programming of the simulatorwould mostly be quite complex and timely.The clever part of the Yale simulator is thatthe user interface actually automatically cre-ates scripting and simulation code - writingthe software previously written by the consult-ants – and loads it into the engine.

When the Yale simulator was launched in2008, it was expected that the majority ofsimulation enquiries would be from Europeancustomers. Surprisingly, there have been anincreasing number of requests from otherparts of the world and we have assisted inprojects located in Nigeria, the Middle East,South Africa and Indonesia, helping clients toachieve the optimum warehouse layoutdesign. The majority of the projects withwhich we have been involved to date have

not been for businesses in the warehousingindustry, but in more complicated productionline processes, which form an integral part tothe product flow of components and rawmaterials in and out of the warehouse envi-ronment.

The Yale simulator has been used not justfor business growth and expansion, but wasalso an invaluable tool during the recentglobal recession. It facilitated the study andanalysis of companies’ materials handlingmethods, often enabling them to eliminatecostly off-site storage and helping them toconsolidate their operations into a more cost-effective and productive solution. It provided

businesses with a tool that made it easier toeliminate any excesses taken on during thegrowth period and allowed them to be moreflexible and intelligent about their processes.In some cases this resulted in a reduction intheir materials handling fleet size.

Warehouse Design TrendsOne of the key areas of development inwarehouse design is lift height. An increas-ing number of companies are looking to gohigher with the height of their warehousesand we are seeing some materials handlingmanufacturers responding by offeringincreased lift heights. At Yale, we are seeingmore requests for Reach Trucks lifting toheights over 11,500mm - simulations haveshown us however, that simply doing more ofthe same and going higher often fails, as weexplained with our 100-pallet example ware-house earlier.

The way a reach truck is designed to oper-ate means that when the truck reaches therequired pallet location, it needs to slow to astop, turn 90 degrees, lift the forks, adjust thetilt, drive forward, reach forward, then do itall again in reverse and whilst doing this, theaisle is blocked. In a productive warehousewhere more than one truck is required, thereis chance of congestion in the aisle and atthe staging areas. As a result, trucks strug-gle to complete their cycle efficiently.

With a VNA machine it is possible to workin smaller aisles, but more importantly, thesemachines are designed to travel and lift atthe same time, generating massive improve-ments in pallet thoughput. A simulation is aperfect tool for testing and comparing thesesolutions and avoiding what could be a costlyoversight.

Lift heights for VNA machines up to17,000mm are today being requested notonly in the European and US markets, butincreasingly, in installations in South Africa,the Middle East and South America. Withland becoming a premium around the worldand businesses wanting to stay close to portsand cities, the construction of warehouses isbecoming progressively more costly.

One solution therefore is to go up and togo narrow - the ultimate in cube utilisationefficiency - and with the possibility to lift aload of 800kg to 17,000mm high at a600mm load centre, this is often enough toaccommodate most applications.

I’m frequently asked what it’s like to be

www.ukwa.org.uk April 2011

Warehousing 41

operating a machine at these lift heights.Not being the most confident at high heights,I have to say the most frightening experienceis being at the full lift height of one of theseVNA machines when it is outside the ware-house. Looking up at the machine, seeingthe clouds moving and the mast narrowingdown to the base, the visual effect can bequite disconcerting. In the racking, however,it is a completely different experience as theaisles are narrow and the pallets are only200mm at most from the sides of the cabin.With the operator sitting down, it’s really nodifferent to sitting on a hotel balcony.

A facility that requires 17,000mm lift willmost often want to get the most out of theirforklift fleet, particularly the VNA. For many,a 3-shift working system will be in operation– the better to eliminate downtime to get cost-ly equipment, manpower and buildings earn-ing money for the business. These facilitieswill then require spare batteries, a batterycharging area. Battery maintenance such aschecking water levels will need to be rigor-ously performed and of course, changingbatteries over at the start or end of a shift isnever as quick as we’d hope. This is wherein-aisle Charging comes into it’s own.

The in-aisle charging system on a VNAmachine utilises a power rail fitted to theracking, normally around 3,000mm from theground. When the truck enters the aisle, itautomatically engages with the power railand activates the on-board chargers, allow-ing the machine to run 24 hours per day, 7days a week, non-stop. Another great bene-fit of this type of system is that because thebattery is never being fully discharged, thebattery is not cycling, therefore increasing thelife of the battery.

When operating a super fast, highly pro-ductive VNA machine lifting to amazingheights, mechanisms have to be in place toensure that collisions can be avoided if a per-son walks into the aisle whilst the machine isin motion. There’s no space to step out ofthe way and avoid the machine, and with atop speed of 12 km/h it’s also a challengeto try and outrun this 10 tonne machine.

One solution that is becoming increasinglypopular is a laser human detection system.The system comprises of a safety scanner thatis fitted to both the front and rear of themachine. Each scanner projects an invisiblelaser beam, which can detect something assmall as a tennis ball from over 8,500mm

distant, whilst the truck is moving. The lasermoves like a high speed radar system, butmuch faster and more accurately. The areasin front and behind the truck are thenmapped out into zones, so anything breakingthe safety zone will decrease the speed of themachine to creep speed and anything enter-ing the danger zone will stop the truck. Thesystem is intelligent enough to know when itis approaching a wall and not a person orother piece of materials handling equipment.

The last major emerging trend is high levelorder picking, in particular for the furnitureindustry. As with turret truck applications, weare being asked more and more about liftingto higher heights and designing solutions tohandle interlocking trolleys or offering fullyenclosed cabins.

Interlocking trolleys are designed to allowan operator to pick furniture items, whichwhen completed, they release the trolleyfrom the truck and collect a new empty trolleyto then repeat the cycle.

An alternative to the trolley system is acompletely enclosed system where two opera-tors are lifted up together. The truck auto-matically stops level with the selected rack,the operator then presses a button whichextends flaps out from the sides of the cabinto bridge the gap whilst simultaneouslyreleasing the locks on the doors. This allowsthe operators to open the cabin doors andstep out on to the decked racking area.Here, the operators can safely lift productsfrom the racking into the truck. During thisoperation the truck remains immobilisedwhilst the doors are still open and the flapsare out. When loading is completed the truckthen travels to the end of each aisle to a pickand drop location, where it can load or off-load its goods.

These are just some of the emergingtrends in warehousing. Yale is always look-ing forward, to be in a position to be able tooffer the customer the best possible solution.This means being fully ‘au fait’ with ware-housing trends and working practices.

So what will the future involve?Materials handling equipment designersbased at our product development centres inthe Americas, Asia Pacific, Europe and indeedin India are continually developing excitingnew ideas to satisfy our customers’ appetiteto increase space utilisation and productivityand to reduce cost. So ‘watch this space’.

42 Spotlight on Germany


In Germany, the economic recovery in2010 has been as drastic as the declinewas in 2009, neither of which had been

anticipated. According to the GermanChamber of Industry and Commerce, theGerman economy grew by 3.4% in 2010compared to 2009.

Based on figures made available to theVDMA (Association for Materials Handlingand Logistics Technology), German intralo-gistics will have generated a turnover of14.8 billion Euro in 2010, around 8% lowerthan in 2009 but still around 10% better hadbeen feared last year. It is anticipated thatturnover will see growth of 9% in 2011, or,in concrete terms, intralogistics in Germanyis expected to generate more than 16 billionEuro, which is at a slightly higher level than2009.

Taking advantage of a visit to Germanyto meet some of the exhibitors from nextmonth's CeMAT in Hannover, I was keen todiscover what it was that set Germany apartin the world of logistics. That Germany is aworld-leader in engineering excellence, ofthat there is no doubt. I wanted to learn howit was that Germany has managed to pull offa dramatic recovery – the classic V-shapedrecessionary curve – whilst many otherEuropean nations, including the UK, stutterand stumble with a bothersome W-shapedgraph.

Government interventionKey to the recovery has been the Germangovernment's implementation of a pro-gramme called kurzarbeit (German for"short-work"). It's a short-term, recession-related programme in which companieshave entered into an agreement to avoidlaying-off any of their employees by insteadreducing the working hours of all or most oftheir staff, with the government making upsome of the employees' lost income.

If an employee agrees to undergo train-ing programmes during his or her extra timeoff, they can often maintain their formerincome.

In 2009, the German government hadbudgeted 5.1 billion Euro on the pro-gramme, which replaced some of the lostincome of over 1.4 million workers. The pro-gramme was favourably cited in a 2009Organisation for Economic Co-operationand Development (OECD) report, which stat-ed that it had saved nearly 500,000 jobsduring the recession.

Besides helping to avoid mass-layoffs,the programme's supporters argue thatkurzarbeit has kept skilled work groupstogether, thus avoiding the atrophy of theirskills during extended layoffs. On the otherhand – and this is something I've heardbandied about in the UK – critics haveexpressed concerns about its expense andthat it might prop up unviable firms aheadof an inevitable collapse.

Christoph Hahn-Woernle, managingpartner of viastore systems GmbH, andmember of the management board of theVDMA, says that the recovery in Germanybeen fuelled by a number of factors – he listsseven – rather than by a single reason. Chiefamong these has been the acceptance of achange in working practices by the unions,who in previous recessions had made it hardfor tough decisions to be implemented.

"Germans have always been seen as themost cautious worriers in Europe," says HerrHahn-Woernle. "But today, many people areenvious of our steep economic recovery.There are many reasons for this. After all,German industry has been doing its home-work, and not just since yesterday. This isnow paying off."1. We have formed an 'Alliance For Work'."2. The Socialist/Green coalition govern-

ment introduced an Agenda 2010 that

Germany has long been a European leader across several industry sectors, not least of which is logistics.Peter MacLeod travelled to Hannover to find out what it is that stands Germany apart from othereconomies

High German


Spotlight on Germany 43

included temporary employment as anessential component for triggering the jobmarket and making it more flexible."3. During the crisis, the current govern-

ment contributed to this flexible develop-ment with changed regulations for short-time working."4. Both sides of industry have worked

together with great understanding and pru-dence. The unions have acted in solidarityand all pulled together, rather than exacer-bating the crisis by demanding even shorterworking weeks at full pay, as was the casein the '80s and early '90s. The conse-quences of unrealistic demands have beenclearly revealed in France or Greece."5. The German government has made an

essential contribution to the recoveryprocess with its economic stimulus package,its moves to save the banks, and its bailingout operations in the Eurozone."6. German industry with its wealth of

innovations, has established USPs on aninternational scale."7. Similarly, the engineering sector has

forged ahead with internationalisation toincrease its global presence on the sales

markets."All in all, we have therefore been in a

position to surge ahead while others werestill being hindered by general strikes, fun-damental changes and bottleneck situa-tions."

Germany is currently facing a contradic-tory situation whereby many people want tokeep things just as they are – wanting toprotect nature and the environment – but atthe same time are against any kind ofchange and progress. "The old ways are nolonger suitable for solving problems," saysHerr Hahn-Woernle. "We must make surethat we don't paralyse ourselves. At themoment, various places in Germany arehaving to deal with a situation where formany individual reasons, including poorinformation or political motivation, the pop-ulation at large is up in arms againstprogress, bringing major important projectsto a standstill. Progress is necessary to faceup to the challenges ahead. Industry musthave unabated faith in progress and keepdriving it forwards, it must solve the chal-lenges in order to safeguard prosperity inour country. That is surely something we all



want to preserve. It is the basis on which weall live together."

Logistics to the foreOn the back of the reputation Germany hasfor high quality engineering, its logisticsindustry is also racing ahead. On the onehand, this is underpinned by that broadmanufacturing excellence, on the other it isaided by its geographic proximity to manyof Europe's main trading routes.

Jens Karsten Rohrbäch, the VDMA's eco-nomic advisor, told me, "Germany is tradi-tionally a transit country, with around 85million inhabitants. We have to invent prod-ucts to make materials handling easier. Wetake problems and challenges into account,for example sustainability – and we under-stand that we have a responsibility forEurope.

"Another demographic problem is anageing population – we will have to inventproducts that make it so that people don'thave to carry something heavy from oneplace to another, and therefore create med-ical problems."

Like any modern economy, logistics inGermany is at the heart of economicgrowth. Without an efficient supply chain tofeed the factories and disperse the finishedgoods, manufacturing would struggle tostay viable. Without an expedient way tofeed these goods into the stores and ontocustomers' doorsteps, demand would beadversely affected.

Many of the drivers of the UK's logisticsindustry are present in Germany, but I waskeen to hear how the industry in that regiondiffered from other territories. To give mean answer, I sought out a logistics consult-ant with considerable experience of plan-ning and implementing warehouse andsupply chain strategy across a wide interna-tional reach.

"In Germany, employees are expensive,"says Marco Ehrhardt, general manager ofEhrhardt + Partner, an internationally lead-ing innovator in warehouse logistics withexperience in excess of 600 successfullogistic centres all over the world. "Landprices are high and there's not much of itcompared to, for example, the US, wherethe government is giving out plots for free.Because of the cost of land, the warehousefootprint is becoming smaller and the build-ings are getting higher. There is a greater

need for optimisation. Germany is a world-wide leader in logistics and the technologythat drives it."

I asked whether this is driving business-es towards a more automated solution."That depends on the customer," HerrEhrhardt told me. "Some have stopped itand gone back to manual to be more flexi-ble. Automation is very straight, whereasthe market changes. Sometimes you needsolutions that are flexible to the market. Youcan't say generally – it depends on therequirements of customers. Sometimes,intelligent manual processes give a muchbetter result. We do both automation andmanual solutions. Over the past 100+projects we have completed in Germany,we have kept a foot in both camps."

Sustainability is a watchword in the UK,and has taken on even greater significance,post-recession, as businesses latch on to theidea that a business that leaves a small orno carbon footprint is also most likely to beone that is run efficiently. But Herr Ehrhardtclaims the German economy has beenswitched on to that concept far longer thanother territories.

"The demand for sustainability hasn'tchanged before, during or after the reces-sion in Germany," says Herr Ehrhardt."Worldwide, yes, it has. But in Germany,we've been doing it for 15/20 years.Customers elsewhere are only now askingus to modernise solutions to take intoaccount sustainability. For example, in theMiddle East they had only been thinking ofexpansion. Now they're thinking about opti-mising their internal internal processes."

In answer to my question about whatstands Germany apart from other countriesin terms of the way its logistics industryoperates, Herr Ehrhardt believes that inter-national boundaries do not demarcatewhere a particular trend or practice starts orends, rather that individual ideas and meth-ods are carried over by the companies thatoperate across these borders.

"When it comes to logistics, it is seldomthe case that the countries or state institu-tions set the standards, but rather the com-panies themselves. What we know fromexperience is that an internationally operat-ing company with its headquarters inGermany will also always apply its tried-and-tested logistic structures and processesto their foreign branches. Rossmann [a

market-leading health & beauty retail chaincentred in northern Germany], for example,a client of ours for many years now, worksthis way. The company has built a newlogistics centre in Poland which is almost anexact replica of its central German ware-house.

"Furthermore, the worldwide logisticsstandards are developing constantly, mean-ing that requirements outside Europe arealso increasing. In this regard, we are see-ing a lot of interest in the latest technologyin various places like Brazil or Dubai and inthe topic of process optimisation and logis-tics modernisation."

Quality is kingThe German storage systems companyBITO is another with a strong internationalpedigree. I sought out Bernd Gründemann,BITO’s manager for international sales,whose job title puts him in an ideal positionto comment on how the mentality of theGerman end-user shapes the industry."Germany users, more than any others(except possibly Switzerland), are very quali-ty orientated," he says. "So, for example,with pallet racking, the quality of the steel isvery important, as is the guarantee, healthand safety considerations, and of coursethe design. Then we talk about the price.My feeling is that this is a German speciali-ty. How to address a German customer is tofocus on quality rather than price.

"Also, German people think more longterm, which gives an opportunity to invest inmore complex systems, because they don'tdemand ROI of one year, rather three orfour. For example, in France the automationside is much lower than in Germany, eventhough labour costs are similar. Theydepend a lot more on manual processesand traditional materials handling equip-ment, whereas in Germany we have amuch more sophisticated solution."

Herr Gründemann agrees thatkurzarbeit has made a big impact on thespeed of the recovery of the German econ-omy. He says it has benefited industry intwo main ways. "Firstly, if I were to have adrop in orders, I can put the staff onkurzarbeit, during which period 60% of thecost is borne by the government, whichsaves unemployment costs. And for thecompany, it means you can retain the stafffor when the recovery comes.


Spotlight on Germany 45

"Secondly, kurzarbeit affects the employ-ment of temporary workers. Up untilkurzarbeit was brought in, the law hadbeen very strict, but now it has been madesimpler for firms to get workers in and outquickly, which aids flexibility.

A weak Euro has also helped Germanand other Eurozone-based companies toboost their earnings by seeking growthoverseas. Both Herr Ehrhardt and HerrGründemann agree that their export busi-ness has kept the wheels of industry turningwhilst the domestic market has been quiet.Whilst the Euro stays weak, the contributionof the export market to the bottom line issignificant.

"Our growth is currently being driven byexport demand," says Herr Gründemann."At BITO, we have won quite a few largeprojects over the past few months, all ofthem outside of Germany. The weak Eurocertainly helps."

Future concernsAgain, like other territories, Germany isconcerned about the future of its industries.In a country famed for its engineering, it issurprising to hear of a skills shortage inGermany. But that's what it is facing. Dr.Christoph Beumer, managing director andchairman of BEUMER Group, chairman ofthe CeMAT Executive Committee and actingchairman of the German LogisticsAssociation (BVL), says the only way toaddress this issue is to confront it withproactive initiatives to energise school-agestudents to be the engineers of the future.

He sees the CeMAT exhibition in May asa wonderful opportunity to show off howexciting a career in the intralogistics sectorcan be, particular with an eye on the engi-neering excellence that lies behind it anddrives it forward.

"German intralogistics is rightly seen as

A weak Euro has also helped German and otherEurozone-based companies to boost their earningsby seeking growth overseas. Both Herr Ehrhardt andHerr Gründemann agree that their export businesshas kept the wheels of industry turning whilst thedomestic market has been quiet. Whilst the Eurostays weak, the contribution of the export market tothe bottom line is significant


www,ifwla.comApril 2011

the world leader in the field," says HerrBeumer. "Germany's leadership in intralo-gistics is seen not only in its export levels,but also in the strong presence of Germansuppliers in the various markets. It is evidentabove all in the innovations and develop-ments that come from Germany and areused all round the world.

"Here in Germany is where innovationtakes place, this is where the heart andbrains of intralogistics can be found. So it isnatural that the leading global trade showfor intralogistics is held here in Germany,and attracts tens of thousands of visitorsfrom around the world.

"Here in Germany, skilled engineers andtechnicians create intralogistics solutionsthat help people all over the world andimprove company productivity – solutions,for example, for lifting heavy loads, for in-house transport, for efficient and error-freesorting and distribution of packages or lug-gage.

"More than half of the added value ofGerman intralogistics is exported. However,an ever larger and rapidly growing share ofthis added value is in domestic markets.There is simply no good environmental oreconomic reason to transport products andcomponents halfway around the world.

"This means that an ever greater shareof Germany's export value lies in 'brainpower'. Most of the discoveries and innova-tions that help companies around the worldto work efficiently, save resources of allkinds and make people's work simpler andhealthier, still come from Germany.

"We need excellent minds here at hometo maintain and extend our competitiveedge, because exports in our sector willincreasingly be based on exporting ideasand innovations for the various markets.More than ever, our engineering talent willbe our capital and our raw material of thefuture.

"Our industry has excellent educationalinstitutions and highly skilled employees.However, if value creation is becomingmore regional, we will need many morequalified and versatile university graduatesin the foreseeable future."

Cemat 2011With this in mind, training new skilled

workers has been made a focus of CeMAT2011, with initiatives such as the

Intralogistics Campus, a Jobs and CareerMarket in Hall 27, and 'TectoYou', whichhas been run for five years at the HannoverMesse industrial fair, now extended toCeMAT this year. 'TectoYou' has been suc-cessfully reaching out to students from pro-fessional and generalist high schools, aswell as college-level students, to capturetheir interest and get them excited abouttechnology.

So, with the industry ticking over verynicely in the present, and the future beingfinely scrutinised and anticipated, the logis-tics industry in Germany appears to be inrude health.

In 2008, at the previous CeMAT event,everything seemed to be in order. Sure,there were some bankers in trouble on theother side of the world, but few of us couldhave anticipated how precipitous thedecline became.

The hard times were, for many of us,extremely hard, and every company I havespoken to or visited has come out leanerand fitter. The intelligence I gathered at theCeMAT preview suggests that Germany iscurrently flying out of the recession, so thetiming of the trade fair is just right as thesecompanies seek to grow their export mar-kets.

In conclusion, the German economy hasbenefited from proactive intervention atgovernmental levels, with action rather thanwords helping to get things back on track. Itseems that the title of this article, 'Logisticsin Germany', fails slightly to hit the mark, asthere is no demarcation between how theindustry operates there than in otherWestern economies.

Trading conditions are tough all aroundthe world, no more so than in Europe, butit's how we confront and overcome thesechallenges that makes the European logis-tics industry – particularly in Germany – aworld leader.

Peter Maclleod is editor of the leading UKmaterials handling publication StorageHandling Distribution (SHD). Please visit www.pressonshd.com/newsletter/ for furtherinformation

The German economy has benefitedfrom proactive intervention at governmental levels

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Warehousing & Logistics Magazine Vol 1

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