Peter Bradley is an award-winning career journalist with more than three decades of experience in both newspapers and national business magazines. His credentials include seven years as the transportation and supply chain editor at Purchasing Magazine and six years as the chief editor of Logistics Management.
For the past decade, talk about sourcing in Asia largely meant sourcing in China. The giant nation opened its doors, invited investment and developed the wherewithal to become the world's workshop—the place to go for low-cost labor and high-quality workmanship. It has prospered as a result.
Withthe spotlight on China, it is easy to forget that until an economic collapse in 1997, the fastest-growing economies in the region were China's neighbors in Southeast Asia. And now those nations are gearing up to go after a bigger share of trade with the West (as well as the rapidly growing intra-Asia trade).
Thailand, Cambodia and Vietnam, along with nations with long-standing economic ties to the United States like India, Malaysia and the Philippines, are looking to get in on the offshoring action. And they're investing in both manufacturing capabilities and trade and logistics infrastructure to make it happen.
China, in the meantime, is scrambling to maintain its advantage over its regional competitors. It is pouring enormous sums into its road, rail and water networks to support its growth—and to spread some of the wealth beyond the coast and into the hinterland. While it is true that its fast-growing coastal cities have lost some cost advantages as wages have climbed, China is still a relatively low-cost place to do business. And it has vast numbers of workers yet available—assuming the country is able to extend its logistics infrastructure to reach them.
That adds up to both complexity and opportunity for U.S.-based procurement and logistics professionals. Economic development in the Pacific Rim is confusing, complex and subject to sudden shifts in political or economic winds, making it tough for even seasoned Asia hands to stay abreast of changes.
Multi-country sourcing adds layers of complexity in the already specialized world of international trade. In many countries, infrastructure development hasn't kept pace with demand. And too often, structural or regulatory barriers create as many headaches as inadequate rail or trucking service.
Spread the risks
Yet for all the difficulties, the potential is too attractive— and too much a competitive necessity—to ignore. Today's cut-throat market environment—particularly in the consumer goods and electronics sectors—essentially requires looking to low-cost Asian sources.
That's true of companies that trade in industrial products as well, says Paul Loftus, a managing partner at consulting firm Accenture. "For a typical industrial products company, the impact of global sourcing on profitability can be substantial: US$100 to US$200 million in annual savings (for a US$5 billion company spending 50 cents out of every sales dollar on direct materials)," Loftus wrote in a recent article, "Procurement for high performance: Global sourcing in the industrial products industry."
Logistics service providers in the region say they're seeing a surge in offshore production. "The trend toward offshore low-cost sourcing is increasing," says Mark Millar, Hong Kong-based director of strategic accounts for UPS Supply Chain Solutions, Asia Pacific, which provides logistics services. "A significant proportion is in China, but other countries in the Asia/Pacific are growing."
Paul Bingham, an economist for the research firm Global Insight, says the efforts by nations in the region to invest in manufacturing and infrastructure create opportunities for U.S. businesses to look beyond China for sources. The challenge will be to persuade potential clients to consider these alternate sources, says Humberto Florez, CEO of third-party service provider DHL Exel Supply Chain Asia Pacific. "The perception is that China is easier than other countries," he says. "But you could be missing an opportunity for doing business [with suppliers] in India, Cambodia or Malaysia that provide good-quality products."
John Langley, professor of supply chain management at the Georgia Institute of Technology, visits China frequently. He says that among companies he talks to, China remains the major attraction, but that many are looking at other nations as part of a "portfolio management" strategy, dividing their business among several nations. "Rather than have 100 percent of their activity in China, they are spreading out the risk," he says. (Langley added that potential outsourcers need not limit their search to the Pacific Rim. He said that when asked what country would be the next hot area for development, most of the respondents to his most recent third-party logistics survey named Russia.)
"I think the idea is to spread the manufacturing base so as not to have all the eggs in one basket," says Millar of UPS. He adds that different regions are developing strengths in particular industries: Thailand in automotive, for instance; Taiwan in high tech; Singapore in health care and pharmaceuticals. And in the case of the apparel and footwear industries, he notes, quotas on garments and shoes are pushing importers to diversify their buys.
Bingham points out that multi-sourcing is only an option for fairly sizable businesses—those with enough scale to spread their production across several countries. "It still depends on having the critical mass," he says. "If you have limited production, the loss of scale overwhelms the advantages. But more and more companies are getting to that critical mass."
Keeping it moving
As nationslike Thailand and Vietnam capture more business, logistics services are likely to follow. For instance, A.P. Moller Maersk Group, owner of one of the world's largest ocean shipping fleets, says it plans to build a major terminal on the Vietnam coast southeast of Ho Chi Minh City. Other shipping lines are following suit. "We are seeing ship lines revisit their rotations," reports Florez. He says once one carrier adds service to a port, others are likely to follow. That could mean more direct service to U.S. ports from more locations, which would accelerate cycle times. Now, many shipments from countries outside China are shipped to ports like Hong Kong for transloading to trans-Pacific vessels.
What helps make investments like A.P. Moller Maersk's possible is that governments are slowly becoming more open to foreign investment. That's crucial to these nations' ability to compete with China. "It's not just about manufacturing costs and utilities, but the ability to get finished goods in and out," Bingham says. Without good logistics infrastructure, total landed costs can still be excessive, no matter how low the manufacturing costs.
India is a case in point. While India has made great strides in capturing service-industry jobs, its attempts to capture manufacturing business often founder over infrastructure issues. Bingham points out that while India has begun some big investments, its spending on infrastructure still pales in comparison to China's.
And China is spending a lot. In his article, Loftus wrote, "China is an infrastructure giant in terms of both supply and demand. China's current five year plan calls for the construction of an additional 6,000 km of rail track, 200,000 km of road, 141 deepwater ports and 57 airports. Its projected energy requirements will necessitate an additional 500 gigawatts of capacity—80 percent of Great Britain's total capacity—every year for the next 10 to 15 years."
But rail lines and highways can be built only so fast, even with a powerful centralized government and few regulatory impediments. And in the meantime, logistics infrastructure development hasn't kept pace with China's ambition.
Langley says that's particularly true of the Yangtze River region, which he says has air, highway and rail issues.
China has other problems, too, Langley says. For instance, moving goods between provinces can result in inventory taxes, even if goods were taxed previously. Other issues are as simple as warehouse technology. Langley cites the case of warehouses in which workers unpack a pallet on a truck, place the goods on the dock and re-palletize the freight—all for the want of dock levelers at the warehouse.
Even something as simple as a truck movement can present challenges. Kris Knutsen, a manager for consultant Deloitte & Touche, reports that long-distance hauling is difficult in China, whose trucking industry is overpopulated by small regional firms. But he notes that the central government in Beijing is pressing provinces hard to reduce protectionist policies that impede logistics efficiency. In a recent company Webcast, Knutsen said that reducing logistics costs is a national goal and part of China's current five year plan. In 2004, logistics expenses represented about 21 percent of China's gross domestic product (GDP), according to numbers compiled for the Council of Supply Chain Management Professionals by Charles Wang, Ph.D., of the China Development Institute in Shenzhen, China. (The comparable number in the United States that year was 8.8 percent.) China's goal, Knutsen says, is to reduce logistics costs to 10 percent of GDP by the year 2020.
Bringing it all together
Supply chain woes are hardly unique to China. UPS's most recent Asia Business Monitor survey showed that although about 80 percent of the respondents said they considered supply chain efficiency to be an important factor in small and mid-sized enterprises' ability to compete, more than 50 percent believed it needed improvement in Asia. More than 60 percent of the respondents in China, India, Indonesia, Korea, the Philippines and Taiwan said supply chain efficiency was lacking in their countries.
Logistics service providers intend to fill at least part of that gap. Like the carriers, they're currently investing heavily across Asia. That's good news for shippers, says Bingham. Not only can carriers and third-party logistics service providers (3PLs) ease some of the trade and transportation complexities in sourcing from multiple countries, but they're also bringing services like consolidation and assembly to the region. "As the 3PLs are opening up shop, they are bringing in best practices," adds Langley.
One of those 3PLs is DHL. "We are setting ourselves up and have [had] good success ... with customers," says Florez. "We have taken the next steps by facilitating infrastructure needed at origin for merge in transit, postponement and handling documentation, so even the smaller retailer can benefit from the existing supply chain."
As an example, Florez points to a kitchen appliance firm (which he is not allowed to name) that imports goods from China, Malaysia and Indonesia into the Americas, as far south as Chile. DHL consolidates all of its Asia purchases at a consolidation center near Hong Kong; configures equipment with appropriate motors and power cords, manuals and cartons for the final destination; and then manages the shipments' movement to destination country DCs.
Millar reports that UPS is seeing similar demand for end-to-end service."Low-cost production is only advantageous for the destination market if you have an efficient supply chain," he says. "What customers are looking for is consolidation from multiple sourcing countries, destined for the same channel, and for those to be consolidated and shipped into the destination market as part of a seamless, integrated supply chain."
At the same time, he says, UPS is also seeing increased demand for value-added services at origin and destination. "If you can move activities up the supply chain, which by nature means lower cost—things like bundling, packaging, labeling, garment on hanger—and have those done at the origin center, then in the destination market you can do deconsolidation and have efficient ground distribution to the destination point."
What happens when your warehouse technology upgrade turns into a complete process overhaul? That may sound like a headache to some, but for leaders at paper crafting company Stampin’ Up! it’s been a golden opportunity—especially when it comes to boosting productivity. The Utah-based direct marketing company has increased its average pick rate by more than 70% in the past year and a half. And it’s all due to a warehouse management system (WMS) implementation that opened the door to process changes and new technologies that are speeding its high-velocity, high-SKU (stock-keeping unit) order fulfillment operations.
The bottom line: Stampin’ Up! is filling orders faster than ever before, with less manpower, since it shifted to an easy-to-use voice picking system that makes adapting to seasonal product changes and promotions a piece of cake. Here’s how.
FACING UP TO CHANGE
Stampin’ Up!’s business increased rapidly in 2020, when pandemic-era lockdowns sparked a surge in online orders for its crafting and scrapbooking supplies—everything from rubber stamps to specialty papers, ink, and embellishments needed for home-based projects. At around the same time, company leaders learned that the WMS in use at its main distribution center (DC) in Riverton, Utah, was nearing its end-of-life and would have to be replaced. That process set in motion a series of changes that would upend the way Stampin’ Up! picked items and filled orders, setting the company on a path toward continuous improvement.
“We began a process to replace the WMS, with no intent to do anything else,” explains Rich Bushell, the company’s director of global distribution services. “But when we started to investigate a new WMS, we began to look at the larger picture. We saw problems within our [picking] system. Really, they were problems with our processes.”
Stampin’ Up! had hired global supply chain consulting firm Argon & Co. to help with the WMS selection and implementation, and it was that process that sparked the change. Argon & Co. Partner Steve Mulaik, who worked on the project, says it quickly became clear that Stampin’ Up!’s zone-based pick-and-pass fulfillment process wasn’t working well—primarily because pickers spent a lot of idle time waiting for the next order. Under the old system, which used pick-to-light technology, workers stood in their respective zones and made picks only from their assigned location; when it came time for a pick, the system directed them where to make that pick via indicator lights on storage shelves. The workers placed the picked items directly into shipping boxes that would be passed to the next zone via conveyor.
“The business problem here was that they had a system that didn’t work reliably,” Mulaik explains. “And there were periods when [workers] would have nothing to do. The workload was not balanced.”
This was less than ideal for a DC facing accelerating demand for multi-item orders—a typical Stampin’ Up! order contains 17 to 21 items per box, according to Bushell. In a bid to make the picking process more flexible, Mulaik suggested eliminating the zones altogether and changing the workflow. Ultimately, that would mean replacing the pick-to-light system and revamping the pick-and-pass process with a protocol that would keep workers moving and orders flowing consistently.
“We changed the whole process, building on some academic work from Georgia Tech along with how you communicate with the system,” Mulaik explains. “Together, that has really resulted in the significant change in productivity that they’ve seen.”
RIGHTING THE SHIP
The Riverton DC’s new solution combines voice picking technology with a whole new process known as “bucket brigade” picking. A bucket brigade helps distribute work more evenly among pickers in a DC: Pickers still work in a production-line fashion, picking items into bins or boxes and then sending the bins down the line via conveyor. But rather than stop and wait for the next order to come to them, pickers continue to work by walking up to the next person on the line and taking over that person’s assignment; the worker who is overtaken does the same, creating a process in which pickers are constantly filling orders and no one is picking from the same location.
Stampin’ Up! doesn’t follow the bucket brigade process precisely but has instead developed its own variation the company calls “leapfrog.” Instead of taking the next person’s work, pickers will move up the line to the next open order after completing a task—“leapfrogging” over the other pickers in the line to keep the process moving.
“We’re moving to the work,” Bushell explains. “If your boxes are full and you push them [down the line], you just move to the open work. The idea is that it takes the zones away; you move to where the next pick is.”
The voice piece increases the operation’s flexibility and directs the leapfrog process. Voice-directed picking allows pickers to listen to commands and respond verbally via a headset and handheld device. All commands filter through the headset, freeing the worker’s eyes and hands for picking tasks. Stampin’ Up! uses voice technology from AccuSpeechMobile with a combination of company-issued Android devices and Bluetooth headsets, although employees can use their own Bluetooth headsets or earbuds if they wish.
Mulaik and Bushell say the simplicity of the AccuSpeechMobile system was a game-changer for this project. The device-based system requires no voice server or middleware and no changes to a customer’s back-end systems in order to operate. It uses “screen scrape” technology, a process that allows the collection of large volumes of data quickly. Essentially, the program translates textual information from the device into audible commands telling associates what to pick. Workers then respond verbally, confirming the pick.
“AccuSpeech takes what the [WMS] says and then says it in your ear,” Bushell explains. “The key to the device is having all the data needed to make the pick shown on the screen. However, the picker should never—or rarely—need to look at the screen [because] the voice tells them the info and the commands are set up to repeat if prompted. This helps increase speed.
“The voice piece really ties everything together and makes our system more efficient.”
And about that system: Stampin’ Up! chose a WMS from technology provider QSSI, which directs all the work in the DC. And the conveyor systems were updated with new equipment and controls—from ABCO Systems and JR Controls—to keep all those orders moving down the line. The company also adopted automated labeling technology and overhauled its slotting procedure—the process of determining the most efficient storage location for its various items—as part of the project.
MISSION ACCOMPLISHED
Productivity improvement in the DC has been the biggest benefit of the project, which was officially completed in the spring of 2023 but continues to bear fruit. Prior to the change, Stampin’ Up! workers averaged 160 picks per hour, per person. That number rose to more than 200 picks per hour within the first few months, according to Bushell, and was up to 276 picks per hour as of this past August—a more than 70% increase.
“We’ve seen some really good gains,” Bushell says, adding that the company has reduced its reliance on both temporary and full-time staff as well, the latter mainly through attrition. “Overall, we’re 20% to 25% down on our labor based on the change …. And it’s because we’re keeping people busy.”
Quality has stayed on par as well, something Bushell says concerned him when switching from the DC’s previous pick-to-light technology.
“You have very good quality with pick-to-light, so we [worried] about opening the door to errors with pick-to-voice because a human is confirming each pick,” he says. “But we average about one error per 3,300 picks. So the quality is really good.”
On top of all that, Bushell says employees are “really happy” with the new system. One reason is that the voice system is easy to learn—so easy, anyone can do it. Stampin’ Up! runs frequent promotions and special offers that create mini spikes in business throughout the year; the new system makes it easy to get the required temporary help up to speed quickly or recruit staff members from other departments to accommodate those spikes.
“We [allocate] three days of training for voice, but it’s really about an hour,” Bushell says, adding that some of the employees from other departments simply enjoy the change of pace and the exercise of working on the “leapfrog” bucket brigade. “I have people that sign up every day to come pick.”
Not only has Stampin’ Up! reduced downtime and expedited the picking of its signature rubber stamps, paper, and crafting supplies, but it’s also blazing a trail in fulfillment that its business partners say could serve as a model for other companies looking to crank up productivity in the DC.
“There are a lot of [companies] that have pick-and-pass systems today, and while those pick-and-pass systems look like they are efficient, those companies may not realize that people are only picking 70% of the time,” Mulaik says. “This is a way to reduce that inactivity significantly.
“If you can get 20% of your productivity back—that’s a big number.”
With its new AutoStore automated storage and retrieval (AS/RS) system, Toyota Material Handling Inc.’s parts distribution center, located at its U.S. headquarters campus in Columbus, Indiana, will be able to store more forklift and other parts and move them more quickly. The new system represents a major step toward achieving TMH’s goal of next-day parts delivery to 98% of its customers in the U.S. and Canada by 2030, said TMH North America President and CEO Brett Wood at the launch event on October 28. The upgrade to the DC was designed, built, and installed through a close collaboration between TMH, AutoStore, and Bastian Solutions, the Toyota-owned material handling automation designer and systems integrator that is a cornerstone of the forklift maker’s Toyota Automated Logistics business unit. The AS/RS is Bastian’s 100th AutoStore installation in North America.
TMH’s AutoStore system deploys 28 energy-efficient robotic shuttles to retrieve and deliver totes from within a vertical storage grid. To expedite processing, artificial intelligence (AI)-enhanced software determines optimal storage locations based on whether parts are high- or low-demand items. The shuttles, each independently controlled and selected based on shortest distance to the stored tote, swiftly deliver the ordered parts to four picking ports. Each port can process up to 175 totes per hour; the company’s initial goal is 150 totes per hour, with room to grow. The AS/RS also eliminates the need for order pickers to walk up to 10 miles per day, saving time, boosting picking accuracy, and improving ergonomics for associates.
The upgrades, which also include a Kardex vertical lift module for parts that are too large for the AS/RS and a spiral conveyor, will more than triple storage capacity, from 40,000 to 128,000 storage positions, making it possible for TMH to increase its parts inventory. Currently the DC stores some 55,000 stock-keeping units (SKUs) and ships an average of $1 million worth of parts per day, reaching 80% of customers by two-day ground delivery. A Sparck Technologies CVP Impack fit-to-size packaging machine speeds packing and shipping and is expected to save up to 20% on the cost of packing materials.
Distribution, manufacturing expansion on the agenda
The Columbus parts DC currently serves all of the U.S. and Canada; inventory consists mostly of Toyota’s own parts as well as some parts for Bastian Solutions and forklift maker The Raymond Corp., which is part of TMH North America. To meet the company’s goal of next-day delivery to virtually all parts customers, TMH is exploring establishing up to five additional parts DCs. All will be TMH-designed, owned, and operated, with varying levels of automation to meet specific needs, said Bret Bruin, vice president, aftermarket sales and operations, in an interview.
Parts distribution is not the only area where TMH is investing in expanded capacity. With demand for electric forklifts continuing to rise, the company recently broke ground for a new factory on the expansive Columbus campus that will benefit both Toyota and Raymond. The two OEMs—which currently have only 5% overlap among their customers—already manufacture certain forklift models and parts for each other, said Wood in an interview. Slated to open in 2026, the $100 million, 295,000-square-foot factory will make electric-powered forklifts. The lineup will include stand-up rider trucks, currently manufactured for both brands by Raymond in Greene, New York. Moving production to Columbus, Wood said, will not only help both OEMs keep up with fast-growing demand for those models, but it will also free up space and personnel in Raymond’s factory to increase production of orderpickers and reach trucks, which it produces for both brands. “We want to build the right trucks in the right place,” Wood said.
Editor's note:This article was revised on November 4 to correct the types of equipment produced in Raymond's factory.
“The latest data continues to show some positive developments for the freight market. However, there remain sequential declines nationwide, and in most regions,” Bobby Holland, U.S. Bank director of freight business analytics, said in a release. “Over the last two quarters, volume and spend contractions have lessened, but we’re waiting for clear evidence that the market has reached the bottom.”
By the numbers, shipments were down 1.9% compared to the previous quarter while spending dropped 1.4%. This was the ninth consecutive quarterly decrease in volume, but the smallest drop in more than a year.
Truck freight conditions varied greatly by region in the third quarter. In the West, spending was up 4.4% over the previous quarter and volume increased 1.1%. Meanwhile, in the Southeast spending declined 3.3% and shipments were down 3.0%.
“It’s a positive sign that spending contracted less than shipments. With diesel fuel prices lower, the fact that pricing didn’t erode more tells me the market is getting healthier,” Bob Costello, senior vice president and chief economist at the American Trucking Associations (ATA), said in the release.
The U.S. Bank Freight Payment Index measures quantitative changes in freight shipments and spend activity based on data from transactions processed through U.S. Bank Freight Payment, which processes more than $42 billion in freight payments annually for shippers and carriers across the U.S. The Index insights are provided to U.S. Bank customers to help them make business decisions and discover new opportunities.
Parcel giant FedEx Corp. is automating its fulfillment flows by investing in the AI robotics and autonomous e-commerce fulfillment technology firm Nimble, and announcing plans to use the San Francisco-based startup’s tech in its own returns network.
The move is significant because FedEx Supply Chain operates at a large scale, running more than 130 warehouse and fulfillment operations in North America and processing 475 million returns annually. According to FedEx, the “strategic alliance” will help to scale up FedEx Fulfillment with Nimble’s “fully autonomous 3PL model.”
“Our strategic alliance and financial investment with Nimble expands our footprint in the e-commerce space, helping to further scale our FedEx Fulfillment offering across North America,” Scott Temple, president, FedEx Supply Chain, said in a release. “Nimble’s cutting-edge AI robotics and autonomous fulfillment systems will help FedEx streamline operations and unlock new opportunities for our customers.”
According to Nimble founder and CEO Simon Kalouche, the collaboration will help enable FedEx to leverage Nimble’s “fast and cost-effective” fulfillment centers, powered by its intelligent general purpose warehouse robots and AI technology.
Nimble says that more than 90% of warehouses today still operate manually with minimal or no robotics, and even those automated warehouses use robots with limited intelligence that are restricted to just a few warehouse functions—primarily storage and retrieval. In contrast, Nimble says its “intelligent general-purpose warehouse robot” is capable of performing all core fulfillment functions including storage and retrieval, picking, packing, and sorting.
For the past seven years, third-party service provider ODW Logistics has provided logistics support for the Pelotonia Ride Weekend, a campaign to raise funds for cancer research at The Ohio State University’s Comprehensive Cancer Center–Arthur G. James Cancer Hospital and Richard J. Solove Research Institute. As in the past, ODW provided inventory management services and transportation for the riders’ bicycles at this year’s event. In all, some 7,000 riders and 3,000 volunteers participated in the ride weekend.
Photo courtesy of Dematic
For the past four years, automated solutions provider Dematic has helped support students pursuing careers in the STEM (science, technology, engineering, and mathematics) fields with its FIRST Scholarship program, conducted in partnership with the corporate nonprofit FIRST (For Inspiration and Recognition of Science and Technology). This year’s scholarship recipients include Aman Amjad of Brookfield, Wisconsin, and Lily Hoopes of Bonney Lake, Washington, who were each awarded $5,000 to support their post-secondary education. Dematic also awarded $1,000 scholarships to another 10 students.
Motive, an artificial intelligence (AI)-powered integrated operations platform, has launched an initiative with PGA Tour pro Jason Day to support the Navy SEAL Foundation (NSF). For every birdie Day makes on tour, Motive will make a contribution to the NSF, which provides support for warriors, veterans, and their families. Fans can contribute to the mission by purchasing a Jason Day Tour Edition hat at https://malbongolf.com/products/m-9189-blk-wht-black-motive-rope-hat.
MTS Logistics Inc., a New York-based freight forwarding and logistics company, raised more than $120,000 for autism awareness and acceptance at its 14th annual Bike Tour with MTS for Autism. All proceeds from the June event were donated to New Jersey-based nonprofit Spectrum Works, which provides job training and opportunities for young adults with autism.