Even the best-designed distribution systems may harbor traps that rob them of their highest performance potential. Here's how to find—and avoid—those velocity traps.
William T. Walker, CFPIM (Certified Fellow in Production and Inventory Management), CIRM (Certified in Integrated Resource Management), is a director of supply chain management for Siemens Building Technologies. He is also author of the book Supply Chain Architecture: A Blueprint for Networking the Flow of Material, Information, and Cash, CRC Press, ?2005.
For one DC, the trap turned out to be its own order approval process. An order for urgently needed replenishments from Taiwan was delayed a full six days because the only person authorized to sign off on the purchase was out of the country. For another DC, the trap turned out to be the company's accounting department. A $3,300 order never reached the DC because of miscommunication with the people in credit. For yet another, the trap lay in a procedural oversight that snarled an incoming shipment from Malaysia. After a series of delays, the shipment finally arrived at the DC only to be held up again while workers frantically searched for a hidden packing slip.
In all three cases, the DCs were ensnared by what we call "velocity traps"—mishaps that disrupt the smooth flow of material, information and cash that's so essential to a well-performing supply chain. Unfortunately, these are hardly isolated cases. Velocity traps are everywhere. Even a well-designed distribution system has velocity traps that can rob a DC of its highest performance potential.
What makes the DC particularly vulnerable to these traps is its position in the larger supply chain network. In its daily transactions, the DC acts as both buyer and seller, simultaneously buying from its upstream suppliers and selling to its downstream customers.
On the surface, the transactions look simple enough: You fill the order, deliver the merchandise and transfer the cash, completing what's known as the order-to-delivery-to-cash (ODC) cycle. (Or if the DC is ordering replenishments, you place the order, accept the delivery and transfer the cash.) Add up the time it takes to complete each step, and you have a measure of DC velocity. It's just that basic.
But the execution, as every DC manager knows, can get complicated. Potential pitfalls lurk in every one of those transactions. The customer's order never reaches the DC. The DC ships the merchandise only to have it rejected at the customer's dock. Payments are misdirected. Orders are put on indefinite credit hold. There are a million ways to lose velocity. It may not be possible to avoid every trap. But the more you know about problems that can interfere with the flow of material, information and cash, the better you can prepare. What follows is a look at some common velocity traps:
Material whirl
The sooner you deliver a shipment, the sooner you get paid. Seems simple enough, but a lot can happen between the time you receive an order and the time your customer takes delivery of the goods. Here are some common traps to watch for:
Rejected shipments. The DC ships an order out, only to find it's back a few days later. A phone call reveals that the shipment was rejected at the receiving dock because of inaccurate counts or damaged cartons. Get the order right the first time and see that merchandise is packed to withstand the rigors of transportation.
A "no-show" carrier. The shipment's ready to go, but it ends up sitting on the dock for days before someone arrives to pick it up. Often, it turns out that the customer has chosen a carrier that doesn't normally serve your DC, causing delays while its dispatcher rearranges routes to accommodate the pickup. Your customers aren't obligated to choose a carrier from your DC's preferred carrier list, of course. But make sure they understand that using an unfamiliar company can cause delays of up to two days.
Out of stocks. An order comes in and the DC goes to fill it, only to find itself short of one of the SKUs. But because the customer has specified that the DC ship only complete orders, the entire shipment is held up. Or a customer that normally orders five cartons suddenly orders 50 with no advance notice, causing delays of a week or more while the DC awaits replenishments. To avoid delays, encourage customers to accept partial orders and to provide advance notice of unusually large orders.
Congested docks and clogged aisles. DCs that process incoming freight, outbound shipments and returns in the same dock space risk blocking the paths of the forklifts trying to load shipments. Similarly, operations that use a lot of floor space for accumulating coordinated shipments risk running short of space needed for cross-docking operations. Keep aisles and paths clear.
Most of the traps described so far mainly affect outbound shipments, causing delays in a DC's efforts to get shipments out the door. There are others that affect mainly inbound shipments. Here are some common "inbound" traps:
Unrealistic delivery expectations. The longer the supply chain, the higher the risk of delay—your inbound shipment could miss the departure date for an ocean sailing, be bumped to the next flight, or get held up in customs. And contrary to popular belief, an airfreight shipment from Southeast Asia to the East Coast doesn't arrive overnight; it typically takes eight calendar days door to door. Let everyone in your organization know what's realistic to expect.
Unfamiliar foreign trade practices. Missteps by first-time importers can lead to lengthy delays. Consider the case of a DC that ordered product manufactured in Malaysia under Incoterms, Delivered Duty Paid. Under DDP, the seller hired the forwarder/carrier to deliver the goods, so the buyer didn't bother to check to see which forwarder the seller had chosen. As it turned out, the seller selected a forwarder that did not hold the DC's power of attorney to clear the goods through U.S. Customs, which meant the goods had to be handed over to a different broker for customs clearance and delivery. Because the delivery wasn't scheduled with the broker, the goods were stowed in a corner until someone realized the shipment was overdue. Keep a close watch on international shipments and get outside assistance, if necessary.
Data woes
While everybody accepts that moving material from point A to point B takes time, most assume that information flow is instantaneous. But that's not always true. For all our lightning fast digital transmission capabilities, plenty of people still communicate via phone, fax and even mail and then spend hours or days waiting for callbacks. Here are some other traps to watch for:
Hierarchical approval processes. The typical corporation builds multiple layers of approval into its purchasing process, sometimes even requiring signoff at the highest levels. While that may reduce its exposure to fraud, it also can lead to serious delays. Take the case of an Indianapolis DC that was caught by surprise when demand took off for an item manufactured in Taiwan. With orders pouring in and supplies dwindling, the DC's purchasing agent tried to place an urgent order with the supplier, only to discover that the dollar value exceeded her authorization limit. Her boss, the purchasing manager, was away on business in Frankfurt but had left a number for emergencies. At 2: 30 p.m. Thursday, she called to ask him to send an authorizing fax directly to the factory in Taipei, catching him as he was finishing dinner at 9: 30 p.m. The boss finally got to a fax machine at noon Friday—which was 6: 00 p.m. Friday in Taipei, where the factory was closing for a long holiday. To avoid this trap, designate a backup person to authorize purchases in emergencies.
Bad inventory data. You've invested in bar codes to eliminate data entry errors and in RFID tags to ensure inventory locations don't go undetected. But you still run into situations in which the computer says that Item A is in the DC, but it simply can't be found. Don't assume your inventory data is 100-percent accurate. It's unlikely to be perfect unless you've put cycle counting or similar processes in place to ensure it.
Missing information and document discrepancies. There's no room for error when it comes to global trade documents, where the smallest omission or discrepancy can lead to lengthy delays and failure to be paid. The information on the advance shipping notice or container contents list (both of which must be submitted well before the sailing or wheels-up) must reflect exactly what arrives at the destination port or airport. Data on other documents—purchase orders, bills of lading, letters of credit, and so forth—must match up as well. Companies that participate in the Customs-Trade Partnership Against Terrorism (C-TPAT) have the added responsibility of complying with that program's information requirements or risk being bounced from Customs'"EZ-Pass"lanes. Prepare your documents carefully.
Follow the money
However irksome they may be, problems that halt the flow of materials or data generally surface quickly. The customs broker calls with the bad news. The warehousing software notifies the supervisor that an item is out of stock. Whatever the problem, the DC manager can start taking steps to resolve it.
That's not necessarily true of the velocity traps that can disrupt the flow of cash. Days, weeks or months may go by before the shipper or receiver hears about the problem, which only lengthens the delay. Here are some common cash flow-related traps:
Failure to communicate. Lack of communication between the credit department and the DC can result in serious delays. Take the case of a retail store that hit a stone wall in its attempts to order replenishments from its DC. The retail store placed a new order for $3,300 from the DC at a time when it was already using $28,775 of its $30,000 credit line. But the order never reached the DC's order management system. Instead, the company's credit department put it on indefinite credit hold until the retailer reduced its balance. In a desperate bid to free up some credit, the retail store returned some slow-moving product, paying a hefty restocking charge in the process (a move that benefited neither party). A quick phone call could have resolved the matter and prevented the delays.
Lax returns management. For some types of merchandise, return rates run as high as 35 percent, which could mean a lot of stuff for the DC to manage, sort, store and move. Not only do those returns tie up cash, but they also impose a burden on the DC to keep its returns records up to date so it can properly credit customers' accounts.
Failure to update records. There's no substitute for a regular audit of records. Take the case of a hardware DC whose supplier suddenly halted deliveries. The supplier, a highly profitable regional hardware company, had recently bought out a competitor, becoming a national hardware company overnight. In the ensuing reorganization, the supplier consolidated the accounts receivable functions and moved them to a new location. The DC somehow missed the notice advising it of the supplier's new bill-to address, and its managers were shocked to learn that the supplier had stopped delivering hardware because the DC owed more than 120 days' worth of outstanding payments. This trap could have been easily avoided by conducting a regular audit of all bill-to addresses.
It doesn't take a hurricane, fire or earthquake to snarl a supply chain. The smallest miscue or oversight can disrupt the flow of material, information and cash, causing velocity to plummet. Review your operation to determine where it might be vulnerable. Then eliminate the traps and watch your DC's velocity soar.
A team from the University of Tennessee, Knoxville, walked away with top honors at this year’s event. It was the school’s first time competing in the scholarship competition, which was held during IANA’s Intermodal Expo in September.
The winning squad included students Jaren Bussell, Elizabeth Shuler, Brock Sooley, and Kathryn Whittaker and was coached by Dr. Donald Maier, associate professor of practice–supply chain. “It is exciting to see what the students can achieve in five hours. Each team reads, analyzes, and prepares a presentation with no faculty input,” Maier said in a release.
In addition to UT, participating schools included the California State Maritime Academy, College of Charleston, Georgia Southern University, and SUNY Maritime as well as the universities of Arkansas, Maryland, North Florida, North Texas, and Wisconsin at Superior.
IANA’s scholarship awards support curriculums designed to attract students to careers in freight and intermodal transportation. Since the program’s inception in 2007, IANA has awarded over $5.3 million in scholarships.
Family-owned business Cibao Meat Products, a producer of Hispanic-style sausages and deli meats, has long prided itself on staying true to the traditions and values the company was founded on in 1969—like a commitment to high-quality ingredients and a family workplace atmosphere. Less of a source of pride, however, was its continuing reliance on the same, mostly manual, processes and data management techniques used at its inception.
With the company now selling its meats to retail giants such as BJ’s, Sam’s Club, and Costco as well as 500 supermarkets and restaurants across the U.S., Cibao president Heinz Vieluf Jr. knew that it was time to take the company into the digital age. “As a third-generation leader of a multigenerational company, I put an emphasis on bringing our business into the digital future and utilizing technologies that will help propel success,” he said in a statement.
IN WITH THE NEW
In Cibao’s case, that would require modernizing its data-collection practices. Because the meat producer still relied on legacy processes, its company data and customer data were siloed, scattered throughout departments from sales to manufacturing to accounting. Teams were manually gathering information and creating reports on a weekly or biweekly basis. As a result, company leaders had no real-time visibility into business-critical operations. On top of that, creating those reports ate up hours of team members’ time each week.
For help bringing all of its organizational data into one central location, Cibao turned to the Slingshot work management platform from software company Infragistics. In October 2023, the company began working with Slingshot to compile data from multiple sources into a centralized hub that would be accessible to every employee.
Today, with the new platform in place, Cibao is benefiting from enhanced data transparency across the company and from accelerated data-reporting capabilities. Employees can now create reports within minutes, eliminating the biweekly reports in favor of daily assessments and unlocking insights needed to make critical decisions 10 times faster than before—saving 120 hours a month, the company says. For example, now that it has real-time access to its customer payment data, Cibao’s accounts receivable team has been able to detect any discrepancies in real time. This has allowed the team to check in with customers as soon as they notice a potential issue, which has increased the company’s cash flow by $40,000 a week on average, or up to 65%.
STRENGTHENING THE BOTTOM LINE
With teams saving hours each week on reporting, Cibao employees can now concentrate on higher-value tasks. For instance, they have more time to connect one-on-one with clients and develop relationships, instead of getting held up on the back end. They can also focus on new marketing efforts and promotions, not only boosting customer satisfaction but also helping to grow existing customer relationships and develop new ones.
“We created Slingshot to bring together data that has traditionally been spread across departments into one completely accessible space so that companies can better drive productivity, insights, and ultimately business results,” said Dean Guida, founder of Slingshot, in the statement. “By bringing its data into a central location, Cibao Meat Products has unlocked insights that have allowed [it] to move strategically and at a faster pace, strengthening the company’s bottom line.”
As autonomous systems take on a bigger role in logistics and industrial production applications, the race is on to make the equipment smarter, more efficient, and safer. To accelerate work in this area, the German lift truck and logistics technology vendor Kion Group is partnering with a local university to support expanded studies on artificial intelligence (AI) and autonomous systems.
According to Kion, Peitz’s work will focus on the development of autonomous systems that operate intelligently and safely for all parties involved, with a particular focus on autonomous mobile robots, forklift trucks, and AI-based systems that are used in logistics and production environments.
The objective of the endowed professorship is to advance the field of research at the highest international level, Kion said in a statement. In close collaboration with research networks and other partners both within and outside TU Dortmund University, such as the Fraunhofer Institute for Material Flow and Logistics IML and the Kion Group itself, the professorship will form a “hub” for digital and intelligent logistics, the company added.
American skin-care company ET Browne—best known for its Palmer’s Cocoa Butter—has trimmed costs, boosted revenue, and increased profits thanks to a recent IT upgrade from its longtime technology partner Syspro, a global enterprise resource planning (ERP) software provider that specializes in serving manufacturing and distribution businesses. ET Browne has run on Syspro software for 25 years and racked up some of its biggest year-over-year improvements following a 2023 upgrade to the latest version of Syspro ERP—an enhancement that allowed it to leverage the platform’s material requirements and planning (MRP) capabilities to build a just-in-time inventory system.
The net result? A smoother-running supply chain.
“We’ve successfully relied on [Syspro] for more than a quarter century while both growing and aligning our business to take advantage of the [platform’s] enhancements,” Pieter Goes, ET Browne’s vice president of IT & BI (business intelligence), said in a statement describing the project. “After bringing in [Syspro] to do native demand forecasts, we were able to better evaluate key markets and key customers, enabling our forecasting and capacity planning to be much more accurate. As a result, we can achieve a fill rate of greater than 95% and are able to process our purchase orders much sooner, resulting in better supply.”
NEW CAPABILITIES, BETTER OUTCOMES
Syspro’s MRP capabilities allow companies to balance supply and demand for materials and components so they can accelerate manufacturing production. With the system upgrade, ET Browne was able to take advantage of those capabilities to gain better visibility and control over inventory and the supply chain. As the companies explain, this allowed ET Browne to predict demand, understand how filling the projected sales pipeline would affect production schedules, and anticipate the peaks in demand it would need to buffer.
Leveraging those demand forecasting and supply chain management capabilities, ET Browne created a just-in-time inventory system that has dramatically reduced the amount of raw material and product it keeps on hand—a move that is translating into increased profits: Since implementing the upgrade, ET Browne has reduced inventory by 22% and increased profits 113% on 7% revenue growth.
ET Browne’s leaders say they intend to leverage Syspro to manage emerging challenges as well. Those include meeting growing consumer, distributor, and government demands to use recycled materials in packaging, while also making sure the company first uses up the materials it already has on hand. That transition will increase complexity within the company’s bill of materials, something Syspro’s management capabilities can help it navigate.
“[Syspro] ERP provides much more than just financial management,” Brian Rainboth, CEO of Syspro Americas, said in the statement. “Our platform empowers mid-market manufacturers to create accurate demand forecasts [and] project exactly how much raw material they’ll need to order and how much product they need to make to meet demand. We’re proud to celebrate 25 years with ET Browne and look forward to enabling future growth and profitability as the company deploys additional capabilities with [our] platform.”
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Illustration courtesy of Clean Energy Fuels Corporation
For consumers, the car-buying process generally includes a test drive so they can see if the vehicle lives up to its hype before they plunk down any money. But the process can be a little more difficult for commercial fleet managers.
The 2025 Peterbilt 579 day cab tractor, branded in Clean Energy’s signature green, will be available for fleets to test on their normal routes for up to two weeks. And if you don’t happen to have an RNG fueling station in your own yard, that’s no problem: The fleets testing the demo truck will be able to use Clean Energy’s fueling infrastructure, which consists of over 600 stations across North America, 200 of which have public tractor-trailer access.
First in line to try the new rig—which can haul heavy loads for an 800-mile range—is transportation and logistics giant J.B. Hunt Transport Inc. After Hunt completes its trial, the truck will make its way through large and medium-sized heavy-duty trucking companies in California, Arizona, Texas, Oklahoma, Ohio, Michigan, Pennsylvania, and Florida. Clean Energy says it expects to run the X15N demo truck program at least through 2025.
“Vehicles powered by renewable natural gas produce significantly less carbon emissions throughout their lifecycle and are more compatible with today’s available infrastructure than most competing emissions-reduction technologies,” Greer Woodruff, executive vice president of safety, sustainability, and maintenance at J.B. Hunt, said in a release. “The new technology and supporting fuel network in this pilot have the potential to be a viable, cost-effective solution for customers wanting to decrease their carbon footprint in the near term.”