Built on the site of an abandoned military airport, a DC run by PC Connection fulfills dreams of geeks everywhere by shipping everything from GPS-equipped PDAs to memory cards overnight.
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.
Time was when the aircraft taking off from Wilmington, Ohio, carried gunship crews bound for deployment in Viet Nam. Today, nearly 40 years later, the aircraft that lift off from the dusty tarmac in southwestern Ohio carry not military personnel but the stuff of dreams. Techno junkies' dreams, that is. Packed into the holds of aircraft leaving the Airborne Airpark are flash drives, notebook computers, digital cameras and surge protectors ordered only hours earlier by customers of PC Connection.
PC Connection's customers are the kind who want their stuff now—no excuses. Some of them are businesses anxiously awaiting the arrival of a replacement part or a desperately needed upgrade. Others are techno junkies looking for a fix in the form of high-tech gadgetry discovered in a weehours surfing session.Whoever they may be, customers can go online and place their orders—as late as 2: 00 in the morning—with the assurance that the package will be in the office (or on their doorstep) in the morning.
It goes without saying, those high expectations create a tall order for the distribution people who must fill the thousands of orders each day. And do it right. And do it quickly. But that's their mission. "We have a saying around here," says Tom Kennedy, vice president of distribution for PC Connection. "Sales creates dreams. Distribution creates reality. Sales is making the contacts, saying what we can do.We're the ones who make the dreams come true.We can screw up a sale for the next time around. But if we outperform our competitors, we give customers a reason to come back."
It's all about the process
One way to outperform those competitors is to promise overnight fulfillment. "Any order we get today, we'll ship today," Kennedy pledges. And though you might assume that he uses the latest whiz-bang technology to carry out that promise, that's not the case. "We're old school," says Tom Dumais, the company's director of shipping and receiving. "We do it with a low-budget, low-tech operation," adds Kennedy. "We're not real high on glitz and glamour."
What makes the distribution system work, Kennedy says, is an intense concentration on process. "Process is what we preach all the time," he emphasizes. "While we're serving the customer, we're doing it with a high rate of accuracy while containing costs." (Labor costs, he reports, total less than 1 percent of sales.) It also means minimizing the need to hold inventory. "All our processes promote flow through," Dumais adds.
The story begins on the inbound side. Most inbound shipments arrive via less-than-truckload carrier or UPS and FedEx, although a few suppliers send daily truckloads. Each day, employees process about 1,500 lines. Dumais says processing these shipments—a mix of pallets and cartons— consumes most of an eight-hour work shift.
All inbound shipments are scanned as they arrive, allowing the system to match the inbound scan with a PC Connection purchase order. "We use UPC codes on everything," Kennedy says. Even items like connectors that are too small for codes are accompanied by labels with UPC codes affixed to them. Shipments that show up without bar codes are given a label with a UPC look-alike code that includes the PC Connection SKU number. Strict adherence to the coding policy has brought the inbound data's accuracy rate up to 99.5 percent, Kennedy says.
As for the scanners themselves, the company began using radio frequency-enabled scanners about five years ago. "It's been a plus since day one," Dumais says. He adds that the receiving staff just recently began using wearable scanners.
Receivers do much more than scan arriving shipments, however. As items come in, workers with vacuum equipment converge on the area to remove "packing peanuts" and other dunnage from the delicate electronics. (PC Connection, which doesn't use the peanuts, ships its outbound products using recycled newsprint for protection.) "When goods go onto the shelf or to a secondary area, they are clean," Kennedy says.
Once scanned and cleaned, inbound goods receive a label indicating where they should be sent next. That could be one of several places, Kennedy explains: If the system determines that the primary pick location for that product has space, it will direct inbound products to that particular aisle and zone until the bin is filled. If the slot is already at maximum capacity, the goods are sent to a secondary holding area. And if the system shows that an item is completely out of stock, the label prints the destination in a reverse typeface so that the item can be "hot shotted" to the shelf. The system also allows goods to be redirected if they do not fit in the suggested location.
Workers can replenish at the pick faces hourly if needed, with a full letdown once a day. Generally, the hourly replenishments take place only if the shelf stock falls below levels needed to fill current orders. "We're not replenishing a massive amount of stock in the heat of battle," Kennedy says.
FAST company
No sooner do products arrive than the company starts gearing up to send them out again. As with the receiving process, no time is wasted: The moment pick lists have been generated from orders in the PC Connection enterprise system, the picking process begins.
The process used today is light years ahead of the one in place just six years ago, says Dumais. Plagued by problems such as mislaid paper pick lists, a burgeoning volume of single item picks and a long narrow building that put serious constraints on the work flow, PC Connections has implemented what it calls the FAST system—an acronym for Fast Accurate Shipping Technology. The FAST system makes use of batch picking, automated picking instructions, and scanners to verify picks at the end of the line. It also provides a single place near the end of the process for capturing serial numbers (a request from the sales group). "With FAST, we put all that on the back end," Kennedy says. "We also put in an audit system. Both of those are overlays to the existing system."
Under the current system, items are batch picked into totes that move by conveyor to the FAST area set up in the DC. There, each item is scanned. Every time an object is scanned, the system searches its database for orders containing that item and notes how many of that item each order calls for. At the same time, the system checks to see if the item is flagged for a serial number capture and records that serial number if necessary.
The system also estimates the cube of each item for packing into a carton. Should a carton cube out before it's projected to, the worker at the station can simply push a button to split the order into two cartons.
Should an incorrect item show up in a bin, the scan will signal a wrong pick. Any missing items are noted when the associate tells the system an order is completed. The system also alerts associates if catalogs or other printed material should be included with an order. Once the order is complete, the associate requests a label that is a combination shipping label and packing slip. Completed orders are packed and sent through an in-line scale, at which point the orders are confirmed as being shipped for billing purposes.
By all accounts, the FAST system has transformed the operation. "We were at the point where we looked like Lucy in the chocolate factory," Kennedy says. "We needed to increase the volume. FAST allowed us to double output."
Still, not all orders are processed via FAST at this time. Picking for multi-line orders follows more traditional procedures. "We use a pick and pass method," says Dumais. Orders move from zone to zone along a gravity conveyor.
Orders are audited at the end of the line, where all items are rescanned. Any missing items are handled through an exception process. The result is that order accuracy that was at 99.8 percent five years ago is now 99.92 percent.
Yet that's not quite good enough for PC Connection. "There's still room to grow," says Dumais. He and Kennedy would also like to eliminate the end-of-the-line verification process. "We want to work toward verification at pick," Kennedy says.
Special orders don't upset us
It's one thing to move components and accessories through the DC at warp speed. It's another to promise overnight delivery on custom systems configured from scratch. Nonetheless, it's normal procedure for PC Connection employees to process these orders for overnight delivery too. (The company notifies customers if the work will take longer.)
When an order for a configured system comes through, labels are generated in batches for the necessary components. Associates take the labels from sheets and place them on components as they are picked and sent to a staging area, from which they move on to a configuration room. The systems are configured by technicians, all of whom are certified by vendors. "People who work in that area continually upgrade their skills," Kennedy says. "We can configure the most complex systems imaginable."
On average, 300 to 400 systems require configuration on a normal day, with peaks of about 700. "We can sustain over 600 a day," Kennedy says. To speed things along, the company keeps specific configurations on file to allow relatively simple repetition of the orders.
For many workers, the configuration department has provided an opportunity for advancement. "A lot of the people in the room came off the floor as material handlers," Kennedy says. It's in the company's interest to promote from within where possible, he notes. "Our associates are what make this place run," he says. "We work hard to make people happy."
Part of that is in the pay system: Hourly workers receive incentive pay for performing above standards. The company uses a formalized system of performance metrics, measuring everything from order completeness, accuracy and rates to safety and attendance. Hourly employees receive incentive pay weekly, while managers and supervisors, who have additional measures to meet based on labor turnover and cost per package, receive quarterly bonuses.
"Everybody has metrics," Kennedy says. "We'll put ours up against anybody's for the dollars spent and the output. We're one of the top dogs."
PC Connection's operating system
PC Connection Inc., based in Merrimack, N.H., reported $1.31 billion in sales last year, making it one of the nation's largest direct marketers of computers and related hardware and software. Organized into subsidiaries that cater to different customer types, the company sells its electronic wares through PC Connection (which serves consumers and small to mediumsized businesses), GovConnection (which serves local, state and federal governments and educational institutions) and MoreDirect (which serves large corporations). Another division, MacConnection, sells Apple software, systems and peripherals. Products for all divisions—about 13,000 of the 100,000 listed in PC Connection's catalog—are shipped from a single DC in Wilmington, Ohio. (The remainder are shipped directly from PC Connection's suppliers.) Here's a look at that DC operation:
Inventory is held in two buildings, each with about 100,000 square feet of space. From those buildings, PC Connection ships about 6,000 packages a day, although it has shipped as many as 12,000. Tom Kennedy, the company's vice president of distribution, reports that the facility is designed to handle up to 16,000 packages daily.
Unlike traditional operations, the DC's staff arrives in staggered shifts. The receiving crew begins at 8 a.m., the first picking crew comes at 1: 30 p.m., and a second picking crew arrives at 6 p.m., which means there is only a four-hour window when both picking crews are at work. The replenishment crew works from 11 p.m. to 7 a.m.
The bulk of orders are shipped out via ABX Air for delivery by DHL or by UPS. (ABX Air is the all-cargo airline previously owned by Airborne Express that operates out of the Airpark. The airline was spun off last year when DHL acquired Airborne.) The company also works with FedEx and the U.S. Postal Service.
Some 500 to 1,000 cartons a night are shipped by less-than-truckload carriers. For LTL shipments, the company's principal carriers are Roadway Express, Yellow Transportation and FedEx Freight
Congestion on U.S. highways is costing the trucking industry big, according to research from the American Transportation Research Institute (ATRI), released today.
The group found that traffic congestion on U.S. highways added $108.8 billion in costs to the trucking industry in 2022, a record high. The information comes from ATRI’s Cost of Congestion study, which is part of the organization’s ongoing highway performance measurement research.
Total hours of congestion fell slightly compared to 2021 due to softening freight market conditions, but the cost of operating a truck increased at a much higher rate, according to the research. As a result, the overall cost of congestion increased by 15% year-over-year—a level equivalent to more than 430,000 commercial truck drivers sitting idle for one work year and an average cost of $7,588 for every registered combination truck.
The analysis also identified metropolitan delays and related impacts, showing that the top 10 most-congested states each experienced added costs of more than $8 billion. That list was led by Texas, at $9.17 billion in added costs; California, at $8.77 billion; and Florida, $8.44 billion. Rounding out the top 10 list were New York, Georgia, New Jersey, Illinois, Pennsylvania, Louisiana, and Tennessee. Combined, the top 10 states account for more than half of the trucking industry’s congestion costs nationwide—52%, according to the research.
The metro areas with the highest congestion costs include New York City, $6.68 billion; Miami, $3.2 billion; and Chicago, $3.14 billion.
ATRI’s analysis also found that the trucking industry wasted more than 6.4 billion gallons of diesel fuel in 2022 due to congestion, resulting in additional fuel costs of $32.1 billion.
ATRI used a combination of data sources, including its truck GPS database and Operational Costs study benchmarks, to calculate the impacts of trucking delays on major U.S. roadways.
There’s a photo from 1971 that John Kent, professor of supply chain management at the University of Arkansas, likes to show. It’s of a shaggy-haired 18-year-old named Glenn Cowan grinning at three-time world table tennis champion Zhuang Zedong, while holding a silk tapestry Zhuang had just given him. Cowan was a member of the U.S. table tennis team who participated in the 1971 World Table Tennis Championships in Nagoya, Japan. Story has it that one morning, he overslept and missed his bus to the tournament and had to hitch a ride with the Chinese national team and met and connected with Zhuang.
Cowan and Zhuang’s interaction led to an invitation for the U.S. team to visit China. At the time, the two countries were just beginning to emerge from a 20-year period of decidedly frosty relations, strict travel bans, and trade restrictions. The highly publicized trip signaled a willingness on both sides to renew relations and launched the term “pingpong diplomacy.”
Kent, who is a senior fellow at the George H. W. Bush Foundation for U.S.-China Relations, believes the photograph is a good reminder that some 50-odd years ago, the economies of the United States and China were not as tightly interwoven as they are today. At the time, the Nixon administration was looking to form closer political and economic ties between the two countries in hopes of reducing chances of future conflict (and to weaken alliances among Communist countries).
The signals coming out of Washington and Beijing are now, of course, much different than they were in the early 1970s. Instead of advocating for better relations, political rhetoric focuses on the need for the U.S. to “decouple” from China. Both Republicans and Democrats have warned that the U.S. economy is too dependent on goods manufactured in China. They see this dependency as a threat to economic strength, American jobs, supply chain resiliency, and national security.
Supply chain professionals, however, know that extricating ourselves from our reliance on Chinese manufacturing is easier said than done. Many pundits push for a “China + 1” strategy, where companies diversify their manufacturing and sourcing options beyond China. But in reality, that “plus one” is often a Chinese company operating in a different country or a non-Chinese manufacturer that is still heavily dependent on material or subcomponents made in China.
This is the problem when supply chain decisions are made on a global scale without input from supply chain professionals. In an article in the Arkansas Democrat-Gazette, Kent argues that, “The discussions on supply chains mainly take place between government officials who typically bring many other competing issues and agendas to the table. Corporate entities—the individuals and companies directly impacted by supply chains—tend to be under-represented in the conversation.”
Kent is a proponent of what he calls “supply chain diplomacy,” where experts from academia and industry from the U.S. and China work collaboratively to create better, more efficient global supply chains. Take, for example, the “Peace Beans” project that Kent is involved with. This project, jointly formed by Zhejiang University and the Bush China Foundation, proposes balancing supply chains by exporting soybeans from Arkansas to tofu producers in China’s Yunnan province, and, in return, importing coffee beans grown in Yunnan to coffee roasters in Arkansas. Kent believes the operation could even use the same transportation equipment.
The benefits of working collaboratively—instead of continuing to build friction in the supply chain through tariffs and adversarial relationships—are numerous, according to Kent and his colleagues. They believe it would be much better if the two major world economies worked together on issues like global inflation, climate change, and artificial intelligence.
And such relations could play a significant role in strengthening world peace, particularly in light of ongoing tensions over Taiwan. Because, as Kent writes, “The 19th-century idea that ‘When goods don’t cross borders, soldiers will’ is as true today as ever. Perhaps more so.”
Hyster-Yale Materials Handling today announced its plans to fulfill the domestic manufacturing requirements of the Build America, Buy America (BABA) Act for certain portions of its lineup of forklift trucks and container handling equipment.
That means the Greenville, North Carolina-based company now plans to expand its existing American manufacturing with a targeted set of high-capacity models, including electric options, that align with the needs of infrastructure projects subject to BABA requirements. The company’s plans include determining the optimal production location in the United States, strategically expanding sourcing agreements to meet local material requirements, and further developing electric power options for high-capacity equipment.
As a part of the 2021 Infrastructure Investment and Jobs Act, the BABA Act aims to increase the use of American-made materials in federally funded infrastructure projects across the U.S., Hyster-Yale says. It was enacted as part of a broader effort to boost domestic manufacturing and economic growth, and mandates that federal dollars allocated to infrastructure – such as roads, bridges, ports and public transit systems – must prioritize materials produced in the USA, including critical items like steel, iron and various construction materials.
Hyster-Yale’s footprint in the U.S. is spread across 10 locations, including three manufacturing facilities.
“Our leadership is fully invested in meeting the needs of businesses that require BABA-compliant material handling solutions,” Tony Salgado, Hyster-Yale’s chief operating officer, said in a release. “We are working to partner with our key domestic suppliers, as well as identifying how best to leverage our own American manufacturing footprint to deliver a competitive solution for our customers and stakeholders. But beyond mere compliance, and in line with the many areas of our business where we are evolving to better support our customers, our commitment remains steadfast. We are dedicated to delivering industry-leading standards in design, durability and performance — qualities that have become synonymous with our brands worldwide and that our customers have come to rely on and expect.”
In a separate move, the U.S. Environmental Protection Agency (EPA) also gave its approval for the state to advance its Heavy-Duty Omnibus Rule, which is crafted to significantly reduce smog-forming nitrogen oxide (NOx) emissions from new heavy-duty, diesel-powered trucks.
Both rules are intended to deliver health benefits to California citizens affected by vehicle pollution, according to the environmental group Earthjustice. If the state gets federal approval for the final steps to become law, the rules mean that cars on the road in California will largely be zero-emissions a generation from now in the 2050s, accounting for the average vehicle lifespan of vehicles with internal combustion engine (ICE) power sold before that 2035 date.
“This might read like checking a bureaucratic box, but EPA’s approval is a critical step forward in protecting our lungs from pollution and our wallets from the expenses of combustion fuels,” Paul Cort, director of Earthjustice’s Right To Zero campaign, said in a release. “The gradual shift in car sales to zero-emissions models will cut smog and household costs while growing California’s clean energy workforce. Cutting truck pollution will help clear our skies of smog. EPA should now approve the remaining authorization requests from California to allow the state to clean its air and protect its residents.”
However, the truck drivers' industry group Owner-Operator Independent Drivers Association (OOIDA) pushed back against the federal decision allowing the Omnibus Low-NOx rule to advance. "The Omnibus Low-NOx waiver for California calls into question the policymaking process under the Biden administration's EPA. Purposefully injecting uncertainty into a $588 billion American industry is bad for our economy and makes no meaningful progress towards purported environmental goals," (OOIDA) President Todd Spencer said in a release. "EPA's credibility outside of radical environmental circles would have been better served by working with regulated industries rather than ramming through last-minute special interest favors. We look forward to working with the Trump administration's EPA in good faith towards achievable environmental outcomes.”
Editor's note:This article was revised on December 18 to add reaction from OOIDA.
A Canadian startup that provides AI-powered logistics solutions has gained $5.5 million in seed funding to support its concept of creating a digital platform for global trade, according to Toronto-based Starboard.
The round was led by Eclipse, with participation from previous backers Garuda Ventures and Everywhere Ventures. The firm says it will use its new backing to expand its engineering team in Toronto and accelerate its AI-driven product development to simplify supply chain complexities.
According to Starboard, the logistics industry is under immense pressure to adapt to the growing complexity of global trade, which has hit recent hurdles such as the strike at U.S. east and gulf coast ports. That situation calls for innovative solutions to streamline operations and reduce costs for operators.
As a potential solution, Starboard offers its flagship product, which it defines as an AI-based transportation management system (TMS) and rate management system that helps mid-sized freight forwarders operate more efficiently and win more business. More broadly, Starboard says it is building the virtual infrastructure for global trade, allowing freight companies to leverage AI and machine learning to optimize operations such as processing shipments in real time, reconciling invoices, and following up on payments.
"This investment is a pivotal step in our mission to unlock the power of AI for our customers," said Sumeet Trehan, Co-Founder and CEO of Starboard. "Global trade has long been plagued by inefficiencies that drive up costs and reduce competitiveness. Our platform is designed to empower SMB freight forwarders—the backbone of more than $20 trillion in global trade and $1 trillion in logistics spend—with the tools they need to thrive in this complex ecosystem."