Collaborating with a third-party logistics management firm and an international material handling specialist, BMW runs a production parts warehouse in South Carolina that operates with the precision of a Z4 roadster.
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.
Any effort to describe the operations of the production parts warehouse at BMW's assembly plant in Spartanburg, S.C., leads inevitably to comparisons with the finely engineered vehicles that emerge from the other end of the process.
BMW has earned a reputation for producing automobiles and sports utility vehicles that are fast, responsive and reliable. In the same way—from the coordination of inbound materials through the material handling process and sequencing of parts and out to delivery of parts to the production line—the warehouse facility is the result of both careful design and a well-oiled operation that ensures that the right parts arrive at the right place with little wasted motion.
What's more,the process is delivering parts not for mass production but for vehicles that are made to order. Each Z4 roadster or X5 SUV that's built at the Spartanburg facility is the result of an individual order configured with options and color schemes for a particular customer. Literally millions of variations are possible, including left- or right-hand drive and manual or automatic transmissions.
It is the challenge of the entire supply chain,and particularly the warehouse operation, to ensure that the right parts arrive for the right car at the right place at the right time. The plant produces 650 cars every day and the odds are that no two of any model are exactly alike.
The warehouse operation is essentially a DC with a single customer but with several delivery points within the assembly plant. Parts come in from suppliers from around the world and are picked for timely delivery to specific locations in the factory.
Many options, one standard
"Our focus is to deliver cars right on time while allowing customers and dealers as much flexibility to change orders as possible," says Manfred Stöger, vice president of logistics and information technology for BMW Manufacturing Corp. The materials and manufacturing systems allow dealers to adjust orders up to six days prior to the start of production. "That has a lot of advantages for customers and dealers," Stöger says, "but it's a huge challenge for the supply chain."
To deliver the enormous variety of vehicles on time and in the right configurations demands a highly automated system and a cadre of sophisticated suppliers and well-integrated systems. "The warehouse could not handle this manually," Stöger says.
The operation is interesting for a number of reasons. First, while BMW owns the warehouse, management of inbound materials and the internal operations is in the hands of a contract logistics company, TNT Logistics, which has more than 500 employees dedicated to BMW operations on site. Second,the highly automated system for storing and retrieving a large portion of the thousands of parts that go into any vehicle, through tight integration with BMW systems and automatic identification technology, enables much of the precision in the operations. The system was designed and installed by the German material handling company Witron, a specialist in building automated distribution centers.
The company selected Witron in part, says Stöger, because it develops and customizes its mechanical parts and software itself, including the warehouse management system used by the warehouse.
Witron CEO Reinhard Boesl says that the planning involved six months of "intensive discussions" with BMW managers in Spartanburg and in Munich. The actual installation took about 18 months. "We had tough timelines," Boesl says . "The roof was not done when we began installing systems." Another few months were required to ramp up and test the system.
Boesl continues, "As soon as we achieved a degree of integration, we invited BMW to do testing. The testing process is a good opportunity to double-check if the detailed specifications match the practical requirements. It's a critical phase. It allows the client to see what he is getting."
The complex system can adapt as BMW makes changes to its operations, though the flexibility is not unlimited.
Responsive handling
On the other hand, the system adapted quickly to increases in production and model changes. Since the automated systems have been up and running, BMW and its partners have made a number of adjustments to the operation. For instance, the company added a third induction point in the warehouse—conveyor locations that move material to storage locations. When BMW ended production of the Z3 roadster and started building the Z4, the system adapted without a single change to software code. In late September, the plant began producing 2004 X5s that included 2,100 new parts—with only a 10-car gap between the old and new models. The warehouse is flowing parts for 600 to 650 cars a day with a system initially designed to support production of 450. Stöger says, "We'll be able to increase production to 700 units without additional storage space."
About half the content of the vehicles flows through the warehouse, which handles about 13,000 active parts for the Z4 and X5. A second warehouse within a few miles of the main facility handles hazardous materials and the largest and bulkiest parts. Those include any materials larger than a pallet and any that are mo re than 2.5 meters high.
Ronald Feld, section manager for physical logistics for BMW, probably has the most day-to-day familiarity with the warehouse operations. Because each car is somewhat different from every other car, getting the right parts to the line is perhaps the central mission of the warehouse. "I'm sequencing single parts," Feld says. But the system is efficient enough that it requires notice only three to four hours before parts are needed on the assembly line. "When a car enters the assembly area from the stacker, its [identification number] generates a broadcast signal to us in the warehouse and to direct sequence suppliers." The system also calculates the expected time to deliver the materials.
BMW's automated warehouse
Pallet warehouse
Eight AS/RS pallet cranes
Picking left or right five pallets deep
38,800 cubic meters storage volume
17,500 pallet storage locations
928 sequence picking locations
Tray warehouse
Five AS/RS tray cranes
Picking left or right one deep
23,500 tray locations
3,900 cubic meters storage volume
Daily activity
2,200 pallet receipts
2,500 tray receipts
2,200 outbound pallets via conveyor
3,300 tray movements, in and out
8,000 sequence picks
Source: Witron
Dual systems
To keep operations running smoothly, Witron installed both pallet and tray automated storage and retrieval systems. The pallet warehouse is a high-bay facility with 17,400 storage locations on six storage levels. The Witron system has a number of fail-safe parts to its design, Feld explains. For example, pallets are stacked six wide at each level. Should a crane fail, the system allows other cranes to retrieve pallets five deep, allowing complete redundancy if required. In addition, the system is designed such that if the system wants a pallet that is three deep, for example, the cranes can store the first two in different areas to retrieve the third, all the while keeping track of the first t wo. "The warehouse reorganizes itself I don't know how many times a day," Feld says . To enable that, the system reserves 15 percent of the storage locations to allow it to relocate pallets.
The warehouse is not fully automated, however. A substantial amount of picking occurs by hand. Employees pick and scan each part. "It's all picks of one," Feld explains. So while a tote containing visors contains enough for 80 vehicles, each one is destined for a specific car. When a worker completes a pick in one location, he or she receives automated notification of his or her next stop. "This optimizes the operation," Feld says. "[A worker follows] the shortest path with the fewest steps."
The automated tray warehouse has 26,000 storage locations, and each storage location can hold up to 10 part numbers. The t ray handling system can handle individual loads of up to 220 pounds, compared to 2,200 pounds for the pallet handling system. Further, the tray system is simpler than the pallet system: Trays are stored one deep on each side of the large racks, and the automated picking equipment need only select to the left and right.
The system provides protection against breakdowns by storing each part number in more than one tray and in separate aisles, so if one machine breaks down, parts are still accessible for other parts of the warehouse. About 70 percent of the storage locations are in use.
Trays selected by the automated system move to one of five identical workstations. Four of the locations are used for picking and putaway, while the fifth is reserved for unusual requirements. Even that is part of the efficiency plan: Keeping the fifth position in reserve helps compress the travel time for the automatic guided vehicle that transports material to and from the work stations. Typically, one worker can man two of the stations.
Inbound controls
On the inbound side, materials are scanned on arrival and data uploaded via an RF system. Data capture then occurs several other times as goods move to putaway locations and eventually to staging for the shop floor. After shipments are received, palletized loads move to one of two major induction points, or i-points as they are called by BMW. "A scan marries the container to a bar-coded pallet," Feld explains. The pallets then move via an automated system to the pallet warehouse. As the pallets move down the conveyor, automated devices automatically check for contours,height and weight and divert any pallets that might need any correction, a process handled manually.
A large portion of the inbound shipments are in returnable containers that will be sent back to suppliers for reuse. "We promote returnables," says Feld. "We're making giant steps with our European suppliers. They were shipping 100- percent corrugated. Now we're getting 30- to 40-percent returnables. Our NAFTA suppliers are shipping 95-percent returnables." Those suppliers, he reports, only ship in disposable corrugated containers when they are short of returnables.
The actual material handling in the warehouse is overseen by BMW, but operations are in the hands of TNT Logistics North America, the lead logistics provider for the company. TNT manages both inbound transportation and material processing and sequencing in the warehouse. It processes more than 10,000 inbound and outbound shipments each day: the outbound sequencing, which involves 28 parts families, is managed through Witron's warehouse management system.
TNT, BMW suppliers and BMW operations are closely integrated from origin until delivery to the production line. Deb Hall, vice president of l ogistics solutions for TNT North America , summarizes the process: "BMW provides the demand file, which provides all information on material from each supply point. We schedule by optimizing loads and provide that to suppliers."
Road masters
Carriers are responsible for signing off on shipments picked up at the supplier locations. Both the carrier and the supplier have to agree on the contents of a shipment: Drivers report any discrepancies to TNT's Jacksonville call center.While physical receiving takes place at the warehouse, BMW has immediate visibility into any exceptions.
Currently, five truckload carriers and one LTL carrier bring in the bulk of the shipments.TNT also operates a small dedicated fleet performing a few milk runs, shuttles between warehouses and truckload shipping. Some 425 trucks a day move through the warehouse bays over two shifts. Those loads are destined either for the plant or the warehouse. Once the materials have arrived, TNT continues to manage the process for BMW, managing the yard and staging of trailers. Shipments are scanned and received at the dock and validated against what's expected. Goods then move either directly to the production line or to the warehouse. (BMW manages ocean and air freight transportation. It consolidates shipments out of Europe in Germany to maximize weight and cube utilization, sending about 9,000 40-foot containers a year to the South Carolina facility.)
Hall says, "A lot of 3PLs manage transportation. The difference here is that we are actually managing materials. BMW does not view the route or the driver—it doesn't need to see that. BMW personnel see things that are of interest to them. They can see exceptions. There's a proactive notification, so there's no monitoring needed by BMW."
She adds, "BMW is a very demanding customer, but it doesn't expect more than it should." She meets with Stöger every month to gain an executive level view of operations. In addition, the TNT operations managers on site meet with BMW's materials and logistics managers daily. "Our staff and their staff are integrated," Hall says. "They are very forthcoming.
They want us involved in the planning process. … We were fortunate to find a customer that would allow us to be integrated, not only in transportation but in material planning. They allowed us to step over a line we're not allowed to step over very often."
Most of the apparel sold in North America is manufactured in Asia, meaning the finished goods travel long distances to reach end markets, with all the associated greenhouse gas emissions. On top of that, apparel manufacturing itself requires a significant amount of energy, water, and raw materials like cotton. Overall, the production of apparel is responsible for about 2% of the world’s total greenhouse gas emissions, according to a report titled
Taking Stock of Progress Against the Roadmap to Net Zeroby the Apparel Impact Institute. Founded in 2017, the Apparel Impact Institute is an organization dedicated to identifying, funding, and then scaling solutions aimed at reducing the carbon emissions and other environmental impacts of the apparel and textile industries.
The author of this annual study is researcher and consultant Michael Sadowski. He wrote the first report in 2021 as well as the latest edition, which was released earlier this year. Sadowski, who is also executive director of the environmental nonprofit
The Circulate Initiative, recently joined DC Velocity Group Editorial Director David Maloney on an episode of the “Logistics Matters” podcast to discuss the key findings of the research, what companies are doing to reduce emissions, and the progress they’ve made since the first report was issued.
A: While companies in the apparel industry can set their own sustainability targets, we realized there was a need to give them a blueprint for actually reducing emissions. And so, we produced the first report back in 2021, where we laid out the emissions from the sector, based on the best estimates [we could make using] data from various sources. It gives companies and the sector a blueprint for what we collectively need to do to drive toward the ambitious reduction [target] of staying within a 1.5 degrees Celsius pathway. That was the first report, and then we committed to refresh the analysis on an annual basis. The second report was published last year, and the third report came out in May of this year.
Q: What were some of the key findings of your research?
A: We found that about half of the emissions in the sector come from Tier Two, which is essentially textile production. That includes the knitting, weaving, dyeing, and finishing of fabric, which together account for over half of the total emissions. That was a really important finding, and it allows us to focus our attention on the interventions that can drive those emissions down.
Raw material production accounts for another quarter of emissions. That includes cotton farming, extracting gas and oil from the ground to make synthetics, and things like that. So we now have a really keen understanding of the source of our industry’s emissions.
Q: Your report mentions that the apparel industry is responsible for about 2% of global emissions. Is that an accurate statistic?
A: That’s our best estimate of the total emissions [generated by] the apparel sector. Some other reports on the industry have apparel at up to 8% of global emissions. And there is a commonly misquoted number in the media that it’s 10%. From my perspective, I think the best estimate is somewhere under 2%.
We know that globally, humankind needs to reduce emissions by roughly half by 2030 and reach net zero by 2050 to hit international goals. [Reaching that target will require the involvement of] every facet of the global economy and every aspect of the apparel sector—transportation, material production, manufacturing, cotton farming. Through our work and that of others, I think the apparel sector understands what has to happen. We have highlighted examples of how companies are taking action to reduce emissions in the roadmap reports.
Q: What are some of those actions the industry can take to reduce emissions?
A: I think one of the positive developments since we wrote the first report is that we’re seeing companies really focus on the most impactful areas. We see companies diving deep on thermal energy, for example. With respect to Tier Two, we [focus] a lot of attention on things like ocean freight versus air. There’s a rule of thumb I’ve heard that indicates air freight is about 10 times the cost [of ocean] and also produces 10 times more greenhouse gas emissions.
There is money available to invest in sustainability efforts. It’s really exciting to see the funding that’s coming through for AI [artificial intelligence] and to see that individual companies, such as H&M and Lululemon, are investing in real solutions in their supply chains. I think a lot of concrete actions are being taken.
And yet we know that reducing emissions by half on an absolute basis by 2030 is a monumental undertaking. So I don’t want to be overly optimistic, because I think we have a lot of work to do. But I do think we’ve got some amazing progress happening.
Q: You mentioned several companies that are starting to address their emissions. Is that a result of their being more aware of the emissions they generate? Have you seen progress made since the first report came out in 2021?
A: Yes. When we published the first roadmap back in 2021, our statistics showed that only about 12 companies had met the criteria [for setting] science-based targets. In 2024, the number of apparel, textile, and footwear companies that have set targets or have commitments to set targets is close to 500. It’s an enormous increase. I think they see the urgency more than other sectors do.
We have companies that have been working at sustainability for quite a long time. I think the apparel sector has developed a keen understanding of the impacts of climate change. You can see the impacts of flooding, drought, heat, and other things happening in places like Bangladesh and Pakistan and India. If you’re a brand or a manufacturer and you have operations and supply chains in these places, I think you understand what the future will look like if we don’t significantly reduce emissions.
Q: There are different categories of emission levels, depending on the role within the supply chain. Scope 1 are “direct” emissions under the reporting company’s control. For apparel, this might be the production of raw materials or the manufacturing of the finished product. Scope 2 covers “indirect” emissions from purchased energy, such as electricity used in these processes. Scope 3 emissions are harder to track, as they include emissions from supply chain partners both upstream and downstream.
Now companies are finding there are legislative efforts around the world that could soon require them to track and report on all these emissions, including emissions produced by their partners’ supply chains. Does this mean that companies now need to be more aware of not only what greenhouse gas emissions they produce, but also what their partners produce?
A: That’s right. Just to put this into context, if you’re a brand like an Adidas or a Gap, you still have to consider the Scope 3 emissions. In particular, there are the so-called “purchased goods and services,” which refers to all of the embedded emissions in your products, from farming cotton to knitting yarn to making fabric. Those “purchased goods and services” generally account for well above 80% of the total emissions associated with a product. It’s by far the most significant portion of your emissions.
Leading companies have begun measuring and taking action on Scope 3 emissions because of regulatory developments in Europe and, to some extent now, in California. I do think this is just a further tailwind for the work that the industry is doing.
I also think it will definitely ratchet up the quality requirements of Scope 3 data, which is not yet where we’d all like it to be. Companies are working to improve that data, but I think the regulatory push will make the quality side increasingly important.
Q: Overall, do you think the work being done by the Apparel Impact Institute will help reduce greenhouse gas emissions within the industry?
A: When we started this back in 2020, we were at a place where companies were setting targets and knew their intended destination, but what they needed was a blueprint for how to get there. And so, the roadmap [provided] this blueprint and identified six key things that the sector needed to do—from using more sustainable materials to deploying renewable electricity in the supply chain.
Decarbonizing any sector, whether it’s transportation, chemicals, or automotive, requires investment. The Apparel Impact Institute is bringing collective investment, which is so critical. I’m really optimistic about what they’re doing. They have taken a data-driven, evidence-based approach, so they know where the emissions are and they know what the needed interventions are. And they’ve got the industry behind them in doing that.
The global air cargo market’s hot summer of double-digit demand growth continued in August with average spot rates showing their largest year-on-year jump with a 24% increase, according to the latest weekly analysis by Xeneta.
Xeneta cited two reasons to explain the increase. First, Global average air cargo spot rates reached $2.68 per kg in August due to continuing supply and demand imbalance. That came as August's global cargo supply grew at its slowest ratio in 2024 to-date at 2% year-on-year, while global cargo demand continued its double-digit growth, rising +11%.
The second reason for higher rates was an ocean-to-air shift in freight volumes due to Red Sea disruptions and e-commerce demand.
Those factors could soon be amplified as e-commerce shows continued strong growth approaching the hotly anticipated winter peak season. E-commerce and low-value goods exports from China in the first seven months of 2024 increased 30% year-on-year, including shipments to Europe and the US rising 38% and 30% growth respectively, Xeneta said.
“Typically, air cargo market performance in August tends to follow the July trend. But another month of double-digit demand growth and the strongest rate growths of the year means there was definitely no summer slack season in 2024,” Niall van de Wouw, Xeneta’s chief airfreight officer, said in a release.
“Rates we saw bottoming out in late July started picking up again in mid-August. This is too short a period to call a season. This has been a busy summer, and now we’re at the threshold of Q4, it will be interesting to see what will happen and if all the anticipation of a red-hot peak season materializes,” van de Wouw said.
The report cites data showing that there are approximately 1.7 million workers missing from the post-pandemic workforce and that 38% of small firms are unable to fill open positions. At the same time, the “skills gap” in the workforce is accelerating as automation and AI create significant shifts in how work is performed.
That information comes from the “2024 Labor Day Report” released by Littler’s Workplace Policy Institute (WPI), the firm’s government relations and public policy arm.
“We continue to see a labor shortage and an urgent need to upskill the current workforce to adapt to the new world of work,” said Michael Lotito, Littler shareholder and co-chair of WPI. “As corporate executives and business leaders look to the future, they are focused on realizing the many benefits of AI to streamline operations and guide strategic decision-making, while cultivating a talent pipeline that can support this growth.”
But while the need is clear, solutions may be complicated by public policy changes such as the upcoming U.S. general election and the proliferation of employment-related legislation at the state and local levels amid Congressional gridlock.
“We are heading into a contentious election that has already proven to be unpredictable and is poised to create even more uncertainty for employers, no matter the outcome,” Shannon Meade, WPI’s executive director, said in a release. “At the same time, the growing patchwork of state and local requirements across the U.S. is exacerbating compliance challenges for companies. That, coupled with looming changes following several Supreme Court decisions that have the potential to upend rulemaking, gives C-suite executives much to contend with in planning their workforce-related strategies.”
Stax Engineering, the venture-backed startup that provides smokestack emissions reduction services for maritime ships, will service all vessels from Toyota Motor North America Inc. visiting the Toyota Berth at the Port of Long Beach, according to a new five-year deal announced today.
Beginning in 2025 to coincide with new California Air Resources Board (CARB) standards, STAX will become the first and only emissions control provider to service roll-on/roll-off (ro-ros) vessels in the state of California, the company said.
Stax has rapidly grown since its launch in the first quarter of this year, supported in part by a $40 million funding round from investors, announced in July. It now holds exclusive service agreements at California ports including Los Angeles, Long Beach, Hueneme, Benicia, Richmond, and Oakland. The firm has also partnered with individual companies like NYK Line, Hyundai GLOVIS, Equilon Enterprises LLC d/b/a Shell Oil Products US (Shell), and now Toyota.
Stax says it offers an alternative to shore power with land- and barge-based, mobile emissions capture and control technology for shipping terminal and fleet operators without the need for retrofits.
In the case of this latest deal, the Toyota Long Beach Vehicle Distribution Center imports about 200,000 vehicles each year on ro-ro vessels. Stax will keep those ships green with its flexible exhaust capture system, which attaches to all vessel classes without modification to remove 99% of emitted particulate matter (PM) and 95% of emitted oxides of nitrogen (NOx). Over the lifetime of this new agreement with Toyota, Stax estimated the service will account for approximately 3,700 hours and more than 47 tons of emissions controlled.
“We set out to provide an emissions capture and control solution that was reliable, easily accessible, and cost-effective. As we begin to service Toyota, we’re confident that we can meet the needs of the full breadth of the maritime industry, furthering our impact on the local air quality, public health, and environment,” Mike Walker, CEO of Stax, said in a release. “Continuing to establish strong partnerships will help build momentum for and trust in our technology as we expand beyond the state of California.”
That result showed that driver wages across the industry continue to increase post-pandemic, despite a challenging freight market for motor carriers. The data comes from ATA’s “Driver Compensation Study,” which asked 120 fleets, more than 150,000 employee drivers, and 14,000 independent contractors about their wage and benefit information.
Drilling into specific categories, linehaul less-than-truckload (LTL) drivers earned a median annual amount of $94,525 in 2023, while local LTL drivers earned a median of $80,680. The median annual compensation for drivers at private carriers has risen 12% since 2021, reaching $95,114 in 2023. And leased-on independent contractors for truckload carriers were paid an annual median amount of $186,016 in 2023.
The results also showed how the demographics of the industry are changing, as carriers offered smaller referral and fewer sign-on bonuses for new drivers in 2023 compared to 2021 but more frequently offered tenure bonuses to their current drivers and with a greater median value.
"While our last study, conducted in 2021, illustrated how drivers benefitted from the strongest freight environment in a generation, this latest report shows professional drivers' earnings are still rising—even in a weaker freight economy," ATA Chief Economist Bob Costello said in a release. "By offering greater tenure bonuses to their current driver force, many fleets appear to be shifting their workforce priorities from recruitment to retention."