Planning a material handling system is not about what equipment to install—not at first. It's about starting with a clear understanding of what the system should do when it's up and running.
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.
When planning a major material handling system, it can seem a long road between inception and completion, from the blank page to an effective operation.
That journey begins with a good map—or, more precisely, with a detailed system design for the warehouse operation. Crafting a detailed plan can be a complex and often daunting process. Experienced systems integrators say the journey begins with a clear understanding of the destination.
"The first thing we like to do is get a handle around the real objectives or goals of the project," says John T. Giangrande, a senior account executive for Fortna, a major systems integrator and supply chain consulting firm. "If you're building a new DC or expanding an existing DC, what's the driver? Is it about business growth, or are you consolidating distribution centers?" Labor productivity or transportation costs could be other factors affecting a design. "That leads to a more in-depth conversation to reach an understanding of the impact on operations," he says.
Giangrande is the author of a white paper for Fortna titled "Profitable Distribution System Design" that outlines the steps involved in revamping a warehouse operation. The first step is "Begin with the end in mind."
As Giangrande explains, that means asking questions like what is the business case—is it to reduce redundant inventory, consolidate processes, or improve customer service response? "That's really critical," he says, "because it helps develop the framework over what to do. That's where we start."
Setting objectives also requires some level of foresight into how business flowing through a DC is likely to evolve. "What are the numbers of orders, the number of lines per order, and how is that likely to change over time?" asks Giangrande.
It's important to engage not just distribution, logistics, and transportation in the discussion, but all the parts of the business that will rely on the system's success. Jimmy Benefield, director of strategy and operations for enVista, another supply chain consulting specialist, says, "One of first things we do is sit down at a roundtable with different stakeholders within the company—operations, but also sales and finance. We talk about where they are heading. Are they looking for acquisitions or will there be a change in the types of product in the next three to five years? We want to make sure we are not missing things."
That's particularly important if operations are likely to change substantially. To make the point, Giangrande cites the experience of two clients. One, a sports cap distributor, is expanding its product line from one sport to several. "What that means is that while the legacy business is growing, the majority of growth will be from a surge of orders for the new lines," he says. In contrast, another customer projects a steady 3 percent annual growth rate, but wants to consolidate two DCs into a single existing facility. Both companies needed complex material handling systems, but the designs were based on very different business drivers.
Do look back
While a detailed goal based on both tactical and strategic plans should be at the heart of the planning process, knowing where you are going and how to get there starts with understanding where you've been. Designing an appropriate system requires a complete understanding of current operations, and that demands careful analysis of detailed data, preferably for a full year of operations.
"We're big proponents of focusing on a data-driven design," Giangrande says. It is not just hard numbers—SKUs, order profiles and such—but a feet-on-the-floor look at current processes, which sometimes can yield surprises.
Giangrande says the data gathering should include interviews with operations personnel—supervisors and line personnel—who often have a different view of current processes than managers. "Managers may be out of touch with what is actually happening on the floor," he warns. That process, while perhaps time consuming, assures that the system plan is based on reality rather than perception.
That does not necessarily mean that current processes provide the best model for a new system, say both Giangrande and Benefield. After all, the very fact that a new or upgraded system is in the works implies that current operations cannot meet current or expected business requirements. Further, improvements in material handling equipment, controls, and software may offer the potential for gains well beyond what installed systems could provide. "We used to collect data to try to understand order profiles, and we still do that," Benefield says. "But we take a hard look at the processes from a lean standpoint. We look at the potential for eliminating touches."
Giangrande recommends looking at order profiles over at least a 12-month period, which will show seasonal or other cyclical trends or unusual spikes. He warns against relying too heavily on averages in designing a system. In his white paper, he writes, "If your business is seasonal and/or experiences cyclical trends, planning to averages will most likely yield a design that works very well except at the time you need it to perform the most."
Benefield also advocates looking at a full year's order data, but says there are exceptions. "Sometimes, [the client] may say we've been growing drastically. Then we might use six months."
Crunch the numbers
All this can add up to a lot of information, as informed decisions require looking at each of perhaps thousands of SKUs. A typical SKU analysis breaks down inventory into segments from fast movers to slow movers (Fortna ranks them A through D, plus an E category for idle inventory). "You can look at the number of SKUs, the number of units, and even how much cube they are taking up," Giangrande says.
The analysis also includes what he calls cross profiling—an examination that relates, say, fast-moving SKU categories with order profiles. Giangrande explains that such an analysis might look at what percentage of orders could be picked complete from A-category SKUs or A and B SKUs.
Major integrators as well as software companies have developed tools to help deal with the volume. Benefield says enVista offers a tool that can automatically generate as many as 7,500 charts and tables comparing the data in a wide variety of ways. "We look for spikes during the year or in lines per order, single line orders—we can break it out in a variety of ways. We have tables that show how orders break down, the percentage of As, ABs, and ABCs. That's one of the most valuable charts we generate."
The detailed look at SKUs and orders can suggest cost savings in the design through what Fortna calls a warehouse within a warehouse—clustering the fastest-moving goods in one segment of the warehouse, which could limit the amount of automated equipment needed. "When you go to do the design, you can better utilize your capital investment," Giangrande says.
He describes a project for a customer in the lawn and garden industry that could complete 71 percent of its orders from its A and B SKUs. The design consolidated those goods into a 10,000-square-foot area in the DC, making use of zone routing and a combination of static and flow storage. The company, he says, can now complete 70 percent of its orders in that area faster than it could with the previous layout, resulting in increased throughput and improved labor productivity. "It was not a radical change in how goods were stored, but a change in how the goods were grouped together, then adding appropriate material handling to that and ensuring we did not engineer in any bottlenecks," he says.
Benefield adds that in existing facilities undergoing a retrofit, it often turns out that DCs can benefit from implementing tactical changes in processes. He cites one customer whose data analysis showed that half the firm's orders were single-line, single-unit orders. By switching from discrete order picking to batch picking those orders in a single wave, the operation reduced travel time for order selectors dramatically, improving labor productivity. "When you are looking at the data, you can find opportunities," he says.
Draw the map
With a full understanding of the requirements, it's time to move on to the design. Giangrande says the design should incorporate four major areas: people, processes, systems, and assets. He treats DC space as a separate issue, particularly for retrofits in existing buildings. "Space is the Achilles heel of a design," he says. "You can have the best systems and good media, but if you need 200,000 square feet and you only have 150,000, things are going to suffer. Or if you have 300,000 square feet, that's going to be detrimental."
During the design process, Benefield says, it is crucial for the design engineers and the DC management to stay in touch. "Communication is key," he says. "You cannot work in a vacuum."
Ideally, he says, the designers will develop alternatives for DC managers to consider. They can guide customers through an economic analysis of each alternative, comparing crucial factors such as up-front investment costs, space utilization, labor costs, throughput, and expected return on investment. The analysis should also include an evaluation of such qualitative factors as flexibility, expandability, safety, security, integration, and ease of implementation, he says.
Ultimately, the design has to incorporate all of the pieces of the operation—receiving, storage, picking, areas for value-added services, shipping, etc. The decisions on storage media alone can be complicated, involving such considerations as cube utilization, level of automation, forward pick versus reserve requirements, and more. Those decisions will be dictated in large part by the order profiles and processes. "If you sell a million units, your storage media are going to look very different if you sell them one at a time than if you sell them 100,000 at a time," Giangrande says.
The completed plan serves as the road map for the implementation—the selection of appropriate technology, material handling equipment, etc. Developing such a map requires time and effort, to be sure. But it's the single best way to keep the journey from veering off course.
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."