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.
Even the best run, most modern, most productive distribution centers have a life cycle. Equipment ages; newer, faster, better technology comes along; or the business changes and with it, the demands on the DC. Eventually the day comes when it becomes apparent to all concerned that an upgrade is in order if the operation is going to stay competitive.
Although some companies take that as an opportunity to move to a newer, more up-to-date facility, that's not the only option. Another alternative is to retrofit the existing DC, replacing older equipment with modernized parts or systems.
But a retrofit can be daunting, with the potential to interrupt business operations. So we asked some experts who oversee retrofits for a living for tips on getting it done with minimal disruption. Here's what they suggested:
Find a partner. Certainly, specialists in DC retrofits have a vested interest in touting their capabilities. But they make a cogent point in urging clients to find partners who are familiar with the process to help with design and implementation issues.
Who that partner is depends on the scope and scale of the project, says Seth Taylor, a director for the consulting and systems integration firm Fortna. "You want to make sure you partner with the right people, people who do this for a living," he says. "You want them providing a thorough analysis of the existing facility and planning how to get the job done. Not all companies are set up to do retrofits. It is a bit of an art, and mastery of that art comes from experience."
Keep the entire business involved. "The facilities I've seen be successful take an all-in approach," Taylor says. "They bring all facets of the business into the planning and execution. Any part of the business that will be affected needs to have a member on the core team." That could include DC management and line personnel, maintenance, engineering, human resources, IT, and sales and marketing.
Taylor also stresses the need for ongoing communication throughout the process. Keeping all parts of the business informed about what will occur during the implementation of each phase, what the risks are, and the expected outcome can help build support throughout the organization, he says.
External clients also should be kept in the loop, so they are not surprised by any changes in business processes that result from the retrofit. Taylor notes that these project updates can be parlayed into a marketing tool. "It's another touch for the customer, letting them know you are improving the business," he says.
Plan, then plan some more. A retrofit requires detailed step-by-step planning in order to succeed. That includes figuring out in great detail what mechanized systems will be used, the number of pick faces needed, how many SKUs the system will manage, the order picking process, and more, says Bob Babel, vice president, systems engineering for Forte, another consulting and systems integration specialist. He adds that it's crucial to examine not only how the business has changed since the existing facility began operations—is the DC shipping smaller and more frequent orders, for example—but also what changes can be expected over the life of the retrofit. That's particularly important for businesses that are moving into e-commerce. "That's a different scenario than expanding capacity to continue what you've been doing for years," he says.
Babel also urges managers to keep the possible need for further expansion in mind when planning a retrofit. For example, he says, if future expansion might include an addition at one end of the DC, the material handling system should be designed to accommodate that. "We try to anticipate with the client what might be the next move," he says.
Taylor adds that while careful and diligent planning is a necessity, companies should also be prepared to depart from their plans if necessary. "Retrofits are ugly, they are hard, and you always have something go wrong," he says. "You have to be able to modify plans in order to succeed."
Draft your plan with an eye toward minimizing disruption. It's rare that a DC has the luxury of a planned one- or two-week shutdown that might simplify a retrofit. In most cases, Babel says, you have to maintain service levels and commitments to customers, while simultaneously installing new systems around the existing operation.
That's not easy. "The analogy I always use is heart surgery," Taylor says. "To keep the business alive, you need a full plan, you need to educate everybody, and you need all the tools you envisioned needing. You need a document that outlines every facet of the plan. You need to have multiple meetings prior to any cut-in."
Babel uses a different analogy to make a similar point. He compares the implementation to a game of chess, with careful coordination of how each of the pieces moves. Babel adds that implementation is particularly difficult in three-shift operations. That, he says, requires implementing the retrofit in smaller chunks.
Taylor concurs with that advice. "One of the biggest mistakes I've seen is the tendency to bite off more than you can chew," he says. "You need to make sure you can do what you plan, but at the same time you don't want to extend the schedule out."
To minimize disruption, companies often build new systems alongside existing systems, Babel says. As an example, he cites one of Forte's customers, an office supply company, that revamped all of its 30-plus DCs, including eight complete retrofits. "We built the automated system around the non-mechanized system, and replaced aging controls and equipment. We built the sortation system slightly above and behind the existing systems, then cut over during the weekend," he says. As a result of careful planning and implementation, he reports, none of the facilities lost any time.
Babel says Forte took a similar approach with a retail apparel company whose whole operation involved a push strategy—shipping its fashion goods, held for a single season, out to 500 stores. To avoid interrupting operations, he says, Forte literally set up a separate area to serve the stores during the changeover. "We devised a way to build mezzanines over the existing packing operation, then we automated the packing operation and the sortation of individual cases, and installed a put-to-light system," he says. "After that was up and running, we retrofitted the existing area."
Test and train. Taylor emphasizes the importance of testing not only components as they are installed, but the entire system. "Sometimes software can be funny in the way different portions of the system can be affected," he warns. "You have to validate the whole system and make sure you are ready to go."
Another crucial piece of the implementation is preparing those who will work with the system. "You want to make sure your operators are fully trained," Taylor says. That's partly because you want employees to look forward to the change, rather than dreading what's to come, he notes. But it's also a matter of readiness. "You need to be ready to go when you go live with the tie in."
Taylor says in one of the most successful retrofits he has worked on, the company spent a substantial amount to send operators to a different facility to learn the technology. "Although it required a large investment," he says, "the DC became the company's second most productive facility on day one."
Manage the handoff. "Handoffs are always interesting," Taylor says. "You want to plan them." He tells of one client that implemented a new warehouse control system, shifted from paper picking to an RF system, and made other operational changes—and then implemented it all in the course of a single weekend. "They affectionately called it the Big Bang," he says. "It took a long time to plan. The only way to make it work without a shutdown was by a managed transition.
"We never just pack up our tools and leave," he adds. "The idea is to make sure they need you as little as possible. The idea is for them to want to take the system and go."
Expansion by design
In less than three decades' time, Ikea has grown into one of the largest mass-market home furnishings retailers in North America. The company opened its first store in the United States in 1985 and now operates 37 here and 11 more in Canada.
Much of Ikea's success is based on offering goods at a relatively low cost, which means the retailer must do everything it can to keep its own costs in check. For instance, when it set up its distribution network, it built a system that matched its current needs but that could also grow with the company.
That foresight paid off a few years back when the retailer went to expand its DCs in Perryville, Md., and Bakersfield, Calif. When originally built, the two facilities, the biggest in Ikea's six-DC U.S. network, each occupied 850,000 square feet and featured 24 high-bay aisles with 60 feet of clearance. But as volume grew, Ikea embarked on a project to build out the two DCs to roughly double their original size. As part of that project, it added another 24 high-bay aisles at each site, providing a total of 120,000 pallet locations in each DC to handle the roughly 9,500 products it carries.
As for the material handling equipment that would serve the additional aisles, that was never in question. Back when it opened the DCs, Ikea selected aisle-changing automated storage and retrieval cranes, rather than installing dedicated cranes in each aisle. That offered a number of advantages, explains Jim Leddy, Ikea's warehouse logistics coordinator. For one thing, employing cranes that can service multiple aisles allowed the company to match cranes to throughput, not the number of aisles, producing what he describes as significant savings at the outset. For another, use of the cranes would allow for scalable expansion to accommodate future growth.
Ikea originally installed just six of the aisle-changing cranes at each DC to service all 24 aisles. Since that time, it has invested in additional cranes as demand dictated. Each 24-aisle section (two in each of the warehouses) is now served by nine cranes, for a total of 18 in each facility, Leddy says. He adds that the system can accommodate up to 12 cranes in each 24-aisle section.
The cranes employed by Ikea are man-up cranes manufactured by LTW Intralogistics that change aisles along tracks that run perpendicular to the aisles. When an operator wants to change aisles, he uses a switch in the cab to move the crane, which rotates around a 10-foot-radius curved track. Leddy reports that it takes less than a minute for a crane to change aisles.
The 3,000-pound capacity cranes are used for both putaway and retrieval. In daily operations, pallet trucks move inbound goods to the high bays, where they are deposited onto pallets. Crane operators, directed by Ikea's warehouse management system (WMS), then bring the pallets to storage locations.
When pallets are needed for shipping, crane operators retrieve them—again according to directions provided by the WMS—and place them on conveyors that take them to the shipping area. Most of the shipments to stores consist of single SKU-pallets. Only about 10 percent of shipments are mixed-load pallets, which are assembled at the DC.
Right now, the facilities handle between 35,000 and 45,000 pallets a week in seven-day-a-week, two-shift operations, Leddy says. In the meantime, Ikea continues to grow rapidly. Leddy says he is confident that the DCs are ready to meet the demand.
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."