WAREHOUSING

& LOGISTICS
INTERNATIONAL
The online journal of the International Federation of Warehousing and Logistics Associations

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Contents

The global
logistics
community

4 REPORT: A number of economies are emerging

and any of these could change the overall landscape
of world economies

8 SUSTAINABILITY RISKS: Sustainability risks

drive US businesses and government to target the
supply chain

6 A CHAMPION FOR INDIA: The UK-based

Chartered Institute of Logistics & Transport is keen to
expand its influence across India

elcome to the first issue of Warehousing & Logistics

International - a brand new electronic magazine
for the IFLWA

The companies who belong to the various trade bodies

that make up the IFWLA play a significant role in this crucially important global industry.
Warehousing and Logistics International will enable these
companies and their suppliers to communicate effectively.
Produced bi-monthly, the publication will contain a mix of

10 GIBRALTAR AIRPORT: Dematic will carry out the

development, installation and commissioning of the
new Baggage Handling and Screening System of the
New Terminal at Gibraltar Airport

news and feature-based content concerning logistics and

materials handling related issues from around the world.
By highlighting the market conditions and experiences of
others, it is hoped that the publication will provide the best
practice information that third party logistics executives from
around the world will be able to apply to their own companies. The publication will also serve to promote the activities
of the IFWLA and raise the Associations profile throughout

12 VESTED OUTSOURCING: The ten key ailments

that commonly afflict outsourced partnerships and
presents five golden rules for success
16 ECONOMY: Facing up to the reality of a difficult
economic situation

the global logistics and supply chain industries.

We are already turning our attention to the next issue of
the publication and editorial from IFWLA member associations will be very welcome. Please send your contributions to
me via email at: RWilliams@ukwa.org.uk
Roger Williams, Secretary General, IFWLA
The IFWLA Secretariat is based at the offices of the: United
Kingdom Warehousing Association, Walter House, 418-422

20 FORKLIFT TRUCKS: 3PLs want to source truck

fleets from organizations that can guarantee the highest levels of service and forklift fleet management
across several
countries
24 BUSINESS: Intelligent electronic trading holds
the key to a faster order-to-cash cycle

Strand, London WC2R 0PT England www.ifwla.com

Warehousing and Logistics International is an official publication of

the International Federation of Warehousing and Logistics
Associations It is published by Quad Publications
Publisher: Daren Thomas; T: 0044 [0]771 9740736
E: daren@warehousinglogisticsinternational.com
Business Development Director: Richard Davies
T:0044 [0]7970101515
E:richard@warehousinglogisticsinternational.com

30 CASE STUDY: An in-depth look at Office Depots

highly automated facility just south of Frankfurt in
Germany
38 WAREHOUSING:
Ron Farr, VNA and warehouse systems manager,
Yale EMEA, considers the various storage and handling systems available
42 FOCUS ON GERMANY:

www.ifwla.com

April 2011

Report
There are a number of economies that are currently emerging and any of these could change the overall
landscape of world economies, according to a recent report by he logistics research company, Transport
Intelligence

Changing the landscape

T

he US economy is currently the largest

in the world, estimated by organizations such as Peterson Institute for
International Economics, to be $14.6 trillion. The Chinese economy recently overtook the Japanese economy to be the
worlds number two, which is estimated to
be some $5.7 trillion. However based on
the current rate of expansion the Chinese
manufacturing base, the Chinese economy
should surpass the US economy in only a
matter of years. PriceWaterhouseCoopers
(PWC) published a report entitled "The World
in 2050", which predicts that the Chinese
economy will overtake the US in 2025 and will
be 130 percent the size of the US market by
2050. The report also goes on to predict that
the Indian economy, which currently eleventh
largest, would be the worlds third largest
economy in 2050, perhaps only ten percent
smaller than the US.
There are a number of other economies
that are currently emerging and depending
on their attractiveness to foreign investment
and manufacturing prowess; any of these
could change the overall landscape of
world economies. The logistics research
company, Transport Intelligence, highlighted
a number of countries that are emerging
logistics markets in 2011 and could
become leading economies in the next
decade.
10. Malaysia
Malaysia has become a force in the south
Asian market by attracting major automotive companies such as VW and Mercedes
to build assemble plants. Other foreign
investment has been forthcoming from electronics, solar-related and oil and gas industries. This has pushed the logistics market
to grow at an estimated 12.5 percent for
next five years.
9. Saudi Arabia

April 2011

Obviously Saudi Arabia is known as the

leading oil exporter but surprisingly this
kingdom has suffered over the last few
years with the global slowdown. It has the
ability to invest heavily in logistics and has
built a number of transportation hubs
across the country. When the growth in the
global economy does return, the Saudis
are in a good position to benefit with the
investment in their infrastructure.
8. Egypt
Before the recent political turmoil in Egypt,
this country was well positioned to be a
logistics center in the middle-east. There
were plans for a number of industrial zones
and development in the new industrial
cities. Unfortunately with a change in political direction this could all be undermined
and Egypts predicted growth fail to come
to fruition.
7. United Arab Emirates
As with Saudi Arabia this federation of
seven states has benefited from significant
oil exports, but unlike the Saudis some of
these small nations have spent their new
wealth in significant infrastructure. When
the global downturn occurred some of the
nations, such as Dubai, found them economically stretched, but based on the
investment already made, Dubai, Abu
Dhabi and Sharjah are in a excellent position to grow when the economy improves.
6. Turkey
Turkey has a unique geographical and
political location which could produce significant growth in the coming years. The
country lies between the western nations of
Europe and the growing Arab states and
politically it is very similar, with an Islamic
population that benefits from a western
style government. If the political situation
remains calm in Turkey this nation could

www.ifwla.com

Report

grow significantly as it grows closer to the

European Union.
5. Russia
Russia is country of vast natural resources
and could exploit these further to invest in
infrastructure. Since the countrys initiation
of foreign investment the economic growth
has increased and will increase further
when the current recession ends.
4. Mexico
Mexico is another country which could grow
significantly over the next few years. Its
physical closeness to the US has some companies looking to invest in Mexico as
Chinese costs rapidly increase. Industry in
the country is growing but its internal problems are still keeping US and European
countries from committing to the nation.
Despite the problems Mexicos air, rail and
road freight businesses are expected to rapidly grow in 2011 and beyond.
3. Indonesia
Indonesia has benefited from a relaxation
on foreign investment and this could spark
significant growth in the country. Previously
the government has limited foreign investment in telecommunications, logistics and
healthcare, which dramatically stifled economic growth. As China becomes less
appealing to foreign investment, countries
such as Indonesia, Thailand and Vietnam
could benefit and see rapid expansion in
the coming years.

2. Brazil
Brazil has benefited from savvy government
involvement, such as tax incentives and
infrastructure investment. The nation is the
eight largest economy in the world and has
significant natural resources. Brazil is a
major exporter of textiles, aircraft, coffee,
orange juice and soybean. The country has
over 2500 airports, over 114,000 miles of
paved roads as well as 36 deep-water
ports. With a population of over 190 million, the internal as well as external market
could give Brazil a major economic boost
when the recession is over.

Brazil is a
major exporter
of textiles,
aircraft, coffee,
orange juice
and soybean

1. India
The Indian economy is booming even during a global recession. It has a uniqueness
that has benefited the nation due to its
colonial history. As English is the language
of the Indian government, foreign investors
have found that doing business in India is
easier than other nations. This ease of
doing business, combined with a highly
educated workforce, has led the worlds top
companies making India their second
home. However despite these benefits and
significant government investment in urban
infrastructure, the nation still has kept foreign investment out of industries such as
retailing, where global powerhouses like
Wal-Mart andTesco are eager to get a
foothold. If the Indian government relaxes
its policies then the country could see
increased investment and growth.
www.transport intelligence.com

www.ifwla.com

April 2011

India

A champion for logistics,

transport & supply chain
matters in India
The UK-based Chartered Institute of Logistics & Transport is keen to expand its influence across India,
as Bernard Auton, Secretary General & Chief Executive Officer, CILT Interntional explains

ndia has been one of the worlds most

robust economies throughout the global
recession. A liberalising market, increasing levels of disposable income and
dynamic manufacturing & retail sectors are
combining to produce one of the best business environments in the world. Industry &
commerce are growing at more than 7%
per annum and anticipated to do so for
many years to come.
Transport and Logistics are key to this
growth and major contributors to the Indian
economy. In 2010 Transport Intelligence
identified India as the worlds most important growing logistics market. We estimate
that at least 12% of the Indian working
population are employed in these sectors
over 40 million in transport alone.
Increased accessibility and connectivity is
opening up new markets. The logistics and
transport sectors have huge potential for
growth, new service development, and
investment.
Excellence in Logistics and Transport
makes businesses more profitable, more
competitive and easier to attract customers
and investment. As Professor Martin
Christopher observed Businesses no longer
compete, its Supply Chains that compete!
In 2010 the Indian logistics market will be
worth $125 billion!
However Transport and Logistics in India
also faces many challenges including infrastructure development, providing nationwide distribution and linking to import &

April 2011

export markets. In 2007 India scored 3.07

(out of 5) in World Banks Logistics
Performance Index (LPI). In 2010 the score
had risen to 3.12 but in country ranking
India fell from 39 to 47 (out of 155 countries). Logistics performance in India is
improving but other countries are improving
faster.
Every improvement in logistics and transport services increases the demand for
well trained logistics and transport operators, supervisors and managers. But unfortunately there is limited provision of internationally accredited, professional, logistics &
transport education in India. One study
identified the need to train at least 4,000
warehouse managers and 25,000 supervi-

Every improvement in logistics

and transport services
increases the demand for
well trained logistics and
transport operators,
supervisors and managers.
But unfortunately there is
limited provision of
internationally accredited,
professional, logistics &
transport education
in India.

www.ifwla.com

sors per year, and that's addition to more

than 10,000 new truck drivers needed each
month!
The Chartered Institute of Logistics and
Transport (CILT) wants to be active in all the
major Indian cities and across all the transport and logistics disciplines. We will beare
working across India over the next 24
months to help develop the CILT including
establishing CILT Branches in the major
logistics and transport hubs.s services . This
will involve existing Members of CILT~India,
CILT Members from other countries and
assistance from the CILT International
Secretariat. We want to meet with as as
many senior members of leading logistics
and transport businesses, trade associations, business organisations, professional
bodies, Chambers of Commerce & Industry,
state & local government, and education
providers as possible.
We also want close working relationships
with other professional groups, particularly
trade associations who are seeking development opportunities for their members'
employees. These will include the
Federation of Freight Forwarding
Associations of India (FFFAI) [12.000 members in India, including Custom House
Association members], Air Cargo Agents
Association of India (ACAAI), Association of
Multimodal Transport Operators (AMTOI),
Asian Council of Logistics Management
(ACLM) and Council for Supply Chain
Management Professionals (CSCMP.) The
Federation of Indian Chambers of
Commerce & Industry (FICCI),
Confederation of Indian Industries (CII) and
The Associated Chamber of Commerce and
Industry of India (ASSOCHAM).
One of the key groups will be members
of the International Federation of
Warehouse & Logistics Associations IFWLA
including those in UKWA.
We welcome suggestions on other
regional, sector, Indian and International
organisations we should work with to promote skills development & networking for
logistics and transport professionals in
India.
Our success depends on working with
the right people - the leaders in these sectors, and we look forward to working with
you...
www.ciltinternational.org
bernard.auton@ciltinternational.org

www.ifwla.com

April 2011

USA

Sustainability risks drive US businesses and government to target the supply chain

Sustainability risks
A

recent report by Ernst & Young LLP

identifies five climate change and sustainability risks that executives should
consider as they respond to growing
demand to eliminate waste from their supply chains and to report on these initiatives.
The demand comes from a proliferation
of large corporate supplier qualification and
scorecard programs that are employed to
examine carbon footprints and resource use
at every step of the product and service lifecycle - from the sourcing of raw materials to
waste disposal by customers. In addition to
commercial customers, consumers,
investors, analysts and other stakeholders
are demanding transparent information
about the lifecycle of products and services.
Government engagement is also motivating corporate focus on greening the supply
chain.
In November 2010, the US government
the largest supply chain in the country
announced its GreenGov Supply Chain
Partnership, a pilot program to cut waste
and pollution in the federal supply chain by
measuring greenhouse gas emissions
(GHG). Following this pilot, the General

April 2011

Services Administration intends to develop

an incentive-based approach to contracting
to favor companies that track and disclose
their GHGs.
Supply chain and environmental professionals share a common goal: to reduce
waste. While these supplier programs could
be seen as a burden, they are actually great
opportunities to cut costs while reducing an
organizations environmental footprint. The
risks - once identified and managed for an
individual organization - can help foster
customer relationships and yield competitive
advantages, explained Steve Starbuck,
Americas Leader, Climate Change and
Sustainability Services, Ernst & Young LLP.
The five highly charged climate change
and sustainability risks to supply chain operations include:
1) Strategic The supply chain, for many
companies, increasingly provides an opportunity to improve competitive advantage
and reduce cost and waste. Leading companies understand this link, particularly as
stakeholders become more interested in
social and environmental costs.
2) Compliance Organizations that are

www.ifwla.com

USA

required to comply with green supplier programs now need to track data on energy
use and make the information available for
audits. On the flip side, if an organization
has instituted a green supplier program, it
will need new processes to track and monitor supplier compliance and to use the data
to drive decision-making.
3) Financial - Supply chain issues impact an
organizations financial strategy in multiple
ways, such as: opportunities to cut costs,
potential cash management and liquidity
implications as a price for carbon is set in
different jurisdictions, and new due diligence requirements for acquisitions.
Additionally, as companies increase public
disclosures in non-financial reports, CFOs
and audit committees are exercising more
oversight.
4) Reputational - Many companies are
implementing supplier qualification programs to ensure they do business with suppliers that share their values, which helps
them manage brand and reputational risk.
As such, these companies may conduct regular audits of suppliers, which might include
compliance with emissions, waste and safe-

ty guidelines.
5) Operational Spare parts inventory
management, manufacturing equipment
utilization, and planned maintenance are
just a few areas where the level of efficiency
could be improved. Other operational
areas to assess include: unplanned downtime, reduction and innovative uses for
manufacturing waste, transportation, logistics and facilities.
As organizations across the public and
private sector decrease their environmental
footprints by focusing on supply chain operations, many find they need to influence
operations that fall outside the direct
control of a single business unit or
enterprise. As a result, supply chain
leaders need up-to-date sustainability
information that meets the growing
demand for transparency and accuracy
from customers and suppliers alike.
Many companies are already taking a full
lifecycle approach to improve the environmental impact of their products and services." explained Eric Olson, Ernst & Youngs
Climate Change and Sustainability Supply
Chain Leader, Ernst & Young LLP.

Recommended actions
that supply chain
operations professionals can take
include:
1) Assess climate
change and sustainability reporting
needs, including evaluating the integrity
and alignment of
data across the supply chain.
2) Monitor and assess
existing or potential
government regulations on the entirety
of the supply chain.
3) Review the corporate risk register and
risk management
policies for appropriate inclusion of climate change and sustainability risks associated with the supply
chain.

Combilift & Aisle-Master join forces

Following the incorporation of the Aisle-Master articulated range into Combilifts portfolio, two of Irelands most successful
materials handling brands are now under one roof, and Combilift continues to blaze the trail in the 4-way and narrow-aisle
handling sector around the world. There are over 14,000 units in operation worldwide, with an extensive global dealership
network spanning more than 50 countries.

More models, more capacity, more choice

Combilift recently launched its largest model to date the giant C25000
with a capacity of 25 tonnes. At the other end of the scale, the baby
of the range, the award winning counterbalance design 4-way
Combi-CB, designed for handling a mix of palletised and long loads
is proving to be a very popular choice across a wide range of
industry sectors. Our ability to react to customer
feedback and develop handling solutions of any size is what sets us
apart from other manufacturers, comments MD Martin McVicar. Since we launched our first C4000 Combilift which is
incidentally still one of our best sellers we now offer models from 2.5t upwards with an almost infinite choice of options for a
truly customised product. Our range encompasses 4-way sideloaders, stand-on models for extreme narrow aisle operation, the
large cab XL series as well as the core Combilift range in varying load capacities.

A New Look for Aisle-Master

Aisle-Master is marking its eleventh year of production with the introduction of new designs,
new models and a distinctive new yellow warehouse safety colour. The hallmarks of the
Aisle-Master range remain the same however: excellently engineered articulated forklifts with an
unrivalled reputation for quality and long life operation, which drive down the costs of storage,
enable vastly increased pallet density and boost productivity. By replacing a combination of reach
and counterbalance trucks with very narrow aisle operation Aisle-Masters, storage capacity can be
doubled. All Aisle-Master models are designed to enable straightforward, quick access to
components, reducing service and maintenance time and speeding up routine daily checks.

Co. Monaghan, Ireland

Tel: + 353 47 80500

www.combilift.com

www.aisle-master.com

10

Gibraltar Airport

Gibraltar Airport:
New Terminal under way
Dematic will carry out the development, installation and commissioning of the new Baggage Handling
and Screening System of the New Terminal at Gibraltar Airport

he Gibraltar Government has signed

the contract with the company
Dragados to build the new terminal
and associated facilities such as the extension of the apron, aircraft parking area,
new cargo handling facilities, new building
for airport vehicles, and new facilities for
Customs, at the airport and border crossings.
Gibraltar airport is located on the isthmus that joins Gibraltar with Spain. This
international airport is located only 500
meters from the town of Gibraltar and a
similar distance from the village of La Linea
de la Concepcin (Cadiz) Spain.
The airfield was built during World War
II and officially opened in 1949 as an
emergency base of the British Royal Navy.
On December 2nd, 1987, an agreement
between the Spanish and British governments agreed to the civil joint use of the
airport by Gibraltar and Spain. In 2006 a
new agreement between Britain, Gibraltar
and Spain, ended up with so far restrictions
on civilian use of the facility, allowing flights
with Spain and thus ending years of conflict.
Two years later the Gibraltar
Government announced it would build a
new passenger terminal as part of these
agreements. The new terminal would have
20,000 m_ on two floors, and then being
much larger than the existing one to be
replaced. This new terminal will be the
focus of the new road network being also
developed. The Terminal will have 5 gates
and a capacity of up to one million passengers per year.
Dematic is implementing the installation,
integration and commissioning of the
Baggage Handling and Screening System
for the departures and arrivals circuits.

April 2011

The Baggage Handling and Screening

System for the departures circuit consists of
two separate paths devoted to Gibraltar
and Spain. There are a total of 16 check-in
positions and one more for Out-Of-Gauge
bags. All bags from check-in are screened
by 2 automatic and 1 manual X-ray
machines. Checked baggage are sent to 2
inclined flight-make-up carousels for manual classification and subsequent transfer to
the aircraft
The arrivals circuit consists of two pier
conveyors where bags are unloaded, and
then carried by two independent conveyor
paths to 2 flat arrival carousels, where passengers will pick them up.
The complete Baggage Handling and
Screening System is supervised by a SCADA
control system, which further integrates the
operation of fire doors, then providing zone
isolation in case of fire.
The deadline for the completion of the
entire Baggage Handling and Screening
System is 12 months, including all operational tests before the New Terminal opens
to the public.
www.dematic.com

Gibraltar airport is located on

the isthmus that joins Gibraltar
with Spain. This international
airport is located only 500
meters from the town of
Gibraltar and a similar
distance from the village of La
Linea de la Concepcin (Cadiz)
Spain

www.ifwla.com

www.ifwla.com

April 2011

12

Vested Outsourcing

As a co-author of a new book entitled Vested Outsourcing, Kate Vitasek, a

leading academic from the University of Tennessee, outlines the ten key ailments
that commonly afflict outsourced partnerships and presents five golden rules for success

Five golden rules

for transforming
outsourcing partnerships
O

utsourcing has been an established

commercial practice for a quarter of
a century, since the days when Peter
Drucker coined the mantra Do what you do
best, and outsource the rest. Although precise definitions are contentious, it has been
estimated that outsourcing programmes
account for 12 per cent of US Gross
Domestic Product. Three out of five companies polled in a recent
PricewaterhouseCoopers survey have outsourced at least some business processes
and a 2008 Deloitte Consulting Outsourcing
Report suggested that 83 per cent of
respondents reported that their projects had
met their Return on Investment goals of
slightly above 25 per cent.
And yet business is littered with stories of
outsourcing projects that fail - or perhaps
more importantly fail to stay the distance
initial gains, certainly, but followed by a relationship that descends into acrimony. Some
partnerships, such as the twenty year alliance
between Jaguar and UKWA member Unipart
Logistics, just keep on delivering for both
parties; others run into the sand.
Lead author Kate Vitasek explains that
after studying many outsourcing relationships
in logistics and in other business processes,
they have identified ten ailments that
impede successful outsourcing, and the five

April 2011

rules that will help both sides find the pony.

The pony, Vitasek explains, is the difference between todays solution and what the
optimised solution could look like, if the parties only knew to look for it. (The derivation
comes from the dialogue: Why are you
excavating that pile of horse manure, little
boy? Why Sir, for this amount of manure
there must be a pony in their somewhere).
The point is that, except for the outsourcing
of the most commoditised services and
processes, real and enduring success for
both parties comes from thinking and acting,
not about Whats in it for me? (WIIFM), but
Whats in it for WE? (WIIFWE). In other
words, says Vitasek, outsourcing partnerships
are not to be seen as a zero-sum game:
working together, and following the five
rules, the game gets bigger for both sides.
Thats the pony.
There is little surprising there. Most firms
go into outsourcing arrangements with at
least the vague idea that they will bring
inputs and resources together - capital
assets, skills, knowledge or whatever - to
benefit both sides. So what are these ailments that frustrate such good intentions?
Its worth noting, although not explicit in
Vested Outsourcing, that several of these
behaviours are not exclusive to outsourcing.
They can be found, for example, in the rela-

www.ifwla.com

Vested Outsourcing 13

tionships between different departments of

the same organisation if those are working
to differing objectives and incentives. Here
are the ten key ailments highlighted by
Vitasek:
1. Penny wise, pound foolish. A company outsources purely on cost. This can
lead to trade-offs in quality and service,
beating up the supplier, and a vicious
cycle of re-bidding, and transitioning to a
new cheaper supplier. Either outsource
providers will refuse to work with that firm,
or they may bid so low that they go out of
business.
2 The outsourcing paradox is
Vitaseks term for the situation where the
service buyers experts attempt to define a
perfect Statement of Work on how the
process is to be performed, down to the last
touch. Obviously, there is then no scope for
the service provider to bring their own skills,
knowledge and abilities to the table.
3 The activity trap. Related to the last
point, this is where providers are rewarded
on a transaction basis - the more operations they perform, the greater their revenue
and profit. Clearly, there is no incentive to
reduce the number of non-value-added
transactions, because that would result in
loss of revenue.
4 The junkyard dog factor, as Vitasek
terms it, is where, to protect their own jobs
or status, employees in the outsourcing firm
insist that certain processes simply must stay
in house. Often, notes Vitasek, this also
means that the best employees, perhaps
those who wrote the Statement of Work in
ailment 2, are retained in house as largely
unnecessary supplier managers.
5 The honeymoon effect. Initially all is
positive, as the provider ramps up to meet
the customers expectations. But after a
time, the low hanging fruit has been
plucked, there is little incentive for the supplier to try harder for the more difficult
goals, or to renew investment, and the relationship deteriorates.
6 Sandbagging. To get over the honeymoon effect, a buyer might offer bonuses
payable on set performance improvements
perhaps a certain percentage reduction in
inventory holding each year. It may in fact
be possible to outperform this, especially in
the early years, but the provider will be
sorely tempted to bank this potential gain
against harder times.

7 The zero-sum game. This is selfexplanatory - the belief that if something is

good for the outsource provider, it is automatically bad for the buying side. Almost
everyone in business school has studied
game theory, but it seems much harder to
think win-win in practice. Vitasek extols the
power of ANDS can I have improved
service AND lower cost? Probably, but not if
you dont believe in the possibility of winwin to start with.
8 Driving blind is quite simply the failure
of the parties to start off with an agreed definition of what success will look like. Often,
costs are tracked, but there is little formal
governance devoted to the other aspects of
the relationship, such as service levels.
9 Measurement minutiae shows up in a
plethora of metrics designed to capture
every single aspect of the outsource
providers performance perhaps 50 or
100 metrics, requiring years of person-time,
and many of which may be of little practical
assistance, if indeed they are ever reviewed
at all.

After a time, the low hanging fruit has been

plucked, there is little incentive for the supplier to
try harder for the more difficult goals, or to renew
investment, and the relationship deteriorates
10 The power of not doing. The contract may, for example, specify quarterly
review meetings around a scorecard of metrics, but if the metrics are not monitored
and the meetings not held, sub-optimal performance should hardly come as a surprise.
Those are the common problems that
Vitasek and her team have identified in
failed or failing outsourcing arrangements.
But is there an alternative approach? How
have relationships such as that of Jaguar
and Unipart Logistics managed to avoid at
least the majority of these traps?
First, says Vitasek, You really have to
believe that there is value (the pony) to be
had by going down the vested outsourcing
route if not, dont go down that path. The
conventional approach treats outsourcing
almost as a commodity: I have low skills so
Im going to outsource to an expert, but the
process is of low value to me so Ill use
Adam Smith market forces to drive down
Continued on page 14

www.ifwla.com

April 2011

14

Vested Outsourcing

Continued from page 13

costs. But in even a moderately complex outsourcing model there will be a few suppliers
that are really good, that could provide a
huge opportunity to unlock value. Im going
to outsource to you because you are smarter
than me, youre going to unlock that value
and together we are going to share it.
For success in these sorts of outsourcing
partnerships, Vested outsourcing implies the
adoption by both sides of five rules.
Rule 1
Is to focus on outcome, not transactions. Flip
the thinking from what detailed operations
the service provider is performing, to desired
outcomes how is the provider improving
turnaround or whatever your problem was.
Desired outcomes are still quantifiable, but
take a different form they may be targets
for availability, reliability, revenue generation,
employee or customer satisfaction and the
like.

If the partnership is going to be outcome based it

can no longer have a hundred different Service
Level Agreements (SLAs) that the buyer is going to
micromanage. The outsource provider has won the
contract because he is supposed to have the
expertise that the buyer lacks
For example, Unipart Logistics and Jaguar
have a joint vision To support Jaguar
Dealers in delivering a Unique Personal
Ownership Experience to Jaguar drivers
worldwide, ensuring industry leading owner
loyalty through partnership and world-class
logistics. This joint vision empowers Unipart
Logistics to deliver the logistics solution that
enables Jaguar to maintain its leading position and its quality image.
Rule 2
Focus on the what and not the how. If the
partnership is going to be outcome based it
can no longer have a hundred different
Service Level Agreements (SLAs) that the
buyer is going to micromanage. The outsource provider has won the contract
because he is supposed to have the expertise
that the buyer lacks. So the latter has to trust
the former to solve problems. The service
provider is, or should be, constantly in the
marketplace, keeping tabs on new developments and processes. Performance partnerships let each firm do what it does best

April 2011

unless you have the skills and resources to

keep up with the latest innovations, leave the
details to the experts.
Dont paint the supplier into a box, but
give him the flexibility to bring his skills to the
job.
In the Jaguar- Unipart relationship,
Unipart Logistics invests in the creation and
implementation of unique processes and
products to maintain a continuous improvement to its service - for instance, the Direct to
Dealer programme has increased availability
and shortened lead-time on customer-critical
orders.
Rule 3
Be very clear on well defined and measurable
outcomes. Ideally, there shouldnt be more
than about five high-level metrics. All parties
- which may of course include users and
other stakeholders that arent directly signing
the contract - need to spend time collaboratively, during the outsourcing process and
especially during the contract negotiations, to
establish explicit definitions for how relationship success will be measured.
Given those outcomes the service
provider can propose a solution that will
deliver at an acceptable predetermined price.
This actually constitutes a fundamental shift in
the business model, it moves risk from the
outsourcing company to the service provider
and the latter is paid for the value the desirable outcomes produce, not for the activities
performed.
The Jaguar Global Control Centre is the
focal point to manage, measure and control
the complex Jaguar aftermarket parts supply
chain, from scheduling orders on suppliers
through to dealer deliveries it brings together people, processes and systems to continuously improve each step of the supply chain.
Rule 4
Optimise pricing model incentives for the best
cost/service trade-offs. Vitasek says, I need
to pay on incentives that encourage you to
optimise my tradeoffs, to find the power of
AND. When you achieve AND how am I
going to pay you? This may imply open
book accounting although Vitasek acknowledges that isnt always possible.
Vested Outsourcing does not guarantee
higher profits for service providers - they are
taking a calculated risk. But it does provide
them with the autonomy and authority to
make strategic investments in their processes
that can generate a greater ROI for them

www.ifwla.com

Vested Outsourcing

over time, perhaps more than a conventional

cost-plus or fixed price contract might produce over the same period.
Unipart Logistics invested significant
resource in reviewing compliance and reducing duty payments the benefits were shared
between both companies.
Rule 5
A governance structure should provide
insight, not merely oversight. In the early
days of outsourcing, the authors say, some
companies simply threw the work over the
fence, with poorly defined requirements and
few, or no, performance metrics or service
level agreements. Unfortunately, some have
gone to the other extreme, with small armies
micromanaging the outsource providers.
The structure that governs an outsource
agreement should be providing both parties
with real knowledge of how operations are
developing and improving. And, of course, of
where the next threats and challenges may be
coming from as Vitasek says Contracts
may be static, but outsourcing is dynamic.
The Unipart Logistics team work with
Jaguar engineers during the development of
a new vehicle to ensure a high level of parts

availability to underpin a cars debut. The

collaborative relationship works too to support Jaguars expansion into new markets,
such as China, where Unipart Logistics has
delivered a fully operational warehouse in
Suzhou, near Shanghai.
Jaguar and Unipart Logistics are cited by
Vitasek as having an outsourcing relationship
that has in large part avoided the ailments
and followed the rules, as shown by the fact
that the arrangement has continued to succeed for two decades, even surviving changes
of ownership at Jaguar. She claims that
Jaguar say we never look at the contract, we
behave this way. I advocate writing a contract
thats right for business, but then shove it under
the table and dont look at it. What Jaguar and
Unipart Logistics have is a shared vision, as well
as one of the best lean philosophies in the
world outside Toyota. End-to-end, total-cost, lean
thinking applied across the supply chain is pretty
powerful. Unipart Logistics convey their lean
thinking to the supply chain which then unlocks
value for Jaguar.
Vested Outsourcing is published by Palgrave
Macmillan, ISBN 978-0-230-62317-0

www.ifwla.com

About the
author
Kate Vitasek is a
faculty member
at the University
of Tennessees
Center for
Executive
Education, and
the founder of
Supply Chain
Visions.

April 2011

15

16

Economy

Preparing for future

growth in the
logistics business
If youre reading this the chances are that your business has survived the Credit Crunch followed closely
by the Recession and you are now facing up to the reality of a difficult economic
situation for some time to come

PC International has developed techniques to enable logistics businesses to

survive downturns in the economy and
help them emerge stronger and fitter when
the upturn arrives. Though the current economic situation is severe, recovery will
come and those that have adapted their
business strategy will be best placed to
take advantage when the economy recovers.
The logistics sector has been, and will
continue to be, hard-hit as consumer
demand falls and fuel prices and taxation
increase.
The economic downturn will create
challenges in an industry which is very
competitive, provides high levels of customer service and works to tight profit margins. Downturns inevitably affect those margins and customers, who themselves suffer
similar economic pressures, look to service
providers to sometimes absorb more than
a fair share of the costs to mitigate their
own financial position.
What action can be taken to address
continuing economic pressures? Unless
your company is confident enough to
invest for the longer term then understanding and planning for short term circumstances is the first course of action.
Essentially this means driving costs out of
the business in order to become leaner
and meaner whilst maintaining revenues

April 2011

and a healthy customer base.

LPC International recommends that three
key areas of the business need to be
addressed: Inventory and Stockholding,
Warehousing Efficiency, and Network
Planning and Transport.
Opportunities to streamline each of
these during difficult economic times are
outlined below. While not all businesses
can implement all measures, it is well
worth exploring all opportunities to
achieve cost reductions, improve the bottom line on the balance sheet and operational efficiencies.
Inventory and Stockholding
Inventory reduction has several benefits,
including:
reducing the direct costs of inventory
ownership
llower warehousing costs
The obvious starting point is to dispose
of obsolete stock which is usually easy to
recognise not least because of the
amount of dust on it! The refusal to dispose
of it is often driven by the unwillingness of
accountants to write-off stock, without
any apparent recognition of the warehousing costs incurred in continuing to store it.
A simple way to identify such items is to
produce exception stock reports which
identify those items that havent been in
demand for a significant period of time. By

www.ifwla.com

Economy

reviewing the reasons for the lack of movement it is possible to identify the SKUs that
can be discarded. Even if there is limited
movement during the review period it is
possible that the SKU is obsolescent and its
stock levels can be reduced.
It is important too, to review purchase
order quantities and order frequency.
Though purchasing large quantities of a
SKU may save on purchase costs, the
potential costs of obsolescence (particularly
of products which have relatively short life
cycles) and warehousing must be considered. Placing smaller but more frequent
purchase orders is prudent during periods
of recession, particularly as prices can be
more competitive, and stock more readily
available than when trading is good.
Action should also be taken to reduce
the range of stock held products. Rather
than hold stock of all items, establish
whether it is possible to buy less popular
items from your suppliers directly against
customer orders, and then cross-dock the
order to customers when the goods arrive.
While this may cause increased lead times,
customers are often prepared to accept
longer delivery timescales provided promises are reliable.
If there are multiple stockholding points
then the centralisation of stock can assist
cost reduction. By centralising all stock of a
SKU at a single stockholding point it is possible to guarantee a level of availability
that is greater than can be achieved if
the same amount of stock is distributed

amongst multiple stockholding points. By

way of example, if you hold stock at one
location instead of four, the amount of
safety stock required to support a given
service level will halve, a saving well worth
having. This is Maisters Law that states
that the amount of safety stock (which is not
the same as total stock) required to support
demand varies according to the inverse
square root of the number of stockholding
points.

Warehousing Efficiency
Centralisation of stock also has other
advantages, notably in terms of warehousing costs. The cost per unit of throughput
from a single large warehouse can be significantly less than the cost per unit of
throughput from one of a network of several smaller warehouses with the same
combined capacity as the larger warehouse. The reasons for this are from the
administrative and operational benefits of
combining and rationalising: order processing, inventory control, security and
managerial resources. Similarly stock
centralisation may create an opportunity to
introduce more advanced storage and
materials handling systems which would
not be economically viable in small warehouses.
It may appear irrational, during difficult economic times, to invest in more efficient materials handling and storage
equipment, however it is a fact that around
40 45% of the total cost per unit of

www.ifwla.com

April 2011

17

18

Economy
Objective and
rigorous
examination
using wellpublished and
readily available techniques
- to review
inventory
levels, product
ranges,
warehouse
layouts and
processes,
storage and
handling
facilities,
operational
efficiency,
distribution
networks, and
transport
operations can
be absolutely
invaluable when
seeking to
reduce costs
during difficult
economic times

April 2011

throughput in a typical warehouse is

space or property related, some 35
40% related to direct labour, and 15
25% related to the depreciation, running,
and maintenance cost of storage and handling equipment.
Investment in more appropriate types of
storage and handling equipment can
improve productivity levels. This might
be where customer orders are picked
in small unit quantities rather than
as full pallets, or where there is
opportunity to sweat the property
asset through the use of high density
storage equipment to make better use
of available height, or to reduce aisle
widths. A financial review of alternative
storage and handling equipment can help
identify solutions which will deliver on-going
cost savings.
The centralisation of warehousing
operations, and introduction of the right
types of equipment and operating procedures can make it possible to release warehouse space, and even whole warehouses,
for sale or to let, without loss of storage or
throughput capacity.
It is important that a detailed review of
the current warehousing operation is undertaken to inform the precise process. This
review should incorporate the current warehousing facilities, operational procedures,
stockholding needs, customer order
demands, productivity, performance, costs
and unit cost performance. There are a
number of well published methods by which
warehouse performance can be measured
using balanced scorecards and other techniques.
Network Planning and Transport
Any change in the number of warehouses
in a network will, undoubtedly, affect transport costs. Generally the more warehouses
there are in a network, the greater the
warehousing and inventory costs, and the
lower the transport costs. It is therefore
important, when considering any change in
numbers of warehouses to also examine
the potential impact on transport costs.
There are a variety of well-established
computer models available for warehouse
network modelling. Many such models
can be used to optimise the numbers,
sizes (in terms of throughput) and locations of warehouses required to serve a
defined customer base. They can also help

to determine the potential impact of closing one or more depots in an established

network.
Computer models can be used for transport planning to determine economic routes
and schedules and to optimise use of the
available vehicle fleet. At strategic level,
and at the same time as doing any warehouse network modelling, the optimum
size and mix of fleet (numbers of vehicles
of different capacities or types) can be
determined.
Computerised routeing and scheduling
can be used for strategic planning whereby
solutions are reviewed periodically or,
preferably, used on a tactical basis to optimise each days transport operations and
to maximise the fill of delivery vehicles.
Though it may be difficult and time-consuming to install and commission a routeing and scheduling system, persistence will
be rewarded. Provided the computer
package is sourced from a reputable
software provider, covers all the companys
transport needs and the parameters are set
correctly, it shouldnt take long to see real
benefits.
At a tactical level, significant savings can
be achieved by introducing telemetry systems on trucks to check driver and vehicle
performance. Fuel consumption and overall vehicle performance can be increased
through monitoring driving habits and
engine condition.
Summary
Objective and rigorous examination using
well-published and readily available techniques - to review inventory levels, product ranges, warehouse layouts and
processes, storage and handling
facilities, operational efficiency, distribution networks, and transport operations can be absolutely invaluable when
seeking to reduce costs during difficult economic times.
Reviewing these areas should be a continual process. LPC can assist you with
developing a program, conducting the initial review, developing solutions, identifying
costs and managing the whole, or parts, of
your project.
LPC have been helping their clients optimise, improve and grow their businesses for
over 25 years.
www.lpcinternational.co.uk

www.ifwla.com

CASE STUDY

Warehouse Statistics

TDG EUROTERMINAL, MANCHESTER

Size: 140,000 Sq ft
Usage: High Racking, Bulk
Storage, Loading Bays
Skylights: Yes, Daylight Dimming
Provided

New Lighting Equipment Saves 75% Energy

Government Incentives
Luxonic Lighting products
are fully covered under the
Governments Carbon Trust and
Enhanced Capital Allowance
Schemes

Light Levels
Luxonic design each installation
to comply with industry lighting
standards. Light levels are often
improved, despite the large drop
in power consumption

Luxonic Service
Luxonic offer a free, no obligation
site survey and design service.
Our ttings come complete with
guarantees on uorescent tubes
and electronic components

The TDG Euroterminal in Manchester is the latest warehouse in

the TDG Group to benet from a new energy efcient lighting
scheme supplied by Luxonic Lighting. The energy savings
created are very valuable to any business in todays climate, but
boosted environmental credentials and Government incentives
further added to the feasibility of the capital investment.
The lighting design was based on a
direct replacement of light ttings
on a one-for-one basis. However,
due to the increased efciency of the
Luxonic Aislelux 2x80W tting it was
possible to reduce the total number
of ttings in some areas of the
warehouse, while still increasing the
light level. This amplied the savings
made, and therefore shortened the
payback period for the project.

luminaire. Each light tting includes

its own integral presence detector,
allowing it to operate independently
and maximise energy savings.

Since the installation was completed,

TDG have taken advantage of the
Governments
Enhanced
Capital
Allowance (ECA) Scheme.
This
enables a business to claim 100%
rst-year capital allowances on their
spending on qualifying equipment.
As with each project, the lighting Businesses can write off the whole of
scheme was tailored to suit the the capital cost of their investment in
requirements of the Euroterminal. qualifying technologies against their
Open areas such as loading bays taxable prots of the period during
were equipped with Hi-Max ttings, which they make the investment. This
with a specic open area presence can deliver a helpful cash ow boost
detector, while the aisle areas were and a shortened payback period.
tted with the highly efcient Aislelux
BEFORE
FITTINGS

AFTER

400W SODIUM

2 x 80W FLUORESCENT

TOTAL LUMINAIRES

374

330

OPERATING HOURS

24 OVER 5.25 DAYS

24 OVER 5.25 DAYS

1,053,692 KWh

273,469 KWh

ANNUAL ENERGY CONSUMPTION

ANNUAL RUNNING COST
CO2 EMMISSIONS PER YEAR

105,369.27

27,346.88

463.6 TONNES

120.3 TONNES

ANNUAL SAVING = 78,022.39

PAYBACK PERIOD = 1.03 YEARS

20

Forklift Trucks
With global changes in purchasing practices, there has been a clear trend among retailers and 3PLs
towards sourcing forklift truck fleets from organizations that are not only capable of supplying a full
line-up of products from counterbalance to warehouse machines but who can also demonstrate
that they have the infrastructure in place to be able to guarantee the highest levels of service and forklift fleet management across several countries, sales Jungheinrichs Bill Goodwin

Global support network

S

ince the formation of the Single

European Market in 1993, many leading retailers and third party logistics
(3PL) service providers have sought to gradually replace nationally based forklift procurement contracts with pan-European fleet
deals.
With these global changes in purchasing
practices, there has been a clear trend
among retailers and 3PLs towards sourcing
forklift truck fleets from organizations that
are not only capable of supplying a full
line-up of products from counterbalance
to warehouse machines but who can also
demonstrate that they have the infrastructure in place to be able to guarantee the
highest levels of service and forklift fleet
management across several countries.
Of course, the leading forklift truck manufacturers have always sold and serviced
their products either directly (as in the case
of my own company, Jungheinrich) or
through a network of regional and, in some
instances national, independent dealers.
In the UK and across the rest of Europe,
there are literally thousands of independently owned forklift dealerships who will
gladly supply you with a lift truck and
undertake to maintain it throughout its
working life. The majority are highly professional and well-run organizations, but some
of them, most definitely are not.
For logistics and procurement directors
tasked with selecting a truck supplier capable of providing both a quality product and
a reliable service and after-sales support
package across several territories, the multifarious caliber of Europes lift truck dealers
can be a deal-breaker. And, the enlargement of the EU in 2004 and the subsequent
restructuring of the European economy has
brought the issue into sharper focus: quite
simply, the quality of many of the dealers

April 2011

operating in the countries that once formed

the Eastern Bloc is well below that which we
have come to expect in the UK and
throughout most of Western Europe. Sadly,
in some cases, this is also true for dealers
operating in mature markets. For multinational retailers and 3PLs rushing to capitalize on the potential that the opening
markets of the east offer, this can represent
a significant obstacle as they strive to establish the most cost-efficient supply chains.
But, as some of Europes biggest forklift
fleet operators will testify, dealing with a
forklift truck manufacturer that retains ownership of its downward supply chain by taking the direct route to market ensures that a
uniform standard of service is achieved
across the fleet regardless of where in the
world the trucks are working.
For international accounts there are, in
my view, several clearly defined advantages
of dealing with a forklift manufacturer that
eschews dealers and provides its products
and services directly. Jungheinrich, for
example, operates a direct sales and service facility in no fewer than 37 different
countries in Europe alone. Staff at all these
facilities from France to Ukraine are
Jungheinrich employees and, therefore, all
benefit from consistency of training at all
levels and standardized procedures and
processes that have evolved over years
within the mature markets that our Group
serves. In addition each country has the
reassurance of knowing that our international Key Account Management co-ordination team, which, with its Head Quarters in
Hamburg, ensures that all facets of each
individual business meet the exacting standards of our global clientele, backs it up.
In effect, this corporate approach allows
Jungheinrich to repeat the successful model
of its biggest territory anywhere in the world

www.ifwla.com

22

Forklift Trucks

and means that the company can offer

the same high levels of service and customer support across international boundaries.
The ability to replicate our successful
business model in new and emerging markets has enabled Jungheinrich to quickly
establish dominant market positions in
many territories.
However, it is not just in the quality of the
after-sales offering that this ability to standardize across borders brings benefits to
the international client. International pricing
structures and delivery propositions are also
far easier to arrange if the needs and abilities of a disparate dealer group do not
have to be satisfied while dispute resolution
(lets be honest, as with any relationship,
problems can arise from time to time) is far
more straightforward if only two parties are
involved.
It is also worth remembering that those
forklift truck manufacturers who sell through
dealers are wholly reliant on the quality of
each particular dealer partner and, for
international clients seeking to establish
pan-European or even global lift truck
fleets, the fact that a manufacturer has no

April 2011

clear control over the way its dealers perform can be further cause for concern. After
all, can the client be sure that the level of
service and after-sales support provided by
the forklift manufacturers long established
Germany-based distributor will be matched
by that offered by the newly appointed
dealer in Bosnia and Herzegovina!
Today, in Europe alone, Jungheinrich has
over 600 sales consultants as well as more
than 3,000 mobile service engineers who
maintain a close-knit network and provide
competent consulting and comprehensive
service. A short-term rental fleet of some
16,000 trucks, which ensures quality, availability, and reliability of supply support
them.
So far, over one hundred retailers and
logistics services providers have international sourcing agreements with Jungheinrich
and, as more such companies seek to
develop their businesses across continental
boundaries and, at the same time, look to
achieve the economies of scale that international lift truck procurement deals can
bring, we believe that this figure is set to
grow significantly in the years to come.
www.jungheinrich.com

www.ifwla.com



 


 


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24

Business

Turning orders
into cash - quickly
Intelligent electronic trading holds the key to a faster order-to-cash cycle, says David Grosvenor

mproving the order-to-cash cycle time is

an imperative for just about every business in these tough times. When a business fails it is normally as a result of a lack
of cash.
These days, when companies trade with
one another the exchange of information,
such as orders, acknowledgements,
advance shipping notices and invoices, can
be conducted using electronic trading technology. The removal of paper and faxed
documents from this process has cut the
level of errors incurred significantly. But
many companies have yet to adopt this
technology and so are failing to take
advantage of a reduced order-to-cash cycle
time.
According to a report published this
September by GS1 UK in conjunction with
the UK-based Cranfield School of
Management, 81 per cent of companies
are still using manual, paper-based
processes. However, the research highlights
the advances made in the grocery sector.
Some 27 million orders are made in the UK
grocery sector every year, with 84 per cent
of orders by retailers and 87 per cent of
invoices transacted using EDI technology.
The EDI Cost Savings report of the UKs
top 15 grocery retailers covering 90 per
cent of the sector finds that the sector
saves 650 million per year in costs by
using EDI instead of manual, paper-based
processes for its orders, invoices and
despatch advices.
The grocery sector understands the benefits of electronic trading, but other sectors
are being slow to realise these savings and
the advantages the technology brings to
improved order-to-cash cycle times.
Matching an invoice to a purchase order
and checking against goods actually
received creates a tricky three-way match-

April 2011

ing and approval process that can result in

a delay in payment due to inconsistencies,
errors and poor communications. Accuracy
and consistency are essential to getting paid
quickly.
Pre-invoice matching can now be
achieved using intelligent EDI technology
that is able to look at the data inside each
message carried between buyer and supplier. Spotting errors or mismatches in invoicing becomes an automated process that
brings direct cash benefits.
If invoices were to be pre-checked
against purchase orders and delivery notes
prior to sending to the customer, potential
problems and mismatches could be identified and addressed in advance, so reducing
hold-ups in payment and speeding cashflow.
It may be that, say, 100 items were
ordered by a buyer but under their terms
and conditions it was acceptable for the
supplier to ship up to a maximum of 110.
However, the invoice might fail if there were
a discrepancy between the purchase order
and shipping notice. Action in advance
could allow for the invoice to be adapted
accordingly or for a buyer to be notified.
Also, if one line item in an invoice containing, say, 80 line items fails, the whole
invoice may well be halted. Under these circumstances an alert would enable a supplier to pull out that one item and generate
an invoice for 79 items instead, so ensuring
fast payment of the majority of the order.
A further area where intelligent B2B integration can be successfully deployed to create cash efficiencies is in the area of supplier performance. As next generation systems
are capable of looking at the content of the
messages, and can apply intelligence to the
data carried, analysis of supplier KPIs can
be used to reveal the most reliable suppli-

www.ifwla.com

26

Business

Although most retailers have pretty slick internal systems for the whole order-to-cash
cycle, they revert to antiquated techniques, such as faxes, when it comes to working
outside the four walls of the enterprise. However, an online platform enables the live
exchange of information between retailer and supplier, which also links into the carrier to
give real-time updates on scheduling
ers. By knowing that you can rely on a supplier that has a 98 per cent performance
rating enables you to reduce safety stock or
may allow you to move to a vendor managed inventory arrangement or Direct Ship.
Direct shipment by a supplier to the end
customer offers a retailer a distinct advantage in that it allows retailers to expand
their product ranges without the need to tie
up cash in inventory or expose themselves
to the risk of carrying unsold stock.
The problem for retailers is that they lose
visibility and control putting the order out to
suppliers for direct delivery. Although most
retailers have pretty slick internal systems
for the whole order-to-cash cycle, they
revert to antiquated techniques, such as
faxes, when it comes to working outside the
four walls of the enterprise. However, an
online platform enables the live exchange

April 2011

of information between retailer and supplier, which also links into the carrier to give
real-time updates on scheduling.
The great thing is, this allows the customer to have a very tight delivery slot given
to them and offers the retailer far greater
control over the whole order-to-cash cycle
for direct ship operations. Jewson, the retail
building supplies company, has used
Wesupply to break new ground in co-ordinating direct ship activities across multiple
suppliers for consolidated deliveries to customers.
Intelligent electronic trading technology
holds the key to reducing order-to-cash
cycle times. Those with the key can open
the door to improved cash performance.
David Grosvenor is Managing Director of
Wesupply
www.wesupply.com

www.ifwla.com

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28

Case Study

Time critical
An eight-year programme of investment into Office Depots Europe-wide distribution network has
reached a pinnacle in the completion of a highly automated facility just south of Frankfurt in Germany.
Bringing the project in on time was of major importance, which made working with reliable suppliers
absolutely essential.

roduct availability, order accuracy and

on-time delivery are critical to retaining customers in the highly competitive
office products market. At Office Depot,
one of the leading global providers of
office products, attention to service has
been central to the thinking behind an
eight-year programme of investment into
reconfiguring the companys Europe-wide
distribution network.
From Spain, Switzerland, the UK, Czech
Republic, to Germany, Bernd Schiel, Office
Depots senior project manager and
European maintenance co-ordinator has
been at the sharp-end of planning and kitting-out the new facilities, deploying the latest handling technologies and bringing
sites online within tight time schedules. Its
been a tremendous programme of consolidation and investment in technology over
the last eight years, says Schiel.
The pinnacle of the programme is the
recently completed Grossostheim distribution centre, 30km south of Germanys
financial centre, Frankfurt. Here a 47 million euro facility, totalling 31,000 sq m and
offering 35,000 pallet locations, has been
equipped with dynamic carton flow racks,
pick-to-light technology, automated minicrane tote commissioners, A frame automated picking machines, 4.7km of conveyors and two fully automated sortation systems for despatch. Remarkably, this highly
automated warehouse was completed within a year foundations were laid in May
2007 and the system went operational in
April 2008. Achieving such a tight target
required the dedication and well-honed
technical skills of the materials handling
turnkey contractor BITO, working in close
harmony with Office Depots planning
team.

April 2011

Weve been working with BITO since

2001 when they provided us with all the
carton live storage and pallet live storage
elements for a warehouse in Hamburg on
a subcontract basis, says Schiel. After the
success of that initial project they became
the preferred supplier for all future projects,
including facilities in Madrid, Switzerland,
Czech Republic and Manchester in the UK.
When it came to the Grossostheim project we wanted to evaluate the option of
using BITO as the turnkey provider for all
storage equipment and after satisfying ourselves on the quality and capabilities of
BITO being able to manage this type of
project we appointed the company to act as
the main contractor for all storage elements
in the system. Bringing the project together
within a tight time frame was critical to the
success of the project, a window of just six
months from 1st November 2007 to April
2008.
Prior to this project, we had three facilities covering Germany and Austria, says
Schiel. We had a warehouse that went
operational in 2001 in Hamburg, we had
an existing facility in Grossostheim and we
had another facility in Munich. The leases
on both the Munich and Grossostheim
buildings were up, so it was either a question of renewing them or doing something
different. The decision was made that both
locations were, from a capacity and a technology view point, at an end.
Office Depot looked at various options,
but decided the best approach was to bring
the Munich and Grossostheim facilities
under one roof. After extensive studies into
the best location to build a new facility, a
site across the road from the existing
Grossostheim facility was chosen. This had
the advantage of retaining existing staff

www.ifwla.com

Case Study

from the area. The new highly automated

distribution centre serves Austria, Southern
Germany and parts of Central Germany on
a next day delivery basis.
The new facility in Grossostheim was the
biggest single warehouse project in Europe
for Office Depot. This is the result of a progressive improvement over the past eight
years, improving our facilities and integrating best practices from what weve learnt
from other sites, says Schiel. The lease on
the old building ending on 1st June 2008
forced the pace of the project many suppliers thought the time scale was too tight.
But BITO helped to ensure that the project
came in on time and on budget.
Office Depot operates two distinct lines
of business, both within the office products
market. Viking is its mail order brand,
acquired in 1998, whereas the Office Depot
brand was originally more noted for its contract business. Founded in Florida in 1986
the company now has sales of over
$15.5bn (2007 figures).
Mail order customers tend to be small to
medium size companies and contract clients
are the large corporates, such as Porsche
and Bayer in Germany. For Schiel this presented some significant challenges in the
design of the order fulfilment operations, as
there are big differences between mail
order and contract customers. Order profile
is one thing, and customer expectations is
another, says Schiel. This requires different
processes such as the attachment of documents to the outside of cartons. In mail
order nobody wants that, whereas contract
customers do. Often these specific requirements go against the grain of automation.
The new highly automated Grossostheim
distribution centre stretches over 31,000 sq
m and is divided into four halls. Goods
arrive on standard Euro pallets and are
logged into the warehouse management
system before being put away in the bulk
store, which occupies most of Hall Four.
Here 14 aisles of 15m high BITO PRO racking are serviced by a fleet of man-up order
pickers.
In Hall Three half the hall is given over
to further bulk storage for larger and wider
goods, with BITOs PRO P6 racking stretching up to 10m high and offering 2.7m wide
bays. This area is for full case and non-conveyable items such as laser printers.
The order fulfilment process starts in Hall

www.ifwla.com

April 2011

29

30

Case Study

3 with three carton erecting machines that

create six sizes of cartons over two footprints. For each order the warehouse management system actions the creation of an
appropriate size carton which is used to
pick to. At one of two input stations a bar
code label is applied to the carton and the
order information printed and placed in the
carton. From here, the cartons are conveyed through to the main picking area in
Hall 2 where they are diverted off to the
required picking loops, of which there are
eight.
In Hall 2 picking activity is arranged for
fast, medium and slow moving products.
Along the picking aisles, operatives pick
goods to cartons using a pick-to-light system, taking items from the BITO SDS
dynamic carton flow racks in accordance to
instructions generated by the warehouse
management system. In aisles dedicated to
faster moving products the zones are shorter so that picking operatives dont have so
far to move between picks. An A frame
automated picking machine is used for reasonably fast moving small sized pack products, with really small items being bagged
up prior to being dropped into the correct
carton as it passes.
Split case picking activity takes place
over four levels, with picked items - normally full packs such as boxes of photo copy
paper - being placed onto a central belt

April 2011

conveyor and moved to a shrink wrapping

machine for consolidation. Picked goods
move between levels via spiral conveyors.
Cartons moving from the picking aisles
in Hall 2 are conveyed to a mezzanine level
where they either move on to case lid application and dispatch, if complete, or are
conveyed to one of three pick-to-tote stations where small but slow moving items
are picked and added to the cartons. The
pick-to-tote stations are fed by four fully
automated TGW commissioners with each
commissioner housing three individual
TGW tote cranes and each crane serving
1100 tote locations. In total some 16,000
totes are accessed across the four commissioners.
The commissioners are responsible for
18 per cent of all split case picks. At each
of the pick-to-tote stations seven orders can
be processed simultaneously, producing
pick rates of 350 to 450 lines per hour,
depending on the order profiles.
Completed orders are then moved on to
a final weight check before being sealed
and an address label applied to the carton.
A further area on the mezzanine is dedicated to small single line orders requiring
smaller packaging such as jiffy bags.
Twenty per cent of orders go through this
system.
Finally, goods for dispatch are conveyed
through to one of two sorter systems. Items
for fluid loading into lorries by telescopic
boom conveyor are routed to the appropriate chute by a TGW zip sorter, whereas full
cartons are sent on for sortation in hall 2
for consolidation onto pallets.
The system at Grossostheim is designed
to handle 15000 orders over one and a
half shifts and enables a 9 pm cut off for
next day delivery to the customer. Having a
system that delivers this level of fulfilment
capability gives Office Depot a competitive
advantage in the office products market
and ensures that the highest levels of customer service are maintained, even through
peak periods.
Bringing the project in on-time and onbudget was a tough call for Bernd Schiels
team and his main materials handling contractor, BITO. But Schiel was confident it
could be done, our past experience with
BITO had shown that they had proven
themselves an extremely reliable partner.
www.bito.com

www.ifwla.com



 

   
 
 

  
  

  
    

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32

Forklift Trucks

UK forklift manufacturer
announces distribution
partnership for India

K-owned Flexi Narrow Aisle Ltd has

announced a comprehensive partnership agreement for the distribution and support of its range of Flexi articulated forklift trucks in India.
The partner company, Voltas, is one of
the world's premier engineering solutions
providers and a leading manufacturer and
supplier of forklifts and other materials han-

April 2011

dling equipment in India. It is part of the

Tata Group the largest industrial group in
India. Tata has interests a number of industry sectors and in recent years has acquired
Jaguar Land Rover, Corus Steel (now Tata
Steel Europe) and Tetley Tea.
John Maguire, sales and marketing
director of Flexi Narrow Aisle Ltd, commented: We are experiencing a significant
increase in demand for Flexi articulated
trucks from the so-called BRIC economies
Brazil, Russia, India and China and the
agreement with Voltas in India is a reflection of the growth we have enjoyed across
Asia.
It has long been Flexi Narrow Aisles
policy to market, supply and provide service
support for Flexis designed and manufactured at its UK manufacturing plant through
well established independent materials handling distributors across the world, as John
Maguire explains: I firmly believe that specialist manufacturers such as ourselves will
enjoy long term success if they resist the
temptation to license out the intellectual
property of their products.
John Maguire continues: We have a
global marketing strategy. Our brief is to
work closely with Flexis existing European,
Asian and North American distribution partners to identify and develop business relationships with potential new dealers and
customers within emerging economies.
The materials handling industry is now
a global business and we want to provide
the highest levels of service and response to
Flexi customers in our key home market
and offer the same reliability and excellent
service support in all international markets.
www.flexi.co.uk

www.ifwla.com

34

Case Study
SSI Schaefer has designed, built and installed a brand new automated storage facility for well-known
brewery Budweiser Budvar at the companys existing production site in the Czech Republic.

The future looks

bright for Budweiser
T

he new high-bay racking facility, complete with Schaefers pallet conveyor

technology, is 26 metres high, three
aisles wide and houses 3000 pallet storage
locations, for pallets with a weight of up to
900 kilograms, directly connected to
Budvars existing block warehouse production site.
Combined with the latest plant technology, Radio Frequency Identification (RFID) integration and tailored Warehouse
Management System (WMS), SSI Schaefer
has significantly increased process reliability
whilst making maximum use of available
space.
Pavel Panek, Head of Logistics and
Purchasing at the Budvar brewery said: "We
were looking for a solution that met our
complex requirements using the latest technology. The key objectives included maximum utilisation of existing space, 100 percent process control, real-time tracking and
the integration of our RFID-led block warehouse into the new Warehouse Management
System, integrated again into our existing
ERP system. SSI Schaefer offered the best
solution to meet these needs with an attractive price/performance ratio."
Assembly work on the warehouse was
completed in less than 20 weeks, including
technoloy and sheathing and the facility went
into full operation with the first incoming pallets shortly after up to 50 HGVs are loaded
each day and sent to over 50 countries
around the world.
When selecting materials for the high
bay racking system, special precautions
against excessive heat build-up and the
effects of frost were taken into consideration
including fire protection criteria. Sandwich
panels with high insulation properties and a

April 2011

high fire protection rating, as well as heatdissipation flaps installed on the roof, ensure
that the required thermal conditions are met.
In order to achieve the required number
of storage positions in the three-aisle warehouse, the first row of shelves and the storage and retrieval devices in the first aisle
were designed for double-depth storage.
Single-depth storage is provided in the two
other racking aisles.
Beer crates or cartons, stacked on 120 x
80 cm pallets in production using palletising
robots, pass through the high bay warehouse
via roller track and conveyor belt technology
to the transfer station. The contours and
weights of the goods are recorded and
entered into the WMS. The pallets are then
conveyed to a pallet lift which transfers the
pallets either directly to an outgoing goods
table in the direction of the block warehouse
or onto a transfer table and into one of the
high bay racking storage and retrieval
devices. A transfer station has been set up
for inside storage into the racking system
and a rotary table ensures that pallets are
aligned correctly.
"At the start of the project, Budweiser
decided to apply the same principles and
strategies for controlling the existing block
warehouse into the new, automatic high bay
racking system", said SSI Schaefer Sales
Executive Rindt. "A key feature included warehouse processes in the block warehouse
processed via RFID. As a result, inventory
management and process control functions
had to be integrated into the new WMS both
for the automated high bay racking system
and for the manually operated block warehouse equipped with RFID."
All warehouse channels in the block
warehouse are identified using RFID tags; in

www.ifwla.com

Case Study

addition, RFID tags are fitted to all transfer

stations on the conveyor system. Display is
used to assign jobs to forklifts from the
WMS and equipped with RFID aerials.
When a forklift drives into a storage
channel, the information is automatically captured on the WMS which also
defines whether the forklift carries out
inward or outward movements, and in what
volume.
For order picking, the WMS initiates the
outward storage processes in the high bay
racking system and in the block warehouse.
With its speed of 130 metres per minute
and a lift of 54 metres per minute, the storage and retrieval devices achieve a
throughput of up to 100 two-way movements per hour. The outgoing pallets pass

via a conveyor to the acceptance station for

the forklifts that are connected directly to
the high bay racking. At the same time, the
RFID aided order picking processes are carried out in the block warehouse.
Panek continued: SSI Schaefer has
provided us with an automated storage and
tracking solution that provides maximum
warehouse capacity and throughput the
integrated process control has also resulted
in the reduction of order picking errors.
The system is designed so that
Budweiser Budvar can integrate future
changes to business processes, for example,
a rail connection is already being planned
and the conveyor will be re-designed to
transport larger industrial 120 x 100 cm
pallets.

www.ifwla.com

April 2011

35

36

Flooring
Concrete Grinding Ltd returned to France to provide a floor grinding solution for an existing client, 3
Suisse. Working in partnership with the main contractor, Promadis, an extension to the existing VNA
facility required the floor to be ground to tolerance ready for racking installation.

Level best

oncrete Grinding Ltd has previously

worked for France-based 3 Suisses
in December 2008 through to
January 2009 when they were first commissioned to provide Laser Grinding to two of
the clients warehouse facilities. At that time
the client had an aging MHE system in a
large portion of their facility. However, after
seeing how beneficial the Laser Grinding
system can be, the client then modernised
with an extension area, resulting in the
revisit completed this year.
Using the Laser Grinder, Concrete
Grinding Ltd carried out 2 wheel tracks
grinding to 13 aisles totalling 702 metres to
meet with TR34 CAT 2 floor flatness specification. A further 197 metres were laser
ground in the centre of the narrow aisle
where joints in the floor were out of specification.

April 2011

The VNA Fork Lift Trucks (FLT) are guided within the aisle by high profile guide
rails. At the client request, the Laser
Grinding was set up in such a way that the
FLT wheels and the guide rails both sit into
the ground paths. As the Laser Grinding
preceded the racking installation, the alignment of the grinding was critical, particularly
as the guide rails and front wheels of VNA
truck were required to be located in the cut
path. By using a 380mm diameter cutting
blade, designing tight tolerances and also
maintaining straight cutting lines, this was
successfully achieved with minimum clearance either side of the guide rails and the
VNA front wheels. This is the best
approach when considering ground clearances of VNA trucks out-rigger wheels.
After the designated aisles had been
ground, the new racking was fitted and
stocked. Concrete Grinding Ltd then proceeded with the remaining aisles, proving that the
Laser Grinder system is clean enough to
work alongside fully stocked racks and does
not affect the day to day warehouse operation
a factor that is vital for a busy client.
Concrete Grinding Ltd specialises in the
upgrading of aisles in new and existing
VNA/narrow aisle warehouse units. Using
their patented laser guided floor grinding
system, the Laser Grinder, aisles on new
and existing floors can be upgraded to the
flatness standards required to operate VNA
forklift trucks safely and at their optimum
efficiency. The Laser Grinder is
designed to grind either the individual
wheel tracks of a forklift truck or the
whole aisle width, for complete flexibility. The wet, vacuum-enclosed grinding process is free from airborne dust and
clean enough to work alongside fully
stocked racks - even in food and pharmaceutical storage facilities.
Concrete Grinding Ltd is part of the
CoGri Group of companies, a consortium
of international industrial floor solution specialists with over 20 years global experience
in the Design, Construction, Upgrading and
Repair of Industrial Concrete floors.
www.cogrigroup.com

www.ifwla.com

38

Warehousing
Ron Farr, VNA and warehouse systems manager, Yale EMEA, considers the various storage
and handling systems available

Future prospects
A

s a starting point, let us consider an

example of the trends in storage density utilisation. One of the most common is how to minimise the footprint (size) of
the warehouse, while at the same time, maximising the amount of available storage
space.
As an example, a warehouse manager is
planning a warehouse to store 2,500 pallet
locations. The majority of businesses would
handle pallets approximately 1,200mm deep
and anything from 800mm to 1,200mm
wide. Typically, this would be a wooden pallet with a load of no more than 1,500kg.
The pallet would generally be handled in a
conventional way, i.e. with petrol, diesel,
LPG or electric counterbalance forklift trucks
and a clear working aisle that would need to
be approximately 4,200mm. If the top
beam of the warehouse racking was
4,775mm high, and the forklift was also
required to drive into the back of a lorry, a
three stage (triplex) mast would be required.
This solution would provide one pallet
location on the ground and three in the racking. This type of application would typically
be a single command system, suitable for
loading and unloading trailers, racking and
pickup and delivery to and from manufacturing areas.
A single command system is when a
machine is tasked with a duty such as emptying a staging lane, e.g. picking pallets from
the staging area and perhaps taking them to
a racking storage area and then returning
back empty to the staging area.
The opposite to this would be a dual
command system, often achieved using a
warehouse management system via a radio
data terminal. When dropping the pallet into
the racking, a radio data terminal would
instruct the operator to take a pallet from the
racking and take it to the staging out area.
This means that the trucks productivity is
increased as it has a higher percentage of its
time travelling with a pallet.
When a conventional counterbalance

April 2011

forklift truck is used in such a single command system, the truck would normally
spend 80% of its time travelling and 20% lifting, handling around 12-15 pallets per hour.
In this imaginary warehouse of approximately 3200 square meters of floor space, by calculating the ratio between the amount of
space used for storage, compared to the
amount of space used for aisle space, we
see that an incredible 66% of the warehouse
is dedicated to providing enough aisle space
for the truck to turn.
Using a narrow-aisle electric reach truck
in place of a counterbalance truck would significantly improve this ratio. This is a battery
operated machine with a compact frame and
a reaching mast and forks. The compact
dimensions and increased manoeuvrability
allow the truck to operate in a smaller aisle
whilst performing the same function as the
counterbalance truck in the warehouse. A
typical clear aisle dimension for a reach
truck would be 2,700mm.
This type of truck is ideally suited to Dual
command systems and reach trucks, like the
Yale MR series, typically spend 60% of their
time travelling and 40% lifting. With the
same number of pallets to be stored, a warehouse of 2,500 square metres would suffice
with only 51% of the space would be dedicated to aisle space for the machine to turn.
There is a third solution for this imaginary
warehouse; a Very Narrow Aisle system.
VNA or Turret Trucks are also battery powered machines. They incorporate lateral
fork movement, which allows the truck to
operate within racking aisles which are fractionally wider than the size of pallet.
Therefore, with a 1,200mm deep pallet, a
suitable clear aisle would be just over
1,600mm pallet to pallet.
These machines typically travel 50% and
lift 50% of their operational time. This
immediately delivers a significant increase in
truck utilisation and productivity. However,
these machines have an additional advantage in that they have been specifically

www.ukwa.org.uk

Warehousing

designed to travel and lift simultaneously.

This solution enables the size of the warehouse to be reduced to below 2,000 square
meters with only 39% of the floor space
wasted as aisle space.
The VNA machine therefore delivers a
40% saving in the floor space required
compared to a conventional counterbalance truck, which equates to over 1300
square meters of expensive floor space.
At todays costs this equates to over 40k
Euros savings per year on a leased property.
However, there are still more potential
savings to be made:
Most VNA applications would not be limited to a 4,775mm lift height that we have
used in our example. In reality, the height
of the warehouse would be more than double this figure, so that the available storage
space can be doubled without increasing
the floor space required, generating even
more savings. Using the Yale MTC VNA
series, a reach height of up to 17,000mm
(top of forks) can be achieved.
Warehouse Simulation
Simulation allows us to look at the pattern
of growth for a warehouse. Here is an
example to consider:
When it begins trading, a small business
will initially only require a small warehouse,
housing only 100 pallets and a single
counterbalance forklift truck to handle
them. As the business expands, the footprint of the warehouse needs to increase as
the number of pallet locations required
increases. Furthermore, an additional forklift truck would need to be acquired.
After ten years, the business has grown
significantly, which has resulted in the construction of a warehouse with 2,000 pallet
locations and the operation still uses counterbalance lift trucks, stacking to a height of
only 4,775mm.
When times are good and businesses
are doing well, there is a tendency to grow
the business by duplicating the same
process but on a larger scale. It is easy to
understand why, as this is a tried and tested
method, however most professionals in the
industry would advise that a much better
solution is to reconfigure the space available. This is of significant importance
when there is a downturn and the economy
contracts - businesses find it difficult to

afford the excess empty warehouse space

and are forced to operate their business
with an inefficient warehouse design.
Businesses often find it difficult to know
what or how to change, in order to make
their warehouse system more productive or
to help reduce operational costs.
The Yale Warehouse Simulator allows a
client to look at various what if scenarios,
by experimenting with different layouts,
configurations and timings. It is possible to
visualise the simulations on screen in both
two and three dimensional views, as well as
analysing the results and cost implications
on graphs and charts.
One of the main differences in using this
simulation software compared to a complex
excel document is the ability of the simulator to calculate throughput in conjunction
with considering congestion. Excel cant
handle the interaction between materials
handling equipment. For example, if the
number of lift trucks is doubled, would our
expectation be to see double the throughput?

www.ukwa.org.uk

April 2011

39

40

Warehousing

There is a significant difference between

the Yale simulator and other systems, in that
it is built on top of a simulation engine. The
simulation engine was originally designed to
simulate production lines for automotive
companies. In time, consultants began to
use the engine to provide additional services,
however the programming of the simulator
would mostly be quite complex and timely.
The clever part of the Yale simulator is that
the user interface actually automatically creates scripting and simulation code - writing
the software previously written by the consultants and loads it into the engine.
When the Yale simulator was launched in
2008, it was expected that the majority of
simulation enquiries would be from European
customers. Surprisingly, there have been an
increasing number of requests from other
parts of the world and we have assisted in
projects located in Nigeria, the Middle East,
South Africa and Indonesia, helping clients to
achieve the optimum warehouse layout
design. The majority of the projects with
which we have been involved to date have

not been for businesses in the warehousing

industry, but in more complicated production
line processes, which form an integral part to
the product flow of components and raw
materials in and out of the warehouse environment.
The Yale simulator has been used not just
for business growth and expansion, but was
also an invaluable tool during the recent
global recession. It facilitated the study and
analysis of companies materials handling
methods, often enabling them to eliminate
costly off-site storage and helping them to
consolidate their operations into a more costeffective and productive solution. It provided

April 2011

businesses with a tool that made it easier to

eliminate any excesses taken on during the
growth period and allowed them to be more
flexible and intelligent about their processes.
In some cases this resulted in a reduction in
their materials handling fleet size.
Warehouse Design Trends
One of the key areas of development in
warehouse design is lift height. An increasing number of companies are looking to go
higher with the height of their warehouses
and we are seeing some materials handling
manufacturers responding by offering
increased lift heights. At Yale, we are seeing
more requests for Reach Trucks lifting to
heights over 11,500mm - simulations have
shown us however, that simply doing more of
the same and going higher often fails, as we
explained with our 100-pallet example warehouse earlier.
The way a reach truck is designed to operate means that when the truck reaches the
required pallet location, it needs to slow to a
stop, turn 90 degrees, lift the forks, adjust the
tilt, drive forward, reach forward, then do it
all again in reverse and whilst doing this, the
aisle is blocked. In a productive warehouse
where more than one truck is required, there
is chance of congestion in the aisle and at
the staging areas. As a result, trucks struggle to complete their cycle efficiently.
With a VNA machine it is possible to work
in smaller aisles, but more importantly, these
machines are designed to travel and lift at
the same time, generating massive improvements in pallet thoughput. A simulation is a
perfect tool for testing and comparing these
solutions and avoiding what could be a costly
oversight.
Lift heights for VNA machines up to
17,000mm are today being requested not
only in the European and US markets, but
increasingly, in installations in South Africa,
the Middle East and South America. With
land becoming a premium around the world
and businesses wanting to stay close to ports
and cities, the construction of warehouses is
becoming progressively more costly.
One solution therefore is to go up and to
go narrow - the ultimate in cube utilisation
efficiency - and with the possibility to lift a
load of 800kg to 17,000mm high at a
600mm load centre, this is often enough to
accommodate most applications.
Im frequently asked what its like to be

www.ukwa.org.uk

Warehousing 41

operating a machine at these lift heights.

Not being the most confident at high heights,
I have to say the most frightening experience
is being at the full lift height of one of these
VNA machines when it is outside the warehouse. Looking up at the machine, seeing
the clouds moving and the mast narrowing
down to the base, the visual effect can be
quite disconcerting. In the racking, however,
it is a completely different experience as the
aisles are narrow and the pallets are only
200mm at most from the sides of the cabin.
With the operator sitting down, its really no
different to sitting on a hotel balcony.
A facility that requires 17,000mm lift will
most often want to get the most out of their
forklift fleet, particularly the VNA. For many,
a 3-shift working system will be in operation
the better to eliminate downtime to get costly equipment, manpower and buildings earning money for the business. These facilities
will then require spare batteries, a battery
charging area. Battery maintenance such as
checking water levels will need to be rigorously performed and of course, changing
batteries over at the start or end of a shift is
never as quick as wed hope. This is where
in-aisle Charging comes into its own.
The in-aisle charging system on a VNA
machine utilises a power rail fitted to the
racking, normally around 3,000mm from the
ground. When the truck enters the aisle, it
automatically engages with the power rail
and activates the on-board chargers, allowing the machine to run 24 hours per day, 7
days a week, non-stop. Another great benefit of this type of system is that because the
battery is never being fully discharged, the
battery is not cycling, therefore increasing the
life of the battery.
When operating a super fast, highly productive VNA machine lifting to amazing
heights, mechanisms have to be in place to
ensure that collisions can be avoided if a person walks into the aisle whilst the machine is
in motion. Theres no space to step out of
the way and avoid the machine, and with a
top speed of 12 km/h its also a challenge
to try and outrun this 10 tonne machine.
One solution that is becoming increasingly
popular is a laser human detection system.
The system comprises of a safety scanner that
is fitted to both the front and rear of the
machine. Each scanner projects an invisible
laser beam, which can detect something as
small as a tennis ball from over 8,500mm

distant, whilst the truck is moving. The laser

moves like a high speed radar system, but
much faster and more accurately. The areas
in front and behind the truck are then
mapped out into zones, so anything breaking
the safety zone will decrease the speed of the
machine to creep speed and anything entering the danger zone will stop the truck. The
system is intelligent enough to know when it
is approaching a wall and not a person or
other piece of materials handling equipment.
The last major emerging trend is high level
order picking, in particular for the furniture
industry. As with turret truck applications, we
are being asked more and more about lifting
to higher heights and designing solutions to
handle interlocking trolleys or offering fully
enclosed cabins.
Interlocking trolleys are designed to allow
an operator to pick furniture items, which
when completed, they release the trolley
from the truck and collect a new empty trolley
to then repeat the cycle.
An alternative to the trolley system is a
completely enclosed system where two operators are lifted up together. The truck automatically stops level with the selected rack,
the operator then presses a button which
extends flaps out from the sides of the cabin
to bridge the gap whilst simultaneously
releasing the locks on the doors. This allows
the operators to open the cabin doors and
step out on to the decked racking area.
Here, the operators can safely lift products
from the racking into the truck. During this
operation the truck remains immobilised
whilst the doors are still open and the flaps
are out. When loading is completed the truck
then travels to the end of each aisle to a pick
and drop location, where it can load or offload its goods.
These are just some of the emerging
trends in warehousing. Yale is always looking forward, to be in a position to be able to
offer the customer the best possible solution.
This means being fully au fait with warehousing trends and working practices.
So what will the future involve?
Materials handling equipment designers
based at our product development centres in
the Americas, Asia Pacific, Europe and indeed
in India are continually developing exciting
new ideas to satisfy our customers appetite
to increase space utilisation and productivity
and to reduce cost. So watch this space.

www.ukwa.org.uk

April 2011

42

Spotlight on Germany
Germany has long been a European leader across several industry sectors, not least of which is logistics.
Peter MacLeod travelled to Hannover to find out what it is that stands Germany apart from other
economies

High German
I

n Germany, the economic recovery in

2010 has been as drastic as the decline
was in 2009, neither of which had been
anticipated. According to the German
Chamber of Industry and Commerce, the
German economy grew by 3.4% in 2010
compared to 2009.
Based on figures made available to the
VDMA (Association for Materials Handling
and Logistics Technology), German intralogistics will have generated a turnover of
14.8 billion Euro in 2010, around 8% lower
than in 2009 but still around 10% better had
been feared last year. It is anticipated that
turnover will see growth of 9% in 2011, or,
in concrete terms, intralogistics in Germany
is expected to generate more than 16 billion
Euro, which is at a slightly higher level than
2009.
Taking advantage of a visit to Germany
to meet some of the exhibitors from next
month's CeMAT in Hannover, I was keen to
discover what it was that set Germany apart
in the world of logistics. That Germany is a
world-leader in engineering excellence, of
that there is no doubt. I wanted to learn how
it was that Germany has managed to pull off
a dramatic recovery the classic V-shaped
recessionary curve whilst many other
European nations, including the UK, stutter
and stumble with a bothersome W-shaped
graph.
Government intervention
Key to the recovery has been the German
government's implementation of a programme called kurzarbeit (German for
"short-work"). It's a short-term, recessionrelated programme in which companies
have entered into an agreement to avoid
laying-off any of their employees by instead
reducing the working hours of all or most of
their staff, with the government making up
some of the employees' lost income.

April 2011

If an employee agrees to undergo training programmes during his or her extra time
off, they can often maintain their former
income.
In 2009, the German government had
budgeted 5.1 billion Euro on the programme, which replaced some of the lost
income of over 1.4 million workers. The programme was favourably cited in a 2009
Organisation for Economic Co-operation
and Development (OECD) report, which stated that it had saved nearly 500,000 jobs
during the recession.
Besides helping to avoid mass-layoffs,
the programme's supporters argue that
kurzarbeit has kept skilled work groups
together, thus avoiding the atrophy of their
skills during extended layoffs. On the other
hand and this is something I've heard
bandied about in the UK critics have
expressed concerns about its expense and
that it might prop up unviable firms ahead
of an inevitable collapse.
Christoph Hahn-Woernle, managing
partner of viastore systems GmbH, and
member of the management board of the
VDMA, says that the recovery in Germany
been fuelled by a number of factors he lists
seven rather than by a single reason. Chief
among these has been the acceptance of a
change in working practices by the unions,
who in previous recessions had made it hard
for tough decisions to be implemented.
"Germans have always been seen as the
most cautious worriers in Europe," says Herr
Hahn-Woernle. "But today, many people are
envious of our steep economic recovery.
There are many reasons for this. After all,
German industry has been doing its homework, and not just since yesterday. This is
now paying off.
"1. We have formed an 'Alliance For Work'.
"2. The Socialist/Green coalition government introduced an Agenda 2010 that

www.ifwla.com

Spotlight on Germany

included temporary employment as an

essential component for triggering the job
market and making it more flexible.
"3. During the crisis, the current government contributed to this flexible development with changed regulations for shorttime working.
"4. Both sides of industry have worked
together with great understanding and prudence. The unions have acted in solidarity
and all pulled together, rather than exacerbating the crisis by demanding even shorter
working weeks at full pay, as was the case
in the '80s and early '90s. The consequences of unrealistic demands have been
clearly revealed in France or Greece.
"5. The German government has made an
essential contribution to the recovery
process with its economic stimulus package,
its moves to save the banks, and its bailing
out operations in the Eurozone.
"6. German industry with its wealth of
innovations, has established USPs on an
international scale.
"7. Similarly, the engineering sector has
forged ahead with internationalisation to
increase its global presence on the sales

markets.
"All in all, we have therefore been in a
position to surge ahead while others were
still being hindered by general strikes, fundamental changes and bottleneck situations."
Germany is currently facing a contradictory situation whereby many people want to
keep things just as they are wanting to
protect nature and the environment but at
the same time are against any kind of
change and progress. "The old ways are no
longer suitable for solving problems," says
Herr Hahn-Woernle. "We must make sure
that we don't paralyse ourselves. At the
moment, various places in Germany are
having to deal with a situation where for
many individual reasons, including poor
information or political motivation, the population at large is up in arms against
progress, bringing major important projects
to a standstill. Progress is necessary to face
up to the challenges ahead. Industry must
have unabated faith in progress and keep
driving it forwards, it must solve the challenges in order to safeguard prosperity in
our country. That is surely something we all

www.ifwla.com

April 2011

43

44

Spotlight on Germany

want to preserve. It is the basis on which we

all live together."
Logistics to the fore
On the back of the reputation Germany has
for high quality engineering, its logistics
industry is also racing ahead. On the one
hand, this is underpinned by that broad
manufacturing excellence, on the other it is
aided by its geographic proximity to many
of Europe's main trading routes.
Jens Karsten Rohrbch, the VDMA's economic advisor, told me, "Germany is traditionally a transit country, with around 85
million inhabitants. We have to invent products to make materials handling easier. We
take problems and challenges into account,
for example sustainability and we understand that we have a responsibility for
Europe.
"Another demographic problem is an
ageing population we will have to invent
products that make it so that people don't
have to carry something heavy from one
place to another, and therefore create medical problems."
Like any modern economy, logistics in
Germany is at the heart of economic
growth. Without an efficient supply chain to
feed the factories and disperse the finished
goods, manufacturing would struggle to
stay viable. Without an expedient way to
feed these goods into the stores and onto
customers' doorsteps, demand would be
adversely affected.
Many of the drivers of the UK's logistics
industry are present in Germany, but I was
keen to hear how the industry in that region
differed from other territories. To give me
an answer, I sought out a logistics consultant with considerable experience of planning and implementing warehouse and
supply chain strategy across a wide international reach.
"In Germany, employees are expensive,"
says Marco Ehrhardt, general manager of
Ehrhardt + Partner, an internationally leading innovator in warehouse logistics with
experience in excess of 600 successful
logistic centres all over the world. "Land
prices are high and there's not much of it
compared to, for example, the US, where
the government is giving out plots for free.
Because of the cost of land, the warehouse
footprint is becoming smaller and the buildings are getting higher. There is a greater

April 2011

need for optimisation. Germany is a worldwide leader in logistics and the technology
that drives it."
I asked whether this is driving businesses towards a more automated solution.
"That depends on the customer," Herr
Ehrhardt told me. "Some have stopped it
and gone back to manual to be more flexible. Automation is very straight, whereas
the market changes. Sometimes you need
solutions that are flexible to the market. You
can't say generally it depends on the
requirements of customers. Sometimes,
intelligent manual processes give a much
better result. We do both automation and
manual solutions. Over the past 100+
projects we have completed in Germany,
we have kept a foot in both camps."
Sustainability is a watchword in the UK,
and has taken on even greater significance,
post-recession, as businesses latch on to the
idea that a business that leaves a small or
no carbon footprint is also most likely to be
one that is run efficiently. But Herr Ehrhardt
claims the German economy has been
switched on to that concept far longer than
other territories.
"The demand for sustainability hasn't
changed before, during or after the recession in Germany," says Herr Ehrhardt.
"Worldwide, yes, it has. But in Germany,
we've been doing it for 15/20 years.
Customers elsewhere are only now asking
us to modernise solutions to take into
account sustainability. For example, in the
Middle East they had only been thinking of
expansion. Now they're thinking about optimising their internal internal processes."
In answer to my question about what
stands Germany apart from other countries
in terms of the way its logistics industry
operates, Herr Ehrhardt believes that international boundaries do not demarcate
where a particular trend or practice starts or
ends, rather that individual ideas and methods are carried over by the companies that
operate across these borders.
"When it comes to logistics, it is seldom
the case that the countries or state institutions set the standards, but rather the companies themselves. What we know from
experience is that an internationally operating company with its headquarters in
Germany will also always apply its triedand-tested logistic structures and processes
to their foreign branches. Rossmann [a

www.ifwla.com

Spotlight on Germany

market-leading health & beauty retail chain

centred in northern Germany], for example,
a client of ours for many years now, works
this way. The company has built a new
logistics centre in Poland which is almost an
exact replica of its central German warehouse.
"Furthermore, the worldwide logistics
standards are developing constantly, meaning that requirements outside Europe are
also increasing. In this regard, we are seeing a lot of interest in the latest technology
in various places like Brazil or Dubai and in
the topic of process optimisation and logistics modernisation."
Quality is king
The German storage systems company
BITO is another with a strong international
pedigree. I sought out Bernd Grndemann,
BITOs manager for international sales,
whose job title puts him in an ideal position
to comment on how the mentality of the
German end-user shapes the industry.
"Germany users, more than any others
(except possibly Switzerland), are very quality orientated," he says. "So, for example,
with pallet racking, the quality of the steel is
very important, as is the guarantee, health
and safety considerations, and of course
the design. Then we talk about the price.
My feeling is that this is a German speciality. How to address a German customer is to
focus on quality rather than price.
"Also, German people think more long
term, which gives an opportunity to invest in
more complex systems, because they don't
demand ROI of one year, rather three or
four. For example, in France the automation
side is much lower than in Germany, even
though labour costs are similar. They
depend a lot more on manual processes
and traditional materials handling equipment, whereas in Germany we have a
much more sophisticated solution."
Herr Grndemann agrees that
kurzarbeit has made a big impact on the
speed of the recovery of the German economy. He says it has benefited industry in
two main ways. "Firstly, if I were to have a
drop in orders, I can put the staff on
kurzarbeit, during which period 60% of the
cost is borne by the government, which
saves unemployment costs. And for the
company, it means you can retain the staff
for when the recovery comes.

A weak Euro has also helped German and other

Eurozone-based companies to boost their earnings
by seeking growth overseas. Both Herr Ehrhardt and
Herr Grndemann agree that their export business
has kept the wheels of industry turning whilst the
domestic market has been quiet. Whilst the Euro
stays weak, the contribution of the export market to
the bottom line is significant
"Secondly, kurzarbeit affects the employment of temporary workers. Up until
kurzarbeit was brought in, the law had
been very strict, but now it has been made
simpler for firms to get workers in and out
quickly, which aids flexibility.
A weak Euro has also helped German
and other Eurozone-based companies to
boost their earnings by seeking growth
overseas. Both Herr Ehrhardt and Herr
Grndemann agree that their export business has kept the wheels of industry turning
whilst the domestic market has been quiet.
Whilst the Euro stays weak, the contribution
of the export market to the bottom line is
significant.
"Our growth is currently being driven by
export demand," says Herr Grndemann.
"At BITO, we have won quite a few large
projects over the past few months, all of
them outside of Germany. The weak Euro
certainly helps."
Future concerns
Again, like other territories, Germany is
concerned about the future of its industries.
In a country famed for its engineering, it is
surprising to hear of a skills shortage in
Germany. But that's what it is facing. Dr.
Christoph Beumer, managing director and
chairman of BEUMER Group, chairman of
the CeMAT Executive Committee and acting
chairman of the German Logistics
Association (BVL), says the only way to
address this issue is to confront it with
proactive initiatives to energise school-age
students to be the engineers of the future.
He sees the CeMAT exhibition in May as
a wonderful opportunity to show off how
exciting a career in the intralogistics sector
can be, particular with an eye on the engineering excellence that lies behind it and
drives it forward.
"German intralogistics is rightly seen as

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April 2011

45

46

Spotlight on Germany

April 2011

the world leader in the field," says Herr

Beumer. "Germany's leadership in intralogistics is seen not only in its export levels,
but also in the strong presence of German
suppliers in the various markets. It is evident
above all in the innovations and developments that come from Germany and are
used all round the world.
"Here in Germany is where innovation
takes place, this is where the heart and
brains of intralogistics can be found. So it is
natural that the leading global trade show
for intralogistics is held here in Germany,
and attracts tens of thousands of visitors
from around the world.
"Here in Germany, skilled engineers and
technicians create intralogistics solutions
that help people all over the world and
improve company productivity solutions,
for example, for lifting heavy loads, for inhouse transport, for efficient and error-free
sorting and distribution of packages or luggage.
"More than half of the added value of
German intralogistics is exported. However,
an ever larger and rapidly growing share of
this added value is in domestic markets.
There is simply no good environmental or
economic reason to transport products and
components halfway around the world.
"This means that an ever greater share
of Germany's export value lies in 'brain
power'. Most of the discoveries and innovations that help companies around the world
to work efficiently, save resources of all
kinds and make people's work simpler and
healthier, still come from Germany.
"We need excellent minds here at home
to maintain and extend our competitive
edge, because exports in our sector will
increasingly be based on exporting ideas
and innovations for the various markets.
More than ever, our engineering talent will
be our capital and our raw material of the
future.
"Our industry has excellent educational
institutions and highly skilled employees.
However, if value creation is becoming
more regional, we will need many more
qualified and versatile university graduates
in the foreseeable future."

Intralogistics Campus, a Jobs and Career

Market in Hall 27, and 'TectoYou', which
has been run for five years at the Hannover
Messe industrial fair, now extended to
CeMAT this year. 'TectoYou' has been successfully reaching out to students from professional and generalist high schools, as
well as college-level students, to capture
their interest and get them excited about
technology.
So, with the industry ticking over very
nicely in the present, and the future being
finely scrutinised and anticipated, the logistics industry in Germany appears to be in
rude health.
In 2008, at the previous CeMAT event,
everything seemed to be in order. Sure,
there were some bankers in trouble on the
other side of the world, but few of us could
have anticipated how precipitous the
decline became.
The hard times were, for many of us,
extremely hard, and every company I have
spoken to or visited has come out leaner
and fitter. The intelligence I gathered at the
CeMAT preview suggests that Germany is
currently flying out of the recession, so the
timing of the trade fair is just right as these
companies seek to grow their export markets.
In conclusion, the German economy has
benefited from proactive intervention at
governmental levels, with action rather than
words helping to get things back on track. It
seems that the title of this article, 'Logistics
in Germany', fails slightly to hit the mark, as
there is no demarcation between how the
industry operates there than in other
Western economies.
Trading conditions are tough all around
the world, no more so than in Europe, but
it's how we confront and overcome these
challenges that makes the European logistics industry particularly in Germany a
world leader.

Cemat 2011
With this in mind, training new skilled
workers has been made a focus of CeMAT
2011, with initiatives such as the

The German economy has benefited

from proactive intervention at
governmental levels

Peter Maclleod is editor of the leading UK

materials handling publication Storage
Handling Distribution (SHD). Please visit
www.pressonshd.com/newsletter/ for further
information

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