Something fascinating occurred to me as I walked down an aisle at Wal-Mart the other day. With the exception of the vendor managed products, ie: bread, snack chips, and soft drinks, there are many sections of the store that are empty. I live in a bigger city that may have more traffic in the stores, but when I go to buy things and they are out of stock, how long am I going to keep shopping at that store before I move to another retailer.
The ‘management’ of inventory down to the individual estimated turns vs. on hand quantity I believe is part of what’s causing the economic slow down to linger. I see this in manufacturing as well. “Just in time” turns into “it’s okay to be out of stock as long as we don’t have overstock.” The biggest problem of course is that revenues are lowered to accommodate profit per item. Yes, all of the product gets sold and the profit margin is in tact, but how much more could have been sold if the shelf always had stock on it. Maybe the bean counters (and we do need bean counters) say that the carrying cost and the markdowns needed to move unsold products kill the profit made on the excess inventory. I say that’s very short sighted.
There is an impact on the customer at the point of purchase that doesn’t seem to be considered in this algorithm. The Kroger Company has taken it as far as to count out of stocks on a daily basis and pound on its vendor partners for not supplying enough merchandise. Of course with the flow of goods as streamlined as it is, any out of stock item should be replenished the next day. The mistake the retailer or wholesaler makes is to put the burden on the vendor. How can a store EVER be out of Miracle Whip, or waxed paper, or black socks, or whatever! I understand that inventory changes and products are often made overseas, but the technology exists to know what is need, where it’s needed, and how much is needed most of the time. When I see 30-40 people walk up to the trash bag section of a Wal-Mart only to find about 40 boxes of bags in a 20 ft. long section of shelving and none of them is what they want to buy, I know that the company has gone too far ‘managing’ inventory.
How is the consumer going to kick start the economy buy shopping at stores with empty shelves. It’s a steal because it looks like someone stole everything from the shelves and no one wants to be responsible. There has to be an ROI case for keeping more products in stock. (Less handling, shipping, breakage, injuries, etc.) If you stock it they will come! Imagine if McDonald’s ran out of hamburgers or Starbucks ran out of cups. Well I believe that we need to beef up inventories and improve cash flow by being in stock so when the customer is ready to buy the products will be readily available.
The average amount of sales per customer will improve if companies improve their in stock positions. Their vendors will benefit, their customers will benefit, their cash flow will improve, and the economy will ultimately improve.
August 10, 2009
A Warehouse on Wheels
By Jay Berg
Check the case study information below. A paradigm shift is on its way. Green, Leed, and carbon foot print are all addressed in mobile storage solutions.
Popular Across the Pond Excerpt from Food Logistics, by Leonard Klie, Managing Editor
The technology has been widely used in Europe and Asia for decades—primarily because of the limited availability and high cost of land there. SSI Schaefer has installed about 1,700 mobile racking systems, most of them in Germany, Switzerland and Austria. The fastest growing markets are Asia, the Middle East and Eastern Europe.
John Nofsinger, CEO of the Material Handling Industry of America (MHIA), though, expects the use of mobile racking to expand in the United States, due in large part to the European influence. "If you look at overall industry growth and the current levels of globalization and consolidation, you have a lot more companies here with ties to Europe and people there are comfortable using [mobile racking]," he says.
Euro-Bake, St. Petersburg, FL, a provider of par-baked and ready-made breads, pretzels and pastries for the foodservice industry, has one of SSI Schaefer's mobile racking systems at the new 56,000-square-foot bakery and storage facility that it opened this month. Twenty-two racks occupy just 13,500 square feet of space.
"With the mobile racks, we were able to add 700 pallet positions.” says Harty Gerhard, president of Euro-Bake, the U.S. subsidiary of German bakery firm Fricopan Back GmbH. "That gives us enough storage space for an extra 32,000 cases of finished product because we got rid of the aisles between the pallet racks.
May 7, 2009
Automate Now
By Jay Berg
Less business, less employees, and less production are the reality for many manufacturers today. Tons of additional capacity sits there waiting to be activated. The typical company doesn’t realize that their staff is walking and driving farther and longer on a per employee basis. Overtime and the demand to do more in less time are the norm. These facts are an indication that workplace accidents may begin to rise. Fatigue is one of the leading causes of workplace injury. Automating increases employ productivity and helps eliminate employee down time. During the economic recovery period some company’s also see a rise in theft in their plants. Safe guarding products and tools within automated systems, helps eliminate loss. Automation also cuts down on production mistakes by delivering the right raw material to the right place at the right time.
Your local material handling specialist can do a plant evaluation that will show you how automation can help your process. It’s amazing that once a company commits to automation they want every process as automated as they can get it. Now is the time to explore automating. Be prepared for the next wave of growth. INNOVATE<INNOVATE<INNOVATE!
March 28, 2009
Avoid this Disaster!
This unbelievable rack disaster could have been avoided with better space planning and a Moveable Pallet Rack System from Spacelogic.
Link to original YouTube content
March 28, 2009
What a Steel!
By Jay Berg
It’s not that I want to see margins disappear for companies that produce steel; it’s that I want companies buying it to demand a lower price for a commodity that has dropped significantly since the beginning of 2009. It is amazing that some suppliers have tried to use the lag in price adjustments to re-coup their losses from last years rise in steel prices.
Take the lower energy costs, lower raw material costs, lower transportation costs, and the trimming of labor costs, put them all together and the price of anything steel should be on the down turn. Companies will have to cost average downward to move old inventory if they plan on retaining their market share. This is not the time to intimidate buyers with inflated margins. If you are buying steel products, now is the time to revisit quotes and take advantage of seller’s willingness to make the deals happen. My own suppliers are coming out of the woodwork (well maybe the steelwork) with new discounts on their products. I believe there will never be a better time to buy steel related products.
Here are a few other things to consider. First, the cost to transport and the competition for your transportation business means you’ll save even more on these purchases. Second, with the extension of the Section 179 tax code into 2009 and improvements to the code, companies can realize huge tax savings by making capital purchases in 2009. Lastly, as was pointed out in my last blog, using capital leases can preserve cash and allow for improvements to happen now.
Bottom line Steel is a STEAL now. Any sign of recovery will drive the price of this important material higher. Be smarter than your competitors. Act now and be prepared for the future.
Creative innovation results in rewards beyond the imagination.
March 17, 2009
The Benefits of Leasing
By Jay Berg
I wanted to pass on some words of wisdom from a colleague of mine regarding leasing in today’s market. Thanks to Tom Cordova of DFI.
In today’s uncertain economic times, it's important for businesses to spend their cash wisely and many are expected to cut spending dramatically in 2009. There is definitely a major pain point that many business executives are seeing now -- inadequate access to capital, which is ranked as the third most important challenge this year.
But, what happens when many businesses see the need to acquire new equipment, particularly if it is necessary for them to conduct daily activities of operating the business. As organizations are focused on saving money, how to pay for these items can place a severe burden on the financial health of the company. It’s critical that organizations, both commercial and the public sector, be focused on conserving cash and not using working capital to acquire any new hardware and software. In addition, they may have seen their equipment finance and revolving lines of capital deteriorate by their previous lenders as many organizations tighten credit for unanticipated needs.
Alternative funding is available, however. Companies can get their equipment necessary to conduct day-to-day operations through lease financing. With this option, companies can save money – which is one of the most important issues facing the majority of businesses. When organizations lease equipment, money can be more wisely spent on investments, working capital, employee benefits or simple cash flow needs. Leasing benefits include:
To stay competitive in today’s environment, it’s important to not be stagnant in technology, products and service offerings, but rather continue to upgrade and evolve with the needs and expectations of customers. Bottom line – business and clientele needs change. Continue to upgrade technology to be efficient and competitive, and use lease financing as a cash source for those technology needs.
February 25, 2009
Bottoms up!
By Jay Berg
It’s over. The recession that is, it ended last Tuesday. That’s why on Wednesday I had three customers announce layoffs. How is it that with $1,000,000,000,000.00 in money now available to “stimulate” the economy that companies immediately took such a defensive stance? Are they crazy? Do they think the “stimulus” won’t work? Think again.
It was only 6 or 7 years ago after the WTC bombings that the economy tanked. There were millions of people laid off and the outlook was grim. What really happened was that companies would lay off workers to boost their stock prices. What happened next was amazing. Many of those people who were laid off received severance packages. Sometimes 6 to 12 months of salary. Many of these same workers were then rehired as contractors which are not shown on the balance sheets as employees. In most cases these people made more as a contractor than as an employee. This influx of cash went directly to the consumer from the private sector, not from government. The economy didn’t take very long to rebound.
How are things different now? They are not! How will this affect material handling projects? If you are smart it will not hurt them a bit. One of the aforementioned customers who sent employees packing last week informed me that they now have a bigger budget and that automating was more important than ever. (I wonder why?)
If you have a company and wanted to upgrade, or expand automation, now is the time. Material handling and automation companies have the tools to help you improve efficiency, and prepare for the up turn in business that is just around the corner. With leasing and financing options that are available there has never been a more affordable time to move forward with capital improvements. The smart companies are making upgrades now that will lower their current cost of operation and position them for the fierce competition that is happening in today’s marketplace. They will also be ready for the dramatic rise in business that is on the horizon.
One final point, in this type market there is always consolidation. This breeds opportunity. Maybe it is time you bought your competition. I’ll bet they’re on sale.
Opportunity is just beyond the challenge that lies before you.
December 21, 2008
Productivity Down? Keep Workers Busy!
By Jay Berg
With the down turn in sales many production lines and distribution centers have also seen a down turn in productivity. Workers are taking their whole shift to accomplish half of what they normally produce because that’s all the orders for the day. Even with layoffs it is hard to justify the cost of production or the price of order fulfillment at the lower level of orders received. Innovative companies are using unique programs and inventive strategies to keep their staff “tuned-up” and operating at their normal productivity levels. I hope you can find some of these methods useful.
• Shorten the work week. Employees are usually more than happy to take a one day pay cut instead of a layoff.
• Voluntary time off (VTO). Allow extra days off without pay.
• Training time. Use one day a week or two hours a day for safety, product, or service training. This forces the staff to produce faster to accommodate the time away from their regular duties.
• Maintenance. Set up a schedule of cleaning, organizing, and clearing out the unnecessary things in the facility. You might find some unused raw material or equipment that can be liquidated. These added duties can also reinforce the importance of keeping a facility in top operating order.
• Take your staff to visit local customers. This is a great time to show your people who their work effects. If they see the faces of customers they will have a more vested interest in doing their job correctly. (By the way, none of your competitors will be doing this. It will amaze your customers! The thought that you want all of your people to understand how their work affects the end user will make a huge impact for your company’s image.)
• Add incentives. Extra time off, parties, game or movie tickets, company outing, are all ways that say you care about your staff. Remember that times may be tough for them too. This is a way for you to keep quality people through the tough times.
• SMILE! Be honest and forthright about the employee’s status with the company. Even though cuts and changes have to be made, your employees look to you as their inspiration. If you show fear and uncertainty about the business they will pick up on that quickly and productivity can suffer.
• Start an employee bright idea program with incentives for cost saving ideas. Your people know the business so let them be part of the solution for troubled times. They will support changes more readily if the idea comes from their ranks.
Be creative and remember that productivity will be one of the things that will help your company weather the storm.
Opportunity is just beyond the challenge that lies before you.
November 25, 2008
Reducing Facility Costs
By Jay Berg
These will be the buzz words for 2009. In order to stay in business in what will become a more fiercely competitive environment, companies will have to get back to basics. The four basic principles of cost cutting will certainly create a challenge for managers who will have to continue production and maintain their facility with less of everything. Automated storage and its fast return on investment may be the solution that will help them overcome the cost cutting bonanza that is already in play.
• Trim employees- 20% have to go.
• Capital expenses are shut down. No new equipment.
• Cut selection and services- no longer offer the selection of products or special services.
• Sell off equipment- we no longer need it so liquidate it and eliminate the maintenance costs.
Of course the coffee goes too!
What I’m going to say next shouldn’t be a surprise to most of you but it might be a wake up call. It’s time to LISTEN! Get out and create some face time with companies that may have solutions to your problems. Don’t stop talking to the Material Handling Account Reps. Let them be your market research team. You need them now more than ever. Remember they are motivated to provide value more than ever before. Let them INNOVATE solutions that will positively impact your business today!
If you have to trim employees, now may be the time to add some automation. No benefits, vacations, sick days or late for work call ins. Automation also improves the productivity of the employees that you do have. It raises their level of ownership in the company when they see you investing in equipment that helps them do their job better.
If capital spending is shut down then it’s time to finance. Lowering operational costs adds to the bottom line which creates new capital for the other projects. (INNOVATE!)
The deathbed for many companies is “THE BIG TRIM”. Backing off from non revenue producing products or services is smart, but many companies go too far. Survey your customers before making arbitrary decisions about what to cut. For instance that little assembly tool that you include in the hardware kit, gold to the customer, but you may think it is a dollar per item you can save. How about eliminating the selection of colors for your product? It seems that your current customers buy 80 % of a basic color and 20% of accent colors. How many customers will pass on the basic because you stopped offering the selection of accents? Be careful, you may be creating unintended consequences that could kill a product line. The answer may be to lower the cost of handling all of your products. That is often where the savings lie.
It might be the time for you to sell some unused equipment that will provide the cash to buy into solutions that improve your facility. Utilizing a material handling professional can save you time and money in that process. Let them inventory and sell the items for you. Offer to trade for items that you really need. MH dealers may have another customer who needs the items you’re trying to get rid of making the process move along much faster.
Opportunity is just beyond the challenge that lies before you.
October 29, 2008
Space, the final frontier.
By Jay Berg
I know that times seem to be tough, so you might ask “How can we address space issues when we really don’t know what the economy will do next?”
I have heard from a number of customers this week who are already starting to layoff employees in anticipation of a slow down in business. The fact of the matter is there isn’t a slow down at all...it seems that they have hit a brick wall that has stopped business not slowed it down. Literally the problem now becomes brick walls. The cost of owning/leasing a facility (four brick walls) will become a source of acute pain for many businesses if it hasn’t already. The choice for some will be to cut employees or reduce other overhead. Does this sound familiar to any of you?
Mind you there will still be customers that need to buy your products, but can you survive with the smaller margins that will be necessary to stay competitive? Where will you find answers?
Start by taking a good look at your facility, that space which may be “your final frontier”. How can you continue to survive without reducing the cost of operation? It’s time to start asking yourself some hard questions.
“Things have been growing for years. I haven’t had to manage this type of downturn before. Do I have the knowledge I need to survive?” (Hard question #1)
Great sales can cover up or allow problems to be over looked. These issues are magnified when a company has a downturn in sales. This is the perfect time to ask for help. Smart companies will be calling on facility consultants, like SpaceLogic, to help identify and address facility changes that will reduce costs, raise productivity and continue with a high level of quality that can decline when staff has to be eliminated.
“I expanded the size of my facility to accommodate anticipated growth but sales are down, now what do I do?” (Hard Question #2)
It takes the same amount of time to pick an order or manufacture a product even if you don’t have the people to perform those functions. Making some small cost effective changes in your work flow can help combat the crunch that can occur when you have to eliminate the people. Have you ever heard this? “We don’t know where Joe kept the information on how to repair this machine?” or “Mary was the person that knew where everything is but she’s gone now.” How about this, “It still takes 10 minutes to pick an order, even though we have half the staff.”, and “The forklift repair person can’t get to my lift because that department is under staffed so I’m waiting for an open piece of equipment.”
If you haven’t heard some of these things before, get ready because you will. Don’t go ballistic when you do. Just remember that there are solutions and things may not be as bad as you think. Don’t wait until things explode. Find a partner who can be a fresh set of eyes. Utilize their expertise to weather this storm. Don’t let your space become your final frontier. Let your space be the answer to lowering costs and maintaining profits.
October 23, 2008
My competition is smarter than I am. By Jay Berg
Just last week I heard those words from the President of manufacturing company I went to on a sales call. He went on to explain how his smaller competitor had just decided to buy a huge new building and expand their capacity to twice the size of their current facility. “It was amazing that in what seemed to be “tough” times that our competition would spend the capital and take on the added expense of a larger facility”, he said, “My competition is smarter than I am! How are they affording this?”
The most interesting part of this story is that his competition was working with me and there were a litany of reasons that added to the decision for his competitor to act now and purchase a facility. I went on to explain the following:
1. Commercial real estate is under valued and is plentiful. Buy now and pay later with cheaper dollars. Get the pick of great locations because builders and real estate companies are motivated to make deals.
2. Re-work the process to include high density and automated material handling technologies. That’s right! The company was expanding the facility, but using a smaller foot print to cut down on operating expenses. They invested in products that were 50% deductible in 2008 according to the section 179 tax code for business. This saved them tens of thousands of dollars in taxes this year.
3. Lowered payroll, forklift expense, insurance, energy costs, and many other operating expenses.
4. Key item: The Company plans to use a smaller operating foot print in the new larger building and lease the unused square footage at a premium, which will allow them to recoup their investment in the building and equipment in a few short years. The added benefit of depreciating the building will boost their bottom line starting the first year of occupancy.
The most interesting part of this story is that the company started out in a leased space that was 30,000 sqft., bought a 67,000 sqft building and had a lower total cost of operation than they had in the smaller building. This also created great opportunities for the sale of new material handling products and service and installation made revenue moving machines.
I said one simple thing to my new prospect. “You now have the same plan available to you that your competition has already implemented. The question is will you be saying, ‘My competition is smarter than I am!’, this time next year?” The next day he insisted I show him some automated high density storage solutions.
Get the point. Be creative. LISTEN, INNOVATE AND DELIVER!
October 2, 2008
Downturn in economy exposes opportunity in the warehousing and manufacturing sectors. By Jay Berg
It’s not often that such negative economic news brings such promise to an industry as the current news regarding the state of our financial institutions. This coupled with what was touted as a smart environmental thing to do turns out to be something that may save the manufacturing and distribution industries in America. For those of you who have not jumped on the less is more bandwagon, let me lay it out for you.
The paradigm has shifted from the old mindset of “Look at my big facility. My company has a big value because of the size of my building.” to “Why am I spending a fortune on energy, employees, and facility maintenance when I can accommodate the process in half of the space?” This was the story for the past five years for companies selling to the industrial market that promoted “Green Principles”. Now it is a matter of economic survival that companies change their mindset regarding the design of their facilities.
The effective use of the cubic feet in a facility will be the true measure of a company’s value in the years to come. Fuel and transportation costs will continue to rise so the need to manufacture closer to the customer or distribution point will increase. Companies who have consolidated their production will now see real savings in decentralizing. If they can make the move quickly to this format they will see their market share rise while the competition struggles to maintain their margins.
Retooling and moving a facility are painful and sometimes expensive processes. Companies who don’t reconfigure though may not be around for the next wave of prosperity.
SpaceLogic Inc. has aligned itself with business partners like Compact Storage Systems who understand this paradigm shift and will be ready to assist companies in their transition. I’m convinced by the data and I advise every business I work with to take off the bad news glasses and see the opportunities that are here now.
Considering the tax savings in Section 179 of the tax code and great leasing opportunities now is the time to make changes. I sincerely hope that all who read this take action today and be leaders in their industries. The tools and technologies are here now to make the changes less painful then they will be in the future.
September 26, 2008
Logical Storage – The Key to Your Company’s Success By SpaceLogic
With the recent economical downturn, companies are changing the way they view their inventory management and out-dated static storage systems. At a recent meeting in Charlotte, NC, Chuck Birt, president of SpaceLogic spoke to a small group about how many of his clients are rethinking their strategy and becoming more streamline to reduce costs and become more efficient.
“Clients that were talking expansion and building larger warehouses now are purchasing vertical systems that will reduce labor and up to 80% of floor space. When a company compares the cost of adding standard warehouse space to a vertical lift, the AS/RS system wins out every time, Birt reported.” Not only do you have to factor in the rising building costs, but the cost of operating the extra space. The high cost of utilities to heat, cool and light the facility, as well as extra travel time and energy to pick the inventory, must be considered when assessing the bottom line.
When you can visualize all your raw material in vertical towers with an extractor, or elevator working with a microprocessor to track, pick and deliver inventory to personnel, companies see the equipment pays for itself. It is a time-proven technology that has been upgraded and improved on over the course of decades. Now software can be interfaced with your existing inventory management system utilizing bar codes or RFD that will communicate to the operator for greater efficiency. With inventory clean and secure, lost products are a thing of the past.
In a meeting with local business leaders recently, Birt reported seeing an increase in his business as more companies try to save big money marked for expansion and investing in more efficient systems allowing them to compete in today’s global market. “It is the key to your company’s longevity and success,” Birt stated, “the right storage solution can change your limited space from a liability to an asset.”
