Nine suggestions for the warehouse and logistics management of the future

Warehouse and logistics management is not just about WMS, minipackers, conveyors, RFID and forklifts. It is also about employees who have to be organized and managed in a way that creates both job satisfaction and productivity. And much more besides. Many warehouse managers are responsible for a large group of employees, for complicated technical solutions and for a vital part of the company's value chain. All areas constantly need to be updated and developed. For this reason Consafe organized a seminar at the beginning of March, to help inspire managers and provide tools for solving management tasks in all areas. The programme comprised nine experts, who dealt with different aspects of modern warehouse and logistics management.

"The word 'optimal' in the seminar title refers to the fact that last year we reaped all the easy benefits in the warehouse, and the word 'progressive' refers to the fact that this year's harvest of benefits consists of the fruits that are harder to reach. It never stops, and we have to keep optimizing and improving; there will always be more possibilities ahead of us." This was how the day's chair, Sales Director Michael Barding of Consafe Logistics A/S introduced the seminar 'Optimal/Progressive Logistics and Warehouse Management', which was conducted on 2 March in Skovlunde, Denmark and 3 March in Fredericia, Denmark.

The seminar offered no less than nine perspectives on warehouse and logistics management, namely management:

of employees - Warehouse Manager Finn Wind, Louis Poulsen El-Teknik
of the warehouse machines - Aftermarket Manager Asbjrn Mortensen, BT Danmark A/S
with the help of a Balanced Scorecard - consultants from Right, Kjaer & Kjerulff
with the help of KPIs - Managing Director Dan Hellstrm, Consafe Logistics A/S
of regulatory requirements and the work environment - Engineer Jens Srensen
of external consultants and advisers - Partner Lars Bek Jensen, Langebk Logistik A/S
with the help of simulation - Consultant Preben Kristoffersen, Consafe Logistics A/S
of suppliers and customers - Consultants Hkan Jne, PipeChain AB, Lund
of Denmark's largest warehouse project - Warehouse Manager Jrgen Larsen, Netto
Think with your heart, not your brain

A very enthusiastic Finn Wind, who manages one of the country's largest warehouses, Louis Poulsen El-Teknik's central warehouse in Odense, held the 120 seminar participants' attention with an exciting and very personal presentation of his experiences with successfully managing 150 employees.

"I believe in leadership, not management. Management means administration, systems and technology. Leadership means dealing with real people, and that's quite a different thing. It is leadership that makes the difference between a good workplace and a bad workplace. I believe that deep inside everyone is an expert. It's all about creating the right framework to enable all employees to build up enthusiasm and let it bloom in the workplace. If we succeed in doing that, effectiveness and productivity will happen by themselves", said the fired-up and committed Finn Wind, who concluded with his motto: "Think with your heart, not your brain".

Last year Finn Wind's workplace received the 2004 Network Award, which is a prize given to companies that lead the way by taking a social responsibility. Among other things, Finn Wind spoke about the company's good experiences with payment by results and with codetermining workgroups. Payment by results was introduced in 1994 and has since been developed on a continuous basis. The employees' salaries consist of 80% basic salary and 20% bonus salary, and this has had a positive effect on both quality and effectiveness. Finn Wind stressed that payment by results is an extremely effective practice for Louis Poulsen El-Teknik, but added that there are many pitfalls, and that it takes time to develop the system in a way that satisfies everyone.

"We have been working with codetermining groups since 1998, because it is human beings we're dealing with. People are very different, and the best form of leadership therefore takes its starting point in that difference. You do this automatically when the employees are organized into smaller groups that plan and organize their own work in their own areas of responsibility. It is definitely our experience that allowing the employees to decide for themselves HOW to do the work produces a positive energy", said Finn Wind, who also pointed out the benefits of ensuring that both sexes are always represented in the group.

Performance management and the warehouse

Klaus Fjalland Right and Michael Ejby from Right, Kjaer & Kjerulf gave a clear introduction to the performance management principles of the Balanced Scorecard (BSC) method. BSC is a performance management tool that aims to create a balance of the work in all areas of a company. The tool divides the measurements into the areas of finance, clients, processes and employees, and makes use of so-called strategy cards to break down the company's strategy into concrete daily tasks. Thus BSC is a system that ensures:

a balanced measurement of both 'soft' and 'hard' aspects
a method for identifying initiatives that support the strategic aims
a method for systematic follow-ups on measurements and initiatives
"The point of BSC is that you get to look at all the aspects that have an impact on results. It is pedagogical, it gives you a common management language, it translates strategy into daily work and it creates involvement on all levels", said the two consultants.

The Managing Director of Consafe Logistics A/S, Dan Hellstrm, continued the theme of performance management and told the audience in more detail about how to define your own performance measurements, or KPIs (Key Performance Indicators), and not least how to use IT tools like Retrospect and SattStore to collect and handle the many KPIs so they are usable and easy to communicate to both the top management and the employees.

Dan Hellstrm presented Ikea's experiences with KPIs, and showed concretely how Ikea has systematically identified the activities and key figures that reflect the value creation in the company's warehouse, measured these key figures, and followed up on them. He showed how Ikea can present the measurements in visual diagrams that provide a quick and clear overview of the development.

Management of the warehouse machines

Aftermarket Manager Asbjrn Mortensen of BT Danmark gave a presentation about how companies can use Fleet Management to keep track of the warehouse's lift trucks and not least how this can create savings for the company. Fleet Management is an IT-based system that can generate all types of reports about how to utilize the company's fleet. At Bt Danmark it works as follows: the company collects the necessary data from the client and generates reports that make the client wiser about how the lift truck fleet is being used. Typical areas that the reports shed light on are: the degree of utilization, costs on different levels, optimization possibilities, frequency of damages, purchases, and average age. BT Danmark aims to be able to give its clients access to their own Fleet Management reports and data through the internet, so the clients can access them whenever they need to.

According to Asbjrn Mortensen, Fleet Management is part of a rising tendency to completely outsource the responsibility for the lift truck fleet to a third party. In fact, currently, every other client relationship at BT Danmark involves the long-term lease of lift trucks.

Management of regulatory requirements and consultants

In their separate presentations, engineer Jens Srensen and partner Lars Bek Jensen of Langebk Logistik A/S spoke about how to get to grips with regulatory requirements for safety and the work environment, and how to manage external consultants and advisers.

Jens Srensen explained the new work environment reform and the new occupational injury reform and their consequences for companies. "Should the company allow itself to be 'interrogated' or should it take the initiative and present and document its own work?" was Jens Srensen's rhetorical question. He pointed out that if you wish to set the agenda, the most effective means is a systematic work structure. "This creates more room for manoeuvre for the company's core activities", he said.

Lars Bek Jensen, who is a consultant himself, gave a number of interesting tips on how to approach the management of external consultants and advisers. Consultants are good at sketching best-practice solutions, developing the organization and giving the clients a kind of 'security' for decisions. He recommended that companies use their market value when they negotiate prices and conditions with the consultants, and that companies pay according to the services rendered and not the hours worked. Clients should ask the consultancy to name and present the consultants who will run the project. Very often the consultancy consists of a small group of experienced senior consultants who sell the project, and a larger group of less experienced junior consultants who are brought in when the project has been sold to the client. Lars Bek Jensen recommends that clients consider this situation before entering into an agreement with the consultancy.

Simulation as a management tool

It is not just pilots in training that can benefit from simulation of reality in a secure framework. Simulation is also something that warehouse and logistics managers can benefit greatly from. Consultant Preben Kristoffersen of Consafe Logistics A/S gave a lively and lucid introduction to simulation as a tool for warehouse management.

"It is always better to learn from mistakes made on the drawing table than real mistakes. Simulation is an easy and effective decision-making tool that allows warehouse managers to test the impact of a change in product placement, the introduction of new lift-truck types, or a completely different initiative. Simulation is also a very pedagogical and visual means of explaining changes to both the top management and the employees", commented Preben Kristoffersen. He added:

"The best solutions are almost always the simple solutions. But the more complex the warehouse world becomes, the more complicated it becomes to find the simple solution. Pareto's well-known 80-20 rule also applies in this connection. A 20% effort can give a savings potential of 80%. With simulation it is possible, on a scientific basis, to cut through the fog and discover where that 20% is".

Management of clients and suppliers

The last two presentations of the day concerned the use of an IT tool to manage suppliers and clients, and the establishment of Denmark's largest central warehouse, namely Netto's new distribution centre in Kge. Hkan Jne of the Swedish IT-supplier PipeChain AB presented Volvo's experiences with establishing VMI (Vendor Managed Inventory) involving a total of 70 suppliers. A VMI is a supplier-controlled warehouse, which means that Volvo outsources the responsibility for constantly updating the stock of products in a given category to the suppliers themselves. The warehouse is at Volvo's address, but the suppliers themselves are responsible for ensuring that the right numbers of products are always on the shelf when Volvo needs them.

This is a concrete example of a genuine collaboration in the supply chain, and of what consultants and academics for years have called Supply Chain Collaboration. "The Volvo case is a textbook example of collaboration in the supply chain. We all know that suboptimization in the supply chain tends to grow bigger and bigger as you get closer to the client - to the detriment of the supply chain's overall competitiveness. It is therefore necessary to collaborate more closely across company boundaries, for example by introducing VMI models that minimize unintended accumulation of safety stock", said Hkan Jne.

Volvo's benefits are: a capital reduction of 50%, an increase of the degree of service by 100% and administrative savings of 40% - marked advantages. One of Volvo's ways of convincing its suppliers to introduce VMI has been to offer the suppliers a free gift: a software system from PipeChain that can support VMI if they agree to introduce VMI.

The creation of Denmark's largest central warehouse

Last year, Netto's new central warehouse in Kge, won the Danish Logistics Award. Warehouse Manager Jrgen Larsen dropped by Consafe's Logistics conferences in Skovlunde and Fredericia and told the story of how Denmark's largest distribution centre was created. The new central warehouse allows Netto to triple its capacity without compromising on the logistics.

"We carried out a thorough analysis of our requirements for the warehouse. That was probably the most boring, but at the same time some of the most valuable work I've taken part in. The analysis and simulation phase made it possible for us to make a lot of free mistakes and experiment our way to the right solutions. It was a very important phase for the finished result", Warehouse Manager Jrgen Larsen told the audience.

The new central warehouse - or distribution centre - opened in 2003. It is the size of two football pitches, and supplies products to all the Netto stores in Denmark. The warehouse and terminal cover 45,000 square metres, and the administration facilities cover an additional 7,500 square metres. It took two years to plan and build. Daifuku, Crisplant, Univeyor and Consafe are the primary suppliers of equipment and systems for the new warehouse. The site can process 1.5 million pallets a year.

The suggested green-field solution originally had the potential for a major drop in logistics costs, and is dimensioned and designed to make room for future expansion.

"For Netto it is important that we are prepared for continued growth in the coming 20 years, and now we believe we are. We can increase the capacity quite considerably without bringing the overall concept into the danger zone", said Jrgen Larsen.