The China Question

Far be it for me to worry about how to deal with the balance of trade issues that confront our policy makers in Washington. But, I, and we, do have to cope with the continuously increasing flow of goods from the Far East that arrives at our warehouse doors.

As the Port of Long Beach and the railroads

choke with the burden of extra container flow, supply chain managers are bringing products in earlier to be sure that they are available for their peak seasons. These goods then, increase inventories beyond the capacity of most facilities.

What can we do?? Here are a few of the steps that some have used to alleviate the problem.

• Unload faster and with less effort by taking advantage of accurate carton level data in an ASN. Pre-plan pallet loads and separate single case storage so that receiving and put-away can be a continuous flow.
  
• Improve storage utilization by creating the right mix of storage modes; full pallet, half pallet and hand-stacked cases to reduce the cube loss of partially filled slots.
  
• Carefully select products to be stored off-site. The goal is to minimize handling steps, transportation cost and dependence on outside storage for filling today’s orders. Consider these options:
• Obsolete stock
• Out-of-season merchandise
• Newly arriving stock
• Large inventories of fast movers
• High cube products
• Kitted assortments that will be shipped as full pallets
• Slow movers

It is also important to think about what is left outside when the peak passes. Can you work it out through shipments, or will you just have to bring it back and put it away?

• Outside storage is found in many forms.
• Take a short term lease on nearby space
• Use the services of a third party warehouse to shuttle and store full pallet quantities of products
• Transfer products to storage trailers. This can be tricky. It works best when a trailer is full of one SKU, or a group of products that will be needed at the same time; i.e. a product launch.
• Keep it in the shipping containers.

I am most curious about the last alternative because it has the important advantage that the product remains in its highest density storage mode and is safe from extra handling damage. However, this option is currently difficult because of the high demurrage charges on the containers and because often the mix of products in one container may include some SKUs that we need right now.

I have some hope that with good load planning we might overcome the mix problem. I also sense that the demurrage issue has more to do with the transport chassis than with the container itself. If so, then perhaps a solution might be to hold the containers in a freight yard where they can be called in as needed.

Sometimes these problems go in cycles. Last year we couldn’t get everything in on time and incurred heavy expedited shipping costs to satisfy customers, so this year we will bring it in earlier. Next year, we will react to the high inventory and handling costs try to cut it a little closer. And, so it goes.

It will require increasingly creative solutions to keep up with the bouncing ball.

ABOUT THE AUTHOR

James M. Apple, Jr. is a Director in The Progress Group. Prior to co-founding The Progress Group in 1991, he was a Partner with Coopers & Lybrand's SysteCon division. During 1992-1995 he served as a Senior Systems Advisor with Vanderlande Industries, a major conveyor and systems provider in Europe.

Jim is an internationally recognized thought leader in the area of facility design and integrated distribution systems. His contributions to the improvement of distribution practices have been recognized by his receipt of the prestigious Reed-Apple Award, which is given for lifetime contributions to the advancement of the material handling profession. Jim has also received the Institute of Industrial Engineers' Facilities Planning and Design Award. He has written numerous articles and handbook chapters on warehousing and logistics operations and is a popular speaker on logistics seminar and conference programs.

Prior to SysteCon, Jim worked as an Industrial Engineer with IBM, was Supervisor of Facilities Planning for the Oldsmobile Division of General Motors and was Executive Vice President for an automotive aftermarket parts supplier. He holds B.S. and M.S. degrees in Industrial and Systems Engineering from the Georgia Institute of Technology.