Warehousing for today and tomorrow

Author and consultant Kenneth B. Ackerman has a reputation for being a bit of a skeptic. A veteran warehousing man, Ackerman does not easily fall for the latest management fad or technology craze. Instead, his levelheaded advice focuses on time-tested, real-world practices that are grounded in common sense and basic business principles.

Ackerman knows warehousing inside and out. Before becoming a consultant, he was CEO of Distribution Centers Inc., a warehousing company that was later acquired by the third-party logistics service provider Exel. After selling the warehousing business, he joined the management consulting practice of Coopers & Lybrand. A year later, he started his own management advisory service.

Over the course of his long career, Ackerman has often picked up the pen to educate his fellow professionals. He co-wrote his first book on warehousing, Understanding Today's Distribution Center, with R.W. Gardner and Lee P. Thomas back in 1972. Other works include Warehousing Profitably and Fundamentals of Supply Chain Management, co-authored with Art van Bodegraven. He also edits and publishes Warehousing Forum, a subscription-based newsletter. This year, he updated Warehousing Profitably for its third edition.

In a recent interview with Editor James Cooke, Ackerman discussed the current and future role of warehousing in the supply chain.

You write in your book Warehousing Profitably that "warehousing is destined to move from a product-centric business to an idea-centric activity." Could you explain what you mean by that statement and give an example of an idea-centric activity?
An idea-centric warehouse manager is one who recognizes ... [that] the role of the warehouse is to support the corporate mission. If that corporation is dedicated to rapid growth, the warehouse must be prepared to support that growth. If the emphasis is on superior service, the warehouse must be managed to achieve zero defects and perfect orders. If the company intends to be a low-price leader, the warehouse must be dedicated to reducing costs.

Has globalization changed how supply chain managers view warehousing?
The warehousing function is not really portable, so globalization has less influence here than it does in manufacturing. However, those supply chain managers who have to establish warehouses overseas must look at how cultural distinctions could change the way the facility is managed. For example, some years ago in Colombia, I saw a rest break where a woman in a starched uniform carried a tray of coffee cups to the workers.

You talk about the information revolution in your book. Would you say it's necessary today for even the smallest warehouse to have warehouse management software in place?
Yes. If you don't have [a warehouse management system], you probably don't have a workable locator system. If you don't have one, you may have US $30-per-hour warehouse workers writing shipping documents with pen and ink. If you don't have directed putaway, decisions about storage location will be made by lift truck drivers rather than by management. So without a WMS, your warehouse would be operating at a higher cost and lower efficiency than it would otherwise, and you will find it more difficult to compete.

Do you expect to see more or fewer warehouses built in North America in the next few years?
It all depends on where you are in North America. In Columbus, Ohio, [USA] the surplus of attractive empty space has pushed pricing down to a point where it is more economical to rent an existing building than to build a new one. This is not true in every city, but unfortunately it is true in many markets.

You note in your book that that many companies today find it difficult to retain warehouse workers. What can companies do to keep their best workers?
The labor situation is not really different for warehousing than for any other job. It starts by picking the right people. Once selected, they must be motivated and receive proper recognition for jobs that are well done. Management should recognize that an order selector in a warehouse has a job that is more rewarding than working on an assembly line or driving a truck. It has more variety, and it requires judgment as well as skill.

You write that the emphasis in warehousing should be on "creating increased value for customers and shareholders." Can you give me an example of how a warehouse can increase value?
Here's one example: A leading apparel retailer has grown its company by providing logistics services that are vastly superior to the competition. When a new fashion is discovered in France, a sample is taken to China, where it is rapidly manufactured, then moved by air to a central distribution center, priced, and reshipped by air to the retail stores. The ability to use superior logistics services has contributed to the value of the retail corporation. Fast-response retail chains combine premium transportation and efficient warehousing with flexible manufacturing. The result is that a buyer can turn a new fashion concept into goods on the store shelves in a matter of weeks while competitors may take months to accomplish the same thing.

Editor's Note: Warehousing Profitably (ISBN# 978-0-9829940-0-9) is available from Ackerman Publications in Columbus, Ohio, USA. For more information or to order, visit the website: www.warehousing-forum.com.