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Welcome to the Growing EBITDA Podcast, where we unlock the doors to management and technology

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insights in the middle market.

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Join us as we explore innovative strategies to drive revenue and EBITDA growth, interviewing

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industry leaders and technology experts.

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Whether you're looking to streamline operations, understand the latest tech trends, or lead

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your company towards exponential growth, you're in the right place.

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Stay tuned and let's grow together.

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All right, welcome back in the studio.

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James, where's your studio today?

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Where are you dialing in from?

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I'm calling in from Vegas today.

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So we're in a mobile studio, Mike, which is kind of nice.

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We're trying out this remoteness.

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Vegas, what are you doing in Vegas?

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So this week, it's going to be a bit dated when you listen to this podcast, but I'm at

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CES this week and kind of attending the CES for the purpose of hearing about all the great

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innovation so one day you and I can have a podcast that we talk about it.

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Cool, great.

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And who do we have with us today?

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Well, I think we have another James joining us today.

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I guess we'll ask James, where are you calling in from, James?

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Hey, I'm calling in from Maryland after 10 inches of snow this week.

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Excellent, excellent.

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How'd they do with that drive in Maryland with 10 inches of snow?

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Nothing, just shut everything down, don't go anywhere.

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Good thing this episode's not about logistics.

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Lots of sledding, that's all you need.

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Yeah, so James, Bandy, what are we going to call our guest James?

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I think we're just going to call him by...

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We're going to be confused the whole time.

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I think we got to show respect to our guest as the first official guest and go full name,

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James Lowe.

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James Lowe?

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Does that work for you, James Lowe?

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That works for James Lowe.

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All right, excellent.

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Well James Lowe, thanks for joining James, Bandy and I, James and I.

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We're excited to talk about all things warehouse.

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And really specifically, when we were prepping for this episode with you, we wanted to dive

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into warehouse optimization, right?

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There's a lot of change that's been going on in fulfillment centers, in warehouses over

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the last five, 10, 15 years, probably a lot more changes to come with technology improvements,

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maybe AI, maybe we'll get into that at some point.

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I'm sure you have some thoughts on that.

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But we're going to do a deep dive and we're actually going to do this over a couple of

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part series.

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We think we're going to do maybe two episodes on this and try and cover some ground, really

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trying to unpack how do you optimize warehouses, where are some of the hidden costs, and how

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do you lay the foundation for making improvements.

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Today we're going to focus kind of on some of the more fundamentals and the costs associated

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with poor warehouse management and kind of get into some of the business problems that

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people are experiencing that they're going to try to improve in the coming years and

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maybe some tools and some best practices and insights that you have as a professional in

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the space that helps all different kinds of companies of different shapes and sizes optimize

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their operations.

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So hopefully we'll learn a little bit from you today, James, about improving efficiencies,

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reducing costs, meeting the ever changing demands of the customer landscape, which if

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you're serving consumers versus industrial companies, a lot of change on both fronts.

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I think a lot of people who are going to hear this think warehouses might go straight to

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thinking about companies like Amazon.com who serve predominantly consumers, but there's

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a big part of this landscape that is kind of more B2B in nature.

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So I'm sure we'd like to hear from you about some opportunities to improve those kinds

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of businesses too.

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So James, introduce yourself, give us some of your background and let our listeners hear

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a little bit why about who you are, what you do, and why you're here today.

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Thanks Mike.

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So James Lowe, I'm a director to TriVista in our supply chain practice.

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Been around the firm for coming up on 13 years this year, so long time employee at the firm.

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Spent first couple of years of my life working in our continuous improvement group, doing

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process improvement work at various manufacturing sites and different businesses, then transitioned

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over to our footprint and network group and spent a lot of years starting up and closing

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down and relocating facilities.

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And in the last couple of years, I've been focusing more on the supply chain side, whether

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that be sourcing, procurement, PsiOp, and then also the warehouse optimization piece

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of this.

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In my footprint experience, I actually started up, personally started up a couple of distribution

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centers.

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So got a deep experience from cradle to grave of designing a warehouse with GCs and landlords

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of what we can build in the building, working with clients on what should their racking

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layout be and how do they want to manage inventory in the building.

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So this is an area that I've personally seen that come from nothing to something, as well

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as gone into existing warehouses and spent a lot of time trying to help clients figure

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out how can they be more efficient and kind of treat the warehouse as an asset as opposed

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to just a building that they keep stuff in.

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And James, so in all your travels, how many different companies you think you've worked

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with over the last 13 different years?

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I looked at the report a few months ago out of the system and I think I was at over 150.

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What's the most interesting business that you've seen out of those 150?

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Warehouse related or not, I'm just looking for, I'm looking for a fun one.

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I mean, I think, I think the one I go to is I spent three months in a marinara sauce factory

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and spent the first month of that working in their cook room.

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They call it the kettle room because they cooked everything in these steam kettles.

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And I personally rewrote all of their recipes, essentially their SOPs and work instructions

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on how to-

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Did sales go down after that?

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I don't think so.

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I kept buying the product.

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They let you change the recipe?

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I tweaked it.

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I standardized the recipe.

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So wait a second, after three months of working in that factory, you still had an appetite

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for marinara sauce?

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That was going to be my question, Mike.

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Do you still eat marinara?

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I took a break for a while.

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I took a break for a while.

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But no, I still promote the sauce and have very proud of that sauce.

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Oh, you're sponsored by them still?

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I wish.

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No, not anymore.

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I wish.

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They did ship me boxes of sauce back home whenever I was done working there.

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I never got one of those boxes.

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You get one of those, James, Bandy?

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No, I don't think I was around, unfortunately.

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No, by the way, I got some pasta in the kitchen, James.

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You just want to send me one of those.

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We'll be able to, we'll feed the kids tonight.

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Hey, by the way, Mike, I think James is actually a chef.

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He sent Cindy the pasta.

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She should arrive at your home, run the recipe and make it fresh for you in your home.

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So that's what I'm here.

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That's true.

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That's true.

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We're going to have to do a whole series on the culinary adventures of Mr. Lowe here.

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I'll just slip it a jar and you guys won't even notice I didn't make it from scratch,

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but it'll still taste good.

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Yep.

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Oh, well, that's fun.

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So to get back to, to get back on topic here, because I'm sure I could talk about pasta

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all day long, one of my favorite foods, that's for sure.

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But to get back on topic here, what I, what I tend to do, I found that I like doing this.

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I plug the topic that we're going to talk about into chat GPT.

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Love chat GPT.

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Quick shout out for those guys.

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And I asked them how it, how would it define warehouse optimization?

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So I'm going to read it to you.

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And it said, warehouse optimization is the process of strategically improving warehouse

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specifications, spanning layout design, inventory management, labor utilization, and technology

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adoption to maximize efficiency and cost.

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And to put that a little bit more in layman's terms, it's really about making your warehouse

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run like a well-oiled machine, right?

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Ensuring everything from inventory to labor works in perfect harmony with your business

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goals.

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Right?

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Is that, you think that's a fair characterization?

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Yeah, absolutely.

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I mean, I think another way of kind of putting a phrase on it is, is how do you make warehousing

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a core competency of your business, right?

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It's not just somewhere you store stuff.

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It can be a differentiator for your business if you, if you leverage it appropriately.

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Hmm.

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And do you, do you mean that for businesses where distribution is the business or do you

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think there's opportunity for companies that aren't pure play distributors?

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I think both.

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I think it applies to both manufacturing and distribution businesses because if you're

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able to improve your order accuracy and whether that applies to both, a lot of the, one of

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the key metrics we talk about all the time with clients is, is on time and full.

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And so making sure you're not damaging product, picking product accurately, shipping it at

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the right time, meeting deadlines.

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That applies to any, any business that has a physical product that they're shipping out.

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So who should, let's talk about who should care about this, right?

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I was kind of joking earlier, not joking per se, but you know, I mentioned amazon.com,

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right?

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I think a lot of people are going to hear warehouse optimization and they're going to

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think about businesses like, like Amazon, but who, who, who should listen to a podcast

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like this where we're talking about best practices around warehouse optimization and, and how

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to improve.

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You just attested to, it's not just pure play distribution companies, right?

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It could be manufacturers too, but who else?

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As we all know that there were three of us at least know our listeners, if they're new

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or might not, you know, we do a lot of work with standalone businesses, corporations,

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whether those publicly or privately owned.

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We also do a lot of work with private equity backed businesses.

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Should private equity investors care about warehouse optimization?

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James, what do you think?

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I think if you're going to spend the time to invest in racking and material handling

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equipment and have a potentially a decent chunk of labor force focused on this activity,

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it should be a key metric that you are monitoring and measuring on a daily basis to see how,

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how well you're running that side of the business.

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If people start focusing on this and implementing some of the maybe suggestions that you'll

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share today, what's typical when you, when you walk into a warehouse operation, what,

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what kind of improvements and benefits are you typically seeing through an initial walkthrough

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or through an initial assessment?

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Yeah, I think jumping over to James Bandi's side of the world for a second, one of the

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changes we've noticed in the last decade has been the adoption of WMS systems.

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They've become a lot more accessible to much smaller companies, smaller than the Amazons

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of the world.

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The challenge with that is it requires a change in process and behavior when you adopt that

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technology to ensure your training, your people to actually use the system efficiently.

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We've seen that during that technology adoption phase, you end up having to throw a lot of

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labor at the problem because you're not able to train and sustain the changes that you're

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trying to require of your, of your business.

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Let me just dive in real quick here.

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I'm going to talk about some of the key topics that we've asked you to talk about today,

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just to kind of tell folks what we're going to go into in a little bit more detail.

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And those include starting from the basics, like we said, the fundamentals, we're going

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to talk about an introduction to warehouse optimization, what it is and why it matters.

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We're going to talk about hidden costs of poor warehouse management, identifying and

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resolving bottlenecks, spend a little bit of time talking about optimization strategies.

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And then we're going to touch on technology, which you just touched on a second ago, James.

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We're going to touch on technology a little bit today and talk about how tools like AI

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and automation are starting to reshape warehouse operations in the 2020s and how that might

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be a little bit different than how they've been running in past decades.

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The next episode in the series, I think we're going to dive even deeper into technology.

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So if that's primarily what folks are trying to listen in for, you know, stay tuned, but

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I'm going to pass it over now to Mr. Bandy and ask him to dive in here a little bit.

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Yeah.

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James, you ready to be on the hot seat?

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No.

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So the first question that I had, which is interesting because Mike, I didn't GPT it.

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I was going to ask our human here the same questions.

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Well, you know, you got to remember, you got to remember, I don't understand most things.

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So if I don't have chat GPT, you know, helping me along the way, I'm not going to get very

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far in this life.

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Yeah.

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And I didn't know a lot about this either because I brought a friend, the other James.

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Is I thought maybe a fun place to start, James is baselining a little bit, right?

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What is warehouse optimization in your words?

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And then I think at the end of that, maybe we can chat a little bit about that.

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And then let's round it out by kind of the benefits, because I think one of the things

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that we on the podcast always try to understand is establish what it is and then how can I

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benefit from it or how can I improve?

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And that's really what we're here for.

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So let's turn it over to you and give you some time to tell us in your own words, what

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is warehouse optimization?

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It's a broad topic.

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It can cover, you know, really every aspect and functionality of the business, regardless

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of whether you're a manufacturer or distributor.

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If you are receiving sales orders and fulfilling those from a location, you know, it takes

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more than just people going and picking items off a shelf and putting it on a truck.

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So if you're thinking about warehouse optimization and all you want to do is try and reduce the

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head count, reduce the complexity inside the four walls, you need to broaden that view

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and go and look at really your inputs, the sales and the procurement side of the business,

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how am I buying product and receiving it in that warehouse, how may be converting it in

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a manufacturing business and then taking finished goods and exchanging those raw materials into

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finished goods, into a finished goods storage facility.

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And then how quickly can I get a sales order processed in the front office and get that

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fulfilled by the warehouse team?

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And though all those pieces have to be in constant communication, you can't just run

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isolation and expect the two different sides of the wall, front office and the warehouse

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to know what each side is doing without constant communication.

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ERP systems help with that, but there's obviously a lot of human error that can be involved

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there and managing exceptions between the warehouse and the processes.

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So we typically walk into a warehouse project like this and we try to interview all the

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key stakeholders across the business.

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It's not just, hey, show me how something moves in your facility.

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Yes, that's the most important part potentially, but it's how does the information and process

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flow between all the different functional areas.

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The secondary part of that becomes the physical side, right?

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There's the information side, then there's the physical side of movement.

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We can go back to our Trivista fundamentals of lean manufacturing and lean processes.

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Lean is a form of waste, so how do we look at a facility and put the inventory in the

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right location that it can be picked quickly, efficiently, without damage?

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And how quickly can we get people to move that to a dock door or staging location to

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then get it on a truck?

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And really those combinations, you want to time is money and to optimize that labor side

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of the piece, you need to get the layout side optimized as well as the information flow

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optimized.

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And if you're able to combine those, you'll start to see significant improvement both

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on an OPEX cost side of the business, but also on the customer satisfaction side because

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you're able to meet customer demands a lot quickly and then become scalable.

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You can then start to go out and push your sales team to sell more, drive top line growth

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and understand the capacity in that warehouse to be able to go and push that market.

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One of the things we get asked all the time is how many locations, how many warehouses

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do I need in my network?

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And that's not a simple question to ask.

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It could be due to market demands as far as lead time.

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We've all seen the expectation in our personal lives that you order something off Amazon

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and it's here next day.

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That's not always the case for every market and every business, but there's a lot of companies

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that have expectation.

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If you order a part, you order some type of B2B item, you expect it to be in your facility

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within at least within a week.

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And you've got to be able to meet that lead time and shrink it as quickly as possible.

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The other piece becomes working capital.

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If you're not able to understand where inventory levels are, how quickly you're turning inventory

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and how you optimize that, that can be a drag on the business because you might have either

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slow moving products that you're not managing appropriately, or you might have excess inventory

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that's just taking up carrying cost and space in your warehouse that you could be using

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for products that actually might make you money quicker.

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So there's a lot of elements here that I think everybody in the business from the sales side

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and the CEO's leadership to a CFO to a COO, all three of those C-suites should have a

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strategic view of how does a warehouse drive and pull levers in their business.

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James, one of the things that I think that's interesting is, I came from large retailers,

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multinational retailers, a lot of warehousing was obviously a lifeblood coming from a distributor

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that also had warehousing.

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I think a lot of times when folks hear these types of programs, they think really large,

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arduous, multi-year, big programs.

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Can you maybe talk about the scale of these projects and is it always this big?

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Because I think we've talked so far to this moment about these big programs.

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Are there potentially some smaller things that are done along the way that are still

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under that warehouse optimization?

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The small projects, and I can give some examples actually.

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That'd be great.

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Of things we've done with clients.

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We've recently worked on a consumer goods company in Pennsylvania and they had a combination

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of a finished good distribution warehouse as well as a final assembly lines within that

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warehouse.

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It's called value add distribution where they're not manufacturing the parts.

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They're outsourcing the actual injection molding and electronics and all those things are all

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done overseas.

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They were bringing that all, landing it in the US and then doing the final assembly and

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then boxing it and putting it into storage.

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They called us going, hey, we don't know our inventory is in the warehouse.

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We are struggling to supply product to the assembly lines so that when sales orders come

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in we are just running around trying to find stuff to get it out the door.

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We had a double approach to that which was we'll come in and help you evaluate where

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should your inventory be stored in the racks themselves because they were not utilizing

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the system to dictate and tell them that.

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We put together a strategy of where should you be storing product and dedicating pick

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locations, storage locations for that product.

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Then we set up really more on the process improvement CI side of the world is sideline,

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line side sorry, line side bins and raw material storage locations so that they could pull

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product as they needed it.

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You set up a Kanban system where empty bin means somebody has to go and pick more product

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and they are able to meet the demand and cycle times that they needed to achieve to get out

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of that on time.

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Those are relatively smaller projects.

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We're not talking about redesigning a whole warehouse, opening a new warehouse.

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It's taking what you've already got and just putting the process and structure behind it.

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Another example on more of a pure distribution business is pick pack ship stations.

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That's a relatively simple project but if you are not thinking about it in terms of

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lean manufacturing viewpoint, you're going to struggle with the whole flow and process

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of that of line leveling, making sure if you're trying to put too much on the pickers versus

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what the packers can pack versus how do those boxes get staged by Dockdors.

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It's not as simple as just again, keep throwing labor at it.

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You've got to figure out how do I maximize that labor and really you start to think in

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warehouse terms, you think about pick lines.

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It's not about how many orders can I get.

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It's how many items on an order do I want to go and pick as efficiently as possible

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because every line item in theory, if you've got primary pick locations that are refilled

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appropriately, every line item is a stop on a track around a warehouse.

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You start to measure your warehouse employees based on how many lines are they able to pick

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per hour, per day and that's how you start to drive efficiency improvements with very

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little other changes.

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It's just, hey, this is your goal.

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This is how many lines you have to pick and setting up that fundamental concept is a simple

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project but can have huge impact on how you run your warehouse.

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Those are great examples.

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I think the VAS side is always an interesting side to talk about how do I align that and

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make sure I'm covered.

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I do also like the idea of thinking about I have a very specific issue I'm trying to

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solve.

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I need to solve this issue before I solve my next.

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I think that's a good one.

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You answered a bit of my question but my follow up to that was going to be how do I know when

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I'm done?

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Right?

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So I have the issue.

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I've done the improvement.

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I've never done.

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The answer honestly is you're never done.

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It is as we do in most of TriVista's clients, it's a continuous journey, continuous improvement

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journey of always looking for that next step of improvement and maturity on the growth

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path of becoming an operationally sound business.

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There's always waste to go and chase.

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It may be in different areas and you're going to kick it down to a different bottleneck

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at some point in the process but you're never done in this journey.

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There's always something and obviously depending on your business, how it changes year to year

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and what products you're carrying, you may find that what you did last year may not apply

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because you've had to change your business model or what products you're offering to

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support or you might do an acquisition.

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A lot of times we get called in because they bought a business and they go, hey, how do

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we fit two different businesses with unique SKUs and profiles and complete different ways

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of picking the product even into the same warehouse because sometimes you're talking

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about case picking or each picking versus full pallet picks and you handle those completely

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different even within the same four walls.

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So it's never done.

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No, I agree with you.

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That was a bit of a tee up, a softball question there because I think that is a fair answer.

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The last one for this section, you talked about it a little bit earlier but I do want

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to call it back because I think it's important because a lot of times when we hear the optimization

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side, warehouse optimization, we think finished goods, pick mods, goods to people, automation,

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all that type of stuff.

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You mentioned manufacturing and I just want to go back and just put a lens on and you

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don't have to spend the same amount of time if you don't want but what's the projects

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you see in that and how am I done and that same lens but for manufacturing, does it change

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at all?

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Am I thinking about optimization differently or is it essentially the same?

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It's just raw materials.

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What are your thoughts on warehouse optimization as it relates to manufacturers?

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Usually doesn't change very much because it's more about segregation inside the same warehouse.

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You're typically not going to intermingle raw material and finished goods inside the

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same four walls.

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You're going to have dedicated either aisles or even just dedicated rack bays to raw materials

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and there's the whole concept of a U-shaped cell and it depends on if you can get into

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actual facility design and go down that tangent if you want but whether you're doing a single

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loaded warehouse where your dock doors are all on one wall, whether you're doing cross

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docking, your flow is going to be dictated somewhat by the shape and size of the building.

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Your layout of racking is going to be dictated by dock door locations and column spacing

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and how you want to set that up whether you've got raw material or finished goods, you're

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probably going to want to segregate because you want to again think about the forms of

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waste.

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If you're a manufacturer and you've got on-site manufacturing next to your warehouse, you

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want that raw material to be as close to the lines as possible and you may receive that

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material differently than you ship finished goods.

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A lot of our clients, they'll receive, think about metal fabrication for a second, you're

399
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going to receive metal fab off typically flatbed trucks that don't use dock doors.

400
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You have to either do side unloading or cranes whereas the finished good might be on pallets

401
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and you can use a dock door and a forklift to get that on and off a truck.

402
00:25:25,480 --> 00:25:31,040
So you've got completely different styles of truck receiving versus truck loading.

403
00:25:31,040 --> 00:25:37,020
And so yes, they are different but you treat them the same way as far as the optimization

404
00:25:37,020 --> 00:25:43,200
approach and process approach and what you probably want to tackle is set up different

405
00:25:43,200 --> 00:25:45,600
projects focused on those unique things.

406
00:25:45,600 --> 00:25:51,440
You can't use the same solutions but the same methodology and tool book can be applied to

407
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both manufacturing raw material as well as packaged finished goods.

408
00:25:55,960 --> 00:25:58,520
So James, let's switch gears here.

409
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We've talked a lot about ways to improve already a little bit.

410
00:26:04,220 --> 00:26:08,040
Tell me about the hidden costs in businesses, right?

411
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I'm sure a number of our listeners are going to be well-versed in warehouse optimization

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but I'm sure there's also going to be a large contingent that is looking for advice on this

413
00:26:18,440 --> 00:26:19,440
matter.

414
00:26:19,440 --> 00:26:23,600
How does somebody tell if they've got opportunities to improve?

415
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Where do these costs hide?

416
00:26:25,520 --> 00:26:31,840
Tell me about some of the inefficiencies that you see and how those inefficiencies are impacting

417
00:26:31,840 --> 00:26:37,560
people's bottom lines whether or not they can see it themselves today.

418
00:26:37,560 --> 00:26:42,920
This again is a broad topic because a warehouse you have inventory and so we could very easily

419
00:26:42,920 --> 00:26:48,320
start having a conversation about SIOP side of the world of inventory planning and optimization

420
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without even thinking about the actual physical warehouse itself.

421
00:26:52,480 --> 00:26:58,360
It's the decisions you make on how much inventory should you carry and so without even going

422
00:26:58,360 --> 00:27:04,040
to a warehouse you can look at historical demand data and current inventory levels and

423
00:27:04,040 --> 00:27:09,400
tell a client, hey, you've got excess and obsolete or poor working capital utilization

424
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that you can improve and that then translates into space utilization within the warehouse

425
00:27:15,880 --> 00:27:22,200
itself because if you as a management team you might look and say I've got $15 million

426
00:27:22,200 --> 00:27:27,880
of inventory and not know that a third of it is excess and if you're able to bleed some

427
00:27:27,880 --> 00:27:34,280
of that inventory off you can now shrink your facility size from maybe down 25-30% or use

428
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that space more effectively for other products or even for more other manufacturing processes.

429
00:27:39,080 --> 00:27:44,080
And so there's a classic joke when you get a new building or you give somebody a bigger

430
00:27:44,080 --> 00:27:48,240
building in this world that you give them extra space and they're going to fill it with

431
00:27:48,240 --> 00:27:49,240
something.

432
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We've literally had clients put up fencing or ballards to stop employees from filling

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empty space because otherwise you come back in six months after you've handed the keys

434
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of the building and you find just stuff stored there and you're like, whoa, this was penciled

435
00:28:04,820 --> 00:28:07,120
in for a future product line, a future acquisition.

436
00:28:07,120 --> 00:28:12,320
We've got a project right now that we're helping a client open a DC in Houston and they currently

437
00:28:12,320 --> 00:28:16,920
outsource their e-comm department but they have plans over the next couple of years to

438
00:28:16,920 --> 00:28:18,840
bring that in-house but they're not ready yet.

439
00:28:18,840 --> 00:28:23,440
They got to do their full pallet picks first and then they want to phase in their e-comm

440
00:28:23,440 --> 00:28:29,800
and so we're setting aside 50,000 square feet of a 350,000 square foot warehouse for e-comm

441
00:28:29,800 --> 00:28:33,920
but we've already told them like, hey, you're probably going to find a ton of pallets stored

442
00:28:33,920 --> 00:28:36,640
there on the floor because it's somewhere to stage something.

443
00:28:36,640 --> 00:28:38,480
It's somewhere just like, hey, we don't know where to put this.

444
00:28:38,480 --> 00:28:40,040
Let's just put it off to the side.

445
00:28:40,040 --> 00:28:45,720
So you think about warehousing and distribution businesses and even manufacturing, one of

446
00:28:45,720 --> 00:28:53,060
your biggest fixed costs is your lease cost of a building and you want to sweat that asset

447
00:28:53,060 --> 00:28:57,240
that you're paying for on a monthly annual basis that you've signed up for 10 years,

448
00:28:57,240 --> 00:29:00,120
a 10-year lease on a warehouse typically.

449
00:29:00,120 --> 00:29:03,840
Sometimes you get down to seven-year leases and you've got to make sure when you sign

450
00:29:03,840 --> 00:29:09,280
up for that that you've got the right space and that's a big area where we see some potential

451
00:29:09,280 --> 00:29:14,120
hidden cost is, hey, you're carrying too much fixed costs on your actual lease piece.

452
00:29:14,120 --> 00:29:16,840
The other piece becomes labor.

453
00:29:16,840 --> 00:29:20,920
Some businesses, depending on how they got the financial setup, warehouse labor may or

454
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may not be in cost of goods sold and above the gross margin line.

455
00:29:25,680 --> 00:29:31,760
Some of it's going to be hidden in OPEX SG&A below the line and they kind of treat it as

456
00:29:31,760 --> 00:29:34,800
a fixed cost and it's not.

457
00:29:34,800 --> 00:29:38,680
People effectively are a variable cost because you can use temps.

458
00:29:38,680 --> 00:29:43,240
You can maybe have to do some seasonal work depending on what the seasonality of your

459
00:29:43,240 --> 00:29:44,240
business is.

460
00:29:44,240 --> 00:29:50,120
And so if you're not able to manage that human capacity side of the business, you're going

461
00:29:50,120 --> 00:29:55,160
to have margin erosion because you're carrying incremental payroll costs that you don't really

462
00:29:55,160 --> 00:29:59,640
need and because especially if it's hidden below the gross margin line, you're not truly

463
00:29:59,640 --> 00:30:06,800
understanding what your product line profitability is when it comes to your people cost and that

464
00:30:06,800 --> 00:30:09,320
becomes a huge focus.

465
00:30:09,320 --> 00:30:14,200
Another fun one is maintenance.

466
00:30:14,200 --> 00:30:17,360
You can go to a warehouse, both manufacturing or distribution businesses, and you'll see

467
00:30:17,360 --> 00:30:20,600
a lot of forklifts, a lot of material handling equipment.

468
00:30:20,600 --> 00:30:25,720
And when those break down and somebody cannot go and pull a pallet, move a product, load

469
00:30:25,720 --> 00:30:30,520
a truck because a piece of equipment is down and there's waiting for a maintenance team

470
00:30:30,520 --> 00:30:32,920
to fix something, that's a huge hidden cost.

471
00:30:32,920 --> 00:30:37,720
I've never heard anybody say the words fun and maintenance in the same sentence before,

472
00:30:37,720 --> 00:30:39,200
but you did that nicely, James.

473
00:30:39,200 --> 00:30:41,240
That's what I do.

474
00:30:41,240 --> 00:30:46,640
So I wish I had to come back for you on that one.

475
00:30:46,640 --> 00:30:48,520
There's room for that next episode.

476
00:30:48,520 --> 00:30:49,520
Yeah.

477
00:30:49,520 --> 00:30:52,800
So James, tell me about the impact on the bottom line.

478
00:30:52,800 --> 00:30:57,500
So you talked about hidden costs, but give me order of magnitude.

479
00:30:57,500 --> 00:31:02,200
How impactful can these hidden costs be on a business or some of these inefficiencies

480
00:31:02,200 --> 00:31:03,200
be?

481
00:31:03,200 --> 00:31:05,200
What are you seeing out there?

482
00:31:05,200 --> 00:31:09,680
I think typically if we're going into a business that really hasn't focused on this, you're

483
00:31:09,680 --> 00:31:16,480
looking at an opportunity of 10% to 20% reduction of pure warehouse cost, whether it's labor,

484
00:31:16,480 --> 00:31:19,560
whether it's just getting more product out, who are more quickly be able to fill orders

485
00:31:19,560 --> 00:31:20,560
more quickly.

486
00:31:20,560 --> 00:31:23,600
You're able to drive that improvement of the bottom line.

487
00:31:23,600 --> 00:31:27,000
And then it becomes a question of, can you scale that with your sales team?

488
00:31:27,000 --> 00:31:31,440
If you've got more capacity identified, it can be a compounding effect of top line growth

489
00:31:31,440 --> 00:31:34,360
because now you can meet more demand.

490
00:31:34,360 --> 00:31:36,440
And so there's a huge opportunity there.

491
00:31:36,440 --> 00:31:43,920
If you focus on driving that cost down within a warehouse, you can be more efficient from

492
00:31:43,920 --> 00:31:48,400
a pure OPEX perspective, but then you can also unlock capacity that you didn't even

493
00:31:48,400 --> 00:31:50,440
realize was there.

494
00:31:50,440 --> 00:31:53,400
So what's the first thing you're looking for?

495
00:31:53,400 --> 00:31:58,040
You go out to a new site, never been there before.

496
00:31:58,040 --> 00:31:59,360
What are you looking for?

497
00:31:59,360 --> 00:32:02,560
You do a walkthrough, 30 minutes, hour.

498
00:32:02,560 --> 00:32:03,600
What questions are you asking?

499
00:32:03,600 --> 00:32:05,320
What are you looking for?

500
00:32:05,320 --> 00:32:10,960
What are some of the telltale signs that there are either $100 bills lying on the floor waiting

501
00:32:10,960 --> 00:32:17,680
for somebody to pick them up or whether the processes can be optimized or the throughput

502
00:32:17,680 --> 00:32:23,400
can be expanded or on time and full, as you mentioned, could be meaningfully improved.

503
00:32:23,400 --> 00:32:27,560
What are some of the first two or three or four things that you're looking for?

504
00:32:27,560 --> 00:32:34,360
Visually, a huge indicator of a poorly managed warehouse is dust.

505
00:32:34,360 --> 00:32:35,400
It sounds silly, right?

506
00:32:35,400 --> 00:32:40,480
But if you walk through a warehouse and you're looking at product on racks, on shelves, and

507
00:32:40,480 --> 00:32:45,600
it's got a lot of dust sitting on it, you know immediately that inventory hasn't moved

508
00:32:45,600 --> 00:32:48,360
in a long time.

509
00:32:48,360 --> 00:32:51,840
So avoid the dusty marinara sauce, James Bandy.

510
00:32:51,840 --> 00:32:53,280
That's what I learned on today's podcast.

511
00:32:53,280 --> 00:32:57,840
That's the secret ingredient, though, that I added for that.

512
00:32:57,840 --> 00:33:02,360
That's what makes it so good.

513
00:33:02,360 --> 00:33:06,600
It's a silly one, but it's a visual check because literally you can figure that out.

514
00:33:06,600 --> 00:33:10,640
Walk in five seconds into a warehouse, you go, hey, how much dust is sitting on this

515
00:33:10,640 --> 00:33:11,640
product?

516
00:33:11,640 --> 00:33:14,600
Now, obviously, there's some manufacturing companies that create dust because of their

517
00:33:14,600 --> 00:33:15,600
manufacturing process.

518
00:33:15,600 --> 00:33:21,240
So it's not a 100% rule, but for generally, if you've got a demised building that inventory

519
00:33:21,240 --> 00:33:23,880
is kept separately, it shouldn't be that dusty.

520
00:33:23,880 --> 00:33:25,600
But that's a big one.

521
00:33:25,600 --> 00:33:30,040
That starts to go down the path of both how am I managing my inventory?

522
00:33:30,040 --> 00:33:31,040
How are people picking it?

523
00:33:31,040 --> 00:33:37,000
Am I following a FIFO practice of first in, first out, and making sure I'm taking the

524
00:33:37,000 --> 00:33:41,200
older aging inventory before I pull stuff that I just received?

525
00:33:41,200 --> 00:33:44,960
And it also goes back to the PsyOp discussion of am I caring too much?

526
00:33:44,960 --> 00:33:49,320
Do I have excess and obsolete that I need to take care of?

527
00:33:49,320 --> 00:33:50,400
That's one.

528
00:33:50,400 --> 00:33:55,680
The other one is go walk the process with a warehouse associate or operator.

529
00:33:55,680 --> 00:34:02,040
Go and ask them, hey, how do you know what to pick next?

530
00:34:02,040 --> 00:34:06,720
If they can quickly show you, hopefully on an electronic device like a tablet or a scan

531
00:34:06,720 --> 00:34:12,720
gun, that these are my pick tasks, this is what I'm working on next, you'll figure out

532
00:34:12,720 --> 00:34:17,240
are they getting the information they need to be efficient.

533
00:34:17,240 --> 00:34:20,280
If you ask them, okay, great, how do you find that product?

534
00:34:20,280 --> 00:34:21,280
That's the next question to ask.

535
00:34:21,280 --> 00:34:22,920
How do you go and find product?

536
00:34:22,920 --> 00:34:26,520
The answer to that is I have to drive around a bunch and look.

537
00:34:26,520 --> 00:34:27,820
That's an immediate red flag.

538
00:34:27,820 --> 00:34:33,160
If you are wasting time by driving up and down aisles looking for product, trying to

539
00:34:33,160 --> 00:34:37,280
identify, because it's either not marked correctly, it's not in the right location that the system

540
00:34:37,280 --> 00:34:44,400
thinks it's in, or the system is just wrong, then you very quickly start again throwing

541
00:34:44,400 --> 00:34:46,680
dollars back to your reference of $100 bills.

542
00:34:46,680 --> 00:34:52,320
You're throwing $100 bills out the door just having people drive around on forklifts.

543
00:34:52,320 --> 00:34:55,200
That's a huge, huge red flag.

544
00:34:55,200 --> 00:34:56,480
The next one is damage.

545
00:34:56,480 --> 00:35:03,160
If you start to see a lot of scrap in warehouses, whether that be packaging materials, whether

546
00:35:03,160 --> 00:35:08,320
that's raw materials, that's finished goods, if there's a large scrap department and how

547
00:35:08,320 --> 00:35:14,880
you get rid of that, that is just pure margin hit because you're throwing away product that

548
00:35:14,880 --> 00:35:20,480
you spent a lot of money on to hold and now you're disposing of it, which most of the

549
00:35:20,480 --> 00:35:22,840
time you're not getting any money back on that.

550
00:35:22,840 --> 00:35:27,880
In some cases, depending on what the product is, let's say if it's some type of commodity

551
00:35:27,880 --> 00:35:32,240
and there's some recycling opportunity there, sure, you might get a few pennies on the dollar,

552
00:35:32,240 --> 00:35:39,400
but for the most part, anything your employees damage in your warehouse is just a pure loss.

553
00:35:39,400 --> 00:35:42,040
That's a red flag as well if you start to see that.

554
00:35:42,040 --> 00:35:45,080
That means there isn't a culture of caring about the product.

555
00:35:45,080 --> 00:35:48,000
How are you training your employees to pick it up with a forklift, put it down with a

556
00:35:48,000 --> 00:35:54,440
truck, and then it becomes a question of customer satisfaction of escapes.

557
00:35:54,440 --> 00:35:58,280
One of the biggest things from a warehouse distribution perspective, and this applies

558
00:35:58,280 --> 00:36:03,320
to both manufacturing as well, is how do you prevent your customer from being impacted

559
00:36:03,320 --> 00:36:06,480
by those bad practices.

560
00:36:06,480 --> 00:36:11,320
Very quickly and easily in a 15, 20-minute walk around a warehouse facility, if you can

561
00:36:11,320 --> 00:36:16,160
visually see those things and ask an operator how do they know what to work on next and

562
00:36:16,160 --> 00:36:19,920
how do they know what their goal is, that very quickly tells you whether or not you

563
00:36:19,920 --> 00:36:21,360
need to go a little deeper.

564
00:36:21,360 --> 00:36:24,280
That's all I got for you, Mr. Bandy.

565
00:36:24,280 --> 00:36:26,480
Well, that was some good insights there.

566
00:36:26,480 --> 00:36:31,640
I think there's a couple, the dusty learning, the part that was funny too, but that's one

567
00:36:31,640 --> 00:36:33,520
of those that I always enjoy.

568
00:36:33,520 --> 00:36:37,560
For me, that equivalent is when I go to a DC and I go see a pile of paper on the back

569
00:36:37,560 --> 00:36:39,040
bay doors.

570
00:36:39,040 --> 00:36:42,040
I know you're not using the system because you got this pile of paper, why the heck is

571
00:36:42,040 --> 00:36:43,040
it in the system already?

572
00:36:43,040 --> 00:36:46,640
Either A, you're not leveraging a system that will allow you to fully automate, or B, you're

573
00:36:46,640 --> 00:36:50,320
so backed up that you can't code it in.

574
00:36:50,320 --> 00:36:56,680
I think that's interesting is now we've gone through what it is, some of the value of it

575
00:36:56,680 --> 00:36:58,720
financially and some of the other components.

576
00:36:58,720 --> 00:37:04,400
I think a lot of our listeners are business folks and sit at these businesses and they

577
00:37:04,400 --> 00:37:08,000
may be thinking to themselves, gee, there's a lot of great information.

578
00:37:08,000 --> 00:37:10,440
Seems like James is really knowledgeable.

579
00:37:10,440 --> 00:37:14,960
I wonder how knowledgeable and how well my organization's working.

580
00:37:14,960 --> 00:37:19,520
I think that's one of the things we always do when we hear something is we bring it internal.

581
00:37:19,520 --> 00:37:24,640
If I'm trying to understand my maturity level and I'm a business operator, what are some

582
00:37:24,640 --> 00:37:29,560
things or how do I think or how can I go investigate my maturity level and do a little of my own

583
00:37:29,560 --> 00:37:34,520
sleuthing and research to know where I am on that continuum that we discussed?

584
00:37:34,520 --> 00:37:39,640
The way we approach that is with an initial assessment.

585
00:37:39,640 --> 00:37:46,160
Fortunately enough, you can combine both the technology side of the world and the business

586
00:37:46,160 --> 00:37:49,320
process human side of that into a single assessment.

587
00:37:49,320 --> 00:37:56,160
Travis has got experience of being asked to come in from both angles where a client goes,

588
00:37:56,160 --> 00:37:58,160
hey, I don't think I'm using the technology right.

589
00:37:58,160 --> 00:37:59,240
Can you go look at it?

590
00:37:59,240 --> 00:38:03,120
While you're looking at it, take a look at how my operators are operating.

591
00:38:03,120 --> 00:38:05,920
From the flip side, I know I've got a bad operation here.

592
00:38:05,920 --> 00:38:07,880
I know I've got an inefficient warehouse.

593
00:38:07,880 --> 00:38:10,920
Can you also just check if I'm using the system correctly?

594
00:38:10,920 --> 00:38:11,920
It can go either way.

595
00:38:11,920 --> 00:38:16,880
Either way is an entry point into this discussion.

596
00:38:16,880 --> 00:38:23,480
What we like to do is go in and use our toolkit of process maps and value stream mapping to

597
00:38:23,480 --> 00:38:27,240
understand how everything's linked together in the business.

598
00:38:27,240 --> 00:38:32,960
As we said at the beginning, you've got this need for information to come from sales and

599
00:38:32,960 --> 00:38:36,360
procurement that has to feed that warehouse to make sure they know what's coming in and

600
00:38:36,360 --> 00:38:38,400
what should be going out.

601
00:38:38,400 --> 00:38:41,320
That process needs to be tightly linked together.

602
00:38:41,320 --> 00:38:46,120
Then you've actually got the goal and process management of the people on the floor.

603
00:38:46,120 --> 00:38:51,200
Are they able to go and drive to accomplish the goals that are set for them on a daily

604
00:38:51,200 --> 00:38:53,440
basis?

605
00:38:53,440 --> 00:38:57,000
Looking at that process, looking at the data that's available, and obviously every client's

606
00:38:57,000 --> 00:39:00,760
got a different level of maturity and quality integrity of data.

607
00:39:00,760 --> 00:39:06,600
If we can look at what's in inventory, how quickly is it turning and start to stratify

608
00:39:06,600 --> 00:39:09,280
that into various segments.

609
00:39:09,280 --> 00:39:14,040
We haven't even started to talk yet about ABC inventory analysis, which is a huge topic

610
00:39:14,040 --> 00:39:17,300
in and of itself.

611
00:39:17,300 --> 00:39:22,200
If you start to think about your warehouse in the different segments that you have to

612
00:39:22,200 --> 00:39:26,560
serve, whether that be product lines, whether that be the ABC moves, whether it be for all

613
00:39:26,560 --> 00:39:30,960
material and finished goods, you start to break that down into digestible chunks.

614
00:39:30,960 --> 00:39:35,640
As we do, we start to put plans together on how do we improve those because not each one

615
00:39:35,640 --> 00:39:39,880
of those different segmentations needs the same approach.

616
00:39:39,880 --> 00:39:43,760
You might have different approaches across the facility.

617
00:39:43,760 --> 00:39:48,400
What we try to do is we try to build a list of projects that will have meaningful impact

618
00:39:48,400 --> 00:39:50,720
into the business.

619
00:39:50,720 --> 00:39:55,680
Then on the technology side, which is really fun these days, is start to work on system

620
00:39:55,680 --> 00:39:57,880
configuration and capability.

621
00:39:57,880 --> 00:40:03,960
Are you paying for a WMS system that you might only be using 10% of the capability?

622
00:40:03,960 --> 00:40:06,280
How do we start to increase that utilization?

623
00:40:06,280 --> 00:40:10,080
Because you're spending a lot of money on license costs and not getting the value out

624
00:40:10,080 --> 00:40:11,080
of it.

625
00:40:11,080 --> 00:40:13,760
We try and look at it from that perspective as well.

626
00:40:13,760 --> 00:40:14,760
They're heavily linked.

627
00:40:14,760 --> 00:40:19,640
You want to use the technology to enable yourself to manage the business and have that data

628
00:40:19,640 --> 00:40:23,780
and insight and not be flying blind.

629
00:40:23,780 --> 00:40:28,100
From there, figuring out what else you need, you look at people.

630
00:40:28,100 --> 00:40:29,920
People becomes a huge component of this.

631
00:40:29,920 --> 00:40:34,160
Do you have the right skill set, the right leadership, the right structure?

632
00:40:34,160 --> 00:40:38,760
Depending on how many shifts you're running in your warehouse, that can impact you heavily.

633
00:40:38,760 --> 00:40:46,880
If you're a type of business that is reliant on external logistics companies to pick up

634
00:40:46,880 --> 00:40:50,240
product, you're somewhat at the mercy of their schedule.

635
00:40:50,240 --> 00:40:52,160
You're going to be told, hey, this truck's coming today.

636
00:40:52,160 --> 00:40:56,060
You're going to be delivering at eight o'clock and you've got to assign a doctor to it.

637
00:40:56,060 --> 00:40:58,480
Your pickup's happening at 2 p.m. because that's when the driver's available.

638
00:40:58,480 --> 00:40:59,680
That's when the truck's available.

639
00:40:59,680 --> 00:41:05,880
You've got to manage your actual receiving and unloading process around a schedule that

640
00:41:05,880 --> 00:41:08,640
you may have very little input on.

641
00:41:08,640 --> 00:41:12,960
There's the whole truck side of things that we haven't even really gotten into yet.

642
00:41:12,960 --> 00:41:19,320
From there, from a people perspective, it's leadership and managing metrics.

643
00:41:19,320 --> 00:41:22,240
As with anything, you only can improve what you measure.

644
00:41:22,240 --> 00:41:24,240
If you don't have a baseline, you don't know what you're starting with, you don't know

645
00:41:24,240 --> 00:41:29,000
what your goals are, and your leaders aren't able to hold their teams accountable to those

646
00:41:29,000 --> 00:41:32,440
goals, then you don't stand a chance really of improving things.

647
00:41:32,440 --> 00:41:37,640
We have to always go in and either see if that baseline exists or a lot of times, we've

648
00:41:37,640 --> 00:41:41,000
worked with a bunch of companies over the years that we've had to put that baseline

649
00:41:41,000 --> 00:41:43,600
in to even be able to start improving.

650
00:41:43,600 --> 00:41:44,600
We go, hey, it's a process deployment.

651
00:41:44,600 --> 00:41:49,240
It's not even process improvement at this stage of your maturity curve.

652
00:41:49,240 --> 00:41:54,720
That becomes a good way of seeing if there's opportunity or not when it comes to improving

653
00:41:54,720 --> 00:41:55,720
the warehouse.

654
00:41:55,720 --> 00:41:58,200
I really like the comment around KPIs.

655
00:41:58,200 --> 00:42:02,280
Here on the podcast, we're big on data-driven decision-making.

656
00:42:02,280 --> 00:42:06,600
I think looking at those KPIs and having something to hitch to is pretty good.

657
00:42:06,600 --> 00:42:07,600
I'm going to put you on the spot.

658
00:42:07,600 --> 00:42:10,480
This is not something we prep for, but I think it's a fun one because I'm going to go back

659
00:42:10,480 --> 00:42:11,720
to the dust thing.

660
00:42:11,720 --> 00:42:15,320
We talked about, I'm talking to my team and I think some of these things are outputs that

661
00:42:15,320 --> 00:42:17,400
you discussed in some of those.

662
00:42:17,400 --> 00:42:23,680
If I had to ask one question of a warehouse operator and by that one question, I could

663
00:42:23,680 --> 00:42:29,720
derive where they were on the continuum, what would be a good question to ask and say, hey,

664
00:42:29,720 --> 00:42:31,280
it's blank, blank, blank, blank, blank.

665
00:42:31,280 --> 00:42:34,840
Then they can take that answer and come to you and say, here's what I heard.

666
00:42:34,840 --> 00:42:36,680
You can help them understand where they are.

667
00:42:36,680 --> 00:42:39,240
We're going for the deep questions on this cast now.

668
00:42:39,240 --> 00:42:40,720
We're not keeping it surface level.

669
00:42:40,720 --> 00:42:42,440
We're stepping outside your comfort zone.

670
00:42:42,440 --> 00:42:43,440
I like it.

671
00:42:43,440 --> 00:42:50,040
Yeah, I think working with the frontline personnel is always the most valuable in these situations

672
00:42:50,040 --> 00:42:52,680
because they know the job.

673
00:42:52,680 --> 00:42:59,240
It's one thing to talk to a COO or a general manager or a warehouse manager, but the people

674
00:42:59,240 --> 00:43:03,440
who actually pick up the product and put it down on a truck, they are the ones that truly

675
00:43:03,440 --> 00:43:07,360
know what the pain points and issues are.

676
00:43:07,360 --> 00:43:13,280
I think the question you can rely on to ask is, do you have all the information and tools

677
00:43:13,280 --> 00:43:16,640
you need to be successful?

678
00:43:16,640 --> 00:43:21,880
If they are able to proudly say, yes, I know what I should be picking, where it is and

679
00:43:21,880 --> 00:43:26,400
where to put it, if they can confidently answer that question, then you've probably got a

680
00:43:26,400 --> 00:43:28,440
pretty good operation.

681
00:43:28,440 --> 00:43:31,880
If they tell you, turn around and say, yes, I know where my inventory is, but my forklift

682
00:43:31,880 --> 00:43:38,040
breaks down every other week, pretty good indication of what your problems are.

683
00:43:38,040 --> 00:43:41,480
If they turn around and say, I don't even have the right tool for the job or you start

684
00:43:41,480 --> 00:43:46,280
to see them duct taping things in the warehouse, it's all those signs.

685
00:43:46,280 --> 00:43:49,560
Going straight to the front lines and asking them, do you have the information and tools

686
00:43:49,560 --> 00:43:53,240
to be successful, would probably be the question to start with.

687
00:43:53,240 --> 00:43:54,240
I like it.

688
00:43:54,240 --> 00:43:55,240
That's a great perspective.

689
00:43:55,240 --> 00:43:58,480
I used to work with a guy that would go to warehouses all the time, and his question

690
00:43:58,480 --> 00:44:00,760
was, what's the last thing you improved?

691
00:44:00,760 --> 00:44:05,080
I think that that really doesn't get you as deep as your question because everyone's going

692
00:44:05,080 --> 00:44:07,320
to have something last thing improved.

693
00:44:07,320 --> 00:44:09,520
At the house, I am always answering my improvements.

694
00:44:09,520 --> 00:44:12,440
I don't really like to focus on the things I'm not doing well.

695
00:44:12,440 --> 00:44:13,440
That's a good perspective.

696
00:44:13,440 --> 00:44:14,720
I like that, going to the front line.

697
00:44:14,720 --> 00:44:19,320
I think that's one of the things that I also, when I joined Trivista, which by the way,

698
00:44:19,320 --> 00:44:22,800
everyone, I hit my five year anniversary, so I don't have the tenure that you two fine

699
00:44:22,800 --> 00:44:25,240
folks have, but just hit my five.

700
00:44:25,240 --> 00:44:28,960
I think one of the things I respect about the firm is we go out, get on the floor and

701
00:44:28,960 --> 00:44:30,040
have those conversations.

702
00:44:30,040 --> 00:44:34,280
I think you proved that just in your answer there, so I respect that answer.

703
00:44:34,280 --> 00:44:39,200
I'm on my path of wanting to be the best in the industry, and I'm on my growth path, and

704
00:44:39,200 --> 00:44:40,480
I'm working my way through it.

705
00:44:40,480 --> 00:44:41,680
Now I have some understanding.

706
00:44:41,680 --> 00:44:43,360
I understand financial implications.

707
00:44:43,360 --> 00:44:46,880
I've talked to the team where I'm at.

708
00:44:46,880 --> 00:44:54,440
On that path to excellence, how would you bucketize that path in as I'm new or I'm along

709
00:44:54,440 --> 00:44:56,200
the way or I'm immature?

710
00:44:56,200 --> 00:44:59,440
How do you articulate where somebody is in that?

711
00:44:59,440 --> 00:45:04,200
I think understanding and being able to have those conversations, let's say at board level,

712
00:45:04,200 --> 00:45:10,080
but then drive the need to maybe reach out to a group like us and say, we need help.

713
00:45:10,080 --> 00:45:15,920
How do I talk about where I am on the journey and then express that to business folks so

714
00:45:15,920 --> 00:45:19,220
I can go get help to move up the curve?

715
00:45:19,220 --> 00:45:25,120
If you could also define bucketize for me and maybe everybody else who ever listens

716
00:45:25,120 --> 00:45:27,560
to this, that would be helpful too, Mr. Lowe.

717
00:45:27,560 --> 00:45:31,800
By the way, Mr. Bandy, is that a technical term, bucketize?

718
00:45:31,800 --> 00:45:32,800
I believe so.

719
00:45:32,800 --> 00:45:34,400
Bucketization of information.

720
00:45:34,400 --> 00:45:35,400
Bucketization.

721
00:45:35,400 --> 00:45:43,160
Yeah, I'm going to bucket your question to the side and let Dave talk about that continuation.

722
00:45:43,160 --> 00:45:45,520
Besides how do you group?

723
00:45:45,520 --> 00:45:48,240
Sorry, let me be more proper.

724
00:45:48,240 --> 00:45:52,720
How do you group those things and how do I articulate that?

725
00:45:52,720 --> 00:46:01,160
The buckets I would use are definitely around the probably for most of our clients these

726
00:46:01,160 --> 00:46:06,320
days it's about how they introduce technology into the warehouse.

727
00:46:06,320 --> 00:46:12,920
You go back before most of our clients were using sophisticated ERP WMS systems and everything

728
00:46:12,920 --> 00:46:13,920
was paper.

729
00:46:13,920 --> 00:46:19,600
Everything was you get a pick ticket, you go and find the product manually, you take

730
00:46:19,600 --> 00:46:23,160
it to a staging area and you put it on a truck and you're handing manifests over, you're

731
00:46:23,160 --> 00:46:29,200
handing pick tickets over, everything's being signed off completely by human hands on pencil

732
00:46:29,200 --> 00:46:31,040
paper.

733
00:46:31,040 --> 00:46:34,920
The other end of the spectrum becomes full automation.

734
00:46:34,920 --> 00:46:40,600
We can use the Amazon reference where very little humans actually walk around that facility.

735
00:46:40,600 --> 00:46:47,880
It's a lot of robotics, a lot of automation and barcode scanning, RFID.

736
00:46:47,880 --> 00:46:50,920
Very few companies are actually at that level of maturity.

737
00:46:50,920 --> 00:46:58,960
You've got the whole spectrum there and there's how many milestones you could put between

738
00:46:58,960 --> 00:46:59,960
the two.

739
00:46:59,960 --> 00:47:07,120
That's a lot, but the buckets in that that you can think about as one of our clients

740
00:47:07,120 --> 00:47:13,960
is let's say you want to get to some of the industry best practices of barcodes.

741
00:47:13,960 --> 00:47:14,960
Barcodes is a simple one.

742
00:47:14,960 --> 00:47:21,720
If you're able to reduce the manual input of SKUs, PO numbers, sales order numbers,

743
00:47:21,720 --> 00:47:25,600
any of that information can be barcoded.

744
00:47:25,600 --> 00:47:30,080
Great improvement because you take out human error of fat fingering data into a system

745
00:47:30,080 --> 00:47:34,960
and you speed up the process of identifying is this the right location?

746
00:47:34,960 --> 00:47:35,960
Is it the right product?

747
00:47:35,960 --> 00:47:38,560
Am I putting it in the right place?

748
00:47:38,560 --> 00:47:43,640
If you're able to go in a warehouse and see barcodes pretty perfectly across the facility,

749
00:47:43,640 --> 00:47:48,520
whether that be bin locations, staging locations on the product itself, that's a pretty good

750
00:47:48,520 --> 00:47:53,440
milestone to try and go for is that barcoding piece.

751
00:47:53,440 --> 00:48:00,040
The next one's going to be around the actual handheld systems that employees are using.

752
00:48:00,040 --> 00:48:08,160
Again, the paper to electronic transition of am I being told what to do because my manager

753
00:48:08,160 --> 00:48:13,240
physically comes and hands me a piece of paper or am I being told what to do because the

754
00:48:13,240 --> 00:48:20,040
computer system is able to do directed picking, directed put away and I can just follow essentially

755
00:48:20,040 --> 00:48:24,160
what the system is telling me to do because it's got enough logic built into it that it

756
00:48:24,160 --> 00:48:29,160
can guide me and be somewhat of a manager itself.

757
00:48:29,160 --> 00:48:31,240
The managers end up then just managing by exception.

758
00:48:31,240 --> 00:48:35,000
They don't have to go and babysit and make sure all the employees are picking the right

759
00:48:35,000 --> 00:48:36,800
stuff at the right time.

760
00:48:36,800 --> 00:48:42,360
The next step in that curve, some of the best practices we like to see is more on the inventory

761
00:48:42,360 --> 00:48:43,360
management side.

762
00:48:43,360 --> 00:48:49,960
I use the phrase there, directed picking, directed put away is do you have a business that, again,

763
00:48:49,960 --> 00:48:58,200
the system is driving you to best utilize all your pallet locations because if you're

764
00:48:58,200 --> 00:49:04,960
a business that has dedicated primary pick locations, you usually have overflow inventory,

765
00:49:04,960 --> 00:49:09,800
excess inventory that is overstock that you're going to be pulling from.

766
00:49:09,800 --> 00:49:13,680
The system should be able to tell you, hey, this bin's getting empty.

767
00:49:13,680 --> 00:49:17,360
Material handler person, you go grab a pallet of it and bring it to the primary pick location

768
00:49:17,360 --> 00:49:22,040
so that the pickers don't have to travel two, three, four times as much to go pick it from

769
00:49:22,040 --> 00:49:24,400
the overstock location.

770
00:49:24,400 --> 00:49:27,400
That's another gating item.

771
00:49:27,400 --> 00:49:32,440
The other piece that we've seen a lot more get introduced is license plates.

772
00:49:32,440 --> 00:49:37,120
Actually be able to monitor discrete pieces of inventory because you're giving them a

773
00:49:37,120 --> 00:49:44,800
unique ID number inside the system versus a lot of times, if you're doing a basic WMS

774
00:49:44,800 --> 00:49:49,280
location and running a warehouse that way, you are simply telling it, hey, I got another

775
00:49:49,280 --> 00:49:52,280
pallet of SKUX and it's a thousand pieces.

776
00:49:52,280 --> 00:49:53,280
I already have a thousand pieces.

777
00:49:53,280 --> 00:49:56,280
Now there's two thousand, but I don't know which one's older, which one's newer.

778
00:49:56,280 --> 00:49:57,280
I don't know where the new one is.

779
00:49:57,280 --> 00:49:58,280
I don't know where the old one is.

780
00:49:58,280 --> 00:50:03,520
Whereas if you're giving it a unique warehouse license plate number and you tell it, hey,

781
00:50:03,520 --> 00:50:09,800
license plate Y is in that location, it can now start to handle that inventory churn and

782
00:50:09,800 --> 00:50:12,360
turnover that you want.

783
00:50:12,360 --> 00:50:18,360
If you're doing bulk picking versus piece picking and you know you've got a full pallet

784
00:50:18,360 --> 00:50:24,160
of something and a customer orders a full pallet's worth of product, you now don't

785
00:50:24,160 --> 00:50:27,160
have to go and build a pallet of that based on multiple boxes.

786
00:50:27,160 --> 00:50:29,760
You can go and just pull that full pallet because the system knows it exists.

787
00:50:29,760 --> 00:50:31,680
It knows how much is on it.

788
00:50:31,680 --> 00:50:34,240
That's another big step.

789
00:50:34,240 --> 00:50:39,320
Then you start to get into some of the more automation, cobot, semi-automation, whatever

790
00:50:39,320 --> 00:50:42,560
phrase you want to use, and that's a big step.

791
00:50:42,560 --> 00:50:47,640
That's a pretty big step for our clients because it's a trade-off of labor cost versus a significant

792
00:50:47,640 --> 00:50:50,560
investment because it's not just buying a robot.

793
00:50:50,560 --> 00:50:55,360
It's buying the systems to operate and optimize that robot and then having a support staff

794
00:50:55,360 --> 00:51:02,240
in the background who can run it for you because now you're going from relatively entry-level

795
00:51:02,240 --> 00:51:08,080
warehouse employees to pretty sophisticated engineers from a salary comp perspective to

796
00:51:08,080 --> 00:51:09,840
go and operate those robots.

797
00:51:09,840 --> 00:51:13,960
It's not as simple as, hey, I'm just going to buy a robot and throw it in the warehouse.

798
00:51:13,960 --> 00:51:14,960
We've implemented those.

799
00:51:14,960 --> 00:51:20,080
We've worked with a couple of vendors to put those in place, but the volume you have to

800
00:51:20,080 --> 00:51:25,320
be driving through a warehouse to justify that is pretty high as well as it needs to

801
00:51:25,320 --> 00:51:29,300
be product that can be handled by that robot.

802
00:51:29,300 --> 00:51:34,360
For our clients, industrial-type clients, the product's too heavy for robots anyway.

803
00:51:34,360 --> 00:51:37,800
The robot physically can't even move it because it needs to have the weight capacity of a

804
00:51:37,800 --> 00:51:40,880
forklift and it's not going to happen.

805
00:51:40,880 --> 00:51:42,000
Actually, I will go back.

806
00:51:42,000 --> 00:51:46,200
There's one cool thing you can do that, again, it depends on the product and your business,

807
00:51:46,200 --> 00:51:48,600
is wire-guided forklifts.

808
00:51:48,600 --> 00:51:53,480
You start to think about capacity and optimization of a warehouse.

809
00:51:53,480 --> 00:51:56,800
You want to fit as much in as possible, but in order to do that, you need to make the

810
00:51:56,800 --> 00:51:59,520
aisle width as narrow as possible.

811
00:51:59,520 --> 00:52:03,560
You can get into a whole rabbit hole here of material handling equipment, opportunities

812
00:52:03,560 --> 00:52:05,280
to improve.

813
00:52:05,280 --> 00:52:10,600
If you're able to do wire-guided forklifts and you're no longer worried about human error

814
00:52:10,600 --> 00:52:14,840
of crashing into an upright of your racks and knocking the whole building down, that's

815
00:52:14,840 --> 00:52:16,600
a pretty cool step to get to.

816
00:52:16,600 --> 00:52:17,600
It's expensive.

817
00:52:17,600 --> 00:52:23,000
Again, you think about the payback period of going to that level of sophistication, but

818
00:52:23,000 --> 00:52:29,760
if you've got the right product mix and the right pick profiles to support that, it's

819
00:52:29,760 --> 00:52:30,760
a worthwhile endeavor.

820
00:52:30,760 --> 00:52:36,160
One of the examples I've seen at Best Used was a manufacturing facility that had a lot

821
00:52:36,160 --> 00:52:38,800
of jigs and fixtures for all their products.

822
00:52:38,800 --> 00:52:43,600
It was a metal fab facility, so heavy jigs, heavy fixtures that they used to put steel

823
00:52:43,600 --> 00:52:47,240
pieces in to stage everything right and weld it all up.

824
00:52:47,240 --> 00:52:50,360
They had, I don't know, a couple thousand jigs and fixtures.

825
00:52:50,360 --> 00:52:56,000
The question becomes, how do I quickly pick those, put those away and get them to the

826
00:52:56,000 --> 00:52:59,600
welders because at the end of the day, the welder is the most expensive labor part of

827
00:52:59,600 --> 00:53:00,600
that business.

828
00:53:00,600 --> 00:53:01,920
I need to be able to get them their fixtures.

829
00:53:01,920 --> 00:53:04,520
I can't have welders walking around going to find those.

830
00:53:04,520 --> 00:53:10,160
They put in a wire-guided, it was only three aisles of racking, but this one person just

831
00:53:10,160 --> 00:53:15,320
all day just drove up and down those aisles on a wire-guided system, picking and pulling

832
00:53:15,320 --> 00:53:16,320
jigs and fixtures.

833
00:53:16,320 --> 00:53:19,000
Again, that's not even a finished good we're talking about.

834
00:53:19,000 --> 00:53:20,200
It's not even a raw material we're talking about.

835
00:53:20,200 --> 00:53:24,680
We're literally talking about something that is used in the process itself that the customer

836
00:53:24,680 --> 00:53:29,420
doesn't see that as a value add of how do I get my jigs and fixtures.

837
00:53:29,420 --> 00:53:33,360
The business realized, hey, this is a huge cost for us.

838
00:53:33,360 --> 00:53:36,800
That's a complete different angle on how do you go after warehouse optimization.

839
00:53:36,800 --> 00:53:39,040
No, I really appreciate that.

840
00:53:39,040 --> 00:53:42,200
I think those are some very visual things that our listeners can go out to their own

841
00:53:42,200 --> 00:53:43,960
warehouse and see pretty easy.

842
00:53:43,960 --> 00:53:48,320
The other thing I loved is there's a lot of tech in those answers.

843
00:53:48,320 --> 00:53:52,000
Next episode, I'm pretty excited for, there's going to be some good conversation.

844
00:53:52,000 --> 00:53:55,760
It's interesting, you made me think about, I am at a conference here right now, like

845
00:53:55,760 --> 00:54:01,200
we discussed at the top of the call, but Nvidia yesterday announced, and I'm not sure if anybody

846
00:54:01,200 --> 00:54:06,840
saw it, but their CEO came out and said that IT departments will become like HR departments

847
00:54:06,840 --> 00:54:08,840
in support of systems.

848
00:54:08,840 --> 00:54:13,480
The idea being is no longer you're going to be a build and create and run, it's more support

849
00:54:13,480 --> 00:54:14,480
and be around.

850
00:54:14,480 --> 00:54:18,760
You called out, which I think is an interesting call out, is as you add these systems, there

851
00:54:18,760 --> 00:54:22,000
is a support mechanism or a support team that goes behind it.

852
00:54:22,000 --> 00:54:23,620
It's not just the folks on the floor.

853
00:54:23,620 --> 00:54:25,280
You add cost of ongoing maintenance.

854
00:54:25,280 --> 00:54:29,120
I think all of us, when you initially buy that vehicle and then you continue those years

855
00:54:29,120 --> 00:54:31,600
of maintenance, it's there and those systems aren't.

856
00:54:31,600 --> 00:54:35,280
I think that's a pretty interesting call out for some of our folks on the line is, and

857
00:54:35,280 --> 00:54:39,280
I think I'm sure you do a lot of the financial analysis of my upfront cost versus my ongoing

858
00:54:39,280 --> 00:54:41,160
cost versus doing it the way I do.

859
00:54:41,160 --> 00:54:42,160
It's a great call out.

860
00:54:42,160 --> 00:54:44,800
The other part of being at the conference, it's interesting you say that.

861
00:54:44,800 --> 00:54:51,720
I walked by the industrial section and it had goods to people, pilot robots, full automation,

862
00:54:51,720 --> 00:54:56,960
RFI with hyper awareness down to a single inch, all these things are driving some of

863
00:54:56,960 --> 00:54:57,960
those.

864
00:54:57,960 --> 00:55:00,200
I think it's interesting that you say that's high on the maturity curve because if you

865
00:55:00,200 --> 00:55:03,080
see these guys, they're selling you, it's like everyone's doing it.

866
00:55:03,080 --> 00:55:05,800
The CapEx is extreme to get there.

867
00:55:05,800 --> 00:55:07,680
It's not really something that a lot of folks are doing.

868
00:55:07,680 --> 00:55:09,760
It's still that bleeding leading edge.

869
00:55:09,760 --> 00:55:11,240
I appreciate that.

870
00:55:11,240 --> 00:55:13,360
My last question before I kick it back to you, Mike.

871
00:55:13,360 --> 00:55:17,240
I know, James, beginning of your career, we probably focused more on PE.

872
00:55:17,240 --> 00:55:21,560
Over time, I know that Trivista has changed and now we're not just only PE focused.

873
00:55:21,560 --> 00:55:25,240
We have a bunch of other folks in the middle market, but I'd be remiss with all your years

874
00:55:25,240 --> 00:55:27,620
of experience to not ask.

875
00:55:27,620 --> 00:55:34,120
If you put on your PE hat for warehouse optimization as a PE operating partner, as a PE leadership

876
00:55:34,120 --> 00:55:41,640
team or even as a PE group, why should I be interested in warehouse optimization?

877
00:55:41,640 --> 00:55:46,560
Why are PE folks and PE companies interested in this and why do we get engaged and get

878
00:55:46,560 --> 00:55:51,300
calls to go to their port coast to do some of the very things you discussed?

879
00:55:51,300 --> 00:55:55,040
You just close us on a PE lens.

880
00:55:55,040 --> 00:55:59,280
A lot of the times, private equity calls us because things have started to get formed

881
00:55:59,280 --> 00:56:01,760
poorly when it comes to the KPIs.

882
00:56:01,760 --> 00:56:06,480
We talked briefly about on time and full OTIF is a huge metric.

883
00:56:06,480 --> 00:56:08,920
Customer satisfaction is a huge metric.

884
00:56:08,920 --> 00:56:13,640
If a private equity firm senses that warehouses are struggling to meet the demand and customers

885
00:56:13,640 --> 00:56:18,860
are dissatisfied and they start to see that softening of the top line, it becomes pretty

886
00:56:18,860 --> 00:56:21,880
obvious that who's the customer touching?

887
00:56:21,880 --> 00:56:26,640
A lot of times, the last person to touch your product is a warehouse employee.

888
00:56:26,640 --> 00:56:31,880
You start from the customer backwards of why is that experience bad?

889
00:56:31,880 --> 00:56:37,680
That can become a huge issue to try and fix for when you go to sell the business.

890
00:56:37,680 --> 00:56:41,320
If you're doing due diligence and you've got somebody walking through your warehouse

891
00:56:41,320 --> 00:56:46,920
and they see the things we sometimes see when we walk around, the warehouse becomes a huge

892
00:56:46,920 --> 00:56:55,280
risk on that transaction, then you want that warehouse to be as clean and organized and

893
00:56:55,280 --> 00:57:00,360
as safe as possible because that can become a huge risk for a private equity firm, whether

894
00:57:00,360 --> 00:57:02,480
that be a manufacturing site or a distribution site.

895
00:57:02,480 --> 00:57:07,000
Obviously, if it's distribution, all the focus is on that, but as a manufacturing site, it

896
00:57:07,000 --> 00:57:09,400
should also be a huge differentiator.

897
00:57:09,400 --> 00:57:12,220
Well, James Lowe, thank you very much.

898
00:57:12,220 --> 00:57:13,800
Great having you.

899
00:57:13,800 --> 00:57:17,560
Great your thoughts on warehouse optimization and helping everybody understand, not just

900
00:57:17,560 --> 00:57:23,560
a buzzword, really a means of competitive advantage if you can get it done right, if

901
00:57:23,560 --> 00:57:26,680
we all understood everything that you shared with us today.

902
00:57:26,680 --> 00:57:31,640
My key takeaways were start by assessing where you stand today.

903
00:57:31,640 --> 00:57:35,920
In the next episode, we'll dive deeper into fixing some of those bottlenecks, leveraging

904
00:57:35,920 --> 00:57:40,460
technology to do it, and building data-driven efficiency.

905
00:57:40,460 --> 00:57:42,160
Don't miss it, everyone.

906
00:57:42,160 --> 00:57:47,560
We'll talk to you soon, and again, Mr. Lowe, thank you very much, and we look forward to

907
00:57:47,560 --> 00:58:13,660
chatting with you again in the near future.