Look to the Sky to Increase Warehouse Productivity?

Look to Sky-Trax to Increase Warehouse Productivity

Background Information

TotalTrax is a new company formed via the merger of Rush Tracking Systems (http://www.rushtrackingsystems.com) and Sky-Trax, Inc. (http://www.sky-trax.com). The merger was completed in July 2011. TotalTrax is a portfolio company of Pharos Capital Group (Pharos), a private equity firm with $600 million in capital under management. Pharos supported both the merger and this acquisition with an additional investment. Concurrent with the acquisition of the equipment monitoring product line, the Company announced its new name, TotalTrax, Inc.  This white paper was originally written prior to this merger.

We recently spoke to Larry Mahan who is one of three founders (Bill Conley and Dave Emanuel are the other two) of a company called Sky-Trax (note the hyphen - this company should not be confused with SkyTrax which is in the airline review business). The founders of Sky-Trax originated from DuPont where they had been involved in deploying numerous technologies designed to improve the real time tracking of personnel, assets, equipment, and inventory within the manufacturing and distribution environments.  They founded Sky-Trax in 2004 to pioneer a new generation of optical technology that has since been deployed in 30+ manufacturing and distribution operations in many countries around the world including: New Zealand; Australia; Spain; England; Germany; Sweden and the U.S..

This article provides insight into: Sky-Trax and how their optical real time technology works; who is buying this technology and why; and the cost-benefits of the solution.

Optical Real Time Technology - What Is It and What Are the Benefits?

The Sky-Trax technology application is best described as follows:

1. Each piece of mobile equipment is equipped with a piece of machine vision equipment that is produced by Sky-Trax.  This equipment is based on image processing technology that enables image capture, translation and communication to a a centralized monitoring system.  In the industrial warehousing environment, the solution enables a company to record the real time movement of every vehicle within the facility. Perhaps a good analogy would be to consider this technology as an internal GPS locator system to track mobile equipment in a warehouse.  In short, the current and historical movement of every vehicle is recorded throughout the day.
2. The movement of every unit load (i.e. pallet) within the distribution center can also be recorded by the Total-Trax system so that a company always knows exactly where each pallet license plate has been placed within the four walls.  If anything ever gets lost, the audit trail is readily available to provide information on the pallet’s exact whereabouts.

If you find yourself saying “so what’s the big deal? We’ve been doing that for years with WMS solutions!” then be patient and read on, because this is something completely different.  To understand why it is different, we need to explain how it works down at floor level.

• The ceiling of the distribution facility is equipped with optical position markers which are literally printed strips that are quick and easy to hang from ceiling space every about 10’ - 12’ apart.  The markers are positioned throughout the complex so that all operating aisles and forklift travel areas are sufficiently covered.  The strips are basically a passive technology that consists of a Kevlar core encased in a black nylon jacket such that they are nearly invisible when hung from the ceiling.  The strips are used to communicate (via wireless network) with the optical equipment that is placed on each piece of mobile equipment in the facility.  Hence there is no costly wire-based infrastructure that is required to set the system up.

• As a forklift or other piece of mobile equipment travels within the building, the optical equipment that is on the vehicle is positioned in such a way to read the strips in the ceiling at least once or twice per second.  These readings are transmitted back to a central server to update a Sequel Server database that serves as the repository for all vehicle positioning data.  A supervisor looking at a screen will see a live animation of the facility layout with all vehicles moving within the complex.  The vehicle movement data is constantly being updated throughout the day in real time to create in effect a bread crumb trail of wherever that vehicle has traveled.

• The forklift trucks are equipped with an optical sensor technology that enables an operator to pick up a pallet that has a pallet license label without ever having to scan the pallet label.  The operator simply drives up to the pallet and picks it up without having to slow down and handle an RF scanning device to scan the pallet license plate.  Data from the license plate is automatically captured by the optical sensor technology equipment in one of two ways:
• The optical camera captures a photographic image of the pallet label which is then deciphered so that the on board computer can immediately understand the informational contents of the pallet license label (e.g. item number, UPC, quantity, Expiration Date, pallet ID, etc.); or...
• The lift truck is equipped with RFID reader equipment which captures data from a radio frequency identification tag placed on each pallet
• In either scenario, information from the pallet license plate is captured without the need for the forklift driver to slow down and stop the vehicle to scan the license plate.  While this may not seem like a big ticket, time and motion studies indicate that this represents a 6 to 15 second savings per stock movement transaction. 
• Let us say that the average is time saved to not scan a pallet is 10 seconds.  If an operation has 10 forklift drivers who perform 20 pallet moves per hour over the course of a shift and the fully loaded pay rate is $30/hour, this savings would be worth:
• 10 seconds x 20 moves/hour x 10 operators / 3600 seconds per hour x 8 hours per shift x 5 days/week x 52 weeks x $30/hr = $34,667/year which is a nominal 5.5% savings of the total forklift labor cost of $624,000/year.  Okay, that’s not a huge savings but it’s still money in the bank.
• More importantly, the real labor savings is derived from the fact that the system now understands exactly where each pallet license plate is being moved and has been moved to at any given point in time.  This is an important benefit because there are countless warehouses that have real time warehouse management systems complete with bar code scanning confirmation of all stock movement transactions and yet still people put product in the wrong place all the time.  This is especially true in warehouse environments where there is a high percentage of bulk floor storage!
• As operators must constantly shuffle pallets within floor storage lanes to maintain proper code date rotation, there is a higher tendency to make mistakes such that pallets of merchandise are relocated into wrong floor lanes or worse, lost entirely.  Then at the eleventh hour when the product is needed for an outbound order, it cannot be found and operators waste time searching for lost product.   Having an actual real time recording of the true physical movement of every pallet license plate resolves this issue instantaneously because the all pallet moves have been recorded in the database The WMS records the location address that the operator scanned which may not necessarily be where the operator placed the pallet. The operator may have mistakenly placed the pallet in an alternate aisle, rack, floor lane, etc. The Sky-Trax system records the actual physical location where the unit load was physically placed in the warehouse to within 1 or 2 inches of accuracy.  To this end, Sky-Trax truly does act like a GPS system within the 4 walls of the warehouse.
• Further to this point, the Sky-Trax system can advise an operator if and when a mistake is being made when the operator is placing a pallet to a wrong location so that WMS system directed tasks are proactively managed at the time the transaction is happening rather than after the fact.  In this scenario, Sky-Trax is closely integrated as a subsystem that talks in real time to the WMS system.
• Hence the big win out of this technology is that companies can instantly locate unit loads that would have otherwise gone missing and therefore would have resulted in many lost hours of wasted time resulting from operators searching for missing inventory.   The size of the benefit associated with the ability to locate missing inventory in real time at all times where the real money is saved.
• Sky-Trax is gathering client data to understand the magnitude of forklift time savings due to the use of their technology.  According to their estimates, the overall forklift productivity improvement at their client sites is in the range of 25 - 35% which tells us that if an operator saves say 5% of his time by eliminating the pallet scanning function then the balance of say 20% of the time savings is attributed to the elimination of searching for lost inventory. 
• For example, EastPack Company is one of the largest kiwifruit packing houses in New Zealand and after implementing Sky-Trax across 3 separate facilities they were able to reduce 24 forklift trucks and drivers down to 16. 
• Of course, these results will vary significantly by facility and the quality of the warehouse operation to begin with, but Sky-Trax has managed to consistently and significantly improve forklift productivity for a good number of operations.
• Below you can see an example of one client that experienced a 47% productivity increase within 20 weeks of deploying the Sky-Trax Solution.

• Its is important to note that the Sky-Trax system is not a WMS and is not intended to replace the role of a WMS, rather it is a subsystem that is integrated into your WMS application so that information on all actual stock movements can be captured and recorded.  The system directed putaway, letdown and stock movement commands will still originate from the WMS application.  Sky-Trax can still be used without the need for a WMS, the difference is that operators would make all decisions concerning where stock is to be placed and Sky-Trax would capture the data as to where the goods were placed.

What is the Business Case for This Technology?

The Sky-Trax technology budget requirements at a very high level are expressed below with the disclaimer that these prices (in $US) are meant to serve as general guidelines only and are subject to change based on the requirements of each project:

• Assume $0.05 - $0.10 per square foot to pay for the printed markers to be installed in the ceiling of the facility.
• Assume between $15 - 25,000 per forklift vehicle for the optical technology / machine vision equipment
• Assume about $100,000 - $150,000 for fixed project costs to pay for software license fees, hardware server, database, training, installation, integration and services.

Note that if forklifts are already equipped with existing truck mounted RF devices then depending on the age of the RF equipment, the Sky-Trax system will typically try to make use of the existing equipment so that it is not necessary to spend extra capital to replace the RF unit or to buy a second terminal for every forklift vehicle.

By way of example, a conservative budget for the installation of this technology in a 300,000 square feet distribution facility with 15 forklift drivers would be:

• (300,000 x $0.10) + (15 x $25,000) + $150,000 = $555,000. 
• Assuming a 25% productivity increase for the forklift labor function and a fully loaded wage rate of $30/hour then the labor savings associated with this technology would be in the order of (15 x 25% x $30/hr x 40 hours/week x 52 weeks) = $234,000 for an approximate payback of 28 months before we count the savings associated with the reduction of lift trucks. 

In our opinion, the size and type of facility that is most suited to the Sky-Trax technology would have the following attributes:

• Large distribution center in terms of foot print
• Distribution facilities where there is a reasonable number of forklift drivers working on a shift (e.g. 15 or more)
• High product throughput operation that creates a demanding environment
• Distribution operations where there is a high percentage of bulk floor storage or drive in rack or any other storage medium whereby there is a dense number of pallets held together within the same location making it difficult to find inventory. 
• It is quite common that distribution centers in the food & beverage industries have this profile because goods are often stored on the floor within a fast turnover of the merchandise.  Fresh food distributors are interested in the solution because it guarantees proper expiration date rotation.  Similarly, consumer packaged goods (CPG) manufacturers also make good candidates for this technology, particularly within their larger mixing centers.  The Sky-Trax solution has also generated interest within the 3PL sector where it is seen as a competitive differentiator.

Lastly, Sky-Trax a company that belongs to a cottage industry known as the RTLS (Real Time Locating System) industry,   There are other vendor solutions that have been developed and deployed by other vendors such as: AeroScout Inc. headquartered in Redwood City, CA or Ekahau Logistics based in Helsinki, Finland.  Other companies exist in the RTLS industry such as Identec, Savi, Intelleflex, Tagsense, Wherenet, Pinc Solutions, ContainerTrac.  For the most part, these firms have based their technology solutions on the use of RFID tags which do not always work well with every product type, particularly denser formats of product such a s liquids and metals. Some of these RTLS applications are designed specifically for asset tracking, yard management, healthcare environments, etc.  To differentiate these solutions, the devil is in the detail as they say.  Having said this, Sky-Trax is one of the few vendors that has focused its efforts on improving warehouse efficiency and accuracy by providing RTLS technology solutions that focus on activities that happen within the four walls of the distribution center.

MWPVL International thinks that you should expect to hear much more about this technology and the Sky-Trax solution offering in the coming years as they have developed a unique value proposition that is generating a very real return on investment for their customer base.

Marc Wulfraat is the President of MWPVL International Inc.  He can be reached at +(1) (514) 482-3572 Extension 100 or by clicking here.  MWPVL International provides supply chain, logistics distribution consulting services. Our services include: distribution network strategy; distribution center design; material handling and automation design;  supply chain technology consulting; product sourcing; 3PL Outsourcing; and purchasing; transportation consulting; and operational assessments.