Housekeeping is among the most neglected aspects of lift truck maintenance. Think about it. If operators are running over debris, they’re not only damaging tires, but they’re not doing themselves or the products they’re transporting much good either. If you’re looking for opportunities to cut costs, walk the floors of your plant or warehouse.

“We wouldn’t sell as many tires if customers had good housekeeping habits,” Philip Lannon told me. He’s sales and training manager for Continental Tire the Americas, in Chicago. “Tires don’t chunk out in and of themselves, and when you look at scars and dents, that doesn’t happen unless they’re running over things.”

In the worst of conditions, tires are worn down to where they can’t roll properly or they get stuck because there’s such a low diameter to them. Whether you’re talking cushion or pneumatic tires, most lift truck buyers take what comes from the factory. That lack of consideration generally haunts the truck as it is put through its paces. Even if debris isn’t a problem, misjudging when a tire needs retiring is.

“Operators typically don’t know when tires should be replaced,” Lannon says. “If it’s a cushion tire, in theory you could wear it down to the steel band. But in so doing you’ll increase maintenance costs on that vehicle substantially. Rule of thumb is, when 30-40% of useful rubber is removed, that’s when a tire’s load capacity and safety requirements are compromised.”

Tires provide the cushioning to protect products and the safety to protect operators. Worn tires increase shocks to loads and people. And if you specify non-marking tires, maintenance considerations figure into that consideration too. According to Lannon, a quarter to a third of lift trucks in warehousing today use a non-marking tires.

“But if you want to avoid marks on floors, that’s only part of the solution,” he says. “You also have to make sure you get dirt off the floor with a scrubber. Otherwise it’s like wearing your tennis shoes into your garden and then back into your house.”

That brings us back to good housekeeping. And if you scrub your floors anyway, you may not need non-marking tires—especially if you have electric trucks that you can adjust the plugging. The big concern with tires, according to Paul Weymann, vice president of Summit Handling Systems, a Toyota dealer in Long Island, NY, is the steer axle, mast, worn forks damage you get from letting tires run down too far. Also driver fatigue due to the fact that good tires reduce shock

Using his client, Railex, as an example, this company used white non-marking tires before investing in the new lift trucks Summit provided.

“They decided to switch to black tires because they wore better at their Schenectady site,” he says. “You probably get a quarter less run time out of non-marking tires than blacks. And Railex uses scrubbers to clean their floor regularly.”

Key takeaway: good lift truck maintenance starts with a clean and orderly workplace. The less junk you run over, the more service life from tires and the lift trucks that wear them.

In MH&L’s September feature on Automation’s ROI, I reported that many material handling professionals are taking a more “holistic approach to cost justification.” That’s a fancy way of saying “think outside your box.” I realize both of those phrases are annoying—the first for sounding pretentious and the second for being clichéd. But in an economy where there are still number crunchers who demand hard figures to justify a technology investment, it’s good to see that environmental factors are getting easier to get harder.

This week we reported that Pharmaceutical Distributor McKesson expects to use IBM’s Supply Chain Sustainability Management (SCSM) system to determine the value of keeping cold-chain pharmaceuticals such as insulin and vaccines in one central refrigeration facility rather than distributed among several sites. This system factors in the inventory cost and the potential reduction in carbon emissions against the option of keeping such products in all its warehouses. McKesson hopes it will be able to use such comparisons to help it increase efficiency without spewing more emissions into the environment. But if Don Walker is right, this tool will also help justify future investments in material handling technology—as well as the location of the facility in which that equipment will be used.

Walker is McKesson’s senior vice president of distribution operations. He told me that as his company’s relationship with IBM evolves, McKesson will eventually be able to factor environmental impact—a traditionally soft cost—into ROI calculation.

“If you think about building a building today, supply chain people try to find the lowest cost to deliver what they’d like to have,” he said. “It’s a game we have to play in terms of capital funding. But if we had additional information it would provide carbon impacts and energy impacts over the life of that building. The real value is being able to monetize the value of some of the sustainability efforts because you can now measure and understand the impact financially of the carbon footprint.”

The SCSM system may also help McKesson select facilities for LEED certification. Attaining “Leadership in Energy and Environmental Design” status provides independent, third-party verification that a building project is environmentally responsible, profitable and a healthy place to work. McKesson’s most recent building in Chicago is LEED certified, and Walker is hoping this tool will not only help his company target other facilities for LEED certification, but that it will also help them select future sites and the equipment to be used at those sites.

Now that big end users like McKesson are getting smarter about hardening carbon footprint numbers, material handling technology vendors are going to have to get better about sizing themselves up to see if their shoes fit their customers’ footprints.

“Fool-proofing” is a term that goes back to the beginning of the 20th century. It’s that concept of making something so easy that even a fool couldn’t screw it up. The technological extension of this concept is “idiot lights.” Those are the indicators on your car’s dashboard that light up when something’s starting to go wrong. Now, when it comes to fixing things mechanical and electronic, I AM an idiot. Those lights were made for guys like me. The only time the hood of my car gets popped it’s by a mechanic who knows the next step to take once the hood is open. At least I’m smart enough to schedule my car for maintenance so those idiot lights never have to tell me how dumb I am about what gets me from point A to point B.

Here’s a problem, though. How do you know when idiot lights need maintenance? I was driving back from a business trip last week and my peripheral vision sensed a red glow from the dashboard. Sure enough, the battery light came on. At least I think it was the battery. How could that be?? I just had my car serviced! The only thing I could figure is that maybe there’s short in my car’s electronic system. That may sound like an educated guess, but as I said, I have no talent when it comes to fixing things on wheels. Only writing about them (but that’s for you to judge).

But I’ll bet there are plenty of fleet managers out there who are equally clueless about some aspects of the inner workings of their lift trucks. Like cars, lift trucks are computers on wheels. And as I’m talking to maintenance professionals for an upcoming article on this topic, it became clear that the more industry tries to foolproof lift trucks, the more maintenance challenges it can create.

Bill Rowan, president of Sunbelt Industrial Trucks, Komatsu dealers covering Texas, gave me an example of the challenges faced by even the most experienced lift truck maintenance professionals.

“The federally mandated operator presence system which is intended to restrict travel and hydraulics when the operator leaves the seat involves numerous relays, wires, controllers, fuses. solenoids, etc.,” he told me. “A fault in any component of this system can shut down the forklift. This creates a service call and downtime….loss of productivity.”

Bill’s response flashed in my head as I looked at the bright red battery symbol on my car’s dashboard. Guess I’ll be taking my car in again. After all, as Bill said, “The cumulative effect of not doing some repairs is often a lot more costly than the small savings enjoyed.” Wonder what an idiot light costs.

The U.S. budget deficit has ballooned to almost 9% of the country’s Gross Domestic Product, and Washington intends to do something about it. The Obama Administration has set up a Deficit Panel, and the first set of proposed budget cuts would hack that deficit down to 2.2 percent of GDP by 2015; that’s more aggressive than the 3 percent target originally set by the Administration. That has several implications for your own business budget—including the prospect of losing a number of deductions.

Officials admit this first round of announcements is more of a trial balloon, an effort to arrive at more doable numbers. However, businesses would be smart to start looking at their own numbers with a little more care. As I said in my last blog, if you don’t measure you can’t manage. Even among world-class companies, fewer than half of them have any kind of way to measure their supply chain performance, according to that Next Generation study I cited. But let’s get even more granular than that. How about lift truck fleet management?

Ken MacDonald, president of M&G Materials Handling Co., a Yale dealer based in East Providence, R.I., told me fleet managers need to be more granular in how they budget.

“Too often companies are still operating on a department, or location accounting practice where all the expenses go into one bucket,” he said. “That doesn’t allow you to spot waste in a proactive manner because all the costs are blended into that account.”

He suggests that through asset-based management you’ll not only save money but increase productivity. Productivity losses aren’t always accounted for when examining spending habits. For example, what if you rent your lift trucks? MacDonald says rental costs are often not charged to specific assets. So if your equipment isn’t being used efficiently, you won’t be able to tie that under-performing asset to your rising costs.

My point is, if your business is going to lose deductions, it will be important to be able to cut costs more surgically than you’ve been used to. Lift truck fleet managers are their business’s link to many of those opportunities. The problem is that these managers are often shackled by old-fashioned accounting practices and little access to productivity measurement tools. Lift truck OEMs are designing fleet data management tools into their products, but fleet managers have to learn how to make best use of them. That’s where material handling equipment distributors really add value.

We are in the early stages of using these new communication technologies for fleet data management. However, there are pioneers at many leading-edge, lean-operating companies using data reports from these tools to help them run more efficient fleets and either repair or weed-out lift trucks that have outlived their usefulness. The resulting reduction in operating costs goes straight to their bottom line.

In an era where tax deductions may be on the chopping block, cost reductions will be more important than ever. The more material handling and logistics managers find these cost reduction opportunities, the more visible and valuable they’ll be not only to their companies, but to the U.S. economy.

If it’s true that you can’t manage what you don’t measure, there are plenty of supply chain managers who aren’t living up to their titles. According to a Next Generation Manufacturing study, fewer than half of companies at or near world class in supply chain management (45%) have a high-level measurement regimen. That’s defined as “regular monitoring and review of company-specific metrics by CEO and senior staff. Among those furthest from world class, only 17% have such standards for measurement.

Surprisingly, of those claiming to be in the world class category and don’t have a high-level measurement regimen, 11.5% of them don’t have any measurement system at all to track supply chain effectiveness. Non-measurers represent almost a third of those furthest from world class (31.6%).

So while supply chain management and collaboration is ranked as highly important or near highly important (4 or 5 on a scale of 1-5) to 68% of companies, according to the Next Generation Manufacturing study, collecting supply chain metrics doesn’t get much commitment, even from those who consider themselves world class.

It would be interesting to follow the progress of these non-measuring companies as we enter 2011. It would be even more interesting if a company like Dun and Bradstreet tracked how many of the companies that go bankrupt actually kept supply chain metrics. D&B keeps tabs on about 27 million active United States-based businesses in its global database. It came out with a report recently on firms that filed for bankruptcy. I guess such a report might be useful for companies that don’t measure the effectiveness of their supply chains. D&B says the purpose of its report is to help business owners “make better-informed and confident decisions in the face of the myriad risks and uncertainty in today’s challenging economic environment—decisions that will have an impact now and into the foreseeable future.”

According to D&B, although business bankruptcies are still growing, it’s happening at a slower pace compared to a year ago. In fact, business failures have actually registered a decline in the 12 months ending in June 2010 compared to 12 months ending in June 2009. However, the failure rates of companies in transportation, construction and manufacturing remain 40%–80% higher than the U.S. average.

D&B offers a caveat with its figures. They just represent companies that filed for bankruptcy. They note that it’s easy for businesses to just cease operations and disappear without leaving debt or filing for bankruptcy. These are classified as “hidden failures.”

Such failures are a tragedy for those companies, but think about their supply chain partners—especially those that don’t bother to keep supply chain metrics. Imagine one day coming into work and calling one of your key customers, ABC Company, and finding the phone’s been disconnected. The D&B report concludes that while such business failures may be unavoidable, they don’t have to come as a surprise to supply chain partners.

“Using delinquency rates and balances past due, business owners can effectively and proactively anticipate customers’ and partners’ future financial health and propensity to fail,” the authors write. “It is important for business owners to regularly and systematically review this data as part of their overall business planning process and day to day operations.”

By regularly checking up on the fiscal health of customers and supply chain partners, when negative trends appear, you might consider revising collection behavior to minimize outstanding sales and limit customer exposure. Then, when they show stable or positive trends in delinquency, you can expand their credit line and encourage revenue growth. You could also look for new products and services from these companies that might expand your relationship with them.

Good advice from D&B. But if you consider yourself world class, make sure you’re keeping tabs on your own supply chain performance first. It’s best not to get to the point where you’re depending on the mercy of supply chain partners to stay in the game.

Recently I blogged about the challenges of protecting sensitive production information communicated via wireless devices in today’s manufacturing plants. Strategies to block an outsider from plucking the data out of thin air can be as simple as planting a lot of trees around your facility.

Unfortunately, no tree is big enough to block a big mouth. As supply chains grow more complex and manufacturing depends on partnerships with multiple tiers of suppliers, anyone who really wants to know what you’re up to can find out by knowing what to ask and whom to ask. More than ever, that WHOM is not under your roof, and in fact may be in another country. So the new challenge becomes, how do you seal the leaks in your business pipeline?

The Apple pipeline is a perfect example. While AT&T was focusing on promoting its iPhone product, Verizon was also eyeing iPhones. All it took was for a few market analysts to start sniffing around these supply chains to find out that Apple submitted orders for millions of units of the Verizon-specific chipset and people started putting two and two together. People like writers for The Wall Street Journal who rely on “people familiar with the matter” as their sources.

That’s the kind of supply chain visibility that gives brand managers migraines. While visibility is key to logistics agility, it’s also used as a key to top secret information. So while the material handling industry tempts you with all its warehousing and distribution visibility vehicles, taking the keys to those vehicles comes with responsibilities.

JDA Software recently came out with these recommendations for companies planning to introduce new products to their markets:

1. Achieve better synchronization and alignment between product development and the rest of the organization (sales and supply chain in particular);

2. Limit pre-launch partners to only those necessary to fill launch-time orders, whereas others can be brought online once demand requires it;

3. Keep partners in the dark about the end product or other suppliers; and

4. Have strict confidentiality agreements.

I called Raja Chandrashekar, v.p. of high-tech strategies for JDA, and asked him why high-tech manufacturers are so vulnerable to supply chain information leaks these days.

“Because supply chain software contains more sensitive information than it did five years ago,” he answered. “Somebody who has access to your demand forecast can quickly infer what your financials will look like for the company. Somebody with the right skills to get this off an unencrypted WiFi connection could make a lot of sense of that information.”

So the point is that even high-tech companies can’t rely on high-tech solutions to keep their sensitive information secret. It’s still a matter of good old fashioned organizational discipline. It’s making sure there are much finer levels of authorization and authentication required to see information. It’s compartmentalizing information for a select few so if it does leak, at least you know who leaked it.

This kind of supply chain security has to be as much of a priority for smaller companies as it does for the high-tech giants. After all, who have these giants been giving their business to lately in the sourcing and assembly of many components? Contract manufacturers. These companies may not only be small, but they’re probably also overseas—which means they may have to be managed by proxy; or at least an iron-clad contract. You do have some direct power in this situation, however.

“If you’re a small guy making displays for Verizon, it’s very important to keep that information top secret because you have a contract with Verizon and if you breach that contract it will bankrupt you,” Chandrashekar says.

In his position at JDA, he works with many of these outsourced manufacturers—some of which are small shops in Taiwan and China. His work with the OEMs at the other end of that supply chain is a balancing act. It’s making sure there’s adequate information flow between them so the OEM can ensure there’s continuity of supply when required, and at the same time making sure that information is secure so the new-product pipeline and the launch dates are well masked.

But there’s another challenge on the horizon. These small contract manufacturers are growing—through organic growth and mergers and acquisitions. Some of them are larger than the OEMs they serve. They want to sustain their growth and that means vying for marketshare. In their work for the OEMs, they’ve become more agile and nimble and they’ve learned their customers’ businesses. They’re starting to talk about bringing to market low end, unbranded products in markets like China and India. How long will it be before they become their customers’ competitors?

Sleep on that, supply chain managers. If you can.

It happened again. The smell of mold has prompted another drug recall. Last time the story involved J&J and Tylenol. This time it’s Pfizer and Lipitor. Lipitor is a cholesterol drug taken to reduce the risk of heart attacks, so I hope the logistics folks at Pfizer had a good dose of it when news of this problem made the rounds.

The company is recalling 38,000 bottles of this stuff due to two consumer complaints about a musty or moldy odor on Lipitor bottles, according to an AP report. That represents two product lots. The problem seems to be that the packaging is made by an outside company in Puerto Rico. Pfizer has recalled more than 360,000 bottles of Lipitor in the last three months because of the issue. The company recalled 140,000 bottles in August and another 191,000 earlier this month.

Patients have complained of nausea and diarrhea after using those products, making the cure seem worse than the disease itself. The Food and Drug Administration has assured the public that the risk of serious harm is remote.

As we reported recently, that moldy odor has been tied to a chemical called 2,4,6-tribromoanisole (TBA), which is used to treat wooden pallets often used to store and ship bottles. TBA has been identified as one of the chemical compounds responsible for “cork taint,” a moldy or musty smell problem that has haunted the wine industry as well—costing it a good $10 billion in damages worldwide, according to a group of grape growers, wine merchants and restaurateurs known as Professional Friends of Wine.

Pfizer inspectors found the chemical in packaging materials and wooden pallets at the Puerto Rican plant which supplies its bottles. This time, the company assured its customers in a statement, “We have identified the source of the odor and we are enacting rigorous measures to prevent odor-related issues going forward.”

It’s not the going forward they have to worry about as much as what’s coming backward. It hedged its public reassurance by warning that product that has already shipped from the plant may still be subject to recalls. If you do wind up with that moldy odor wafting from your next bottle, take it back to the store for a free replacement.

This is a dramatic example of how complex a logistics professional’s job can be. You can spend thousands on technology to make your product meet its delivery dates, and you can spend thousands more on systems to tell you if that journey has been interrupted and why. But until you have someone with boots on the ground responsibility in your supply chain, customer satisfaction is a crapshoot—literally, if you believe those customer complaints.

Managing reverse logistics is a growth opportunity. A few more of these recalls and J&J and Pfizer should get pretty good at it. In the meantime, entrepreneurs in the 3PL world are taking it on as a value-adding, profit-making enterprise. As consultant James Tompkins will tell you in his article on reverse logistics—coming up in MH&L’s November issue—returns cost companies in the retail world plenty. Here are some numbers he cites:

Average rate of returns across all industries: 9.1% (12.1 % during holiday season);

Returns as a percentage of revenue: 6-14%;

Cost to process returns: 2.7 times greater than outbound shipments;

Average asset recovery cycle time: 55 days.

“Add to these the lack of visibility due to non-integrated processes with outsource service providers and the lack of aligned incentives across supply chain partners, and it is surprising that many companies do not view the service supply chain as a differentiator,” Tompkins says. “Nor do many turn reverse logistics into a source of high-margin revenue.”

I know a couple pharmaceutical companies that are nervously eyeing the performance of their margins as a result of the backup in their supply pipelines. Let’s hope their sense of smell improves as a result.