Closing Case Cengage Uses Information Technology to Improve Warehouse Operations
The Problem Cengage Learning (www.cengage.com) is the second-largest higher-education textbook company in the United States. It has 5,500 employees, generates revenues of approximately $2 billion, and operates in more than 20 countries. The company provides teaching, learning, and research solutions for academic, professional, and library markets globally. Cengage Learning purchases educational materials from suppliers all over the world. Many of these materials arrive in print form at the Cengage Learning Distribution Center (CLCD), where they are stored until they are shipped out to Cengage customers. The CLDC stores 81 million textbooks. To manage this vast inventory, Cengage needs to optimize the CLDC's performance.
The IT Solutions To operate the CLDC at peak efficiency and effectiveness, Cengage utilizes a warehouse management system called Logistics PRO, produced by Manhattan Associates (www .manh.com). Logistics PRO continuously tracks the location and status of every textbook in the warehouse. In addition, the system calculates the lowest shipping cost for each parcel. Finally, it calculates the amount of labor required to ship each day's orders on time.
As books enter the CLDC, Logistics PRO records their dimensions and then assigns them to their proper storage location in the building. When customers place orders for books, the system calculates the most efficient way to pack the books in shipping boxes and then to pack the boxes on the trucks that take the parcels from the facility. It then feeds those calculations into a voice-directed picking system called Jennifer Voice Plus, designed by Lucas Systems (www.lucasware.com). The Jennifer system translates the information into spoken directions-for example, how many books to pick, how to pack the box, where to ship them-and then conveys that information to warehouse workers wearing headsets.
Because the new system performs all of the essential calculations, the warehouse workers no longer need to carry a bar-code scanner. Therefore, they can use both hands to select and pack books for shipment. As a result, they have become more productive, and the overall process has become more effi cient. Jennifer guides the workers, very precisely, through their workday.
The CLDC also utilizes a high-speed package-conveying system from Automotion Conveyors (www.automotionconveyors .com). This system enables employees to move boxes of books- many of them quite heavy-from different parts of the warehouse without injuring themselves. Eight miles of conveyer track connect to a 600-foot-long, high-speed sorter that funnels 130 units per minute into one of 36 diversion lanes. Workers on those lanes-all listening to instructions from Jennifer-sort, pick, pack, and ship 100,000 custom orders each day. These learning materials often go from a storage shelf in the CLDC to a customer's mailbox in just 24 hours.
The Results The implementation of the warehouse management, voice direction, and conveyer systems has enormously improved productivity at the CLDC. Ten years ago, 300 employees working at full capacity could ship only 50 million units annually. Today, 250 employees ship 63 million parcels, an increase of roughly 50 percent per employee.
In addition to increased productivity, the three systems have produced many benefits for the CLDC. Per-unit shipping costs have decreased, while the quality of outbound shipments (e.g., accuracy of the order, timeliness, and other metrics) has increased. Workers make fewer mistakes. Training times for new and temporary workers have decreased from an average of four days to just four hours. Interestingly, since the installation of the conveyer system, the CLDC has enjoyed a near-perfect OSHA record.
In sum, then, the new systems have dramatically transformed the way the CLDC operates and the way that Cengage customers view their interactions with the company. In addition to these immediate benefits, these systems support the company's long-term growth strategy.
Questions
1. Describe the advantages that the Lucas PRO system provides for the operation of the CLDC.
2. Describe the advantages that the Jennifer system provides for the operation of the CLDC.
3. Discuss possible positive and negative reactions that CLDC workers might have to automating the operations of the CLDC.