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Case Study: NYK Logistics

Rick Pople, General Manager, NYK Logistics
By Bob Violino
Apr 18, 2004—to come back to Chicago. I’m from Illinois originally. About 21 years ago, I loaded up my car and escaped to sunny southern California. But I did grow up back here; I went to school with a lot of people from Chicago. I spent most of my adult life at FedEx. I joined NYK Logistics in February 2003, when they were recovering from the fallout of the port lockout in ’02. Anybody that’s in any type of import business that does anything through the West
Rick Pople
Coast knows what a disaster that was. So we had several challenges, and finding a way to manage our yard, which included roughly 50,000 containers and about 30,000 trailers, was just one of them. (Download presentation.)

Here’s a quick profile of the parent company. NYK is a $16 billion company, and logistics accounts for about $2.6 billion of our total revenues. We have a complete portfolio of core competencies built around transportation and logistics, primarily marine transportation, logistics management, consolidation and de-consolidation. De-consolidation is the business that I manage for NYK Logistics.

At our facility in Long Beach—we’re located about seven miles from the ports of Los Angeles and Long Beach—we receive over 50,000 containers annually; this year, that number is going to be closer to 75,000. Just a little bit of growth! And those 30,000 trailers I mentioned before are going to turn into about 45,000 trailers. We are Target’s largest distributor; actually, we are a de-consolidator. They use competitors of ours in Seattle and Norfolk, but we handle all of their imports to LA and Long Beach, which is the largest port in the U.S. and third largest in the world.

[The Long Beach facility is] a 70-acre site and 1,200 parking spots, 250 dock doors and up to 1,800 gate transactions daily during peak. This year, that’s going to go up to probably 2,500 or more transactions at our gate. And our gate is really the pinch point for our entire operation. Every unit coming in and leaving will only have three inbound lanes and two outbound lanes. And we operate 24/7.

The challenges are keeping up with the demand, the volume, and the velocity in limited yard space. And obviously everybody’s real estate is precious, and it’s very precious if you’re seven miles from the ports of LA-Long Beach. Level of service performance at risk,??? were responsible for moving the cargo out of an ocean container and into the trailers heading out to distribution centers within seven days from the vessel ETA. Sounds like a long time particularly from a guy coming from FedEx. But it wasn’t very long, because the vessel takes about two days to discharge, and if there’s a weekend in there you lose another day or two. By the time you get the cargo, you’ve got a day or two usually to transload it. And we handle during peak as many as 300 hundred containers a day, so it’s a high velocity operation.

[You may have heard we had] difficulty finding containers and trailers; that’s not really true. We found lots of containers and trailers. We just couldn’t find the ones we were looking for. Target dictates what domestic carriers we use. We have 11 different carriers at any one time; they all arrive at different lanes that they serve. But if they run out of equipment; there is a backup and then there is a tertiary. In the old system—with a clipboard and spreadsheet and a walkie-talkie—that was impossible to manage with the volumes that we were handling. Labor intensive yard checks, to say the least. The way you do a yard check is that you walk the yard, or you ride around on a bicycle or a cart or something and write down where everything is.

We were focused on retaining business as opposed to growing business. We were in jeopardy of losing our largest account if we didn’t fix our operation coming out of ’02. And the system just couldn’t survive another peak season. When we listed the things that we needed from a Yard Management System, we decided we needed it to do a lot of things. We needed a robust decision-making machine, which we found plenty of, but we needed real-time information to feed that machine. When we did our selection process, we got down to the final two: WhereNet provided the real-time information system and another provided a bar-coded system. [We looked at a bar code system.] But if the driver doesn't park the container where we tell him to, we would have to drive around and scan it again. So the bar-code solution really wasn’t going to work for us.

What we selected was what is referred to as real-time location system, which is really somewhere between an RFID, or a passive tag, and GPS. The active tag that we applied to every unit coming into our yard and removed when it left transmits every two minutes. We have an array of antennas around the property that create essentially a localized GPS system. Some of the capabilities of RTLS:
Omni-directional reading
Long battery life (5 to 7 years)
High data capacity
Long range
Coverage of a wide area outdoors

W have a 70 acre campus, and we’re using 35 antennas. We would probably have half that many if it weren’t for some of the nooks and crannies that we chose to cover. Some long narrow strips required a lot more antenna coverage. If that were a 70 acre unencumbered campus, we probably would have covered the entire thing with less than 20 readers.0

Some of the advantages we got with this system include the parking assignment. It sounds simple, but if we mess that up nothing else in our business works. We have to go find the container that we need now, and the containers are prioritized; if you get them out of sequence, bad things happen, and our drivers used to drive around the lot looking for them. Again, we tell the driver to park it somewhere, but if he left it somewhere else we still have to go find it.

Another benefit is automatic yard inventory, which we now transmit to the domestic carriers four times a day so they can manage their inventory. [Our customers know] what they have there, how many are loaded, how many are empty, how many are being loaded, so they can manage their inventory. They’re responsible for getting a loaded trailer out of our yard within six hours. That was impossible prior to implementing this system. Before, you had to write it down, walk-in, record it, make a phone call, do a fax, whatever. With this system, we automatically e-mail the inventory to our customer four times a day.

The system helps with door assignments, so that we can assign the containers to the right door and the trailers to the right door. Wireless switch or dispatch our yard goats or yard hostlers—the guys who move the equipment around within our yard or all dispatch wirelessly, location based alerts unit pickup, and here is an example of what the unit that the guy at the gate on the left is scanning and entering the information from the container or a trailer on his left hip is a printer and he is swiping a license, driver’s license to load, enter that person’s information, print out a bar-coded gate tag on the right and that tag is a dual transaction that tells the driver were to park the load that he is bringing in or the empty that he is bringing in and where his loaded trailer is located.

One of the advantages with this system is that it’s allowed us to segregate our yard by carrier, so that the JB Hunt trailers are all together, the empties and loads, and the Schneider trailers are all together, the empties and loads, so the driver who used to spend an hour on our property is in and out of our property in about 15 minutes. And anybody in the transportation arena knows that this year, particularly with some of the law changes January 1, on clock hours for over the road drivers is a huge issue. When you can cut an hour or more out of their time at a location, you save them tremendously.

There is the magnetic card reader for entering license information and a printed gate pass. And the meat and potatoes of what drives everything is that tag going on that container. Most of what you see is the device that holds it up. The clamp device that you can see, that’s kind an orange material that it clamps onto the container. There is about a 14-inch riser and then on top of that is a small tag, not quite the size of my cell phone. And that tag is what’s transmitting every two minutes, and indicating to us where that container is. There is an identification number on the container that’s entered into the system; the tag is scanned and married to that unit. So now we know where that unit is. We’ve integrated this system with our own existing information management system, so that we have all the information about the cargo in that container: how old it is, what size it is, how much it weighs, where it’s going. And now that it’s married to the unit, we know where it is in the yard when we need to queue it up to the door.

I often get asked if we encountered any resistance when we implemented the technology, and the answer is really very little. A year ago, the guys had a thankless job; they’d drive around a 70-acre campus at 2 in the morning with a flashlight trying to find a specific container. Now they can not only select all their moves on their screen, but they can hit ‘Map It’ and it will tell them exactly where the container or the trailer is. It’s a huge advantage, particularly in peak season when we bring in temporary drivers to augment our staff and they don’t know anything about our property. They can be productive within minutes, because that’s going to tell them where everything is.

I am convinced after one season going through this that to do the type of operation that we’re managing now if you don’t have a system like this feeding you and driving your operation, it’s impossible. You can’t have enough people riding around in the yard writing things down; by the time they get back in and enter it the stuff is moved. And I think some of our competitors have found that out in the last year.

There is a yard rule manager. Essentially, the decision-making is all done through these rules. We assign different attributes to the equipment, to the doors and then through that everything in the system is configurable. We want to set the warehouse up a certain way and we want to be able to switch that setup later, because we are going to do some special projects in one area and some forklift work in another area, that used to have to be done manually, and once you switched it, it had to stay that way for weeks, because it was a pain to switch it back and forth. When we built this with WhereNet’s assistance, we said we need to be able to say at two o'clock in the afternoon we may want a different setup tonight. So we have to flip a switch in at 5 p.m. that would start queuing up differently. So when we started that a year ago, we mapped out three different building configurations, and right now we have 15. We had no idea that we would use that many, but it’s the configurability of the system that really gives it the power for us.

Very important in this business—not only on the marine on the ocean container site but on the domestic equipment too—is the detention and demurrage charges that could pay for the one of those. Just to point out that the rules engine is really what it is driving the functionality of the system, we have parking assignments throughout the yard and at the doors and the door assignment based on availability and unit characteristics. Some examples of a queue, those numbers across the top of the spreadsheet are the doors 122 and up. That’s an outbound door queue and it shows what’s at the door now and what the next unit that would be taken to that door would be. Just to give you an idea what happens in the heat of the battle in this business, you’re back up for a particular DC is Schneider Logistics, and you are about to run out of the primary carriers, but Schneider has very little equipment you should maybe skip him and go to your tertiary carrier or you’re gonna run out of the Schneider for the primary lanes. There is decisions like that we have to make during peak that were impossible to make in a manual system and frankly we just guessed, but now we can look at the entire inventory and not only the inventory in the yard but how that inventory is queued up to be use and then make intelligent decisions from that.

The system shows us the current status of each dock door, pending unit move request, what’s in the queue, where that move came from, and automatic unit move request. We still have a controller that sits in our equipment control office but he doesn’t have a whole lot to do most of the time, because the system is going to make most of the decisions for him. Although I will say this to WhereNet's credit, when we started designing all of this we laid out we needed to do all of this things flipped a switch and reconfigure the building. Queue different stuff up, everything, and we need that this thing to make those decisions for us, and we need to override every decision whenever we want, and that was the tricky part is the allowing it to do everything for us but be able to jump in and overwrite anything whenever we wanted. And important that, that we know the age of the unit so that we (inaudible) the equipment in and out of our yard.

Overall, we had a pay back in less than a year. Our savings are tremendous now. Anybody that’s gone to the justification process knows they can make an ROI look a lot of different ways, and sometimes it’s relative to how screwed up you were before you implemented something. I would simply say it's enabled us to handle peak volumes, because we couldn’t handle them without a system like this. We cut down the number of yard tractors we had from 10 to 5 during peak, some 7 to 4 now and probably we could operate with 3 most of the time, and we received a commitment for 20 percent more containers in ’04. Actually, it has been bumped up; it’s more like 50 percent more volume we are going to see through our facility in ’04. You know improved level of service performance by two days.?? In the past, during peak our customer would extend their expectation from 7 days to 9. This peak season they didn’t do that, and we never fell out of LOS even through the busiest weeks of peak. We eliminated daily yard checks; essentially, there is no need to have anybody walking around in the yard. We know exactly what the inventory is and we know where it is. And we cut our driver site real time. Before, often they could spend an hour or more on our property, and now they are in and out in about 15 minutes.

People ask me, “How did you know you were making the right decision when you went with WhereNet last year?” Blind luck, frankly. I mean we did some due diligence and narrowed down to what we thought were the two most competent, but we rolled the dice to a certain extent. We needed the robust information that a real-time location system would give us, but frankly we didn’t know if it was going to work, and it may not have. If, when we fired it up on June 21 last year the tags didn’t work, or the antennas weren’t good or the information management system was full of glitches, I wouldn’t be up here talking to you right now. But it did work. They were a tremendous business partner, and I am confident we have the most sophisticated Yard Management System going right now. We won’t have the most sophisticated system very long, because I know our competitors will copy it very soon. But it worked very well for us, and it’s going to allow us to grow our business and make maximum use out of limited real estate.

Question: How did you calculate the ROI

Pople: We could easily quantify were labor savings, using less yard tractors in peak, things like that. But there was a high degree of trust that everything was going to work the way we had mapped it out, when we sold the ROI to the executive management of our company. But there were really greater ROIs than that when we got into the detention and demurrage charges and things like that, and frankly a lot of ROI for our business partners that we didn’t realize but they did.

Question: What was the overall implementation time from original concept until actual operation? And then did it meet the expectations that you gave to executive management?

Pople: Yes, we finalized our selection in March last year, and we told them we have to have this up and running June 1, which was an incredibly tight timeline and we missed it by three weeks. That was up by June 21st but peak for us started September 1.

Question: How many trailer tags do you manage?

Pople: I think what we have an inventory of about 1,600 tags. The tags are all identical; the devices that clamp onto the equipment are different. There is a specific device for a trailer, it clamps onto the lip of every trailer, and there is a particular device that clamps onto the corner casting of the ocean container. So those devices are different and if we are short on one inventory or another, we could move tags around, but that’s why we have 1,200 spots, we have about 1,600 tags.

Question: Does it use GPS?

Pople: I call it or liken it to a localize GPS system because the tag itself is transmitting and we’re getting a location down to about roughly 10 feet, but we’re getting down like 6 feet accuracy on the location, but only on our property.

Question: Did you consider a GPS system?

Pople: Not seriously, no. Most of the GPS applications we saw were really what Schneider or JB Hunt might be using to find out whether a truck is in St. Louis or Kansas City. We needed to know is the trailer in spot 1294 or 1292. So we didn’t find GPS solution that really fit but we are looking at it.

Question: Did you have any problem with the readers and the antennas around the property? Did the sensors, the readers and all that work together?

Pople: No, I mean it started up. I’m sure we had an antenna or two that wasn’t working. You know, Larry Electrician hooked it up and didn’t do his job or something, but for the most part they’ve been very reliable and we haven’t had any real system problems with the antennas—maybe with the guy we had installing them, but not the antenna.

Question: Is the software system integrated with other business applications that you’re running, and, if so, which ones?

Pople: We have a system that we call TLS, a Trans Load System. It is not really proprietary, although as far as I could tell we’re the only customer using it. But it drives our businesses; it’s what we use to manage between us and our customer where a container is, what’s in it, the allocations and all of the information we need to know about the cargo. We’ve integrated that system with the WhereNet systems so that we know not just where container is, but its DNA. We need to know everything it’s made of, and how long it’s been here and everything else so the combination of those two really is what has made it such a robust tool for us. If we had all the information management stuff it’d be great, but if we don’t know exactly where it is, it wouldn’t work. And if we know exactly where it was, but we don’t exactly what’s in it that wouldn’t work either.

Question: So, do you do that at the point of entry when you actually hook those systems together?

Pople: There were several touch points, I can’t remember now, the technical guy would have to answer this, I think there were seven, or eight or nine real touch points between the two systems that we had to integrate but the first and the primary one is at the gate. We have an advance shipping notice, an ASN that that container is coming in. We know everything about that container. So at the gate when he enters that container number it populates on the screen we are waiting for you. We want you to park here, and we print out a tag and we ask the driver what terminal are you going back to, because he might be bringing in a Maersk container, but he is going back to APL terminal. So he wants the oldest APL empty in our yard. So we ask him what terminal you’re going back to APL, enter that in it gives him the oldest APL container in the yard, tells him where it is, and in the ticket it’s bar coded that we can stand on the way out, good to go.

Question: With the system that you have now, how much more capacity would you have available?

Pople: How much more capacity on this system, you mean? Frankly, I don’t know what the limit is. I know it’s expandable, we could add property, we could actually add properties to it. You could control multiple yards from this system, we’ve talked about doing that. We don’t have another facility right now, with quite the demands that this facility has. We could put the facility in New Jersey on this system and run it from the yard; right now our equipment control officer is on site but it really doesn’t need to be. You could be controlling the yard from anywhere.

Question: What was the cost of deploying the system?

Pople: I can you tell that it was slightly less than [$1 million].

Question: Did you consider using passive tags?

Pople: I don’t know that a passive tag would have worked any better than the bar-coded thing for this application, for wheeled units that are moving around. It would tell us that that unit is in the blue lot, but we need to know more than it’s in the blue lot. We need to know it’s in 1292 in the blue lot.

Question: What frequency of tag do you use?

Pople: A 2.4 GHz.

Q: Can we visit the facility to see the technology?

Pople: We have a lot of requests for visits to the yard, and by all means, if you’re visiting the area and want to see it in action, you can do so. We’ve been less welcoming to some of our direct competitors, but you know they’re going to have the same technologies available to them, too. We’re just trying to slow them down by another year, see if we can increase our distance between us and them. Thank you.
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