January 2003

equipmentspotlight

For companies like Edy’s Grand Ice Cream, voice technology is paying huge dividends in the distribution center. So why aren’t the vendors getting the air time they think they deserve?

FOR THE MANAGEMENT AT EDY’S Grand Ice Cream, going live with its new voice technology system was like being handed an ice cream scoop and an unlimited supply of Strawberry Fields—they just couldn’t wait to dig in.

In Edy’s case, the move to voice was prompted by the management team’s search for ways to boost both picking accuracy and productivity in the harsh environment of an ice cream facility, where workers pick products in temperatures that average minus 20 degrees. “To stay warm in an ice cream freezer, you really have to keep moving,” says Brad Adams, division logistics manager for Edy’s.“It’s a real advantage to be able to pick fast.”

Edy’s managers were soon convinced that voice tech was living up to its hype. Buoyed by the success of the voice system installed at the company’s Chicago distribution center (DC) in 1999, Adams went back for seconds—installing voice technology at the company’s Rockaway, N.J., DC last year. Not only has productivity increased 14 percent, but the company has reported a 50-percent decrease in mispicks as well. That all means fatter margins for Edy’s, which operates 14 distribution centers nationwide.

Vocal minority
No question these are impressive results, but in a sputtering economy, that doesn’t guarantee that orders for voice tech equipment will come rolling in.Though Edy’s and other big name companies like 7-11, Supervalu, Corporate Express and Petco have enjoyed great success implementing voice technology, which enables a computer to communicate with workers via spoken instructions,the perception out in the marketplace is that the technology has been slow to catch on. One estimate puts the market saturation for voice products within the DC at only 5 percent.

“From everything we’ve seen, its still a wait and see kind of thing,” says Bob Silverman, president of Gross & Associates, a Woodbridge, N.J., company that specializes in warehouse consulting. “It was poised to be the next big thing, but the growth in that area hasn’t been what I expected.”

To no one’s surprise, the vendors tell a different story. “This market is growing at a very rapid pace,” argues Larry Sweeney, vice president of marketing for Vocollect, which produces the technology used at the Edy’s facilities. “We’re looking at about a 70-percent increase in our revenues over last year, so the technology is really taking off.”

Sweeney, who claims that voice technology is making the most headway in the grocery and retail industries, says the biggest worries—concerns about the technology itself, its durability, payback and employee acceptance—are fading as more and more installations take place. “Customers look at our install base and see a lot of people using it on an everyday basis, 24/7, 365 days a year,” he says. “Some had concerns about payback models, but we’ve seen payback in the area of six to 12 months, and it’s not unheard of to have payback in under six months.”

Fear factor
To get that kind of payback, managers have to get their workers on board and up to speed with the new technology quickly. And that’s not always easy. Adams reports that while some employees at Edy’s were excited about replacing their paper system with the new technology, it created temporary headaches and anxiety for others.

“We had some challenges,” admits Adams. “Basically the employees need to be somewhat computer literate, since they are now working with a computer as opposed to paper and pencil. Not every employee started up smoothly. It took some workers months to make it work for them, while others were up in two or three days.”

	”It took some employees months to make it work for them, and others were up in two or three days.” —Brad Adams, Edy’s Grand Ice Cream

Sweeney says time has a way of solving most of the startup difficulties. “Throughout our customer base, we consistently see that em ployees accept it once they realize it makes their job easier,” he says. But in the rare event that acceptance is not forthcoming, he cautions, the company should move quickly to address the problem. “If [employees] don’t accept it, you can just for get it. Even if the technology works, they won’t use the equipment to the best of their ability.”

Chris Barnes,a consultant with CMAC Inc., a technology solutions company based in Atlanta, suggests that companies seeking to expedite worker buy-in invest in dedicated equipment for each person,a move that helps quell the concerns of even the most germ-phobic staff members. “You can buy your way out of some resistance by getting enough units for every person on each shift,” he says.With the average cost of outfitting a worker running to about $5,000, however, that is not an option all companies can afford.

Can you hear me now?
As voice penetrates more industries, experts hope the resistance issue will dissolve and that DC managers will be persuaded that voice technology is not something out of the next century. “The market is rapidly adapting and investigating voice-based products,” says Nick Narlis, chief financial officer of voice technology provider Voxware, a competitor of Vocollect. “What has changed in the last six months or year is that the major leaders in food and grocery, apparel, and consumer products have a lot of sites up.

“People used to believe the technology wouldn’t work in their environment,” he adds. “That isn’t an obstacle anymore. We are beyond the point of people seeing this as scifi stuff. People can see that it works.”

And then there were two

Just six months ago, DC managers had a choice of three vendors in the voice technology market space. But the August demise of Boulder, Colo.-based Syvox Corp. leaves only two survivors on the voice tech island—Vocollect, located in Pittsburgh, and publicly traded Voxware of Princeton, N.J. Syvox’s story is sadly familiar: Despite infusions of capital and a history of partnerships with other companies, the vendor found itself awash in red ink a few years ago. A name change and reorganization were not enough to keep it afloat. Instead of realizing profits in 2002, as the company predicted a year ago, it ended up filing Chapter 7 bankruptcy. With less than $500,000 in assets and debts approaching $10 million, Syvox left behind several major customers, including food giant Nabisco. The remaining two competitors both claim to be financially sound, although Voxware has plummeted to penny stock status. (Its stock hovered near 5 cents a share at press time.) According to chief financial officer Nick Narlis, the company is in the process of landing up to $5 million in private funding. He expected a deal to be finalized by the end of 2002. Rumors persist that Vocollect may purchase Voxware should it fail to receive financing. For Voxware’s fiscal year ended June 30, 2002, total revenue was $4.5 million, an increase of $2.5 million, or 120 percent, over the previous fiscal year. Net operating loss for the period was $2.8 million, compared with $8.7 million the previous year. “Our challenge is to convince the public we are not underfunded, should this financing round materialize,” says Narlis, who admits that landing new customers has been difficult due to concerns about the company’s future viability. “The expectation is this is the final round of financing, and it would really enhance our chance of winning new deals.” Rival Vocollect does not release sales numbers, but industry analysts say the company is roughly 10 times the size of Voxware. Vocollect had sales of between $10 million and $20 million in 2001, and vice president of marketing Larry Sweeney says his company expected to grow sales by about 70 percent in 2002. That would put Vocollect’s sales at approximately $25 million to $30 million. Vocollect recently calculated that at least 100 million voice transactions occur each day throughout the world using its technology. As of November, the company had 175 sites installed, with plans for 60 to 80 new installations by this spring.

John R. Johnson, contributing editor, is a Boston-based freelance writer specializing in supply chain journalism and marketing communications services. He can be reached at jjohnson@dcvelocity.com

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