Speeding HP orders 'out the door in four'
Hewlett-Packard's rush orders for parts ship to global customers in 4 hours as DC improves materials flow, reduces handling.
By Tom Feare -- Modern Materials Handling, 5/1/1999
"We work more like an emergency room for our customers around the globe," says Loretta Watson, distribution manager, Hewlett-Packard, "than a traditional parts distribution operation. We're responding to customers' needs 24 hours a day, 7 days a week, 365 days a year-within a few hours."Obviously, Watson doesn't want any of her "patients" to await remedial measures any longer than necessary before they're "healthy," back up, and running strong again.
Those patients are users of HP computers, printers, diagnostic devices, and other kinds of electronic equipment. They all share one thing in common: They need to receive repair or replacement parts not very long after the machines encounter problems or go down. Contracts between users and HP call for a 4-hour response time to initiate corrective steps.
More timely shipments of rush orders of parts was one factor behind HP's decision to upgrade and streamline its parts distribution operations. Other factors also led to the construction of a new central distribution center in Lincoln, Calif., near Sacramento.
Business volumes have been growing rapidly for this HP distribution operation in recent years. Annual percentage increases have been in double digits. Field stocking locations for parts with customer service engineers manning them have shrunk in numbers, however. HP was having a tough time keeping up with customer requests; demand amounted to some 15,500 lines of parts shipping daily. Complicating the distribution process was the fact that HP shipped from six warehouses spaced as much as 35 miles apart.
Centralizing distribution
Consolidating this scattered warehousing into a new DC with greater capabilities is one major step that HP has taken. A project team developed a number of materials handling solutions and systems for installation in the DC facility. Finding smarter and simpler ways to handle parts fewer times at several points in the physical distribution process were among recommendations made and actions taken by the team. And the approach is succeeding.
Exel Logistics operates the Lincoln, Calif. DC as a third-party provider of logistics services to HP. Amy Alberg, HP logistics engineer, and Peter Dyer, Exel Logistics operations manager in Lincoln, were co-leaders of a team project to design the 405,000 sq ft DC and specify equipment for its operations.
Key features of the new DC the team came up with include conveyors, about a mile in total, and a sortation system capable of 45 pieces per minute (Hytrol). Packout/closeout workstations are redesigned for fewer steps, less handling. A picking module with carton- and pallet-flow racking holds the top 10% or so of fast movers for order filling efficiency. Finally, a specially designed and equipped air express cargo shipping dock gives HP the capability to go, literally, right up to the last possible minute to meet deadlines for FedEx and other services.
"We looked at all of our previous materials handling and logistics processes with the aim of streamlining as many as we could," says HP's Alberg of the team effort. In some old processes, items were handled 5 to 10 times- much more than needed for efficiency. There was a lot of staging and queuing that needed to be eliminated.
Design of materials handling systems, including conveyor, storage systems, and pick module, and simulation of their operations was accomplished by a systems integrator (Hytek Material Handling).
Ways to pack shipping information onto a single bar coded label were found-instead of using 5 to 7 labels-for example, which simplified prior procedures.
"Improved materials flow is the big benefit we've achieved," adds Exel Logistics' Dyer. "We now have that capability to flow parts in and out in 4 hours.
"Bringing HP's operations physically closer together has helped with streamlining," he adds. "For the first time, parts are received at the same building from which they are shipped. HP is saving costs by not having to shuttle packages and parts from building to building. The company is now able to be more efficient in servicing its worldwide customer base."
Parts move to storage locations in racks and bins quickly now compared to as long as 3-8 days for receiving among the scattered warehouses. Picking rates within the fast-mover module are 2.5 times what they were before, says Dyer. And shipping rates are 1.5 times better.
Out the door in four
HP distribution manager Watson's emergency room analogy proves particularly apt. Why? Because of the difficult goal HP has set for shipping certain orders: "Hots," or rush orders, need to start moving within the internal distribution channel and be shipping "out the door in four"-4 hours, that is.
Consider the wide range of customers and how vital continued, computer power is to them: Major automakers' production lines depend on HP equipment, as Watson explains. Single moms run home businesses off HP computers and printers; they rely upon the company's support. Hospitals and clinics with medical diagnostic instruments count on HP for timely service, Watson adds.
Small package shipper
Shipping small packages or cartons of parts in large volumes to thousands of customers daily is predominantly what Exel Logistics associates and the mechanized systems do for HP at the DC. A "part" can be a PC component, a circuit board, almost anything going into an HP product, on up to an entire new computer, printer, or medical device, in some cases. Roughly 45% of the volume in shipments are destined for delivery by overnight services.
Inbound shipments, meantime, are received from HP manufacturing plants or other parts suppliers, of course, and many arrive on pallets prior to storage/staging. Roughly one-fourth of received items will need repacking before they're ready to go to HP customers.
Within the 600 ft by 320 ft section of the DC known as L7 West, items are stored in narrow-aisle racking served by wire-guided vehicles. Transport conveyor delivers, takes away loads to/from this building as do lift trucks.
The L7 East part of the facility is where much of the DC's work goes on. Orders are filled from the fast-mover pick module's flow racking, for example, onto one of three conveyors serving this module. It also is de- signed for simultaneous picking and replenishing with 13-ft-wide aisles for the latter activity. Generally, the module stages 10% or so of the active parts, Dyer explains.
Efficient packout/closeout
Orders picked from the module or pulled from separate storage areas and cabinets will head by conveyor to one of 30 packout/closeout work- stations in totes. Here, a redesigned procedure simplifies handling through fewer steps.
Packout/closeout now is a simultaneous procedure instead of a two-step process, say Alberg and Carl Walker, Exel Logistics industrial engineer. As separate processes, it took Exel Logistics associates 24 steps to get from scanning for a pick number to pushing the carton away on conveyor bound for shipping. The routine takes only 13 steps to accomplished combined packout/ closeout. A single, automatically generated common mailing list/ packing label instead of 5 to 7 labels previously used is a clear benefit.
Further DC upgrading
When we visited the DC early this year, HP and Exel Logistics were continuing the team's planning for further improvements. Warehouse management software will replace an old legacy system, for example. Radio frequency data collection terminals will be added to receiving and picking operations.
With this additional technology in place, HP expects productivity to be up 33% over what the old mix of six warehouses delivered, says Watson. She's also anticipating that the efficiency improvements realized by this project will make it a good financial investment for HP.
System Snapshot
Hewlett-Packard Distribution Center
Lincoln, Calif.
Facility completed: November, 1998
Size: 405,000 sq ft
Third-party provider of logistics services: Exel Logistics 614-890-1730
Project cost: Estimated $6 million
Items distributed: Parts and components for computers, printers, scanners, medical and analytic devices, and test and measurement equipment
Total parts stored: 350,000
Stockkeeping units: 185,000
Pallet positions: 34,000
Bin locations: 32,000
Picking capability: 18,000 lines/day on 2 shifts
Employees: 300 Exel Logistics associates
Conveyors, sortation system, controls: Hytrol, 870-935-3700
System integrator, simulation studies: Hytek Material Handling, 614-497-2500
Storage rack: Lodi Metal Tech,209-334-2500
Picking module rack: Unarco Material Handling, 800-862-7261
Lift trucks: Raymond, 800-235-7200; Caterpillar, 800-CAT-LIFT
Air cargo container dock systems: Kietek, 800-510-4888
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