Building a new kind of on-line business
Developing its Internet-based grocery shopper and errand runner service, Streamline solidifies links to consumers and sets up new supplier relationships.
By Tom Feare -- Modern Materials Handling, 8/1/1999
Where can you get groceries and ready-to-go meals ordered and delivered to your home with a few mouse clicks? Dry cleaning and film processing picked up and returned from an online order? Video movie cassettes chosen over the web and sent to your house, ready to pop into the VCR for tomorrow night's entertainment? And all from one company?Yes, all these goods and services-and more-are available over the Internet to busy suburban families in an area along Boston's route 128 near Westwood, Mass. Families there find their lives simpler. Helping ease their hectic pace and lifestyle is Streamline, Inc. with its time-saving, online order placement and direct-to-consumer delivery of goods and services.
Make no mistake, however: Stream-line's operation definitely is not a local supermarket with a crude web page to take orders and a delivery van or two to send them out
Instead, Streamline is an Internet-based, technology-enabled company backed by tens of millions of dollars of venture capital. The company also is pioneering new supply chain strategies with its customers, especially, and with its suppliers (see sidebar).
"We are responding," says Frank Britt, vice president of marketing and merchandising, "to consumers who ask, 'Why can't I order online the goods and services that really make my household run?'"
The role of technology also can be seen at Streamline's small (56,000 sq ft) but efficient distribution center. This DC relies upon an innovative blend of technologies to serve its customer base. Included are a warehouse management system (WMS), bar code scanners and wrist-worn computers with radio frequency data communications (RFDC) capability, and an outbound transportation management system. Together, they help receive, pick, and send out individual orders to customers.
At the customer end of its supply chain, Streamline users have the company's patented service box, its in-home dry goods storage and refrigerated/ freezer unit, in their garages or basements. Delivery personnel gain access to the homes and these boxes via a special keypad entry system. Thus, the customer need not be home to accept delivery.
"We have inserted technology into all the critical points of our distribution system," says Britt. "For the groceries and others goods and services we sell," he adds, "we're like FedEx in our capability to track where any order is at any time in real time."
Succeeding so far
Streamline's approach to its emerging market appears to be succeeding. The company soon expects to open a similar operation in the Gaithersburg, Md., area north of the Beltway around the nation's capital. "Our goal within five to seven years," Britt declares, "is to be in the top 20 geographical markets in the U.S. (where 43% of the population lives) serving busy suburban families. We want to have the best million customers in the U.S.," he stresses.
To do so, Streamline will keep its DC operations small.
"We won't build mega-warehouses," says Britt. They will be more than 100,000 sq ft to no more than 200,000 sq ft.
A high volume of crossdocking at the Westwood, Mass. DC helps make efficient use of the 56,000 sq ft of space there. Like many a DC, Streamline's facility is organized for its slow and fast movers, its bulk items (dog food bags, for example) and its delicates (potato chip bags and similar soft dry goods).
Maintaining a high level of tracking accuracy as order pickers move these items from storage to totes and then to carts in the DC is the function performed by a wearable bar code scanner integrated with its wrist/forearm-worn wireless communications system (see photo).
With the ring scanner worn on the index finger, the picker points his or her finger at a bar code to scan it, activating the unit's scanner with a trigger. The scanned information is captured by the wrist/forearm terminal and communicated to the WMS by radio frequency signal. Weighing in at about 11 ounces, the scanner/terminal combination includes a CPU, LCD display, keyboard, and battery pack. The picker's hands are free to handle items as needed.
Electronic pick lists generated by the WMS go by RF signals to pickers equipped with these systems. Displayed on a terminal's LCD screen is information giving each picker instructions to pick orders for his or her zone (four to 24 orders per zone).
Pickers confirm picking the correct order to the correct tote by scanning the item's bar code and the tote's bar code. A warning beep signals the wrong item for a particular tote. Streamline also keeps similar products stored in separate areas to cut down on mis-picks.
When orders in one area of the DC have all been picked, the packing totes, placed on carts, are staged at temporary locations according to the required temperature zone, with a scanned location bar code telling the WMS where a particular cart is at any one time.
Dry goods are staged on the loading dock, while orders requiring refrigeration or freezer conditions are staged separately in their respective zones of the DC. Dry cleaning and developed film orders also have their own staging areas.
Orders received by midnight of the day before will all be consolidated between 7 and 9 a.m. Crossdocked goods, cold storage and frozen items, dry goods and service items-everything making up individual orders will all be aggregated into truckload quantities and loaded onto refrigerated vehicles kept at 35 deg F.
Transportation software will ensure that the departing truckloads which leave from dock bays travel the most efficient routes, each truck serving its 30-50 customers by no later than 6 p.m.
At each customer stop the truck driver will enter a code on the keypad, deliver the outbound items, and pick up film for processing, videos for return, dry cleaning, recyclable bottles and cans, and the like.
Through this direct-to-consumer order fulfillment process, materials handling steps are reduced to less than they would be in typical grocery store operations, which helps trim distribution costs for Streamline.
With over 75% of its orders now coming in over the web and less than 25% by fax or phone, the chances for order entry errors are diminished. Converting fully to web order entry in a few years should virtually eliminate all transcription errors.
System Snapshot
Streamline Inc., Westwood, Mass.
Vice president, marketing and merchandising: Frank Britt
Goods handled: Groceries, prepared meals, dry cleaning, health and beauty care goods, video store movies, film processing, specialty pet foods, package pickups/delivery, bottle and can recycling
Consumers served: Busy suburban families
Distribution area: Fifteen-mile radius of Westwood, Mass.
Facility size: 56,000 sq ft
Number of SKUs: 10,000
Warehouse management system: AllPoints Systems, Inc., 781-461-8700
RFDC terminals, bar code scanners: Symbol Technologies, 516-563-2400
Transportation management system: Lightstone Group, 516-294-7505
Far more than a grocery store supply chain
"We're not in the grocery business," says Frank Britt , vice president of marketing and merchandising. "We're in the lifestyle simplification business."
Britt's comment is aimed at drawing the lines between what a retail grocery store or supermarket does and what his Westwood, Mass. company provides- and how it affects his firm's supply chain strategies.
"Shopping at a retail grocery store is a two-fold experience," he explains. "You get information. You get products."
Streamline, however, separates the two experiences, and brings the information-gathering, decision-making purchasing process on-line, directly to the consumer's PC. After an order is placed by midnight prior to the scheduled day for home delivery, Streamline takes over the function of getting products-as well as services.
The company's DC and its employees perform the actual picking and assembling of orders of selected products, take care of their deliveries to homes, and-quite significantly-make return trips loaded with clothes needing dry cleaning, film requiring processing, cans and bottles for recycling, donations going to a local food or toys for children drive, and the like.
The customer saves time and avoids the long checkout lines and other hassles of retail shopping. And, unlike the more traditional shopping and errand running process-often left to be done on weekends by suburban families-Streamline has set up a new kind of supply chain linkage with its end consumer.
Goods and services are delivered to Streamline customers on a weekly basis for a monthly fee of $30. The average order will contain 40 or more items and run $100 or more. Streamline gives 2-3 options for the day of the week a customer will receive her order, thus helping manage efficiency in its delivery fleet operations. Payments are by credit card or electronic funds transfer.
Britt says Streamline has brought vendor managed inventory down to the household level. Certain items for each of its customers are on a "Don't Run Out" automatic replenishment cycle. Cycles are as short as one week or as long as three months before automatic reordering occurs. Orange juice, bread, and bananas are among typical DRO items.
Conventional grocery stores put emphasis on factors such as location in the community and product display. "There are fairly profound costs associated with good real estate, good display," says Britt. "Neither of these are relevant to our business." Streamline's costs for its DC site are one-third to one-fourth of the costs to lease high-traffic, Boston area supermarket sites.
Typical retail stores will offer customers a choice among some 30,000 SKUs (stockkeeping units). Streamline's focus on a particular class of consumer gives it a more homogenous customer base, however. So its SKUs total only 10,000 or so.
Managing fewer SKUs simplifies the complexity of Streamline's supply chain relationships and keeps operating costs lower. By targeting its offerings to essential goods and services relevant to the busy suburban family, moreover, Streamline gets more repeat orders and thus demand for its goods and services is more readily forecasted.
"I have only a week's worth of inventory on hand," says Britt. That volume contrasts sharply with the several weeks' worth of stocks held by a typical retail grocer, coupled with products housed at its upstream DC.
How can Streamline keep its inventory so low? "Because we're so good at predicting demand. For example, I can tell you on Friday, within ±5%, how much milk I will sell on the following Wednesday," he says.
An initial bar code scanning of UPC labels on all goods in each Streamline customer's home when she joins the service also helps establish demand patterns, as does data derived from electronic ordering.
Streamline strives to create supply chain partnerships with firms offering national and local premium brands of goods-companies which don't sell through retail grocery channels normally. These suppliers, such as Boar's Head Deli, Legal Sea Foods, and Iams pet foods, then have an additional, direct-to-consumer link to potential customers. They acquire the prospect for more sales, but without diminishing the value of their brands, Britt says.
With Legal Sea Foods, moreover, known for its motto equating "legal" with "fresh" sea food, Streamline has a just-in-time relationship. Items from this supplier which can be ordered electronically up to 11 p.m. the night before are delivered to the DC by 6:30 a.m. the next day and thus are ready for consolidation into outbound orders which begins at 7 a.m., ends at 9 a.m.
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