No confusion in Kenosha

Ocean Spray's Wisconsin warehouse thrives by seamlessly integrating wireless terminals and software.

By Staff -- Modern Materials Handling, 1/1/2001

Much like the cranberries long associated with the Ocean Spray name, the company's Kenosha, Wisc. warehouse found itself in a bit of a bog.

As cases of juice products came off the line in the adjacent filling plant, workers had trouble reading printed product code information easily. Sometimes the code couldn't be read at all. Clearly, this was causing some efficiency troubles in the 300,000 sq ft distribution center.

Today, the facility uses bar codes and wireless terminals (Symbol Technologies, 516-563-2400, www.symbol.com) to identify and manage the movement of inventory. In addition, Ocean Spray implemented a warehouse management system (Applied Tactical Systems, 973-808-1750, www.atsworld.com ) and interfaced it with its enterprise resource planning (ERP) system.

The results have been impressive despite a 15% increase in volume moving through the warehouse and 10% more stock keeping units (SKUs) as the company's product line expands. The warehouse now ships 1.8 million more cases a year with 2,200 fewer labor hours. In fact, cases per labor hour increased from 451 to 550 since the elimination of manual recording of code dates on the cases.

Other measures of success include inventory accuracy that now exceeds 98% and 100% product traceability with every shipment. Misshipments have been nearly eliminated. And on the business side, 29% of the facility's sales are now invoiced one day earlier than before due to the improved flow of information.

Inventory management improved too. The DC now stores 121,000 fewer cases than before while maintaining high customer service levels. Meanwhile, Kenosha was able to eliminate the need for a third-party warehouse that had been used to house an overrun of 10,000 pallet loads.

Making plans

Getting to this point was definitely a process. While some of the ideas for the eventual solution actually came from some outside observers, Ocean Spray managed the process internally. "A cross-functional team was established to look into new, more efficient options for warehousing," recalls Gardner Smith, a business process analyst at Ocean Spray.

Some of the options considered included a re-engineering of the manual, paper-driven inventory management process that had been used for years. That, however, was not considered to go far enough to make the gains desired. Another solution was the installation of an automated storage and retrieval system. That was rejected because it would have required a reconstruction of the warehouse–a step upper management was not willing to take.

"We developed a set of criteria for what we thought would be the ideal warehousing system," says Smith.

The team wanted real-time inventory status and location control to improve both inventory management and customer service. Another criteria was lot traceability of shipments by expiration date to reduce waste due. Also important was a fully functional stock location system with directed putaway and picking functions to maximize warehouse utilization and shipping accuracy. A shift to paperless operations also got the nod. Full and seamless integration of the new system with the existing ERP system was considered essential too.

In a nutshell, the team was looking for a system that would allow Ocean Spray "to know its inventory on a real-time up-to-the-minute basis," says Smith. "We also have to be able to plan to meet those orders and fulfill customers' expectations."

Requests for proposals were sent out to 10 suppliers of warehousing systems. Beyond functionality of the systems and the ability to meet the criteria established, the suppliers' responses were evaluated on the basis of cost, potential savings, and return on investment (ROI).

As the chart (above) shows, the team's business needs assessment expected to justify the project in five areas. These are; scrap reduction, reduced misshipments, lower inventory carrying costs, labor savings, and increased cash flow due to earlier billings. Reductions in labor, scrap, and inventory levels accounted for 84% of the expected costs savings. And the projected ROI was 19.66% for a 3 yr payback.

When the supplier of the WMS and related technologies was selected, the team knew it had on its hands a system with more functionality than was actually required. However, the package's modular architecture was considered a major plus. In addition, the supplier was willing to tailor the system to Ocean Spray's established practices in production and warehousing.

"We also ensured that upper management gave its blessing to the project, and was involved in every step of the roll out," says Smith.

How the system works

With the new system, the corporate order management system tracks orders, plans inventory levels, allocates available inventory to orders, determines shippable orders to be picked at the warehouse, and invoices customers based on actual shipments. The WMS manages the accurate, real-time execution of 1,200 orders a day in the warehouse. Both the order management and warehouse management systems run on the corporate mainframe in Massachusetts.

In Kenosha, the corporate mainframe interfaces with a local server. It receives data from another local server that is actually managing the wireless radio frequency data communication (RFDC) system which meets the 802.11 wireless standard. Data is transmitted at 2.4 mbps.

Workers log onto that system using portable terminals in the warehouse. Additional PC workstations tap into the system too.

At the end of the filling lines, pallet loads of cases receive a bar coded license plate. That label carries the product ID, expiration date, the plant of manufacture, and a sequentially assigned serial number.

A lift truck driver scans the bar code and the information is sent by radio frequency to the WMS. A return message tells the driver the exact location for putaway of the load. Putaway is based on a first in/first out , last in/first out rotation as required to ensure shipment of the freshest product available.

Whenever possible, the WMS consolidates inventory when the SKU matches and the expiration date is within a range of acceptable dates. If consolidation is not possible, the WMS knows which are the open storage locations and directs the driver there.

To confirm putaway, the driver scans the storage location and transmits that to the WMS too. The same pattern is followed for pallet loads that arrive from other Ocean Spray plants.

To pick inventory, the RFDC system directs the driver to the designated location. The bar code label is scanned to ensure picking accuracy.

For those orders that require less than a pallet load, the driver is directed to take the load to a staging area and build a new pallet of the required cases for shipment. A new bar code label is printed and applied to the re-built pallet load.

Over-the-road trailers are scheduled to designated shipping dock doors. Pallet loads for orders assigned to that truck are loaded onto it in the reverse order in which they will be delivered. If necessary, the driver of the over-the-road truck can re-sequence and re-balance the load.

What the system delivers

As part of its standard procedure, Ocean Spray audits new systems such as this one. In this particular case, overall savings exceeded expectations.

As the chart shows, labor reduction came in as expected with misshipments somewhat exceeding the initial goal. The value of early invoicing was not as strong as planned but did contribute to the improved bottom line.

However, significantly stronger gains were made in the reduction of inventory carrying cost. That actually came in at nearly 300% greater than planned. Scrap reduction due to expired date codes on cases of juice was even greater. Because those gains were so much stronger than anticipated, the project team actually cut them in half when determining the actual ROI for the new system. As a result, the audited ROI was put at nearly 35%, allowing a 2.5 yr payback.

According to Smith, the system works so well in Kenosha that it has been rolled out to other regional distribution centers. Most recently, the WMS and RFDC systems have been installed in two, third-party warehouses Ocean Spray uses elsewhere in the country. The next step is tie in even more information to its ERP system to make further improvements in the company's supply chain.