No wrong numbers at Tele Danmark

Denmark's telecommunication company made all the right connections when it folded 60 plus warehouses into one and cut handling costs 65%.

By -- Modern Materials Handling, 6/1/2000

There's nothing like being let loose into the free marketplace to encourage a company to improve connections with its customers. Such was the case with Tele Danmark.

In 1994, the government of Denmark privatized its national phone system, which had until then been segmented into five regional phone operations that controlled basically everything having to do with phone communications in the country. This not only included the phone service, but also consumer phone handsets, switching gear, and communications infrastructure.

Going from a government monopoly to a large market-oriented company was a major challenge.

"We had five different logistics areas, three large warehouses that were manually-driven and about 60 local warehouses spread throughout the country. That's a lot for Denmark. We are a small country of only five million people," says Torben Grodt Petersen, vice president of logistics for Tele Danmark.

Market economics no longer permitted such a model in the private arena. As a result, Tele Danmark chose to combine all of its distribution infrastructure into one highly automated facility (Vanderlande Industries, www.vanderlande.com ) in the centrally located city of Odense.

The facility has brought operations together under one roof, and has reduced duplicate inventory while providing a better product mix. A paperless management system has produced greater efficiencies, labor has been reduced, and accuracy has gone up by a whopping 34%.

Overall handling costs have also been slashed more than 65%. That has allowed a handling surcharge on each order of 12.4% in 1996 to be reduced to only 3.5%.

One company, one DC

The Odense distribution center ships a wide range of products. Think of them as Denmark's answer to AT & T, Bell, and Motorola all rolled into one, and you have some idea of the breadth of items in the DC.

Much of the warehouse stock is delivered to Tele Danmark's 54 retail shops that sell telephones, fax machines, and cell phones. In addition, the facility supplies equipment to field technicians who perform phone installations. Other parts in the warehouse range from cable and switches that keep phone traffic moving, to office equipment for the company.

Petersen says the move to the new facility was a huge technological shift for Tele Danmark.

"It was a major challenge," he says. "When we look at the logistics area, it was a shift of about 20 years in technology and the use of IT systems. We came from mostly manually-driven warehouses to a more highly automated warehouse."

Because of the automation, the number of logistics employees (including warehouse workers and drivers) has been reduced from 263 to 100. Most of these are now higher-skilled workers trained for the advanced handling and information systems.

Products at the Odense facility arrive based on a known delivery schedule. Items first go to an arrival and registration station where they are compared to the advance ship notice and order records.

Once entered into the warehouse management system (WMS), items next proceed to five receiving stations. Large items are placed on pallets for transport by lift truck to pallet racks. Each lift truck is equipped with a PC, a monitor to display putaway and picking instructions, and a telephone.

"The driver can go into his lift truck in the morning and stay there most of the day," says Petersen.

The WMS prints out a bar code label that is attached to the pallet before it leaves the receiving station. The lift truck driver scans the bar code upon pickup using a radio frequency unit. The WMS then indicates on the display the proper storage location in the pallet racks.

The pallet storage aisles are very narrow to maximize space. As the trucks enter the aisles, they engage rails that guide them through the tight spaces between the racks. As the driver reaches the proper storage location, he scans the bar code attached to the rack to notify the WMS of proper putaway.

Meanwhile, small products arriving at the receiving stations are removed from shipping cartons and repacked into plastic bins for putaway in the mini-load automated storage and retrieval system (AS/RS).

"We are not just taking a pallet from a supplier and putting it into the warehouse," explains Petersen. "We are making items fully clear for the picking activity."

Each bin has a bar code label that is hand scanned into the WMS to marry the bin to its contents. The bins then travel by conveyor to the AS/RS. Putaway in the 21,000 location system is by seven storage/ retrieval (S/R) machines as directed by the WMS.

Fast moving items are stored in the first aisle, which is used to replenish two flow rack areas. Some product may also by-pass the mini-load and head directly to the fast-moving flow racks if needed for immediate replenishment.

Each of Tele Danmark's retail shops are connected into the warehouse IT system. When inventory within the store reaches a minimum level on any item, a re-supply request is sent directly to the WMS.

"We have large shops in large cities that are supplied everyday," says Petersen. "And we have small shops on some of the small islands in Denmark that get supplied once a week."

Other orders from business units, contractors, and installers are entered into the system by sales people.

Paperless processing

All orders are processed together, regardless of whether it is for store replenishment or for other customers. Picking is performed in waves from both main storage areas.

"Our goal is to have the most efficient production (picking, packing, and shipping) within the warehouse," says Petersen.

Lift truck drivers take an empty pallet to the bulk storage areas and begin batch picking items that will fill 10 to 20 customer orders. As with putaway, the WMS directs the drivers to the needed pick locations and relays the required quantity via the onboard radio frequency data communication (RFDC) terminals.

The pallets are next taken to a distribution area where they are broken down into returnable plastic containers that will ship directly to stores or customers.

Two main waves are used to pick orders from the mini-load, one wave runs in the morning and the other in the early afternoon. Bins from the mini-load are pulled and sent to order processing stations where plastic customer delivery totes are staged. Handheld RF terminals instruct workers to pull the required product quantity from each bin and place them into the proper totes.

Storage bins that have unpicked items left in them are returned to the mini-load, while empty bins are conveyed back to the receiving stations.

The totes are then forwarded by conveyor to the flow rack. Workers here are again directed by RF terminals to pick any fast-moving products from the racks and deposit them into the corresponding tote for each customer order. Once all picking has been completed, the delivery totes travel by conveyor to packaging stations. Proper picking is confirmed there while delivery papers and a shipping label are added to each tote which is then sent on to a carton sorter for diversion to one of seven delivery spurs.

The returnable totes join items brought from the pallet racks in Tele Danmark's dedicated delivery fleet. Retail items are dropped off at each store, at which time the driver also picks up empty totes.

In addition to the store deliveries, Tele Danmark also has established 300 other drop points around the country. Technicians can pick up totes at these points, complete their installations, then return empty totes to the drop points at the time of their next pick up.

Dialing up solid numbers

Tele Danmark's new DC has put up some impressive numbers, especially in accuracy.

"Back in 1995 we had a precision of delivery of about 62%-it was extremely bad. Today we have more than 96%," says Petersen, noting that 100% accuracy has been achieved during the past four weeks.

A more efficient facility has also allowed Tele Danmark to reduce overall inventory by 30%, permitting greater stock turnover while reducing the money tied up in inventory.

Business has also increased during the year that the facility has been in operation, with revenues up 30%.

"Not only can I do things cheaper, but I have much more flexibility," notes Petersen.

He adds that he can add promotional products and alter the picking schedules to accommodate special conditions or large orders. Urgent orders can now be processed within three hours. Catalog and Internet orders in by 1:00 PM ship same day. Most other customer orders are either processed same day or according to the promised delivery date.

Most important of all, Petersen's crew was able to participate fully in planning and building the D.C.

"We wanted to run the project by ourselves," he says. "When the project was finished, we wanted the knowledge of what was done in our own house. So, we used a few consultants, but put our own people to work with the project so they would know the warehouse. The facility has done what it was supposed to. We have not had one day when we could not run."

Benefits at a glance

• Consolidated 3 DCs and 60 local warehouses

System Snapshot

Tele Danmark DC Odense, Denmark

Began operation: April, 1999

Facility size:

7,200 sq mtrs (77,500 sq. ft.)

Cable storage: 5,000 sq. mtrs. (53,820 sq. ft.)

Annual throughput: 7 million products annually

Stock keeping units: 13,500

Pallet storage locations: 5,000

Mini-load storage locations: 21,000

Logistics employees: 100

Equipment Suppliers:

Sorter and conveyor systems, Integration, Mini-load storage, conveyors, RF systems, WMS:
Vanderlande Industries, Inc., 770-661-7800, www.vanderlande.com

Lift trucks, reach trucks:
BT Prime-Mover, Inc., 800-523-0082, www.bt-prime-mover.com