As Migros, one of Switzerland's largest companies proves, the Swiss are anything but neutral when it comes to the supply chain. "We need to increase our speed and reduce costs. Centralization of logistics is necessary for us," explains Armin Meier, a member of Migros' executive committee for logistics and information technology.

What makes Meier's statement especially noteworthy is that the company is a decentralized organization that currently dominates the retail market in Switzerland. Migros consists of ten cooperatives offering wide-ranging commodities such as banking, fitness centers, travel agencies, gasoline and groceries. The company recently began transforming its grocery division in an attempt to cut costs and remain competitive.

Meier says that streamlining grocery distribution will eventually save $30 million annually, while $130 million is projected to be saved cooperative-wide through new logistics strategies. The company's goal is to reduce its total distribution costs from 15% of revenue to 11%.

The first phase of grocery centralization encompassed the closing of ten regional distribution centers and one large center that had formerly handled dry goods. These were consolidated into an expanded facility in Suhr, Switzerland designed to distribute dry goods nationwide. Frozen and refrigerated goods and non-food items will also be centralized within two other facilities during the next two years. Perishables, such as fruits, vegetables and meats, will be handled through ten local DCs to ensure freshness to market.

The Suhr facility was created by doubling the size of one of the older distribution centers. At 100,000 square meters, the DC will eventually distribute product to 853 destinations, including 582 Migros grocery stores and 301 company-owned restaurants. Migros is taking a year to ramp up volumes and currently serves half of the stores, with the full complement of stores expected to be online by next June.

Materials handling equipment added during the Suhr expansion includes four miles of conveyors, a high bay containing an automated storage and retrieval system and ergonomic picking mobiles, a unique vehicle not yet found in North American DCs (Witron). The new systems process 350,000 cases each day. The facility only picks full cases.

"The warehouse is the cornerstone of our new processes," says Meier. "It allows us to be faster, cheaper and better. Redundancy has been reduced, turnover has increased and floor space has been saved by a level of five. We are much more productive than before."

Migros chose a combination of automation and manual labor for processing orders in Suhr.

"Our quality depends on our people," says Meier. "We want to keep them motivated because they make the difference for us. So, it was important to equip the warehouse with materials handling systems that are 'human'."

The ergonomic picking mobiles do just this. These man-up picking machines ride rails as they speed along to picking positions. The machines raise workers to the exact location of stock, using electronic eyes to automatically adjust the load heights to an ideal ergonomic position for picking. It is a high-speed system that increases pick volume, and reduces errors.

"Switzerland is seen as not being cost effective in its distribution, and we may see more competition now from France and Germany," says Clemens Zehnder, industrial manager. "Our performance is much higher now with the new systems. We should be able to reduce our costs and increase our flexibility to encounter whatever competition we may see in the future."

Products arrive at the Migros distribution center by rail and truck. A rail spur carries freight cars directly though the building. Lift trucks drive onto the cars to offload pallets. On an average day, 120 rail cars are unloaded with a total of 4,200 pallets. Some 1,500 pallets are also unloaded daily from 50 trucks arriving at adjoining docks.

Receipts are scanned into the warehouse management system and deposited onto pallet conveyors for transport to the high bay warehouse. Since the facility processes grocery products, Migros operates on a strict first in/first out policy to maintain freshness of stock.

The high bay has twelve aisles and capacity for 52,500 pallets. Future expansion will eventually accommodate 67,700 pallets. A quarter of the storage area is climate controlled and is used to house temperature-sensitive products, such as chocolates and specialty cookies.

Storage/retrieval machines (S/RMs), one working in each aisle, pick up the incoming pallets at stations found on two levels. The stations are used for both input and output. The SRMs take the pallets to randomly assigned storage locations. Each machine can hold two pallets at a time for transport, making this a very efficient system.

Once a pallet is put away, the SRM is assigned to pick an outgoing pallet that will be used to replenish the facility's pick modules. The machine drops off the pallet at the output station, where it is then conveyed to the pick module, also known as the commissioning area. This area is located on two floors and consists of pallet racks capable of holding 3,067 pallets.

As pallets arrive from the high bay, 28 replenishment machines pick up the loads. Riding on rails, they deposit the pallets into double-deep pallet flow racks on both sides of their aisles. The storage locations are assigned by the WMS with several priorities in mind. One criteria is to balance the workload during picking.

"We also store product as much as possible according to 12 family groups to make processing more efficient," says Walter Strebel, general manager at Suhr. "Examples of the groups are breakfast products, beverages, canned goods and pet foods."

Orders are created to replenish items sold in the stores, based on point-of sale data. The orders are transmitted to the distribution center and the warehouse management system begins the order fulfillment process. The orders ship daily, as most Migros stores have little or no storage space.

The commissioning area contains 112 manned ergonomic pick mobiles (EPM) operating in zones. The process is highly automatic with all movements controlled by the system. This makes training easier.

"We can train a person to pick in just half a day," says Zehnder. "We can tell within a week if a person is going to be a good picker."

After logging in, the worker grabs two handles that contain switches. When the switches are depressed, the unit begins to ride on its rails and raises to the storage location for the first pick required for the order.

A display screen shows the quantity to select. The worker pulls the needed cartons from the storage location, places them onto a pallet, hits a confirmation button, grabs the handles and is then whisked off to the next pick location. Before arrival, the section of the machine holding the pallet automatically lowers so that the top layer, which will receive the next pick, is always at the ideal ergonomic height. This level is adjustable according to worker height. When the worker logs in, stored data on the worker's height and preferences automatically controls pallet positioning.

Once all picks from that zone have been completed, the pallet rolls off the EPM onto a short conveyor that carries it to the next zone requiring picks. The process repeats until all picks have been made for that store or the order pallet is full. A worker can also signal the system when he or she feels that adding more picks could be unsafe.

"We schedule the picks to build a safe pallet," says Zehnder. "It is part of how we optimize the system everyday based on orders we get in the morning."

On average, the system picks 7,200 pallets a day with up to 380,000 cartons. Completed pallets are conveyed to wrap machines that circle stretch film around the loads to secure them for shipping. They then are conveyed to a vertical lift that drops them a level to one of twelve awaiting shuttle cars. The shuttles transport the load, riding on rails, to an appropriate shipping spur aligned along 40 outbound docks. Lift trucks carry the pallets from spurs to the 180 trailers that depart the facility each day, making up about 75% of outbound shipments.

The other 25% is shipped by rail. These products are diverted to spurs where other lift trucks load them directly onto rail cars.

"Some days are very busy with double the throughput," notes Strebel. "We have the flexibility in this design to handle it."

Dry goods currently remain in the facility an average of 26 days. As volumes increase and more stores are added during the coming months, the company hopes to reduce the time stock remains in Suhr to only ten days.

With the facility open only a short time, Strebel says the automation is performing perfectly as designed.

"We are exactly on track and we are already seeing gains," he notes. "The combination of automation and human power has been a very good mix for us."

"This logistics strategy will define how Migros will do its business in the future," adds Meier. "We have achieved unification here. It is a good first step."

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