When Todd Noethen and Hal Wilson of Big Lots started planning for the close-out retailer's newest DC, the objectives were clear.

'Expense is critical in the discount world,' says Wilson, senior vice president of distribution and transportation services. 'We measure our performance on a cost-per-carton-handled basis. We want to reduce capital and labor as we improve store service. And we also expect to reduce transportation costs,' he adds.

Furthermore, says Noethen, vice president of distribution services, 'we expect each new DC to be more efficient and post higher performance numbers than the one built before it.'

Noethen says that the new 1.2 million square foot DC in Durant, Okla. will be the most efficient of the company's five regional DCs. The target is to improve overall efficiency and performance by 10% over the Tremont, Penn. DC, which had been the company's top performer.

Specific improvements are expected to include improved lift truck efficiency and a 7% uptick in sortation efficiency. In addition, says Noethen, it will take only half the time for picks to leave the pick modules enroute to the sorter.

Such performance is critical because Big Lots bet big on the success of the Durant facility. Total cost was $70 million. Materials handling equipment and information systems came in at $18 million, and the building accounted for the balance.

A DC this size takes some time to grow into, explains Wilson. Startup was in April of this year. Currently, 200,000 cartons a week are being shipped to 120 stores in Oklahoma, Texas, Kansas and Arkansas. These stores were previously supplied by DCs in Montgomery, Ala.; Columbus, Ohio; and Rancho Cucomonga, Calif.

Two to three years from now, the facility is expected to supply 350 stores, shipping 1 million cases a week to 16 states, says Wilson.

Given Big Lots' close-out business, Durant ships a broad range of goods. The list includes electronics, health and beauty aids, sporting goods, toys, chemicals, automotive, paint, and food, among others. And the mix is changing every week.

That requires a highly flexible and versatile materials handling scheme. Lift trucks and storage rack predominate. Conveyors and a high-speed flat-slat shoe sorter (Intelligrated, www.intelligrated.com ) are the only materials handling automation in Durant. Behind the scenes, a warehouse management system, yard management system and automatic data collection manage the information side of the DC.

Durant joins an extensive distribution network already in place at Big Lots. In addition to the five regional DCs, the company operates two furniture DCs. That's a total of 9.4 million square feet of space feeding 1,440 stores for the $4.2 billion retailer.

Wilson explains that the company lives by a five-year distribution plan. It ties in with the plan for new store openings, and is focused on reducing the portion of corporate costs tied to distribution. 'This is a foundation of profitability growth for Big Lots,' says Wilson.

Initial plans for a new DC start three years out. A dozen sites are selected based on location, transportation costs and tax incentives. That gets narrowed down to three or four sites, which then receive a full economic analysis and discussions with local governments. Labor accessibility and costs are also considered.

Once a site has been selected, a typical build cycle is 12 months, says Wilson. And then Big Lots typically takes 4 months to start up the facility.

There's only one expected direction for a new DC's performance at Big Lots—and that's up. The Tremont DC, which opened in 2000, is the benchmark for Durant that needs to be exceeded. And that isn't going to be easy.

'Tremont has consistently outperformed our other DCs by 20%,' says Noethen.

While Tremont is a model for Durant, design of the new DC was not going to be a cut and paste operation.

As the layout drawing above shows, the receiving and shipping docks are perpendicular to each other. 'Since the Durant DC was designed for even higher throughput rates than the Tremont DC, both shipping and receiving dock areas were expanded to allow the most dock doors to be built. Additionally, the remote office areas were moved to be more centrally located to minimize travel,' says Noethen.

There is the ability to have 65 receiving doors, 51 of which are installed. The other 14 will be installed as volumes build. In shipping, there are 40 active doors today with the ability to add another 20 in the future.

Lift truck performance is another critical area to the success of the new DC. For the first time, Big Lots is using AC-powered models. According to Noethen, the higher acceleration rates result in an overall 10% increase in speeds for the AC trucks and is expected to allow the DC to move 12% more pallets an hour. He also anticipates 20% more lifts per battery cycle. In addition, maintenance costs, related downtime and spare parts requirements are less.

Testing of the AC trucks was conducted at Tremont prior to final selection for Durant. Big Lots, however, did not go to an all AC fleet. Only the 30 reach trucks use the technology. The 15 dock trucks, orderpickers and pallet jacks are DC powered.

The battery handling and recharging area was also modified. To minimize floor space requirements and make better use of the cube, battery charging racks are six high. In Tremont, they are stacked only four high.

Both facilities use large forward pick modules to process orders. In Durant, there are six modules, each with four levels. Five modules handle full-case picks and the sixth is for split-case picks. The modules are 30 feet high and 330 feet long. On each module level, pallets are stored three deep on both sides of a conveyor that runs down the center for case takeaway.

The challenge is to move cases through the modules by conveyor after picking without creating bottlenecks. There is only a single discharge point for the module conveyor in Tremont. But for Durant, there are two. As a result, cases are discharged from the first and third levels at one location and from the second and fourth levels from another location. 'That has effectively doubled our throughput from the modules,' says Noethen.

All output from the pick modules have dedicated accumulation lines to the merge that acts as a spine in the facility (see layout drawing below). The accumulation conveyors, while a dominant feature of the DC, vary from 200 to 500 feet long from the module discharge to the merge. Including the conveyor in the modules and the shipping lanes, there is a total of 27,400 lineal feet of conveyor at the facility.

Each line in the spine feeds a staging belt, where cartons are pre-spaced for the sortation system in 37-foot trains. These staged cartons are then released in a planned sequence to the high-speed merge. While Tremont has a relatively simple 4:1 merge, Durant has a 13:1 saw-tooth merge with the ability to add accumulation lines.

The new sortation system is a flat-slat shoe sorter with a sustained capacity of 235 cartons a minute and a peak of 330. It handles picks in 20-store waves now, and is capable of feeding up to 40 shipping lanes at a time.

Wilson also points out that considerable effort was spent to make the DC worker friendly. To begin, it is air conditioned. In addition, he says it is well lit, and has high-gloss floors. Storage racks are color coded for ease of identification.

As Wilson and Noethen say, Durant is only in the early stages of its contribution to Big Lots' distribution efficiencies. And already they are planning for what comes next.

Currently, full pallet picks are only 5–7% of all activity in the DC. 'By going direct from storage rack to the shipping dock, these are the most cost-effective moves we can make other than flow-through,' says Wilson. Flow-through, or crossdocking, is part of the plan for Durant, but has not yet been implemented.

Calling expansion of flow-through 'a biggie,' Wilson says the plan is to 'rollout flow-through over the course of the next three years.' Similarly, an increase in full pallet picks is expected.

Meanwhile, Durant continues to ramp up to its full potential after a startup that was on time and under budget.

Click on the icon to read about Big Lots' Tremont DC, the model for the Durant facility. (Big Lots and more - June 2002 )