To understand what SKU (stock keeping unit) proliferation really means, walk into an A.C. Moore store. Do it for the first time just before Halloween. Then as Thanksgiving approaches. And finally close to Christmas.

You'll first see the full range of arts and crafts for each of those decorating seasons. The stores will start out filled with everything from carvable pumpkins to miniature hay bales, then move on to every Thanksgiving decoration imaginable. And we all know how varied Christmas decorations can get. At the same time, the stores are filled with non-seasonal arts and crafts such as the 96 variations of just one width of ribbon for scrapbooks.

But SKU proliferation is not the only challenge at A.C. Moore. Until spring of this year, the company picked all 25,000 warehouse-supported SKUs with wireless terminals and pallet jacks across four warehouses.

But as the 93 retail store company continues to grow at 12–15% a year, that model was not viable, say Chris Green, general warehouse manager, and Rich Kinkel, chief engineer.

As a result, A.C. Moore invested more than $45 million in a new 770,000 square foot DC and office complex in Berlin, N.J. Forty percent of that investment went to materials handling equipment including conveyors, a sliding shoe sortation system, and extensive pick-to-light (Siemens Logistics & Handling Systems) as well as racking and very narrow aisle (VNA) trucks. A real-time information system features a home-grown warehouse management system (WMS) and wireless terminals.

'We now handle inventory fewer times,' says Kinkel. 'In addition, our forward pick areas are better stocked which reduces our replenishment costs and ultimately improves productivity. And we expect to handle the same number of lines a day as before with 25% less labor.'

'As we continue to grow, we will be accomplishing more throughput with the same number of team members,' he adds.

'But the real return on investment here is having the ability to keep pace with the company's growth,' says Green.

No doubt, the A.C. Moore Co. has been on a nice trajectory. The $500 million company started in 1985 with a single store in Moorestown, NJ.

Along the way, it moved into four New Jersey warehouses—two in Blackwood and two in Barrington— and had 600,000 square feet of low-bay space a year ago. But the four weren't as efficient as they needed to be.

There were limitations beyond the manual operations. The forward pick areas only held three days of inventory. This required excessive replenishment, hurting productivity.

In addition, not every warehouse stocked every SKU. As a result, a typical order was picked in part at one facility, then transported to another before it was consolidated with the rest of the order prior to shipment to a store.

Fortunately, top management understood both the limitations of the warehouses and how they affected the company's ability to continue to grow at the desired pace. They decided to make a move.

A new DC was designed and a site secured in the fourth quarter of 2002. Ground was broken for the new facility in September 2003, but it was now a race against time.

'Our busy season is from July through December. So we had to be operational in the new DC by July of this year. Otherwise, we would have had no choice but to stay in the old four warehouses for another year,' explains Kinkel.

By March, the floor, walls and most of the roof were up. Rack construction could wait no longer. By May, much, but by no means all, of the materials handling equipment was in place. But the push to move inventory into the DC had to begin. So, Kinkel worked with what he had.

Fortunately, the 34,000 pallet position, 19-aisle VNA area was ready for inventory. 'We filled that first then moved on to other areas of the warehouse as they were ready for inventory,' says Kinkel.

Then the roof fell in. Literally. The roof on one of the Blackwood DCs fell in following a heavy rainstorm. That required some re-prioritizing as office personnel joined in to help move inventory into the new DC.

'This was the only way we could do it,' says Kinkel. 'We would have preferred to do it differently, but we were always on the back end of everything.'

The first order was shipped in June. And by the end of July, Green and Kinkel declared the new DC operational. A total of 1,600 truckloads of inventory were moved to Berlin from the other DCs.

At the end of last month, ramp-up of the facility was completed, and day-to-day operations are beginning to settle in.

The DC runs three shifts, five days a week. On the first shift, receiving, putaway and picking occur. On the second shift, activity is limited to replenishment and putaway. A skeleton crew on third shift does only replenishment.

About 60% of stores receive three shipments a week, while the balance receive two. A typical store shipment is either a full or half trailer.

Picking is done in four waves, each requiring about two hours. There are typically 20 trucks in a wave. All picking is under the direction of the WMS, and is done in four, three-level towers, each 350 feet long.

'Much of our success depends on getting as much throughput as we can from the pick towers with the least amount of handling,' says Kinkel. 'Part of that is holding three weeks of inventory instead of three days as in the old warehouses. This way we limit replenishment and increase overall productivity.'

On the first level of each tower is pick-to-light with a total of 6,000 locations for the fastest movers. Workers simply follow the lights, selecting the correct quantity of each SKU and placing picks into a tote. Totes travel along a central conveyor spine until the end of the tower where they join a takeaway conveyor that ultimately feeds sortation.

'In the old facility, an average worker picked 125 to 150 items an hour,' says Kinkel. 'In the pick-to-light system, 250 picks an hour is not uncommon.'

On the second level are slower moving broken case picks. Workers here receive pick instructions on hand-held wireless terminals from the WMS. As on the first level, items are picked into totes that travel on a central conveyor spine in that tower.

The third level is full case picks onto a central conveyor. Paper pick labels direct workers.

Cartons and totes travel by conveyor to a 7:1 merge that feeds the sliding shoe sorter. That, in turn, directs an item to one of 20 sortation lanes for staging prior to pallet building, stretchwrapping and loading onto trailers at the 25 shipping docks.

Even though top management did not work to a conventional return on investment for the facility, Kinkel had a budget that required him to do some value engineering. He estimates a total of $4 million was saved.

For instance, conveyor costs were trimmed by merging items from two lanes on the same level of the picking towers onto a single takeaway conveyor. Kinkel says it would have cost an additional $850,000 to dedicate a takeaway conveyor to each lane in the tower.

With initial operations underway, the focus is beginning to shift to other goals. In the near future, twice the number of cartons is expected to be handled. Meanwhile, throughput is expected to double in just three years.

To meet that, provisions have already been made for expansion. Within the facility's current footprint, there is room for a fifth picking tower and additional sortation lanes. Furthermore, all of the infrastructure is in place to accommodate an additional 120,000 square feet of space.

In any regard, both Green and Kinkel agree that this facility is ready for now as well as the foreseeable future.

Click on the icon to see how other DCs pick and ship to retailers.
(A fresh look at Elizabeth Arden - August 2004)