Joltin' java DC

Green Mountain Coffee's caffeinated growth required a new DC that can triple throughput in a few years.

By Gary Forger, Editorial Director -- Modern Materials Handling, 1/1/2005

Tucked away in Waterbury, Vt., Green Mountain Coffee is your typical overnight success story. That is if 20 years is overnight.

What started as a local coffee roaster for local businesses cleared $130 million in revenue in 2003. And by the fourth quarter of last year was on track to hit $160 million for 2004.

Better yet, says Jon Wettstein, vice president of supply chain operations, the expectation is for 20% annual growth to continue for the foreseeable future.

That's great on the business side. But in the combined roasting facility and DC, space was so tight that people were literally tripping over each other.

"We needed new distribution capacity to support that growth and get out of our own way," says Curtis Hooper, plant manager. "We could have used this new facility a year ago."

He's referring to Green Mountain's new integrated 56,000 square foot DC (Diamond Phoenix) adjacent to the original building. It's sized to accommodate growth from handling 17 million pounds of coffee in '03 to 50 million pounds a year in the next seven years. In fact, the plan is already in place to reconfigure the facility within its current footprint, upgrading from semi-automation to true automation when needed.

But there is much more going on here than just a new DC with a plan for the future. Green Mountain also reconfigured its businesses and how it handles orders, explains Wettstein.

Before, shipments were handled as four distinct businesses – truck shipments to grocery chains and other large volume customers, FedEx shipments to convenience stores, route deliveries to small customers in New England, and consumer direct. Each order was picked individually using a hand cart for less-than-full-case picks and lift trucks for pallet loads.

Today, the DC handles all orders without regard for the previous business designation, says Hooper. And it now picks by stock keeping unit (SKU) using a rail-guided orderpicker, conveyors and an automatic sortation system.

"We decided it would be much better to maximize the efficiency of the DC rather than match order processing to our sales channels," says Jason King, director of facilities and process engineering.

The payoff is already evident. Since moving into the DC in mid-August of last year, volume increased 35% but is being handled with the same number of people as before, says King.

Increasing volumes is only part of what convinced King and others that a more caffeinated DC was needed. The need for speed (as in inventory turns) and the growing number of SKUs also played a part.

Air and light are natural enemies of roasted coffee. The longer that beans are exposed to either, or, worse yet, both, the more that the flavor suffers.

And even though roasted coffee is protected from both enemies at the Waterbury facilities, it's best to move product through as quickly as possible. Only seven days typically elapse from when sacks of beans from around the world arrive until roasted coffee is shipped out of the DC.

Meanwhile, the number of SKUs continues to proliferate. New flavors are being added. A co-branding agreement this year with Newman's Own has added still more SKUs. There is also a rapidly expanding line of single-serve coffees.

Green Mountain's particular blend of volume, speed and SKUs led to not only quite a different DC than before but a new approach to filling orders and the work that people do. All are intertwined, says King.

In the past, there were literally four different work forces within the DC. People who worked consumer direct knew nothing about how to handle a FedEx order, for instance. Furthermore, a FedEx order would never be handled at a workstation for consumer-direct orders. The silos were just that, silos.

Now workers are cross-trained for multiple tasks from light-directed case and less-than-full case picking to completing orders for all four sales channels at packing stations. Leading by example, vice president of supply chain operations Wettstein often works the rail-guided orderpicker.

People received six hours of classroom training in change management. They were also trained for many more hours in the various tasks using the equipment.

"We need a flexible work force and that's what we've developed," says King. "People now flow to the where the bubble of work is. They have a matrix of skills and that's a breeding ground for a fully trained work force and the opportunity to make more money. This also helps to maintain interest in the job and keep a positive attitude."

Another major development in the new DC has been the move to more automation. There was nothing more automated in the old DC than a lift truck. In fact, any form of automation was mostly an unknown to King and others. But that didn't stop them from taking the leap.

As the layout above shows, semi-automation is mixed with standard equipment in the DC. A rail-guided orderpicking truck stores and retrieves pallet loads in one lane while a swing reach truck operates in the next. Pick-to-light systems direct workers in the case-pick tunnel and in the split-case pick area on the 20,000 square foot mezzanine. Conveyors route cases between floors and on the main floor. A narrow-belt sorter directs cases to divert lanes that feed shipping.

But the information side of the DC is even more automated. The facility operates in real time, explains King, and starts with collecting bar code information and using it to track pallets and cases using a warehouse execution system (WES). That data is then linked with order data from the enterprise resource planning system (ERP) and the WES, which is more than a warehouse control system. The WES acts as a bridge between the ERP system and the automated equipment, eliminating the need for a stand-alone warehouse management system.

All picks now are by SKU not by order as before. Then orders are assembled using the conveyors and sortation systems.

"Timing is everything with this system," says King.

And good timing serves different objectives. For instance, picks for common orders are released at different times throughout the various warehouse zones so those lines can be merged at the sorter at the same time. Route delivery orders are sorted in the reverse order of the route so the first items on the over-the-road truck are the last ones off. Some full case picks circulate on the conveyor while less-than-full case picks are sorted to expedite handling prior to shipping.

"Developing the right schemes took us months to work through," says King, "but now that we've been in the DC for a few months it's clear that these schemes are what we need."

Getting to this point was a bit of a fast track. Board approval was in mid-October of 2003 and ground was broken two months later. That meant the first steel went up when the weather hit -35ºF below in central Vermont. By the end of March and before the building was fully enclosed, installation started on the first materials handling equipment. The first orders were processed in mid-August of 2004, just in time for the start of the holiday shipping season and more than eight months ahead of the original schedule.

Throughout the process, says King, the DC workers were involved in several aspects of the project. One notable example is the design of the packing workstations. Input was solicited from all who would use them rather than limit input to a small team.

"Everyone was a major contributor," says King. "People involvement does not give you a sub-standard result. We believe that you get better systems with their input."

That said, this DC did not have a blank check behind it. Just as it worked to a tight schedule, it was also done on a budget. "We needed a specific return on investment for the health of our overall business, and that's what we worked to," says Wettstein.

As a result, the size of the DC was kept small and the equipment limited with the help of real-time controls. But this is only the first phase.

From the beginning, there was a plan for taking the DC to the next level of performance. While the footprint will remain the same, the layout and operation of the facility will change as the business grows and changes.

The walkies that now bring loads over the bridge from manufacturing will be replaced by an automatic guided vehicle. A third storage aisle will be added against the back wall, and two automated storage/retrieval machines will be added to the aisles alongside the rail-guided orderpicker. The case-pick tunnel will move over one aisle, and be divided into three levels. These are just some of the larger, more obvious changes to come.

"The plans are already drawn up. It was all part of the original design and helped us to get our initial return. This way we didn't have to overbuild the DC for the business at the time, and can bring it along as volumes grow," says Hooper.

There's also some flexibility built into the design for unexpected developments. For instance, a faster than expected growth in pallet picks than case picks in 2004 is already spurring installation of some new equipment to handle that.

When all is said and done, King says, DC costs are on a downward spiral. In the second year of operation, the DC's costs as a percentage of the cost of sales are expected to drop from 3% to 2.7%. And by the fourth year, that 10% decline will become 25% lower than today. "Lower costs and improving efficiency are a powerful combination," says King.

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