New is what home décor retailer Kirkland's is all about. "At any time, 70% of the SKUs [stock keeping units] in our DC are new items," says Todd Weier, vice president of logistics.

And that shouldn't come as a surprise. The retailer offers the latest styles in lamps and framed art as well as other decorating accents such as candles. Not long ago, furniture was added to the repertoire.

While that has made Kirkland's a trendy place to shop, it also created some tough materials handling challenges for the Jackson, Tenn., retailer. It shipped product from three manual warehouses with 650,000 square feet to more than 300 stores in 37 states.

"We didn't have a WMS [warehouse management system] or any mechanized equipment to manage and move inventory," says Weier. "In addition, we were using too much space to store inventory, were constantly developing workarounds to get product out the door, and we didn't exactly have great control of receipts, either," Weier adds.

All that has changed since Kirkland's consolidated the three warehouses into a single 770,000 square foot DC. While floor staging dominates the facility, a WMS now directs warehouse activities. Meanwhile, the company's first use of conveyors and automated sortation (Intelligrated) now speed picked inventory from staging to shipping docks.

And the results less than a year after moving into the new facility are impressive.

It used to take three days to pick a single SKU for all stores. Now that can be done in a day.

That, in turn, has had a strong impact on retail stores. Before, all had their own mini-warehouses of 500 to 5,000 square feet to manage inventory coming from the DCs and directly from importers. Now, almost all of those satellite facilities have been eliminated with more inventory than ever coming from the DC. In fact, stores that tended to stockpile inventory for several months are now comfortable with just 3 weeks of stock on hand.

"We are much more reactive to store needs," says Weier. "And now stores keep much less inventory than before."

In addition, distribution productivity has improved considerably. Throughput by shift has increased 40%. That gain meant that last year's peak shipments to stores for the holiday season moved from August to November.

And to top it all off, the cost of handling inventory dropped 14% in last year's fourth quarter compared to the same period one year earlier. At its best, unit cost dropped 30% for one week in 2004, says Weier.

As Robert Hyde, director of distribution and warehousing, explains, the old system was maxxed out. "We just were not going to be able to maintain even the old service levels much longer with that distribution scheme," he says.

"We were at the point of diminishing returns," explains Hyde. "We were great at throwing people at the problem. But it got to a point where the more people we threw at it, the less efficient we became. Basically, it was all held together with Band-Aids."

To complicate matters, Kirkland's continues to grow 20% a year, even with more than 300 stores. At that pace, 45 to 50 new stores will be added this year alone. That clearly called for higher distribution throughput.

A review of the situation led to three priorities. To begin, it was obvious that a new, central DC was needed to replace the three that were in place. Second, a warehouse management system was essential to future success. And third, some form of materials handling mechanization was needed to produce the expected efficiency gains and keep pace with store growth.

Deciding where to put the new DC was based on the company's history. It had always been based in Jackson, Tenn., which is about as central as anyplace to the chain's stores. As a result, the new DC was placed there too.

The other two objectives were much more challenging.

The old inventory management system was spreadsheet based. The people on the warehouse floors followed printed pick lists. Receiving and putaway were tracked by paper with data input to the system later.

Along with Hyde and Weier, distribution center manager Steve Horn had great concerns how easily people would adapt to the new system. After all, they had never picked orders by scanning bar codes, following directions from a WMS and communicating in real time with wireless computers.

"Their mindset was very low tech. But with about six weeks of training prior to moving into the new DC, people caught on," says Horn. "In fact, we had more misgivings about the switch than was justified. People were more computer driven than we thought."

But that didn't mean all went perfectly smoothly, either.

While people were quick to catch on to use of the hardware, they did not understand at first how processes had changed. For instance, Horn says they were unclear that each new step mattered. They would put away pallets without scanning bar codes on them, and didn't realize that the inventory was both lost in the DC and invisible to the WMS.

The third step was the move to conveyors, sortation and stand-up reach trucks. The move to the new trucks started 6 months before the move to the new DC, says Weier. Rather than wait until the move, the reach trucks were delivered early to give workers a chance to get used to them.

But the bigger challenge, at least initially, was the addition of conveyors and sortation systems. And it was a challenge to both the warehouse management team as well as workers.

As Weier explains, top management thought the new equipment was "one bridge too far" in terms of changes that could be managed successfully. The plan was to add that equipment after the DC was running for a year.

However, when top management heard the plan, they saw no obstacles. Instead, they viewed the new equipment as much less complex and costly than originally thought. In fact, top management thought the greater risk was not to use conveyors and sortation from the beginning. As it turned out they were right on those counts.

There was, however, a bit more of a hurdle for the people on the warehouse floor. The issue was pace. When combined with the WMS and wireless computers, the conveyors and sortation equipment picked up the pace in the DC quite considerably. "All of a sudden people started to understand the importance of minutes in picking, moving and shipping product. That was not the case before," says Weier.

That said, there is much more confidence in the DC's ability to support stores today. While 30,000 cases was considered maximum throughput with three DCs, the new facility had a day of 45,000 carton throughput late last year. An average day now is 30,000 cases. In addition, order accuracy is now 99.79%, up from 97%.

There are also plans to introduce crossdocking in the near future to further increase throughput. Weier says as much as 40% of receipts could be crossdocked within 2–3 years. And that's part of a much larger program to reduce inventory levels in the DC.

"There's more that we can do to maximize the efficiency of this facility, and we're already working toward that," says Weier.