Just when you thought all grocery distribution centers are manual, highly labor intensive operations, Stop & Shop comes along. At the Northeast grocer's new DC in Freetown, Mass., an automated storage and retrieval system (AS/RS) with 77 aisles significantly reduces the labor required to handle non-perishables and perishables for hundreds of stores.

"We wanted to reduce the number of times people have to touch inventory," explains Jerry Pimental, director of warehousing at Freetown. "The AS/RS does just that. It cuts our manual pallet moves in half."

And that's just the tip of the iceberg when it comes to controlling distribution costs. "Competition is forcing us to look at how to take costs out. And this building is an example of that," adds Jose Alvarez, executive vice president of logistics.

Although the building has been fully operational only since January of this year, the same work force as needed at a previous facility in Massachusetts now handles 40% more volume.

The grocer's investment includes more than $20 million of materials handling equipment ranging from the AS/RS (HK Systems) to voice directed picking and a warehouse management system. The AS/RS is said to be the largest in North America. In addition, the Freetown DC at 1.3 million square feet is the largest in square footage and volume for Stop & Shop, the largest grocery retailer in the Northeast.

To say the least, Stop & Shop distribution has come a long way. The previous facility, which serviced 240 stores, handled produce only. The 40-year old building was highly manual, featuring extensive use of lift trucks and a paper-based pick system.

"We needed to improve quality of store service and reduce costs," says Alvarez.

Initially, automation was not part of the equation. However, Stop & Shop's manual-based distribution model meant increased volume would result in an increased work force over time.

The rise of more affordable automation options gave Stop & Shop the opportunity to change its approach to distribution. With automation, an up-front investment could stabilize work force size while accommodating increasing volumes, leading to higher productivity and lower costs.

The design of the DC looks more like two warehouses than one (see drawing next page). One building handles more than 4,000 stock keeping units (SKUs) of perishables at 34–55°F in 480,000 square feet. It services 160 stores today. The other handles 5,000 SKUs of non-perishables at ambient temperatures in 612,000 square feet. It services 130 stores. There is, at this point, sufficient capacity for the combined facilities to handle 1,000 or more additional SKUs, and service more than 100 additional stores.

Each operates independently of the other. However, a single WMS directs activities in both. In addition, handling operations in the two mirror each other (see system layout image and caption below).

But size and automation are only two factors that separate Freetown from its predecessor.

Far from paper pick tickets is the extensive integration of systems. Pimental explains that there are six major components here. These are: WMS, equipment management system controls for the AS/RS, voice-directed picking, wireless terminals, planning software and procurement systems. Combined, they direct activities from purchasing non-perishables and perishables to planning and execution in the DC and delivery to stores.

Such a radical change also required a major change in how work is done in the DC.

"We started designing new processes in June of 2002, more than a year before the first equipment was installed," says Pimental.

Just the fact that automation was introduced to the DC required extensive process changes. Not only was putaway completely different, but so was replenishment (see drawing caption page 26 for details).

Another significant process change was orderpicking itself. More than 100 order pickers are out on the floors of each building in a typical day. At peak times, as many as 140 could be in action. Throughput can run as high as 400,000 cases a day, depending on the day of week, promotions and holidays. In addition, Stop & Shop wanted to streamline the picking process to make it more efficient and accurate, as well as safer for workers.

"To manage this, we needed new tools, and voice-directed picking was one choice," says Pimental. This shift also helped the DC to truly operate in real time and make picking decisions as close to the time of shipment as possible.

Even the handling of empty pallets required process change. The DC accepts loads on three different types of recyclable pallets. When a pallet is emptied in a picking location, an order picker uses the voice system to initiate pickup of that pallet by the S/R machine. It then places the pallet in a special stacker built into the AS/RS. Each of the three pallet types has a separate stacker for ease of recycling.

Accommodating all of the changes in processes and equipment required extensive training. A strong effort was made to keep people informed of construction progress too. The idea, says Pimental, was to prepare and include people as much as possible to ease the transition.

Order pickers as well as lift truck drivers received nearly a full day of training before going out on the floor. Some, he says, suffered "technofear." However, the use of demos first and then live training before ever picking a case helped to get people through that.

Transformation teams of 12–15 people started testing of systems in the warehouse eight weeks before the first case was received. "We built our future generation of leaders with this," says Pimental.

Managers and supervisors received 70 hours of instruction before they ever walked into the new DC.

"We sent through a gigantic transformation, and wouldn't have been able to do it without the dedication and willingness of our people to learn. We also developed new leaders under some pretty extreme circumstances," says Alvarez.

And as Pimental adds, "We know now this organization has a lot of heart. They are passionate and dedicated people who are the reason we will be successful going forward."