Distribution ain't what it used to be!

By Bob Trebilcock, Editor at Large -- Modern Materials Handling, 6/22/2006

That’s according to Jeff Hutchinson, a partner with the consulting company Accenture. “Distribution used to be looked at as a necessary cost, which is why so many companies outsourced their operations to 3PLs,” Hutchinson explains. “Now, companies look at distribution as a strategic opportunity.”

Do distribution right, the theory goes, and an also ran can leapfrog to the head of the market share pack.

That’s a significant shift in thinking. And according to Hutchinson, that new approach to distribution is spawning several trends that are changing the way the best distribution centers operate. Five key trends are:

• Crossdocking
• Strategic automation
• Value-added services
• Demand for real-time information
• Proliferation of stock keeping units

Following are five companies that are capitalizing on these trends in their distribution centers.

1.) Crossdocking reduces handling and speeds inventory from the receiving dock to the shipping dock, sometimes in ten minutes or less. For Belk (Crossdock for productivity, May 2006), the largest privately-held department store chain in the US, a new highly automated crossdock facility reduced the total time it takes for product to move from a vendor to store shelves from as many as 21 days to just eight days (FKI Logistex).

Making the system work was a two-step process. First, Belk worked with its vendors to provide value-added services like the garment hangers and human-readable price tickets that used to be added in the DC or at the store. That took steps out of the process and reduced handling in the DC.

When inventory arrives, it’s now ready to go straight to the shipping dock without ever hitting the DC floor. A bar code scan compares the merchandise in the truck against an advance ship notice. If the order is accurate, merchandise is placed on a conveyor and automatically sorted to a shipping lane by store location.

Cartons flow from one end of the facility to the other in just seven minutes. What’s more, the combination of store-ready goods and crossdocking has reduced the number of touches before an item reaches the selling floor from ten to just four or five. The payback: Belk is getting an extra week of selling time at full retail before any markdowns of the price.

2.) Strategic automation mixes automated processes such as conveyance, which can significantly improve throughput, with traditional processes like picking, where agility and flexibility are paramount. Green Mountain Coffee’s (Joltin' java DC, January 2005) new facility in Waterbury, Vt., is a case in point.

For maximum flexibility, associates are cross-trained to perform multiple traditional tasks from light-directed case and less-than-full case picking (Diamond Phoenix) to completing orders for multiple sales channels at the packing stations. For maximum efficiency, Green Mountain added automation in areas that would deliver the most return for the investment. A rail-guided orderpicking truck stores and retrieves pallets . Conveyors transport cases and a narrow belt sorter routes cases to divert lanes that feed shipping

Traditional and automated processes are synchronized by bar code information collected in real time and shared between the warehouse control system and the enterprise resource planning system. The end result is a system that can keep pace with Green Mountain’s 20% annual growth, a proliferation of new stock keeping units and customer demands for speedy orders.

3.) Value-added services are a fact of life for many distribution centers today. Major retailers demand custom packaging and labeling while consumers want personalized products in order quantities of one. Lillian Vernon (Personalized sortation, February 2005) a specialty and gift retailer, has created an entire business around product personalization, offering customers 14 different ways to personalize a product.

Some 40% of the 10 million items shipped from its Virginia Beach DC go through some sort of extra process in a 100,000 square foot mezzanine work area just for personalized items. Afterward, many of those items have to be matched up with non-personalized items to complete an order

A series of sorters makes all of that happen. First, a narrow-belt sorter (TGW Ermanco) directs totes coming from the mezzanine work area to a lane where an operator manually stacks totes to a pallet by wave. Once enough pallets have accumulated, a tilt tray sorter (W&H Systems) sorts individual items to hampers for further picking. At the end of the picking and packing process, a traditional tilt tray sorter (Eisenmann) directs boxes to shipping lanes by shipping method.

Automating these value-added services has delivered a 52% increase in the pieces per hour handled in the personalization area.

4.) Demand for real-time information is speeding up the adoption of voice systems, radio frequency identification and other real-time data collection and communication technologies. For Sportsman’s Warehouse (Sportsman's Warehouse hits the target, July 2005), a Utah-based big box retailer, working in real time was driven by the need to keep on top of day-to-day operations while growing the company by 50% a year.

The answer has been a warehouse management system (HighJump Sofware) designed to enable the DC’s managers and operators to manage the facility in real time, as events unfold. On the floor, the system does labor and wave planning at the beginning of the shift. Using task interleaving, the system routes pickers and lift truck operators to the next most efficient task to eliminate unproductive travel time. As new orders come into the facility, the system automatically adjusts.

What’s more, the warehouse management system provides management with real-time feedback throughout the day. Shift supervisors, for instance, carry Web-based PDAs outfitted with scanning devices while they’re on the floor. That allows them to access the warehouse software and make timely decisions while interacting with associates.

5.) The proliferation of stock keeping units (SKUs) is forcing distribution centers to rethink how to manage inventory. That is especially true given the brief shelf life of everything from consumer electronics to high fashion to entertainment media. Case in point: Blockbuster’s 1 million square foot facility in McKinney, Texas

While Blockbuster (Just the ticket for Blockbuster, October 2005) once shipped VHS tapes to retail stores for rental, the inventory now includes DVDs and games. In addition to its rental business, Blockbuster also has retail sales and a used game and movie trading business. The bottom line: Blockbuster maintains as many as four SKUs for a single release.

And how is Blockbuster managing? With a new two-pronged handling system that expedites orders within the four walls and creates substantial transportation costs savings down the road.

Inside the four walls, Blockbuster relies on a combination of picking from horizontal carousels and a sophisticated conveyor and sortation system Dematic that feeds five packing stations and 15 shipping lanes.

To save on transportation costs, cartons are shipped in truckload quantities to 42 pool points around the country. At each point, boxes for each store are broken down for direct store delivery.

The outcome has been Oscar-worthy. The facility manages thousands of transactions per hour with a 99.97% accuracy rate. Labor costs are going down. And the pool system is keeping a lid on transportation costs.