Automation: Kroger changes the distribution game

In the not so distant past, most grocery distribution centers made due with labor intensive, traditional materials handling technologies and processes. Pallets were moved by lift trucks and stored in racks. Mixed pallets were built the old fashioned way, with manual labor.

For some leading grocers, those days are history. The same industry that led the way in the adoption of warehouse management and labor management systems, wireless bar code scanning and voice technology is now adopting automated materials handling in a big way.

The Kroger Company is one of those industry leaders. About eight years ago, it began working with a systems integrator (Witron Integrated Logistics Corp., 847-385-6113, [url=http://www.witron.com]http://www.witron.com[/url]) to create a new design to automate its grocery distribution centers. The end result was a system that can receive and putaway full pallets, then break them down and rebuild them into store-ready mixed pallets according to how they will be put away on the shelves in a store aisle. It all happens with almost no human intervention: Operators typically touch a product once when lift truck operators unload pallets at the receiving dock and once again when they are loaded at the shipping dock for delivery to Kroger’s stores.

The system uses:
• Automatic pallet exchange and depalletizing machines.
• A 10-crane unit load automated storage and retrieval system (AS/RS) with approximately 21,000 pallet positions for reserve storage.
• A 32-aisle mini-load AS/RS with nearly 400,000 tray positions for temporary storage of cartons prior to order fulfillment.
• Transfer vehicles that deliver pallets from the system induction area in receiving to a pallet exchange station and from the conveyor system to the AS/RS crane selected for putaway.
• A unique system for automatically building mixed pallets in the sequence they will be stocked on shelves in a specific store aisle; the system uses a separate mini-load system for buffer storage, a custom-designed palletizer to place the cartons on the right spot on the pallet, and an automatic stretch wrapper.

In all, Kroger processes about 110,000 cases per day with a peak capacity of 160,000 cases in the first facility built with the new design in Arizona.

“When we began working with our system integrator to create this design, we were looking for a paradigm change in grocery warehousing,” says John Winkels, Kroger’s senior director of logistics engineering and network strategy. As Winkels’ title suggests, the design was part of a long-term supply chain strategy. After going live with the Arizona facility, Kroger built a second facility in Colorado and is in the process of building a third using the same design in southern California. “We’re looking at our network, and rethinking how we serve the characteristics of different geographic areas,” he says.

Addressing 21st century problems
Founded 126 years ago, Kroger is one of the best-known names in American business. Like most of its competitors, for many years it had been a traditional grocery logistics and distribution company. “Fundamentally, I don’t think that we had done much different from what other companies were doing for 50 years,” says Winkels.

The grocery industry, however, is incredibly competitive, operating on razor-thin margins. Any reductions in operating costs in warehousing, order fulfillment and transportation go right to the bottom line. For that reason, Kroger set out to re-engineer the way it distributes product to its stores, creating a distribution system for the 21st century.

“The philosophy that most of our industry has taken is that you need to be close to your store base with your facilities,” says Winkels. “We wanted to look at our network and rethink that. In the East, we have a complex network that consists of facilities distributing fast-moving products to local markets and facilities for slow-moving items that serve a broader geographic area. And, in the west, where the new facilities are located, you are more isolated geographically.”

Surprisingly, cycle times and throughput were not major issues for the new design. Kroger was able to meet its throughput requirements in its traditional warehouses by adding labor. Instead, Kroger wanted a solution that would address some of the major long-term challenges of operating a grocery distribution center.

The first was to efficiently deal with SKU proliferation. “As the number of SKU’s continues to grow, you have to continually add space for more pick faces,” says Winkels. “We wanted to be able to manage the amount of real estate we need to handle a large number of SKUs.” 

A second was to efficiently build a mixed case pallet for individual stores. “The Holy Grail for our industry is to create a system that will automatically build a pallet of mixed SKUs that doesn’t damage the product, maximizes the cube of a truck, and gets to the store in an aisle-aligned manner based on the planogram for that store,” Winkels explains. Aisle-aligned means that cartons are loaded on a pallet in the sequence they’ll be put away on the shelves in a specific aisle, with the top layers at one end, the middle layers in the middle of the aisle, and the bottom layer at the other end. But, the system would also understand constraints like crushability so that it doesn’t stack cans of soup on top of Japanese noodles on the pallet.

Being able to build an aisle-aligned mixed pallet would not only make the warehouse and store operations more efficient, it would also create a safer workplace. “When you look at where you have injuries in a warehouse, the majority are repetitive motion injuries to backs and shoulders,” says Winkels. “Most of those are the result of lifting. Developing an automatic mixed case palletizing system would eliminate those.” 

Finally, Kroger wanted a system that would address the changing warehouse industry workforce. “As our volume has grown, it has become more difficult to attract a stable workforce for this kind of work,” Winkels says. “Like many distributors, we’ve had significant turnover in our warehouses and that’s very inefficient.” Turnover is less of a problem today, given the current economic climate, “but long-term, we see it as a continuing problem,” says Winkels.

An automated solution
After Kroger identified its high-level supply chain priorities as well as the operational challenges it wanted to address, Winkels says it became clear that materials handling automation was the way to go. “We knew that there are pluses and minuses with automation,” says Winkels. “The minus is that a machine can only do what a machine can do, so you have to approach your processes in a very disciplined manner. If your volume of orders increases, you can’t add more labor to get the orders out the door.”

At the same time, he adds, a highly automated storage and pallet building system would take much of the human element out of the equation: That would eliminate repetitive motion injuries, reduce the turnover rate of unskilled labor, and free up personnel for more productive activities, like value-added services. Through dense storage, Kroger can also accommodate a high number of SKUs in a reduced footprint.

“Once we had decided that automation was the way to go, we challenged our system integrator to think differently about grocery warehousing,” says Winkels. “We wanted an efficient automation system that could build mixed SKU pallets in a store-friendly manner.”

The solution incorporates a number of familiar automated materials handling technologies: A unit load automated storage and retrieval system (AS/RS) for full pallet storage; an automated depalletizer that removes a layer of cartons and orients them for putaway in a mini-load AS/RS; and automated palletizing and stretch-wrapping.

What’s unique is how those familiar technologies come together to build aisle-aligned pallets. The case order machine, for instance, takes cases from the mini-load and places them in a buffer storage system that then delivers them in sequence to the palletizer; that machine uses a unique series of arms to maneuver a carton into the right position on a pallet before delivering the finished pallet to an automatic stretch wrapper. “The trick isn’t to build an AS/RS or a mini-load,” says Winkels. “The trick is to seamlessly connect the pieces. What’s special about this solution is the way the software coordinates pulling the pallets out of the AS/RS, dictates how much product needs to be placed in a mini-load tray, and sequences the delivery of the cartons to the palletizer.”

The Arizona facility has been fully operational since 2005, with the Colorado facility going live a year later. The third facility using this design is currently under construction.

With two facilities with the new design operational, Kroger measures its success in several ways. “Our orders are more accurate and we have reduced product damage, which means we’re getting more of the product our customers want to the store in a sellable condition,” says Winkels. “What’s more, it has provided us with significant logistics efficiency. We’re not just more efficient in the warehouse, we’re making better utilization of the cube of the trailer and making our stores more efficient. The impact can be felt across our supply chain.”

System Snapshot
Kroger Company, Ariz.
Size: Dry goods: 650,000 square feet; Perishable goods: 350,000 square feet
Shifts: 7 days/24 hours
Employment: 500
Products:  Grocery distribution
AS/RS: 21,000 pallet positions/10 cranes
Mini-load AS/RS: Up to 400,000 tray positions/32 cranes
Volume: 110,000 cases per day/160,000 cases per day peak capacity

System suppliers
System design, integration and implementation, palletizer, and warehouse control system: Witron Integrated Logistics Corp., 847-385-6113, [url=http://www.witron.com]http://www.witron.com[/url]
Conveyor system, transfer cars, and AS/RS cranes: TGW-Ermanco, 231-798-4547, [url=http://www.tgw-ermanco.com]http://www.tgw-ermanco.com[/url]
Racking: Nedcon, 513-367-2656, [url=http://www.nedcon.com]http://www.nedcon.com[/url]
Depalletizers: Univeyor, 651-229-3401, [url=http://www.univeyor-us.com]http://www.univeyor-us.com[/url]
Stretchwrapper: Strema Packaging Machinery (Italy), 39-045-6661376, [url=http://www.strema-machines.com]http://www.strema-machines.com[/url]

This article appeared in the April 2009 issue of Modern Materials Handling.