Southern Wine amp; Spirits’ state-of-the-art distribution center is built to last

Southern Wine & Spirits, Santa Fe Springs, Calif.
Facility size: 620,000 sq ft
Products: Wine, spirits, non-alcoholic mixers, bottled water and energy drinks
Shifts: 3 shifts, 5 days a week
Employees: 265
Throughput: 15 million cases per year

The beverage industry is one of the last verticals to embrace automated materials handling technology.

Most facilities still rely on floor storage, lift trucks and manual labor to get the job done.

Southern Wine & Spirits turned that formula on its head when it opened a new 620,000-square-foot distribution center in Santa Fe Springs, Calif. to distribute wine, spirits, non-alcoholic mixers, water and energy drinks throughout Southern California.

Opened in September 2005, the facility consolidated five regional warehouses into one high-speed distribution facility. Working with a systems integrator (W&H Systems), the distributor designed a facility that sports one of the highest throughput rates in the industry, including:

• Four tri-level picking modules housing 3,400 stock keeping units (SKUs) totaling 185,000 cases,
• A voice-directed split-case picking module housing 13,000 SKUs totaling 32,000 cases,
• A 125,000-square-foot mezzanine area,
• More than 3.5 miles of roller conveyor, and
• A high speed conveyor and sortation system capable of handling 9,200 cases per hour, more than double the rate of the previous manual systems.

“We recently tweaked our control system and think we’ll be at a peak of 10,000 cases per hour by the end of the year,” says Robert Pavone, vice president of operations. “I don’t think there’s another center in our industry that does that much volume per hour.”

The system also features two high-performance merges that merge a total of 15 picking lines which then feed a high-speed two-to-one combiner into one line prior to the sortation system. This is believed to be the first time that technology has been applied in the wine and spirits industry, where the cartons are relatively unstable because of their size and contents.

All told, the facility receives and ships an average 75,000 case per day, and ships out 15 million cases a year. The facility does that while providing 24-hour turnaround on orders. “Orders received by 4:30 p.m. are shipped by 7:30 the next morning,” says Pavone.

And by consolidating facilities, Southern Wine has eliminated the need to transfer cases between facilities to meet those customer service requirements. What’s more, the company has reduced the number of cases returned because of shipping errors by 35%.

“In our old system, we might short-ship as many as 1,200 invoices a night out of 4,000 invoices processed,” says Pavone. “Today, it’s roughly 10 customers a night. That’s a big improvement.”

Overcoming inefficiency
The largest distributor of wine and spirits in the country, Southern Wine was serving Southern California from a total of 800,000 square feet spread over five different warehouses and 35 miles with the city of Los Angeles in between.

“With the talented group of people we have, we were able to process and sort over 5,000 cases per hour on our old conveyor system in Cerritos,” says Pavone. “But with almost 12,000 different items, there were some real inefficiencies in the system.”

One inefficiency was the result of having those SKUs spread across five different facilities. “We tried to balance our inventories, but when we purchased items, we didn’t always know the sales pattern,” Pavone explains. “Since no one facility could store all 12,000 different items, we were transferring four million cases a year between buildings to meet customer service requirements.”

Transfers alone added several million dollars a year to distribution costs. In addition, Pavone estimates that a third of the invoices shipped each night were short some items. “It wasn’t just one item, it was sometimes multiple items,” says Pavone.

That resulted in either lost sales, additional cost to handle returns, or both. “If you can’t put the right product in the customers’ hands, they’ll look for other opportunities,” Pavone says.

As the distributor’s business continued to expand in the region, Pavone says it became necessary to consolidate to overcome those inefficiencies and better serve customers.

Design for the future
Once Southern Wine chose a site for the new facility, Pavone’s team spent about nine months designing and building the DC. The goal was to create a world class facility with the capability to handle today’s demands plus room to grow during the next 20 years.

As part of that process, the group visited Southern Wine facilities in other parts of the country, including newer DCs in Chicago and Las Vegas. “We wanted to incorporate best practices that were being used across the company,” says Pavone. “Everything we put into this building was the result of what we learned from other facilities.”

In addition, the distributor decided to maintain a manual system for handling full pallet shipments to chain stores, which represent about 50% of the facility’s business. The 2,000 fastest-moving SKUs are floor-stored near the shipping doors for efficient truck loading.

At the same time, Southern Wine automated case handling operations for delivery to restaurants and liquor stores. “We knew we needed to automate to handle the number of SKUs we carry,” says Pavone. “The average cost per case on spirits and wine was high enough to justify the conveyor and sortation system.”

While the distributor has yet to install a warehouse management system (WMS), voice-recognition technology is used to direct split-case picking and automated bar code scanning, including scan tunner verification, combined with a sophisticated warehouse control system (WCS) to manage picking waves and the flow of goods to the conveyor and sortation system–dramatically improving accuracy and reducing the number of returns by 35%.

Best of all, says Pavone, the facility and technology can grow as Southern Wine’s business grows over the next two decades. “We already have plans to add an additional 220,000 square feet in years four and five,” says Pavone.

One year into the new system, Southern Wine & Spirits is set for the future. “In my opinion, we’re at a very good point,” says Pavone. “The money we spent on technology has paid for itself through reductions in the amount we were spending on overtime. Plus we have the capacity to expand in this facility even as our business in Southern California grows from 3% to 10% a year.”

System suppliers
Systems integrator and warehouse controls: W&H Systems
Warehouse Control System: Contech Systems
Conveyor and sortation systems: Intelligrated
Scanning system: Accu-Sort
Flow rack: Unex
Pallet rack: Interlake Mecalux
Mezzanine: Seizmic Inc.
Truck loaders: Stewart Glapat
Lift trucks: Yale

This article originally appeared in the December 2006 issue of Modern.