Five ways to set up a value-added DC

Custom packaging and palletizing are facts of life for any company selling to retailers today. The right layout is the key to providing value-added services without sacrificing productivity.

By Bob Trebilcock, Editor at Large -- Modern Materials Handling, 9/5/2007

Putting a new twist on the same product for sale down the street is the way many retailers try to stand out in a crowded field.

That twist is putting pressure on manufacturers and distributors shipping to retail stores, according to Don Derewecki, president of the consulting firm Gross & Associates.

“You may be selling the same SKU (stock keeping unit) to each of your retail customers, but everyone of them wants it labeled or packaged differently,” says Derewecki. “If you don’t step back and think through your processes, layout, equipment and labor planning, you’re not going to be optimized from a productivity or quality standpoint.”

The trick is to provide value-added services without losing value in your own operations. While every facility is unique, Derewecki believes that five common principles come into play in setting up the value-added DC.

1. Be flexible: Create processes that can change on a dime. “Whatever you’re doing today is probably going to change tomorrow so you need processes that can be easily reconfigured to meet new requirements,” Derewecki says.
2. Set up a value-added area: Value-added processes are best done separately from the rest of the order fulfillment process. That opens up an opportunity to make use of alternative space. “Since value-added services are usually done at work cells and don’t require a lot of height, we often put the value-added services area on a mezzanine at the end of the pick line or in the shipping area. Getting it up off the ground allows you to use the clear space above the staging area.” 
3. Pay attention to the environment: Value-added services are labor intensive. For that reason, Derewecki says it’s important to consider lighting and the temperature. Employees and labeling machines will both operate better in a comfortable environment. 
4. Move it back into manufacturing: Do several retail customers want the same product but with different labels or packaging? There may be an opportunity to take advantage of automation and move those operations back into manufacturing.
5. Take on a partner: “Depending on the nature of your operations, you may want to work with a third-party logistics (3PL) provider to do value-added services for you,” says Derewecki. This is especially true for distribution centers with high labor costs. Many 3PLs specialize in value-added services and can do them cheaper than you can in-house. 

“At the end of the day, it’s not rocket science,” says Derewecki. “But, if you don’t do the planning, your not going to get productivity and your costs are going to be high.”