System Report: Toll puts automation to work down under

Toll’s new 550,000-square-foot, multi-channel distribution center in Sydney, Australia, has some familiar technologies for a facility that was purpose built for both store replenishment and e-fulfillment. That includes a 113,000-square-foot mezzanine with two dozen goods-to-person workstations powered by a shuttle system. The facility went live about two years ago, in December 2017.

But, look closer, and you’ll notice something you don’t normally associate with e-commerce fulfillment or each picking for an apparel retailer: automatic guided vehicles (Dematic). Underneath the order fulfillment mezzanine, a fleet of six automatic guided vehicles shuttles two pallets at a time some 1,000 feet from the very narrow aisle reserve storage area to a drop-off location in the decant area. There, where product is prepped for putaway in the shuttle system fulfillment engine, four single pallet AGVs retrieve the pallets from two different drop-off locations and load them onto the work area for associates.

See inside the layout of the new Toll Group distribution center

While we normally associate AGVs with manufacturing plants and finished goods warehouses, Leon Land, senior manager of product delivery for the Australian-based logistics provider, notes that Toll turned to AGVs for the same reasons as manufacturers: to eliminate non-value-added travel and to create a safer work environment.

“This was a greenfield facility and very early in the design process, we recognized that we had this long, non-value-added run to bring product from storage to decant,” says Land. “We assessed a variety of technologies, and AGVs became the solution.” Land adds that Toll and its associates collaborated a lot to get the system up and running: “You’ll notice that we named all of the AGVs,” Land says. “We put it to a vote, and the associates gave them all superhero names, like Superman.”

Lift trucks are still used on the receiving and shipping docks: That’s because the distance from receiving to storage is too short to justify the use of AGVs, and conveyors go directly from the automated packaging lines into outbound trailers.

The elimination of non-value-added work could be the guiding principle behind the overall design of the facility. Rather than pushing carts through pick zones and then inducting the cartons onto a conveyor, the 117,000-square-foot mezzanine hosts 24 goods-to-person workstations, allowing the fulfillment engine to handle up to 325,000 items per day with room for expansion.

Similarly, automated packaging not only takes labor out of the packaging process, but the system uses weight, cubing and volume information to optimize the size of the package. All told, Land says the new facility has delivered a 70% reduction in manual handling, and the remaining work is more ergonomic. Orders that once took a day or more to fill can now be filled in hours.

In addition to improving productivity, Land notes that the facility represents “a dramatic change from our former manual warehouse, but, it’s a change for the better. It’s more ergonomic, and there’s less walking involved to pick an order, all of which are positives we brought to the workforce.”

Collaborative design

Three years in the making, Toll invested some $112 million (in U.S. dollars), including nearly $35 million in automation, to create a new era of automated fulfillment in the Sydney facility. But, according to Land, it represents more than just a milestone for Toll. “We were the first in Australia to bring something on this scale to the market,” says Land. “The facility invigorated the market here and has brought a lot of interest to this facility.” That means that it also serves as a potential model for other distributors in the country.

According to news reports, the facility “was constructed in collaboration with apparel retailer Specialty Fashion Group (SFG),” which is the anchor for the new multi-tenant site. Designed for both store replenishment and e-commerce fulfillment, Toll worked closely with SFG “to design the facility with scalability and future growth in mind.”

More importantly, Alex Linton, SFG’s then general manager of logistics, noted at the February 2018 ribbon cutting that it was designed to “improve the omni-channel experience for our customers, which includes offering faster and more convenient delivery options for online and ‘click-and-collect’ orders…We have a highly specialized supply chain, so we needed a customized solution that would meet our ongoing needs as a retailer.”

The logistics provider may not be a household name to U.S. readers, but Toll is a major player in global logistics, ranking No. 18 on Armstrong & Associates’ Top 50 Global 3PLs list, as of April 2019, with an estimated $5.98 billion (in U.S. dollars) annual revenue. Part of Japan Post, Toll has more than 125 years worth of logistics and distribution experience. It operates an extensive global logistics network across 1,200 locations in more than 50 countries, including a U.S. presence, and employs more than 40,000 workers.

Planning for the new facility began in 2014. The catalyst, according to Land, will sound familiar to anyone engaged in e-commerce fulfillment: Toll’s older conventional facility, featuring pick to cart and some conveyor, could no longer effectively meet the growing customer demands of a multi-channel retailer. Toll’s anchor tenant needed fast and efficient store replenishment with cartons that were picked and packed shelf-ready; “click-and-collect orders,” or orders placed online for pickup in the store; and conventional direct-to-consumer e-commerce orders.

“In our old facility, orders required associates to walk a considerable distance, and we weren’t as competitive as we needed to be,” says Land. He adds that Toll delivers more than 70 million units a year out of the facility. “That’s significantly more than we could ever do manually.”

In addition to Toll’s in-house design team, which had experience with some of the new technologies albeit on a smaller scale, the design process included input from Toll’s anchor tenant and its workforce. “We recognize that getting 500 people a day into a single facility is becoming a factor,” Land says. “But our motivation wasn’t to reduce headcount. Rather, we saw a real opportunity to avail ourselves of the new technologies that are going to change the future of warehousing. For that reason, our employees were very engaged in the design process.”

Due diligence and design

Toll spent roughly 18 months investigating solutions and technologies for the new facility. According to Land, the design and goals for the new facility were driven by increased throughput and speedier fulfillment and delivery.

“To position ourselves as a partner that can deliver for our customers, this was a direction we recognized that we had to go in,” Land says. “We had to deliver an improved customer service, for our customers and our customers’ customers. We knew we couldn’t do 70 million units a year with manual processes.”

While AGVs are an anomaly in multi-channel distribution centers, Land says that Toll began to consider them early in the design process. “Along with a lengthy run from storage to the decant area, there is also a lot of labor in that area,” he says. “We wanted to improve safety. After we assessed the various technologies out there, AGVs became the solution.”

When it came to a fulfillment engine, Land says Toll did a considerable amount of due diligence evaluating different technologies, including site visits. “We looked at alternative technologies, including pouch sorters,” he says. “Ultimately, given our throughput and speed requirements, the combination of shuttles, AGVs, automated packaging and conventional receiving and storage processes gave us the appropriate service-level requirements for our anchor customer.” He adds: “It’s not always about total automation. It’s the right level of automation at the right price to meet our requirements.” An example: Given that receiving is located so close to the very narrow aisle reserve storage area, there was no justification for AGVs in that area.

With a design in place, Toll launched what Land describes as a “compressed timeline” to get the facility up and running. “This was a big leap for Toll, and we engaged our workforce and our vendors in the journey,” he says.

For a smooth transition, Toll essentially built two solutions: One was a new, albeit conventional, “shed” next to the new facility as it was being built. The processes in the shed were familiar to associates while the automation was being commissioned in the new facility. “That took away the urgency to move into the automated facility,” Land says. Once the manual operations were up and running, the team began installing the automation. As part of that process, Toll brought associates over on a regular basis to observe the progress being made.

Before going live with product, Toll did a lot of dry runs, or what Land refers to as “running the system logically,” to train the team and highlight bottlenecks in the system. “We’d bring over 65 to 70 people to the picking stations and have them just pick air or pieces of paper to make sure we were getting the throughput we would require and order accuracy and quality,” Land says. He adds that they didn’t just test the shuttle system and picking stations.

During these test runs, which took place over a 12-week period, empty cartons were delivered from storage to the decant area on lift trucks, and associates simulated decanting up to 80,000 items into cartons for the shuttle system. “We made sure all of the systems were talking to one another and printing the documents required to fill orders. It was a detailed and complex process that ensured that we would have the right people and teams in place when we went live.” Once Toll proved the system using lift trucks for transport, the AGVs were brought online.

Land adds that while a core group of associates maintained continuity, rotating groups of associates were added to the core during the change management process. That allowed for more feedback, and tweaks to ergonomics and peripherals at the workstations. A similar training process was used to switch from manual delivery to the decant area to AGVs. By the time the facility went live in December of 2017, “we never had to go back to manual,” Land says.

The system has been up and running for 18 months. Land notes that it’s part of a $2 billion commitment from Toll to invest in infrastructure over the next six years. “We’re safer, faster, leaner and more sustainable,” he says. “In addition to productivity improvements, we’re getting 30% more cartons on a truck as optimized packaging allows us to ship less air. Ultimately, it’s improved our speed to market and our customers’ customer experience.”

Systems Suppliers

• System Integration, Conveyor and Sortation, Automatic Guided Vehicles, Shuttle Automated Storage and Retrieval System and Picking, Warehouse Management and Control Systems and Rack and Shelving: Dematic

• Cubing and Weighing: Quantronix (Cubiscan)
• Mobile Computing, Scanning and Printing: Zebra Technologies
• Lift Trucks: Crown, very narrow aisle; Baoli, pallet and order picking trucks.
• Carton Erectors: Lantech
• On-Demand Box Sizing: E3NEO (Ranpak)