Kenco’s conventional thinking

Conventional thinking says you can’t put 10 pounds of stuff in a 5-pound bag.

Yet that was the challenge presented to Kenco, a national third-party logistics (3PL) provider with headquarters in Chattanooga, Tenn., by a distributor of repair parts for equipment with a long operating life.

Kenco was already managing a portion of the customer’s business in a conventional 478,000-square-foot warehouse with 32-foot high ceilings. It was the kind of warehouse that predominates across the industrial landscape: Kenco had dedicated 300,000 square feet to the distributor, with pallets stored on the floor and paper-based picking. Kenco was asked to take on additional business that was being managed by the customer in a 650,000-square-foot building.

The question was: How do you fit 650,000 square feet of product in 478,000 square feet?

“We were asked to increase the SKU count from 2,000 product codes to 32,000 and to increase the number of pieces we were managing from 42,000 to more than 3 million,” says Tim Roth, Kenco’s general manager.

Even after dedicating the remaining 170,000 square feet of building space to the customer’s requirements, the 3PL had to come up with a way to fit all of that material in a building that was 28% smaller than the one the distributor was managing on its own—something akin to putting 90 pounds of stuff in a 5-pound bag. Read: How Kenco manages service parts.

To make it work, the 3PL’s team completely redesigned the layout of the space to make the most of conventional warehousing technologies. While some areas were still dedicated to floor storage with conventional aisles, more than half the storage area was converted to very narrow aisle racking (Ridg-U-Rack, ridgurak.com) serviced by wire-guided turret lift trucks and orderpickers (Raymond, raymondcorp.com). Turret trucks were even installed in a 76,000-square-foot storage area dedicated to narrow aisle floor storage.

To create space for 9,000 different small parts, Kenco created an 11,000-square-foot area with narrow aisle, narrow beam shelving serviced by a wire-guided orderpicker.

Along with narrow aisle storage technology, Kenco replaced the paper-based picking processes with a warehouse management system (WMS) and wireless mobile computing and bar code scanning to improve accuracy and efficiency.

The result: a layout in a conventional warehouse that could accommodate 30,000 new SKUs to start plus an additional 5,000 SKUs the customer added later.

60 years of distribution
Kenco was founded in 1950 with one 100,000-square-foot facility in Chattanooga and two employees, founders Jim Kennedy Jr. and Sam Smartt.
Today, Kenco is still family owned by Jane Kennedy Green. Over the past 62 years, it has grown into one of the largest woman-owned, privately-held, third-party logistics providers with 4,000 employees, more than 100 facilities and more than 30 million square feet of warehouse space in 30 states and Canada.

In addition to warehousing and distribution services, the 3PL provides transportation services, materials handling equipment and real estate management. In addition to parts distribution, it serves customers in the food, appliance, electronics, CPG, retail and apparel industries.

Kenco began distributing spare parts in the Chattanooga facility as far back as 2004. For the most part, these were larger products that were palletized and stored on the floor. In 2009, the 3PL was approached with the opportunity to take on significantly more business. Not only did Kenco add 30,000 SKUs, the new project also required taking on a different profile of products and new processes.
“Many of the parts we inherited are very small parts that don’t lend themselves to pallet rack storage,” says Roth. “We knew we were going to have to find a way to get as many parts as possible into a very small area.”

In addition, the customer wanted Kenco to absorb a packaging department that occupied about 15% of the building. “Our customer receives parts from a number of different vendors in a variety of packaging formats,” Roth says. “They want us to repackage the product in uniform packaging. In addition, we do some repackaging for their customers.”

The first step in the process, Roth adds, was to take over the 178,000 square feet of the building that was being used for other purposes, expanding from 300,000 square feet to 478,000 square feet. However, in a facility where paper-based processes and floor storage ruled the day, the facility was still too small to absorb the new business.

“In warehousing, you have two kings: storage density and travel times,” says Roth. “Our first problem was storage density. We were a 100% floor storage facility and we only had a small amount of additional horizontal space to grow. If we were going to gain more storage space, we had to go vertical to take advantage of the full height of the building.”

Focus on storage
The question for Kenco’s design team was how to best take advantage of that vertical space. The order profiles and throughput did not justify an automated solution. That left creating a better conventional warehouse.

One possibility was to create a mezzanine. In fact, in its old building, the customer had a two-level mezzanine for small parts picking. But, the Kenco team rejected that approach. “We didn’t want a permanent structure occupying 20,000 to 30,000 square feet of warehouse space,” Roth says. “We wanted flexibility for future changes.”

Instead, the team customized a flexible strategy with eight distinct areas of storage. They include:

• Three areas, comprising 126,000 square feet, consist of floor storage with normal aisle widths. “There are some parts that just don’t lend themselves to rack storage,” Roth explains. “We have some very lightweight parts that stack well and some extremely heavy parts that don’t lend themselves to pallet rack. We also have some parts that we carry in large quantities and can store four to six pallet locations deep. In all of those instances, single-deep pallet rack would not be optimal.”

• Three areas, comprising 126,500 square feet, use very narrow aisle pallet racking and other storage techniques. In some areas, for instance, the ground level is reserved for floor storage with pallet locations above the floor. In other areas, the lowest and uppermost storage locations are reserved for pallets. The mid-level storage areas are reserved for small bin locations. “In those areas, we wanted parts to be accessible by as many different pieces of equipment as possible,” says Roth. “The small parts can be reached by an order selector on foot or using an orderpicker. The pallet positions are designed to hold a 40-inch by 48-inch pallet and are serviced by turret trucks.”

• The smallest parts are stored in bin boxes in a very dense racking area comprising 11,000 square feet. To accommodate that product, Kenco installed narrow aisle, narrow beam rack in an area located near the shipping dock with room to store 9,000 SKUs. The area is serviced by a wire guided orderpicker. This allows the operator to focus on accurate picking rather than driving the truck. Placing the area near the shipping dock minimized travel time after picking.

• And, 76,000 square feet was set aside for a floor storage area serviced by wire-guided narrow aisle turret trucks. “In part, we did this because we needed to get as much product into the building as we could in a short period of time,” says Roth. “By using floor storage, we didn’t need the additional time to install racks. Using turret trucks allowed us to get more dense storage in a bulk storage area.”

• Finally, the remainder of the building is used for shipping and receiving, packaging and administration functions.

Although Kenco had not previously deployed narrow aisle storage, turret trucks or wire-guided pickers, pushing the technologies to their limits freed up significant amounts of storage space. “In the slow moving parts area, we freed up two 400-foot long rows of rack using the technology,” Roth says.

From paper to WMS
In addition to rack, Kenco also introduced warehouse management and system-directed picking as part of the new solution. “When you are expanding from 2,000 SKUs to 37,000 SKUs, you have to have a system-based means of tracking the product,” says Roth. Beyond the additional SKUs, the facility increased the number of lines picked and shipped per day from 250 to more than 1,800 lines per day. Moreover, the profile of orders being filled also changed. In the past, Kenco primarily handled large items. Now, they were picking smaller pieces and shipping more parcel orders. The increase in volume and the changes in order profile now put a premium on accuracy.

Finally, the number of employees assigned to the customer increased from 14 to 80. That led to an emphasis on training. “With all of the process changes and new personnel, we had to train everyone,” says Roth. “We use an ISO-based quality management system. As part of that approach, we documented changes as they occurred. Typically, that would take place in our daily start-up meetings.”
Three years into the project, Roth says the success of the program is primarily measured by customer satisfaction. “One of our biggest objectives was to reduce our customer’s cost to fill an order,” Roth says. “We were able to do that by taking over their distribution activities.”

More importantly, he says, the new storage design worked. The bottom line: “We added another 5,000 SKUs after we were up and running and the customer is looking to send additional products our way,” Roth says. “We’re looking at new ways to develop additional space within the facility.”

System suppliers
System integrator, warehouse control and warehouse management systems: Kenco, developed in-house.
Pallet rack and very narrow aisle rack: Ridg-U-Rak
Lift trucks: Toyota Material Handling U.S.A.