Southern Wine & Spirits of America: Top-shelf distribution

The first thing you notice in Southern Wine & Spirits’ 334,000-square-feet Atlantic Street distribution center in Union City, Calif., is an automated storage and retrieval (AS/RS) system that reaches 55 feet to the top of the building. Inside, storage and retrieval machines (SRMs) move two pallets at a time in and out of 10-deep pallet rack. The pallets replenish full-case picking locations inside the AS/RS and fill orders for full pallets of wine, spirits and non-alcoholic products for delivery to on- and off-premise retail establishments.

The second thing that stands out is the two-level, split-case bottle picking room, where associates use RF and voice technology to pick mixed cases that are delivered by conveyor to a mezzanine-level, high-rate sortation system. That’s where large waves of cases are sorted into smaller sub-waves, and then sorted again into orders that are delivered in the right sequence for route-stop deliveries for each truck.

AS/RS technology is not new to Southern. The application of AS/RS technology to automatically replenish pick locations is emerging as a best practice in wine and spirits distribution. But, the Union City facility takes this design to a new level of automated throughput and efficiency. Working with a systems integrator (W&H Systems, whsystems.com) and a provider of AS/RS technology (Westfalia Technologies, westfaliausa.com), Southern created a fulfillment center that directly services retail customers and also sends trailer-load quantities of product to smaller crossdock depots that then transfer the product into delivery vehicles for last-mile delivery to a local area.

As designed, the new facility allows Southern to:
• manage 12,500 SKUs with storage capacity for more than 1.8 million cases;
• process 6,000 cases per hour with a sortation system that can handle 10,000 cases per hour;
• deliver accuracy rates from 98.5% to 99%;
• double storage density from roughly three cases per square foot to more than six cases per square foot in this facility;
• increase productivity from 180 cases picked per man hour to 300 cases picked per man hour; and
• get trucks on the road by as much as two hours earlier each morning.

The AS/RS performs three primary functions. First, it manages the 4,500 fastest-moving SKUs that represent about 82% of the volume that flows through the facility, moving them from receiving into storage locations in a six-level storage area. Next, it replenishes the 1,500 pick locations in two five-level, full-case pick modules in the AS/RS. Finally, it fills full-pallet orders for big box retailers and large grocery chains with ease.

While it is the automation that catches the eye, the heart of the system is the warehouse execution system (WES) software developed for the facility, according to Robert Pavone, vice president of operations for California, and Mark Booth, vice president of distribution and technology. The software orchestrates the flow of material through the building and enables a unique double sortation process that allows Southern to minimize the number of times an order selector visits a picking location during a shift.
It does so by aggregating multiple sort waves into one very large pick wave that is subsequently broken down through two sorts.

The first sort breaks the large pick wave into its component sort waves. The second sorts the smaller waves into orders that are married up with cases from another pre-sort that is fed from other picking areas before being conveyed to outbound trucks.

“The software is the heartbeat of the building, along with the people that manage it,” Booth explains. “Without it, there just wouldn’t be enough time to pick, pack and ship the orders on time.”

Most of all, the design meets Southern’s projected growth in Northern California. “This facility secures our future volume growth for about 20 years, which is our planning horizon,” says Bobby Burg, senior vice president and chief supply chain officer. More importantly, Burg adds, “We made an investment of close to $80 million in this facility. That delivers a message from our leadership to the brands we represent that we are committed to being the leader in California.”

Meeting new demands
Over the last 10 years, the wine and spirits industry has been in the midst of a transformation. Small, local family-owned operations have merged into a handful of large distributors with the scale to manage bigger portfolios of product and distribute across multiple states, all in a highly regulated environment. These new distributors are in the process of transforming their networks and capabilities.

Small, conventional facilities are being replaced by larger buildings, which can serve a region with next-day deliveries. Inside, those facilities are evolving from paper-based manual operations to voice-directed picking—complemented by high-rate conveyor, merging and sortation systems and, in some instances, automated storage technologies.

Southern Wine & Spirits has been a leader on both fronts. Since it was founded in 1968 in Miami, Southern has grown through acquisitions and greenfield expansions into the country’s largest wine and spirits distributor. Today, it represents more than 1,500 suppliers and makes weekly deliveries to approximately 200,000 customers in 35 states. In California, the company distributes 31 million cases a year—divided between big box retailers and grocers and some 30,000 restaurants, bars, clubs, hotels and retail outlets.

To service this national footprint, Southern has invested $200 million over the last five years to consolidate, retire or renovate 2.5 million square feet of warehouse space. Another 1 million square feet will be addressed in 2015. “As part of our long-term strategy, we have replaced a number of small-cube buildings with high-volume, high-capacity and high-cube warehouses,” says Burg. Along the way, Southern has moved beyond mere distribution to become a true supply chain focused organization.

Automation, technology and software play a major role in Southern’s strategy. It was an early adopter of voice-directed picking and automated labeling. Similarly, Southern was an early adopter of materials handling automation, becoming the second distributor in the country—and the first in the private sector—to implement AS/RS technology. The first project in 2010, in a facility in Southern California, featured 17 SRMs that put away one pallet at a time in single-deep rack. “Over the years, we have looked at that system and asked how we could improve on that application,” Burg says.

Making space
Union City provided the opportunity to improve on Southern’s original AS/RS application. When the project began, Southern was bursting at the seams in its existing facility—which services nearly two-thirds of the state—from a small depot near the Oregon border in Eureka to Bakersfield to the South. At the same time, little industrial land was available, which meant that any DC had to make the most of every cubic foot of storage. Moreover, with a sortation system capped at 4,500 cases per hour, the facility couldn’t process orders fast enough to meet customer requirements for early deliveries.

“In the past, a majority of our trucks left at 7 a.m.,” says Pavone. “Now, 60% of our trucks are on the road before then, with some leaving as early as 5 a.m. We needed a system that could get our trucks on the road up to two hours earlier.”

An AS/RS that made efficient use of storage space and could handle replenishment of the fastest-moving SKUs appeared to be half of the answer. To that end, Southern took an emerging design developed for wine and spirits distribution to the next level.
To make maximum use of space, the AS/RS reaches 55 feet high with six levels of 10-deep pallet rack, storing about 1.4 million cases in a 105,000-square-foot footprint, with capacity to store up to 1.8 million cases. In all, about 4,500 SKUs representing 82% of the volume are stored in the AS/RS while the remaining 8,000+, slower-moving SKUs are stored in the conventional warehouse.

Southern realized further space savings in other ways. For instance, the AS/RS is located 100 feet from the receiving dock, shortening the travel time from the dock. Two 200-foot-long pallet accumulation conveyors are located inside the AS/RS for induction into the system. Together, they provide accumulation for two truckloads worth of product. “Our fork trucks can unload 25,000 cases an hour,” says Burg. “The system can put away 100,000 cases in a day.” In addition, the SRMs are moving about 800 pallets a day to replenish pick locations. By locating the accumulation conveyor halfway in the pick module “we never get backed up,” Burg says.

Outside the AS/RS, Southern Wine freed up space by installing the conveyor and sortation equipment on a mezzanine over the receiving dock. Meanwhile, the two-level bottle pick room was installed under the after-sort mezzanine: The fastest-moving SKUs are picked from case flow racks on the first level while slower-moving SKUs are picked from static shelves on the upper level. On the outbound side of the building, spiral conveyors act as an accumulation buffer for cases between the sorter and the shipping dock. “Even though it’s a 334,000-square-foot building, it’s comparable to a 700,000-square-foot facility,” says Pavone. “Our storage density per cubic foot is about double our standard facility.”

The AS/RS also enabled more efficient replenishment of the bottle room where split case orders are filled. In the past, associates would pick cases to pallets and deliver them to the bottle room. Now, once picking is complete at the end of a shift, order selectors in the AS/RS pick cases that are conveyed to the bottle room to replenish case flow rack and static shelves.

Sorting it out and saving time
The AS/RS was only half the answer in Union City. The other half was a solution that was more efficient and productive. With a sorter capped at 4,500 cases per hour, the old system struggled to keep up. What’s more, it wasn’t uncommon for an order selector picking full cases to make as many as 200 to 225 visits to pick locations during a shift.

In the new facility, a high rate conveyor, combiner and sortation system is the mechanical engine of the facility. It features two pre-merges, two pre-sorters, three mid-merges and a three-to-one combiner to sort and marry up cases from various picking areas. While it currently operates at 6,000 cases per hour, the sorter can handle up to 10,000 cases per hour as volumes grow.

Meanwhile, a new methodology for creating pick waves reduces the number of visits an order selector makes to each pick location in the full case pick modules. The heart of this new process is WES software that combines a number of sort waves into one large pick wave. For example, if a typical pick wave called for order selectors to pick 125 cases from 20 locations, the software might combine four waves into one large wave of 500 cases. This allows that same number of order selectors to pick for several waves with each visit to a location, reducing the number of visits and the amount of walking to pick the same 500 cases.

The trick, of course, is to then break that very large wave back down into its component parts. That’s where the WES developed for this installation comes into play. It does so through a double sortation process that has been used before in retail e-commerce distribution but is now being adapted to wine and spirits. It works like this:

• Cases from the pick modules accumulate up and onto the mezzanine until it’s time to load trucks.
• When it’s time to load, the software unscrambles the orders through two sorts:
–Using the example above, the first sort breaks the large pick wave down into the four sort waves that are aggregated together for picking.
–The second sort breaks those individual waves down into orders destined for specific dock doors.
• As the cases begin to flow toward the dock, mixed cases from the bottle room and full cases of slow-moving SKUs picked from reserve storage are merged into the flow.
• Once the orders are married up, the product is conveyed to the right dock door in the right order for route-stop deliveries.

“The sorter may be the engine of the facility, but the software is the heartbeat of the system that drives everything,” says Booth.
The result has been a dramatic improvement in productivity—a nearly 35% increase in the cases per hour handled by the sorter and a 50% increase in the cases picked per man hour. “The ability to get the throughput we need without adding to head count is the real benefit of what we’ve done here,” says Pavone. “Order line accuracy, customer fill rates and on-time deliveries are critical for us because customers have a choice.”

Burg says the facility not only secures Southern’s future in Northern California, it also represents progress in Southern’s distribution evolution. “I firmly believe the role of our team is one of innovation,” he says. “We have to ask how we can apply best-in-class materials handling technologies in our facilities to deliver value to our customers. This is one more step in that evolution.”

System Suppliers
Systems integration and warehouse control and execution systems: W&H Systems
Automated storage and retrieval system and associated software (Savanna.net): Westfalia
Warehouse management system (WMs) and voice picking software: Manhattan Associates
Voice recognition technology: Vocollect by Honeywell
Conveyor and sortation equipment: Intelligrated
Spiral conveyors: AmbaFlex and Hilmot
Adjustable conveyor: Stewart Glapat
Fixed scanners: Datalogic
Lift trucks: Toyota; Stock pickers: Raymond; Reach trucks: Bendi
Pallet Rack: Frazier  
Bottle room rack: Interlake Mecalux; Span-Track
Route delivery software: Roadnet Logistics Systems