Marshall Retail Group: Big throughput in a small space

Have you ever looked closely at a ship in a bottle? The best are meticulous miniaturizations of the big ships that served as models, with all the details in place. You’d almost think they could perform just like their larger counterparts.

That analogy describes the new distribution center that the Marshall Retail Group (MRG) opened in Las Vegas in August 2015. The largest independent specialty retailer in the country, MRG operates more than 160 stores in 12 states, the District of Columbia, and Vancouver, British Columbia. Most are located in casinos and resorts, including 80 stores just in Las Vegas, along with a growing retail presence in the nation’s airports.

Like any major brick-and-mortar retailer, the new DC’s primary role is to keep the shelves stocked. Stores are replenished frequently. The bulk of those replenishments involve mixed totes and shipping cartons that require a significant amount of labor-intensive each picking. As a result, the solution designed by MRG’s system integrator (DL Neu, dlneu.com), includes a level of automation you would expect from a leading retailer, including narrow-aisle reserve storage, a conveyor and sortation system driven by a state-of-the-art warehouse control and execution system and put-to-light directed picking.

The catch: All that automation was scaled down to fit in a warehouse measuring 64,000 square feet, including a 13,000-square-foot mezzanine for picking operations—a miniaturized version of a typical retail DC measuring 500,000 or more square feet. But as Esther Diedrich, MRG’s director of distribution, points out, small retailers today face the same challenges that confront their much larger competitors. During the course of a year, MRG is managing up to 50,000 SKUs—everything from novelty candies, glassware and souvenirs to high-end women’s and men’s apparel. Keeping inventory fresh and exciting is a must. Seasonality is an important factor, even though evergreen items, like Las Vegas-branded key chains, are a must. Value-added services play a big role in minimizing the amount of work that takes place on the retail selling floor, and inventory turn time is a key metric.

“Every day an item sits in our DC is a day of lost sales,” Diedrich says. “In peak months in our old DC, items sat for five to seven days. With this new system, we’re making strides to keep inventory in the DC for just one to two days.”

The difference is one of scale. Instead of replenishing mall-sized stores or big box retail spaces, MRG spaces range in size from an airport kiosk to an 8,000-square-foot fashion apparel store in a casino. And rather than shipping out a pallet of cartons to a location, an MRG store may receive one to 20 cartons per shipment. Retail locations in Las Vegas are replenished six days a week, while some airport locations receive deliveries every day.

What makes it possible, and what put the solution in reach of an organization requiring 64,000 square feet, is the low cost of high-powered computing and software, PLCs and smarter automation. That allows for solutions that can scale up, or in this case, scale down. “We certainly had concerns going into this about how much automation would cost,” Diedrich says. “But, I attended materials handling shows such as ProMat and realized that we could pick and choose technology that would work in a smaller footprint such as ours.”

The result: While the system has been live for less than six months, MRG expects to double its throughput, especially in the picking area, as evidenced by the improved turn times. What’s more, automation, especially in the put-to-light picking area, has created a more ergonomic environment; combined with large, slow-moving overhead fans (see p. 24) the new facility is much more associate-friendly than the old paper-based DC. That reduces turnover. “Many of my associates have been with us five years or more,” Diedrich says.

Driven by growth
The Marshall Retail Group may not be a household name, but chances are good that if you have flown into the McCarran International Airport or shopped in a Las Vegas resort or casino, you have visited one of MRG’s 80 stores in that city. Founded in 1955, it is America’s largest, independent specialty retailer in the casino-resort and airport marketplace. The Welcome to Las Vegas souvenir and gift shops are its most visible store fronts, but MRG also operates some 35 branded stores, including Paradiso, which features glamorous women’s fashions; Misura for fashion-forward men’s apparel; and a number of Las Vegas Harley Davidson stores. In any casino, you’ll find one to six MRG-branded stores. Stores range in size from small airport kiosks to about 8,000 square feet.

For years, the Las Vegas stores were serviced from a 30,000-square-foot conventional DC. Beginning about 10 years ago, the company began expanding into casinos outside of Las Vegas, including Atlantic City, and into some 20 airports in the United States and Vancouver. Expansion continued in 2014 with the acquisition of more than 30 DC-area AMERICA! stores specializing in patriotic and political gifts.

The evolution and expansion of the business created the need for a larger DC. “Following the AMERICA! stores acquisition, we were out of reserve storage space, and we couldn’t get product distributed fast enough,” Diedrich says. “With more than 500,000 SKUs company wide, we also realized we had outgrown our merchandising system.”

It was time to automate. The old facility was largely paper based and inefficient. Meanwhile, MRG often has to react quickly to get hot items in the stores when needed, such as rapidly processing and expediting Mets memorabilia to the Newark Airport when the team was in the World Series. And in the old facility, items were carefully counted, inspected and made store ready in a value-added services (VAS) area—those labor intensive processes were key to accuracy.

“We had installed some put-to-light for picking,” Diedrich says. “But it was still a very manual, paper-based system.” For instance, associates had to load product in the staging area onto carts and wheel them to the VAS area.

In late 2013, the company president Michael Wilkins and the executive team began the search for a new location, even before the AMERICA! acquisition. The ultimate goals were to increase the units processed per hour, reduce the overall labor cost of distribution, and reduce the number of days new stock remained in the facility before it was shipped out to a retail location. Finally, MRG wanted to create a more worker-friendly environment by bringing work to associates rather than associates having to go out and retrieve their work. “We wanted to make sure that the facility and technology we selected would cover us for the next 10 years of growth,” Diedrich says. “At the same time, we didn’t want to pay for something we didn’t need.”

Ultimately, the team found the new location, which more than doubled the existing square footage. Working with an existing system integrator, Diedrich says MRG evaluated a number of possible designs before choosing the put-to-light mezzanine that also has room to grow in the future.

Pulling it together
Some processes from the old facility were maintained in the new DC. Newly received merchandise is still inspected for quality and damage, and manually counted in the value-added services area. “Our buyers still often want to check some new products themselves, especially if we’re bringing in a new design,” Diedrich says. While most items are pre-ticketed as part of a vendor compliance program, and some hardlines like shot glasses are shipped in customer inner packs by vendors, a number of services are still performed to get items store ready. Security tags are added to some high-value items, for instance, and children’s merchandise is put on hangers in the DC.

The difference is that associates no longer walk to a staging area to get their work. Instead, the centerpiece of the new facility is a conveyor and sortation system, directed by a warehouse control system (WCS), which ties the various work centers together and delivers work to associates. Paper is also a thing of the past, as instructions are delivered electronically to RF guns and the put-to-light system.

Once items have been received into the WCS, new merchandise is inducted onto the conveyor system and delivered to a catwalk area, where an associate groups cartons together and sends them down a gravity conveyor to a workstation in the value-added services area. That way, shipments are kept together.

Once items are verified, tagged, placed on hangers or otherwise made store ready in the VAS area, the conveyor and warehouse control system takes over. Inline scanners read the license plate bar codes on the totes and the WCS determines whether the tote should be sorted into reserve storage or to the put-to-light area to fill an order. At the same time, the system is directing associates in reserve storage to pull and induct totes that are then sorted to the put-to-light area for order fulfillment. There are currently 10 pick zones in the put-to-light area, which is located on a 13,000-square-foot mezzanine area, with room to expand the mezzanine in the future.

One feature of the new facility is a concept the system integrator refers to as a shuffle sortation process. With 160 stores, a tote may need to visit more than one pick zone before it is returned to storage. Rather than send a tote to a recirculation conveyor, a series of 90-degree, narrow-belt sorters were embedded in the conveyor system at the end of each zone. When a tote exits a pick zone, the sorter shuffles it in the right direction for the next zone; the tote is sorted a second time into a zone.

Once all of the items have been put to a shipping container for a store delivery, it is put on the takeaway conveyor and sorted to a packing station; and once packing is complete, the tote is conveyed to the shipping area where it is staged or loaded into an outbound parcel truck. Local orders are shipped in reusable and nestable totes; orders going outside the local area are shipped in a custom-designed box with an auto-locking bottom that maximizes the cube and eliminates the need for taping.

Since going live last August, Diedrich says the most important measure of initial success is that turn times have been reduced by more than 50%. “In peak months, items sat in our DC for five to seven days before we could get them out the door,” she says. “Now, we’re making strides to have it here for just one to two days. And, we have room to grow in the future.”

The facility may be small, but like the ship in the bottle, it has all of the features of the larger versions.

System suppliers
System design and integration: DL Neu
WCS: QC Software  
Put-to-light: Lightning Pick Technologies
Conveyor and narrow-belt sorter: TGW Systems  
Spiral conveyor: AmbaFlex  
Extended conveyor: Flexible Material Handling (Nestaflex) 
Bar code scanning: Zebra Technologies (formerly Motorola Solutions)
Case rack: Unex  
Pallet rack: Ridg-U-Rak  
Lift trucks: Toyota Material Handling and Landoll
Overhead fans: Big Ass Solutions