June 2003 | Case Studies | DC Solutions

Coty's DC Gets a New Look

Tags: Warehousing

Coty gives its DC a facelift by optimizing the building's cube and adding automation. Now it serves demanding retail customers from one location.

Coty US LLC's distribution center in Sanford, N.C., recently underwent a head-to-toe makeover. "When we started looking at our logistics network in 2000, we realized it was based on legacy decisions," says Mark Y. Newberry, vice president of logistics for Coty US LLC.

After taking a hard look at its Sanford DC, the company concluded that "the facility was large enough, but not optimized," he says.

Optimizing the DC—taking full advantage of the building's cube and adding appropriate automation—would enable Coty to "consolidate multiple facilities into one location, improve service to demanding retail customers, and save money," Newberry says.

Coty's distribution requirements are complex. With the exception of Internet, direct-to-consumer, and direct selling, Coty services virtually all retail channels of trade, including department stores, specialty retailers, mid-tier department stores, mass merchandisers, national drug chains, and the food business. "The requirements for those channels of trade vary greatly," Newberry says.

In addition, the Sanford DC needed to be modified to accommodate changes in Coty's business. "The facility was set up originally to assemble orders containing a $20 bottle of fragrance," says Newberry. But, over time, Coty moved into new lines of business. The facility today handles a full portfolio of fragrance, specialty bath, cosmetics, and personal care items.

"We quickly had to find a way to assemble orders full of two- and three-dollar items," Newberry says. In addition, the unit volume handled by the facility increased dramatically.

Tuning In To the Future

After analyzing current DC operations, a team headed by Newberry worked on developing projections of the company's business in 2010. Instead of basing future plans on historical performance, "we took our company's three-year business plan, met with senior executives at headquarters" and collaborated on developing a solid picture of the future.

In addition, the team identified customer requirements for its food channel customers, a new channel for Coty's personal care business, and incorporated those into the design. As a result, "at the end of 2000, we had a picture of what we needed to service from the trade requirements point of view, as well as the volumes we needed to manage," Newberry says.

Coty was assisted in its DC transformation process by consulting firm Kurt Smith & Company, Hillsville, Va.

The existing DC had one pick-to-light line and a small A-frame. Coty knew that optimizing the DC required a fuller range of material handling technology, so the next step was to develop a conceptual design. The team then put together a Request for Proposal based on that design. Rather than work with multiple vendors, Coty decided to have a material handling integrator manage the entire project, sending RFPs to three integrators.

"So that we were comparing apples to apples, we had the integrators quote on our conceptual design," Newberry says. The integrators could also submit alternative designs for consideration.

In April 2001, the team completed a matrix ranking of each of the three proposals, giving high priority to the flexibility of the integrator as well as cost. Coty and the winning integrator, Werres Corporation of Frederick, Md., spent the next month and a half finalizing the design of the entire system.

The final design includes a pick-to-light system with five lines, two carousels, an A-frame, two three-story case pick mezzanines, a robust weigh-and-motion audit system, and a large sortation conveyor system.

Running the planning operation, materials handling equipment, and picking work centers is a Werres-developed control system customized specifically for the Coty operation. It interfaces with Coty's order processing system from American Software.

Tearing Things Apart

Implementing the new technology required literally tearing apart the DC. "Everything had to be moved out so things could be constructed," Newberry notes. Werres relocated a number of lines to Coty's bulk warehouse area and tied them to the facility's dock with a conveyor, so that Coty could continue shipping. "For three months, we really didn't have a DC," Newberry says.

At the same time that hardware and processes were being revamped, Coty took the opportunity to review all the jobs in the distribution center, rewriting job descriptions as necessary.

In addition, Coty put a moratorium on hiring new associates for the DC at the beginning of 2000, replacing those who left the facility with temporary labor. "We let attrition reduce the workforce over a two-year period," Newberry says. Some of the remaining workforce moved to the nearby manufacturing site, and Coty staffed up with new employees as the facility was completed. The company also added some management strength in the DC, as well as a new engineering department to maximize efficiencies.

The facility went live in April 2002. After a break-in period of several months—which included three months of debugging, two product launches that exceeded expectations, and the company's peak season—the operation has settled in, and the expected results are being achieved.

"We closed two facilities, brought that volume into the Sanford DC, and had the volume of several products increase," Newberry says. In the past, the facility would have operated two shifts, with a third shift added during the peak season. The revamped facility is handling the increased volume primarily with a single shift, and a handful of people working a second shift.

On the first anniversary of go-live, Coty is finishing up its fine-tuning of the operation. The company is making adjustments in the processes and functions of workload planning, replenishing picking work centers, and dock management. In addition, Newberry says, "we've done a number of reslottings on our SKU line in our picking work centers. After performing three major reslots in about a year, we might just have figured out the optimum slotting matrix, giving us the right base for future reslottings."

Transforming an operating DC is a massive and challenging task. "When you rip a facility apart and install new equipment and processes, it won't be what you expect it to be in the first six to 12 months," Newberry warns.

Some keys to Coty's success include:

Managing expectations. Newberry was open and direct about the short-term impact the transformation would have on operations. Early in the process, he advised senior and sales management that the next 12 months would be difficult, giving what he calls "the sky is falling" speech.

Ongoing communications. "The most important thing is to communicate," Newberry says. "We got in front of our senior sales people and our most important customers. They were accommodating and understanding, as long as they were informed up front."

Managing change. "What people found difficult was their belief that things would be perfect in the first three months," he notes. During the break-in period, associates worked long, hard hours. They also had to work with new processes, new technology, and, in some cases, new people.

Associate involvement in the changes also helped ease the transition. Teams of management staff and front-line personnel addressed 19 key areas of the transformation, such as developing and implementing a detailed training plan.

Extensive training. Coty worked with its equipment suppliers and material handling integrator to get complete details on the new equipment. Then teams developed work center guides with explicit instructions on what to do and photographs of the tools to use to do the work.

Then, as new equipment was bolted to the floor, the training team was able to "true up" their documentation and work center guide. The training team included five front-line employees and a supervisor. Coty trained its warehouse associates before go-live, then did retraining on key jobs eight weeks later.

Thanks to careful planning, a sound design, and hard work, the transformation of Coty's DC is nearly complete. Once the fine-tuning is done, Newberry says, "we'll get 100-percent of the results we expected."