DC Automation: Sorting It Out

Tags: Warehousing, Distribution, Materials Handling

Changing consumer expectations and demand for greater efficiency, economy, and productivity present new twists and turns in warehouse automation.

Warehouses today are abuzz with the sounds of automation and innovation. E-commerce is driving much of this change; so, too, are retail demand for more frequent store replenishment, and consumer expectations for faster fulfillment. As companies variabilize their brick-and-mortar footprints and optimize their on-hand inventory, the distribution center becomes an extension of the store shelf—and must respond in kind.

As inventory navigates new demand twists and supply turns at breakneck speed, DCs are evolving. Companies have countless options, from implementing warehouse, labor, and order management systems to investing in mobile hardware, voice-based applications, and materials handling equipment. But as businesses explore the bells and whistles, they also have to consider the nuts and bolts.

"Cross-belt sortation has advanced over the past several years, providing the higher throughputs, accuracy, and smaller footprints required in today's modern DC," says John Sarinick, chief sales officer for BEUMER Corporation, a German conveyor and sortation company with U.S. headquarters in Franklin Lakes, N.J. "But tilt tray sortation remains a viable, cost-effective solution for many parcel handling and receiving and shipping operations."

The type of operation influences materials handling equipment decisions. "Due to relatively small order size—typically three items per order—e-commerce and retail replenishment orders often lend themselves to using bags, as opposed to cartons, as the packaging material," Sarinick says. "Handling bags instead of cartons often requires a different conveying and sorting solution."

Even if companies aren't selling product in a virtual marketplace, e-commerce expectations are transcendent because consumers are more attuned to cost, service, and speed. As a result, retailers, wholesalers, and suppliers are held to these emerging standards down the line. These demands—internally and externally driven—are compelling companies to look inside their DCs, and at their materials handling infrastructure, with an eye toward the future.

A Vintage Approach

Ashland, Va.-based The Country Vintner faced this organizational challenge six years ago. The wine and spirits importer and wholesaler, which is part of the larger Vintner Group company, serves a Mid-Atlantic region stretching from Delaware to West Virginia to South Carolina. Sixty percent of its product is imported from Europe, South America, South Africa, Australia, and Japan. The rest is domestically sourced.

Country Vintner serves two primary channels: restaurants and wine shops; and its retail division, which delivers to chain stores. In the Mid-Atlantic region, it delivers direct to customers with a fleet of approximately 90 temperature-controlled trucks. A distribution partner coordinates transportation for product shipped nationwide.

In 2007, the company decided to relocate from its existing Louisa, Va., facility to a new site in Ashland. The company wanted closer access to the I-95 corridor, which is the main north-south artery for the markets the business serves. But Country Vintner also needed a greenfield site to develop a state-of-the-art distribution facility under the guidance of W&H Systems, a Carlstadt, N.J.-based systems integrator.

"Although our previous facility had a warehouse management system (WMS) and RFID, operations were manual; we used pallet jacks and hand-picking," recalls Rick Gliot, senior vice president, Country Vintner. "It was prone to error, and was not the most efficient solution."

Retrofitting the Louisa facility was out of the question because of its low ceilings, minimal racking, and lack of conveyors. "Our WMS worked well, but our technology and processes were outdated," Gliot says. "If we kept going with those systems, we couldn't have grown as much and shipped as far as we do now."

Planning for Growth

Country Vintner's transition was timely, given the looming recession. But the market has changed considerably over the past five years. In the wake of the economic downturn, many companies placed their automation projects on hold as they prioritized cost-cutting measures and tabled capital investments. Now those tables are turning.

"Coming out of a recession, the general trend is to plan for future growth," explains Sarinick. "Return-on-investment calculations are more frequently based on building the DC infrastructure to support strong growth over the next five years."

W&H Systems generally works with companies to plan out three-, five-, eight-, and 10-year benchmarks to make sure a project falls in line with where the business expects to grow.

"You may start off with one worker and a pick module, then add a second or third over time," says Paul Laman, vice president of sales at W&H Systems. "If you have two loading doors, you might add another. It may require some additional investment, but you make sure the system is reasonable for today and expandable down the road. You don't want to lock yourself in."

When W&H gets involved with a full system installation, it considers the customer's existing business as well as its planned growth trajectory. While retrofits can sometimes be completed in six months, bigger projects can take three times as long.

"You have to establish how many SKUs a facility is handling—and will handle at different volumes—to determine its velocity profile and curve," Laman says. "You also have to consider how a company moves product to market. Is it shipping via pallets, or floor-loading on a truck? Is it crossdocking product or shipping directly to a big retailer? Does it need a software system that allows the facility to pick in waves rather than order by order?"

No two integration projects are alike. Countless variables outside the enterprise push and pull decisions. Different industries warrant different strategies. But even in the wine and spirits space, a sliding scale of automation complexity exists.

"A wine and spirits distributor in an expensive metro area with union labor, high volumes, and high service demand levels presents a different dynamic than a rural wine company in a franchise market with an old warehouse that's already paid off," explains Laman. "In more expensive labor markets and higher volumes, the needs are more involved and sophisticated."

More Wine, More Whirs

In the wine and spirits industry, every conveyor system has three major components: a means to efficiently pick product; machinery and capacity to process it; and the right loading capacity. W&H usually begins new projects by taking an inventory profile.

"We identify any trends to be concerned about," says Laman. "We extrapolate that inventory out over the number of years and the expected growth rate. Then we look at the best storage density patterns, whether it's some form of racking or bulk stacking on the floor. We've even put in some automated storage and retrieval systems—but they are expensive, and not common yet in the wine and spirits industry."

After identifying the appropriate storage density, W&H also considers capital-associated requirements—for example, narrow-aisle racking or turret trucks for vertical storage. High-volume items are generally placed the shortest distance from storage to the picking environment, often floor stacked. Slow-moving inventory is stored in a building's extremities, where the least amount of activity occurs.

As a wine importer and distributor, Country Vintner's primary challenge is matching consumer tastes with changing vintages.

"Slotting is very important to maintain productivity," says Gliot. "We have to put the fastest-moving sellers in primary DC real estate in order to achieve our targets. We experience a lot of changes from year to year."

In terms of conveyance options, companies can choose from 18- or 24-inch-wide conveyors with two-inch roll centers, depending on the size of products and boxes. For high-volume operations, warehouses generally use a sliding shoe sorter. Country Vintner opted to go with a medium-range sorter.

Warehouses often employ photo eye sensors rather than traditional mechanical sensors on the accumulation conveyors to keep boxes accumulating, and alleviate line pressure. As suppliers continue to reduce the quality of corrugated packaging and inserts, it's important to keep cases from having too much back pressure because of the risk of damage.

Country Vintner currently operates two full case pick modules configured with case and pallet flow pick positions, and a bottle room that employs a two-level mezzanine system with case flow downstairs and bottle shelving upstairs. This set up helps the distributor drive greater efficiency for faster-moving SKUs.

"The conveyor system operates within each of the picking modules, bringing product to a central location on a shipping platform," explains Gliot. "It allows the product to flow through based on our shipping criteria—whether its waves or routes.

"Product then moves through a scan tunnel that matches the bar code on the case, which is either from the manufacturer or applied by us with our shipping label," he continues. "If the bar codes do not match, the system kicks it out to a jackpot lane, which indicates a pick error."

Since the wine distributor moved to its automated DC, order-picking accuracy has improved significantly—which is important from both customer service and cost perspectives.

"The accuracy rate was around 93 percent at our Louisa facility," Gliot notes. "Now it's 99.96 percent in Ashland. Quality has improved significantly. When you consider how much it costs to process a return —W&H calculated $50 per return—that is a huge savings."

Building Flexible Automation

Flexibility is critical when it comes to automation. With so much change in the marketplace—and especially as e-commerce continues to shape new trajectories for technology and infrastructure integration within DCs—companies have to be able to adapt.

"Companies and suppliers are constantly improving automation processes," says Sarinick. "The challenge is working together to drive higher throughputs, more accurately, in less footprint for less cost. One key is flexible automation—for example, leveraging a unit sorter to handle both e-commerce and retail replenishment in a DC, thus sharing inventory."

Country Vintner and W&H took flexibility to a macro level when they engineered the Ashland DC. Since going live in 2008, they have made few changes to the automation footprint, apart from some tweaks to conveyor systems and storage media—which speaks to the planning invested at the onset of the project.

Country Vintner put in direct truck loading by extending conveyors to the dock. Voice picking was also integrated within the new DC. The company plans to explore the potential of extending voice to cycle counting and some other non-paper functions within its facility.

"We worked with W&H to build for the future," says Gliot. "We have picking areas that are completely expandable, with both mezzanine and additional ground space. We can virtually double our picking space quickly. We can also expand a few down lines in our sortation lanes."

Shifting to Meet Demand

The wine and spirits industry serves as a microcosm for the way automation is changing the distribution space. In some cases, companies are retrofitting existing facilities to meet new demand. In others, as Country Vintner's success demonstrates, it's a complete materials handling makeover.

Given the countless directions companies can take, every automation project is unique. Some may adopt an incremental approach: invest in a WMS or automated conveyor system on their own, then retrofit the racking to push inventory vertical. Others start from scratch with a new facility and convert manual order-based picking operations to a fully automated wave picking footprint. Whether turnkey or piece-meal, there's no standard manual for how companies approach automation—with one caveat.

"Companies need a vision of the big picture so they don't back themselves into a corner," says Laman.