January 2005 | Case Studies | DC Solutions

Merger Combines Two Companies, Two Languages, Two DCs

Tags: Warehousing

To make the most of a merger, GlaxoSmithKline prescribed a new DC, new equipment, and new logistics technology.

When two large companies merge, a myriad of issues always need to be sorted out. Such was the case in 2000 when Glaxo Welcome and Smith Kline Beecham merged to become GlaxoSmithKline (GSK). Combined, the two companies formed a U.K.-based operation with an estimated 7 percent of the world's pharmaceutical market, and more than 100,000 employees worldwide.

Working out an effective warehousing and distribution strategy for the new company was one of the most challenging issues GSK had to tackle. To begin with, GSK had to contend with the usual pharmaceutical industry issues—lot control, drug delivery, and different temperature zones.

Language barriers made things more complex. Within GSK's DC, a variety of packaging for the same products was needed to accommodate the company's Flemish and French customers.

When the companies first merged, they used separate DCs to serve the Benelux countries—Belgium, the Netherlands, and Luxemburg. The Glaxo site in Belgium used an SAP system in conjunction with a paper-based logistics system, while the nearby Smith Kline Beecham site was based on a JD Edwards ERP system.

In July 2001, GSK began integrating the two operations. The existing Glaxo warehouse didn't have enough space to hold the combined product lines, however, which required GSK to store about 35 percent of products off site.

Seeking a more efficient solution, GSK built a new warehouse adjacent to its old Aalst, Belgium, facility. It was completed in May 2002. Together, the adjoining warehouses total more than 88,000 square feet, and serve about 300 hospitals, 50 wholesalers, and 200 pharmacies. In the Netherlands, all orders are delivered to wholesalers.

Going Paperless

"When we reached this point in the project, we had to upgrade the picking operation from a paper-based system, concurrent with implementing an update of the SAP system," says Rony de Bom, director of logistics at GSK. "The SAP warehouse management LES (logistics execution system) module supports radio frequency (RF) data collection and a pick-to-light system."

Hand-in-hand with the software upgrade, GSK also implemented a fully automated logistics system, provided by Inther Integrated Systems, an international systems integrator located in the Netherlands and the United States.

"After considering five different logistics technology providers, we chose Inther because it was the most cost-efficient, and its material flow solution fit our operations best," says de Bom.

Different, But Exact

The facility posed a challenge because the implementation called for two different but exact copies of operations, notes Paul Hermsen, director/owner of Inther, who worked on the GSK project. "The system needed to provide the ability to control different functional areas, such as cold and drugs," he says.

The Inther logistics control (LC) system provided GSK with pick-to-light, RF, and a fully automated transportation system. Since implementing the system, the company achieved its goal of accurate deliveries in the 99.9-percent range. In addition, orders placed before 6 p.m. are now delivered the following day.

The new Inther system handles more than 900 fast-moving articles and 10,000 slow-movers. As items are received, pallets are labeled and scanned with RF devices. The system then allocates storage to the appropriate forklift driver, and pallets are put away in the corresponding storage zone for fast-, medium-, or slower-movers in the high bay. In the high-bay warehouse, every item has a dynamic floor position used for case picking and for pick-to-light replenishment.

After orders are transmitted to the SAP server, they are assigned to the Inther system. "Because products for Belgium/Luxemburg and Holland have different packaging requirements, the complete Inther LC setup of pick-to-light, conveyors, check weighting, box closing, and sorting stations is split into two complete, separate systems," explains de Bom.

"The Belgium/Luxemburg pick-to-light setup has a capacity of 440 items on a picking distance of 18 meters, while the Dutch setup can hold 350 items," he continues. "Orders are split into full-pallet stream, full-case stream—where picking takes place from the pallet on the floor position—and pick-to-light stream."

In the Zone

The pick-to-light area is split into four different zones, with one operator per zone. A corridor divides the zones with a floor-level roller conveyor.

The SAP system calculates how each order is split up, and determines the contents for each box. At the beginning of the first zone, a label is printed, containing the internal bar-coded order and delivery number, as well as an external bar code used for transportation purposes. A fixed scanner is located at the beginning of each zone.

On the pick-to-light consoles, lights illuminate product locations and the number of bundles—different colors indicate pick and confirm signals.

"When the appropriate bundles are picked and confirmed, piece picking follows," says de Bom. "The zone display indicates when the box is complete—it is placed on the propelled conveyor to the next zone if the display indicates 'zone complete,' or to a box-sealing machine if 'order complete' is indicated."

From here, conveyors merge with the central conveyor—which also holds full-case picks—via electrical trolleys equipped with mobile RF scanners and printers. A picker stacks cases onto a pallet and labels them with an internal bar code that identifies the order and directs the conveyor paths to the fixed carton or consolidated carton lanes. Overhead scanners determine the cases' final destinations.

"All piece-picked cartons are checked against weights calculated by the SAP system," says de Bom. "If they don't meet weight specifications, the cartons are redirected and manually checked against a reject report that details the picking path." Manual carton checks are performed once daily as an extra quality control measure.

Dispatch to freight forwarders takes place at two different shipping doors—one for Belgium/Luxemburg, and the other for the Netherlands. Third-party companies that service nearly all pharmaceutical operations in Belgium and the Netherlands provide GSK's freight forwarding service.

The new automated system has enabled GSK to incorporate the annual throughput increase—from 20 million to 36 million items—that resulted from the merger. And because of increased picking efficiency, GSK reduced its direct picking staff by 20 percent.

Meeting Expectations

These accomplishments occurred simultaneously with an upgrade to GSK's IT infrastructure—no small achievement, says Hermsen.

"Over the last three years, as the DC staff achieved these increased operational efficiencies, they were also coping with increased throughput from a corporate merger, and a redesign of the facility," he notes.

The communication with the SAP host system is based on an IDoc (Intermediate Document) interface, a standard SAP document format that allows different application systems to be linked via a message-based interface. The essential feature is bi-directional and synchronous/asynchronous exchange of data packages and information. This is key to integrating standard business applications and real-time logistics applications, according to Inther.

GSK's warehousing and distribution revamp took about nine months and the company considers it a complete success. GSK is now operating at a level of efficiency that will allow it to move seamlessly into the future.