March 2005 | Case Studies | DC Solutions

Raising the Steaks

Tags: Warehousing

A meat processor beefs up operations with new technology and a warehouse redesign.

A trip to Lancaster County, Penn., provides a taste of a rich Pennsylvania Dutch heritage—rolling farmland and horse and buggies can be found at every turn. Many local businesses remain family-owned and -operated and have served as the backbone of the community for years.

One company that traces its roots back some 100 years is Kunzler and Company Inc., a manufacturer of quality meat products. Still family-owned-and-operated, the company stands as a pillar in the community and employs 500 people. Customers include regional retail grocers, club stores, and food service and convenience stores.

But while the company's old-fashioned values have kept it on a successful path for more than a century, it became painfully clear recently that its dated warehousing operations were a hindrance to providing top-notch customer service.

"We were essentially a manual operation," says Ron Fink, vice president operations. "And we had no visibility on a real-time basis, no locator system on a real-time basis, and we couldn't efficiently plan for our demands."

The company was operating from two DCs—a 30,000-square-foot, newly constructed facility in Lancaster adjacent to its plant, and a smaller, 7,500-square-foot warehouse in Tyrone, Penn.

Kunzler's operations are tricky because the meat products it makes are date sensitive—most have only a 20-day to 120-day shelf life.

Without a modern DC layout, equipment, and technology, the company was unable to ensure that all products would ship from its facility in time to meet customers' demanding delivery requirements. "We weren't serving our customers as well as we could," says Fink.

After deciding that modernizing systems and operations was in order, the company embarked on an 18-month effort to find the right solutions. "Our goal was to find a warehouse management system (WMS) that could drive warehousing operations," says Fink.

The company's search led it to Milwaukee-based Catalyst International Inc., a provider of supply chain execution solutions. "Catalyst was a good fit for Kunzler because of its ability to manage by lot, catch weight, and multiple hold levels, and to automate product rotation," says Fink.

At the project's outset, Catalyst found Kunzler needed help with inventory control, says Dean Claussen, Kunzler project manager at Catalyst. "The company needed to control a lot of loss, spoilage, and mis-placed product," he explains. "Kunzler was more comfortable with manufacturing than distribution, and it wanted to step up operations."

To remedy the problems at Kunzler, Catalyst sent a team into the DCs to analyze operations, layout, and systems. "From an operational standpoint, the DCs were gridlocked," recalls Jim Vinson, project manager of facilities at Catalyst. "Kunzler had old pallet flow racks, and was picking by expiration date, which meant warehouse staff sometimes had to search six deep to find products. We discovered they were making as many as 100,000 extra moves each year."

"We realized we had poor configurations," says Fink. "Catalyst worked with us to redesign our layout, select new materials handling equipment, and source vendors."

In addition, Kunzler and Catalyst planned to add a new WMS. The Kunzler team traveled to Milwaukee for training on the WMS product, and upon returning, worked with the Catalyst team on integrating its existing ERP package with the Catalyst WMS.

The new design called for dismantling the existing rack structure and replacing it with new, narrow-aisle storage systems to optimize the DC's footprint. New Bendi forklift trucks were utilized to allow employees to reach the highest racks within the narrow aisles.

Once the dismantling process began, the entire project took about nine months to complete, and included materials handling changes, the WMS implementation/ERP integration, and new DC operating procedures. "We were able to accomplish all this without shutting down operations," says Vinson.

Operations Flow Smoothly

Kunzler and Catalyst worked together closely to design operating procedures that would match the capabilities of the WMS with as few modifications as possible. Operations now flow smoothly from receiving to shipping.

The majority of shipments received at the Lancaster DC arrive directly from the adjacent plant. The DC receives an advanced shipping notice (ASN) that tells the WMS what to expect. A finished pallet arrives in the DC and with a quick bar-code scan, the information is uploaded to the WMS. In turn, the WMS directs Kunzler employees to the proper storage location.

A smaller portion of receiving comes from the Tyrone plant. For that inventory, the WMS builds ASNs between locations, which streamlines unloading procedures.

Because Kunzler's product line is meat, virtually all product goes through a test and hold procedure. "The WMS places the products being tested on hold, but in inventory, so we know they're here," says Fink. "Once the quality assurance department releases them, the WMS recognizes the products as shippable goods."

As orders come in from the company's ERP system, they are downloaded into the WMS. "All item master, customer master, and outbound order information is automatically sent to the WMS, which populates its associated tables automatically," says Steve Henry, information systems manager at Kunzler.

The WMS then drives wave picking based on that information, typically in order of route. "The orders we process vary greatly in size," says Fink. "Orders can be anywhere from one case to 100 cases; 20,000 pounds or even up to 40,000 pounds—all shipping directly from the plant."

Most of Kunzler's customers have strict date constraints that Kunzler must meet. "The WMS looks at the customer constraints and directs picking to the product that best meets those needs," says Fink. "We do full-and partial-pallet picking, then take the loaded pallets directly to the docks for shipping."

When the WMS completes or closes an outbound order, information is automatically sent to the company's ERP. "The ERP then loads data tables that we, in turn, use to bill customers and store for complete shipment history," explains Henry. "By running a simple report, we can determine in less than one minute exactly what lot of product customers received. This used to take us several hours."

By integrating the WMS and ERP systems, the company also achieves visibility at the executive level into the DC's inventory status, capacity, and operational performance metrics.

Meaty Results

Since implementing the new WMS and redesigning its DCs, Kunzler has enjoyed a complete turnaround in operations. Systematic lot rotation, reduced spoilage, and real-time visibility are among the project's highlights.

Specific results include:

  • A 15-percent increase in space utilization. "Before implementing the WMS, we would hit the wall at around 80 percent to 85 percent space utilization," says warehouse manager Steve Lewis. "Now with the WMS, we continue to work efficiently at 98 percent full."
  • Reduced off-site storage expense. The 15-percent improvement in space utilization translates into one full day of production that Kunzler doesn't have to store off-site.
  • Improved labor efficiency. "Increased product and space visibility enabled us to staff more efficiently, and eliminated wasted activities such as roaming the DC looking for specific production dates or lots," says Lewis. "In addition, we realized a reduction in downtime because our material handlers don't have to wait for product replenishment. The WMS schedules the replenishment based on capacity and picking activity."
  • Reduction in inventory "out of code" dollars. Out of codes attributed to misrotation were reduced by 90 percent thanks to Kunzler's ability to move product in true FIFO (First In/First Out) rotation directed by the WMS. Prior to the new system, the company relied on the memory of a few people about which inventory dates were in stock.

Pain Points

While Kunzler realized results within a week or two of final implementation, the road to success was not without its pain points. Learning as much as possible about the WMS before beginning implementation is Fink's recommendation.

"You need to invest in education on the software system you choose so you can identify the gap between the standard package and what needs to be customized to fit your needs," he says. "We incurred more modifications than we expected originally."

It's also important to set up a substantial implementation team when undertaking a large project. "We only had a three-man team," Fink says. "It wasn't the scale of the project that made it difficult, it was defining, mapping, and training for our many customer constraints. We should have doubled the number of people working on this. You need depth to survive an installation."

Kunzler isn't looking back, however. "The WMS has been all we hoped for," says Fink, "and we're just getting started."