The Right-Tech Warehouse

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High-tech or low-tech: which level of technology is right for your warehouse or distribution center?

The distribution centers featured in this article are very different, but they all share one thing in common: each facility uses the unique mix of materials handling, information, and automatic data collection technology that's right for their operation.

"The trick is to blend the right combination of technology that gives you the performance you need without any extra cost," notes Geoff Sisko, senior vice president, Gross and Associates, a materials handling and operations consulting firm based in Woodbridge, N.J.

Here's a look at five distribution centers, and how they got the blend of materials handling and information technology that was right for their operation.

A Symbol of Efficiency

When Symbol Technologies Inc. moved production of its mobile data transaction systems into Mexico, the company decided to build a new distribution center in McAllen, Texas.

"We refer to it as a logistics facility because it houses some customer service activities and does some receiving activities. It also acts as a transit shed or turnaround for raw materials from our domestic and foreign vendors, and handles some customs clearance," explains Donna Caratozzolo, Symbol's director of business application operations.

Work on the new facility began in 2000. In early 2001, Symbol management changed the team working on the facility. Caratozzolo was asked to head the project, and PWC Consulting, a global management consulting firm, was brought in to help.

"We were charged with getting the facility implemented as soon as possible," notes Chris Riemann, principal consultant at PWC. "Symbol was looking for a state-of-the-art warehouse that could also serve as a showcase" for the company's technology, which includes bar-code scanners and mobile computers.

"We tried to automate as much as was reasonably possible without overautomating the process," Riemann explains. The facility went live in January of this year. It's operated by Catalyst International Inc.'s warehouse management system (WMS).

"We have pallet flow, carton flowrack, plus static bin shelving," Caratozzolo explains, plus about a mile of conveyor. The facility uses a combination of roller and powered conveyors.

The conveyor moves orders through five picking fingers, or zones, as well as to a post-picking processing area. Standard orders are picked to carton, with the WMS determining the optimal carton size. Cartons are routed via conveyor to an outbound manifesting station.

"It's not a traditional high-tech warehouse," Riemann says. "But it uses the WMS, Symbol Technology RF scanners for order picking and in the order assembly area, plus 2D bar coding and automated manifesting." And, he says, "it's very efficient."

The conveyors, coupled with the WMS's cartonization functionality, have enabled Symbol to cut cycle time from as long as one day to less than two hours.

Changing Tires at 80 m.p.h.

Four years ago, Avnet Inc. renovated its distribution center in Chandler, Ariz. The company transformed its combination office/warehouse facility into a modern logistics center that handles semiconductor, interconnect, passive, and electromechanical components and computer products from leading manufacturers.

The facility "has all the qualities you'd normally associate with a clean room environment, except that it's not a clean room environment," says Jim Smith, Avnet's senior vice president and director of EMA operations.

While the base building dates back to the 1980s, "inside, it's a very modern building," Smith says. The building has 24-foot clear height ceilings, carousels, a mix of other storage methods, and almost three miles of smart conveyance driven by license plate technology.

"We started looking at different technologies as early as 1995 because of growth and acquisitions," Smith explains. Updating the facility "was like changing the tires on a car going 80 miles an hour. Avnet produces very large volumes, and we couldn't shut down the business while we transferred from our current legacy system."

While Avnet selected the Optum WMS in 1996, a series of acquisitions put the system implementation project on hold for several years. Avnet began phasing in the new WMS in 2000, replacing its old paper-based system and reengineering the warehouse. Avnet IT staff built the interface between the WMS and the materials handling equipment.

The DC has 72 carousels located on a two-story mezzanine. While Avnet didn't move any of the carousels when reengineering the warehouse, "we changed the way we route products to and from the carousels, and put in a conveyance system that incorporates a shoe sorter, which allows totes to be routed at a very fast rate through the loop to the carousel, shelf, or rack," Smith says.

The DC has 210,000 active SKUs, and processes 10,000 order lines and 8,500 shipments a day. "Our product flow is very complex," Smith notes. For example, picking processes may require validation, verification, and printing; military products have unique requirements.

Despite the complexity, the DC is a high-performance facility. Most items are received in the morning and shipped out later that day. "We guarantee our field organization that if they get an order to us by 5 p.m., we'll ship it out that day," Smith says.

The Avnet DC "is analogous to a race car," Smith says. "It's fast, complex, and competes as a top contender. We have drivers who are able to drive it very fast. We have to continue to tweak the performance pieces of the car—the engine needs tuning, the oil needs changing, a wing nut needs tightening."

And, just like at the Indy 500, it all has to be done quickly so that Avnet can continue to stay at the front of the pack.

Pick-to-Light Works for Wyeth

Wyeth Pharmaceuticals' distribution center, located outside of Knoxville, Tenn., supports 900-plus pharmaceutical SKUs, 600 over-the-counter SKUs, and all of Wyeth's sample orders. The facility has 60,000 pallet locations and 2,500 pick-to-light locations, and can ship anywhere from 60,000 to 80,000 cases a day.

The distribution center—which opened in the fall of 1999—was built as the result of the consolidation of multiple distribution centers throughout the United States, notes Patrick B. Flanagan. As director of the DC, he headed up the development of the new facility.

"We considered a lot of different options, taking into consideration our volume of products, number of cartons shipped per day, how we were picking and shipping," he explains. Wyeth ships in full pallet, full case, and less-than-case quantities.

The very-narrow-aisle facility measures 600 by 1,000 feet. It's 40 feet high, and is equipped with 36 doors on the long side of the building. Consumer products and pharmaceuticals are received on opposite sides of the building.

When product is received (generally on full pallets shipped from Wyeth's manufacturing plants), a receiver scans a license plate. This completes an expected receipt from the plant. The pallet is then moved to a storage area depending upon its storage class (such as whether it's kept at room temperature or refrigerated). Forward pick areas, located largely on a three-level mezzanine, are replenished from storage.

The DC's warehouse management system (DCS from Vertex Interactive) enables orders to be released using a variety of parameters. "If we want to send all of the orders for Advil at one time, or all the orders for a specific carrier, the WMS allows us to do that," Flanagan says.

The orders are released to the shipping floor. Full pallet orders and large quantities are picked from a pallet rack area using RF technology from Teklogix, while smaller orders are picked using Vertex's pick-to-light technology.

"The combination of RF picking and the pick-to-light technology allows us to process a very high volume of orders in a short period of time," Flanagan notes. While increased productivity is important, it wasn't the main driver.

"The primary objective for our materials handling technology was to be able to process customer orders to achieve a very high degree of accuracy," Flanagan says.

"In the pharmaceutical business, we must be absolutely, positively sure that we're always shipping the right item, the right lot, and the right quantity to the right customer," he observes. With inventory, customer order, and shipping accuracy all at 99-plus percent today, the new technology is helping Wyeth meet its goals.

Flow-Through for Feiss

Murray Feiss Industries Inc. sells high-end residential lighting to customers that include lighting and architectural showrooms. About three years ago, the owners of Feiss recognized that they needed more room in its Bronx, N.Y., building. So the company decided to build a new distribution center, and roughly two years ago bought a piece of property just a few blocks from its existing building. Earlier this month, Feiss hosted several hundred visitors at the grand opening of its new, 70,000-square-foot distribution center.

The DC is largely a flow-through facility. "There's no assembly, no packing," observes Rita Hoffman, vice president of operations for Feiss. The building is designed to use space very effectively.

"We're talking tight, to the half-inch," notes Geoff Sisko, senior vice president, Gross and Associates, which prepared the material handling design. "We had to get the racks in tight, and get maximum capacity and clearance to fit under the 60-foot dimension the city required."

Because of the space constraints, the architect and Gross had to work closely together to develop an effective design. The team opted to use a pre-engineered building with a center column in order to minimize interior obstructions. "The columns are pork-chop shaped, so we had to adjust the racks to go along with those," Sisko says.

The facility has very narrow aisles. A four-level pick tower uses two-deep push back plus double-deep pallet flow racks for the picking locations, and push back racks for the storage locations in the pick tower. The pick tower bridges across to the roof of a mezzanine built above the indoor truck docks.

"A conveyor starts on the floor level, then snakes its way up," Sisko says. To save space, part of the conveyor is hung above the shipping/receiving doors. Cartons move from the picking tower to the sortation mezzanine, then are brought down to be shipped.

"It's a whole new world for Feiss," Sisko notes. "Everything is totally different from the old operation," which was very low-tech. So extensive testing and training have been crucial, according to Hoffman.

Feiss kicked off receiving at the new facility in mid-March. "We did two weeks of nothing but receiving," Hoffman says. "Then we had to replenish from that building to our shipping facility. This got people familiar with the materials handling equipment, forklifts and reach trucks. Understanding the materials handling equipment was extremely important."

Hoffman says that the new DC has gotten "phenomenal support" from the top—and throughout the company. "It's inspiring, it definitely makes you want to do the job right," she says.

Thanks to careful planning and lots of hard work, everything is going smoothly. The new, modern, and highly efficient DC "is a crowning achievement" for the family-owned Feiss Industries, according to Hoffman.

Building a Paperless DC

Weekenders Inc., which sells a proprietary line of women's clothing and jewelry, offers a new seasonal line of clothing every six months as well as its classic line that is available year-round.

To handle its steady growth—which averages between 12 and 18 percent a year—Weekenders recently expanded its distribution center located at the company headquarters in Vernon Hills, Ill., adding 25,000 square feet and two poured concrete mezzanines.

"It's a paperless facility," notes Richard J. Goone, distribution center manager for Weekenders. Run by a proprietary warehouse management system, the facility today measures 67,000 square feet (plus three mezzanines).

The DC is equipped with a single set of double dock doors, which handles both inbound and outbound shipments.

All of Weekenders' inbound clothing is packed in the same size carton. "This allows our bulk storage to be very efficient, and for us to use space to the utmost," Goone says. When inbound material is received, vendor-compliant labels are scanned with RF scanners and a license plate is applied to the carton.

A quality assurance group checks a sample of the received garments. "We check a minimum of 10 percent coming in the door," Goone explains. "If there are discrepancies on critical measurements, we will check 100 percent of that item."

Then the DC's material handling group counts and separates incoming clothes, and moves product to bulk storage or to a gravity flow location in the forward pick area.

"We use narrow aisle stock picker equipment, and load product by hand into pallet racks," Goone explains. "Our WMS instructs the order fillers to replenish the bulk storage, and pull stock from bulk for replenishment of the gravity flow rack at the same time. It's very efficient."

Order picking is done using a pick-to-light system from Real Time Solutions (RTS) of Emeryville, Calif., which went live in April 2000 when Weekenders reengineered its distribution center.

Orders are released to the pick-to-light system by the mainframe, and order pickers pick to a shipping container. The completed order is conveyed to the packout area, which includes four packout stations, each of which has two packing list stations that feed a manifest station. An outbound QA station audits roughly 10 percent of shipments, which are generally shipped via UPS.

Adding the pick-to-light technology and powered conveyors to move product in and out of pick modules has yielded big results for Weekenders. Picking productivity has increased by 30 to 40 percent, and order picking accuracy has climbed from about 95 percent to better than 99.6 percent.

"We've been able to absorb additional work" without adding headcount, Goone notes.

How Much to Automate?

The right level of technology will vary from company to company.

"There's a continuum of automation," explains Geoff Sisko, senior vice president, Gross and Associates. "The group of companies in the middle generally has a distribution facility with some type of automation, and some component of manual processing."

It's all about determining the best mix of tradeoffs, he says. "The more automated the facility, the less flexible it is. The more labor-efficient or operationally efficient it is, the less space-efficient the facility will be. You have to balance all the tradeoffs to determine what mix of technology that's best for your operation," Sisko notes.

Automation is not the only answer. In many cases, in fact, "having a highly automated facility would be the wrong thing to do," Sisko observes. "Automation and flexibility are on opposite ends of the same curve."

If you have a very high volume and dependable product line or process, automation can work well. If yours is a highly variable operation, where the product changes in terms of physical characteristics, flow, processing, or value-added services, flexibility will be your top priority.

"Take a look at what the payoff of automation is, how difficult it is to implement and maintain, what the benefits are, and how flexible it is for the future," advises Chris Riemann, PWC Consulting.

He recommends that companies building a new facility or introducing a new concept should "start small and grow into the higher tech options. Start with walking, then grow into running."

For example, the Symbol Technologies DC—which Riemann worked on—is designed to easily accommodate a carousel or automated storage and retrieval system in the future.

"It's a lot easier to move from low-tech to high-tech than it is to go in the opposite direction," Riemann notes.

He has worked with several companies that opted for extremely automated, high-tech warehouses with little flexibility. Because some of the things they planned on—including volume levels or escalating labor costs—didn't materialize as expected, these companies are now operating with less-than-optimal facilities, he reports.

Getting the Right Mix

Getting the right blend of technologies in your warehouse or distribution center takes a lot of hard work. "Before you make a decision about what type of facility to build and what type of technology to use, look very carefully at your business," advises Pat Flanagan, distribution center director, Wyeth Pharmaceuticals.

"Analyze the product mix, the type of shipments and orders. Look at projections for the future. What type of new products are coming along, what will customer requirements be? Look into the future to see if the company has any intent of changing," he advises. For example, are acquisitions or new distribution channels in the works?When developing Wyeth's new DC, Flanagan spent six months performing detailed analyses. "You have to understand your product, your customers, order sizes and mix," he says.

"One problem is that companies get hung up on automation and bells and whistles for their own sake," notes Chris Maynard, director of services for DigiTerra, a supply chain and systems consulting company, Parsippany, N.J. "Companies can do too much automation when they don't have to, because they don't understand their business needs."

Identify your goals from the customer point of view, advises Geoff Sisko, Gross and Associates. "What kind of service are you trying to provide? Quick turnaround, quick response, customization, an array of value-added services—goals such as these will influence what type of technology is best for your operation."

In addition, "look at where your metrics are in terms of your industry," Maynard advises. "Are you having problems with order accuracy, on-time deliveries, or handling volume? Look at your key performance indicators—are your labor expenses too high?"

Evaluate your pain points, he suggests, and benchmark them against the industry. Then, "look at automation that can address those pain points."

"Break the business down into segments or components," Sisko advises. For example, you may have a heavy seasonal component of your business, as well as a steady component where the peak-to-average order ratio is very shallow.

"That's a better fit for automation than where the peak-to-average ratio is much greater," he points out.

Once you break down the components of your operation, look at each one separately. "Ask whether each component can be automated, and whether it should be automated," he says. "Sometimes the right kind of automation may be no more than adding good information technology, rather than installing conveyors and automated guided vehicles."

When evaluating automation, look for "show-stoppers" that make automation a poor option, advises Jim Apple. He's a partner in The Progress Group, a supply chain systems and management consulting company based in Atlanta. For example, "you may have an extreme peak that you can't fully automate," he says.

Perhaps you're uncertain about future business requirements, and can't define the problem well enough to warrant investing in automation. Or say that, for some reason, you want to run your operation for a single shift.

"Operating only one shift makes it twice as difficult to justify the automation," Apple warns. "If you never want to operate two shifts, justifying automation will be an uphill battle."

Identifying such show-stoppers early on is definitely worth the effort, Apple says. Doing so will help avoid wasting time when automation is not a viable option.

Lessons Learned

Successfully selecting, then implementing the right technology in your warehouse can present significant challenges. Increase the likelihood of your success by doing the following:

Develop a sound business case.

Companies often don't spend sufficient time developing their business cases, observes DigiTerra's Chris Maynard. This is especially true when companies are retrofitting a facility rather than building a new one. Regardless of how large or small your project is, make sure the necessary return on investment is there.

"You have to know that the potential savings opportunity is big enough so that you don't waste time pursuing automation when it's not really an option," observes Jim Apple. "Clearly, you have to have a critical mass of savings opportunity. If you have a warehouse with three people, you won't want to automate. If you can save 150 people, however, you may want to consider automation."

Labor isn't the only savings that can be achieved through automation, of course. Also consider savings that stem from better space utilization, improved inventory control, and higher accuracy.

When developing your business case, consider the words of Nader Khalil, corporate engineering manager for Dot Foods: "Make sure you do your own ROI in addition to the vendor, and that the two of them add up."

Get serious about the design.

"You don't want to just pick somebody else's solution," warns Apple. "You have to have a rigorous design process" to ensure that the final design fits your facility and your business needs.

Consider several options.

"Look at significantly different options before deciding which one to use," Apple suggests. To ensure that you make the right decision, Apple suggests considering a highly automated solution, a highly manual operation, and a third solution that's somewhere in between.

Design for the future.

When developing your facility design, design for five to 10 years down the road, and build in flexibility. That's what Murray Feiss Industries did. "We realized that the size of boxes will increase over the next five years," Rita Hoffman says.

Determining that it was better to increase the conveyor width by six inches today rather than having an increase in non-conveyable products a few years down the road, the company opted to use a 30-inch conveyor even though a 24-inch conveyor would be sufficient today.

Design the building to fit the requirements.

When Wyeth built its new facility, "we didn't erect the building first, then design the inside," points out Pat Flanagan. "We designed the inside of the building, then built the facility to fit our requirements."

Find the right balance.

"Don't mix too many technologies," advises Jim Apple. "You'll have that many different kinds of systems to manage and maintain." In addition, identifying too many technologies to handle different types of orders can impede effectiveness.

"You can analyze distribution of activity and identify 10 different ways to handle product, but then you have to partition orders 10 ways," Apple says.

With multiple technologies, you'll need a logic for determining which technology is right for each SKU. Plus, "as products change over their lifecycle, how do you move them from one technology to another? While it's appropriate to have more than one technology, you also don't want to have too many," Apple says.

Establish a strong project team.

"Make sure that you have the proper team in place to manage the project so that it comes in on time and under budget," advises Chris Maynard. "Not everyone has the necessary skill set. You have to make sure you treat this like a true project, and manage time, deliverables, and goals."

"A lot of companies will not want to pull their best operations people to work on a project like this," notes Chris Riemann. That can be very risky. "If you put your B or C people on a project, that's the kind of work you'll get," he warns.

A well-organized and well-functioning team was a critical success factor for Symbol Technologies, reports Donna Caratozzolo, Symbol's director of business application operations. "We did well as a team, not discounting anybody's opinion, and knowing when to back off a course of action and take a different route.

"Good project management was crucial," Caratozzolo says. "Having meetings to resolve issues, then not changing our decisions once they were made" contributed to the team's success.

Watch the technology in action. "It's one thing to think and read about technology," Apple says. It's another thing altogether to watch it in action. "Vendors are always selling the advantages of their solution," says Nader Khalil of Dot Foods. "Go to a site and see it in action."

Talk with the warehouse or DC manager, and find out for yourself what the benefits and challenges are. To ensure full and frank discussion, Dot Foods tried to arrange to meet with DC managers with and without the vendor.

Get your vendors on the same page.

"The more vendors you have, the more oversight you have to provide," notes Geoff Sisko. No matter how many vendors you wind up working with, your communication with them must be crystal-clear.

For example, Symbol faced some challenges at the very beginning of its project when vendors misinterpreted what certain deadlines meant, Donna Caratozzolo recalls. A meeting with the management of those organizations cleared up the misperception that scheduled dates had a fudge factor. "Once vendors understood that if someone didn't meet their commitment, we all failed," there was no more problem with meeting the schedule, she says.

Consider doing things in phases.

"You don't have to automate everything all at once," notes Jim Apple. "You can automate receiving this year, and shipping another year."

Some companies may want to design a master plan for their DC and prioritize different phases to be implemented over time.

Dot Foods, for example, has a master plan for its distribution facilities, coupled with an ongoing effort to enhance its DCs. Taking the phased approach has worked well for Dot, Khalil says. Take the food wholesaler's 350,000-square-foot dry DC in Mt. Sterling, Ill. Today, it uses bar-coding technology from Teklogix, gravity flow racks, and very-narrow-aisle wire-guided equipment. As part of its master plan, Khalil is considering introducing automation such as robotics or pick-to-light technology in the next few years.

The phased approach doesn't always work, though. "When you can implement in phases, you can achieve a big financial advantage," says Sisko. "But sometimes the change you're making—such as installing a complete new conveyor system—is so integrated that it's very difficult to take it apart and install it in phases.

Implement gradually.

/While some companies take the Big Bang approach to implementation, others prefer to implement in phases. For example, Rita Hoffman says that one secret to the success of Murray Feiss Industries' new DC was the fact that Feiss had implemented its warehouse management system (Logistics Pro from Intrepa/Manhattan Associates) a year earlier in its existing facility.

"We got all the software bugs out of the WMS and got to be extremely familiar with it," explains Hoffman. When the company opened its new DC with concepts and technology new to the company—including very narrow aisles, man-up lift trucks, a pick module, and conveyors—"we had the software implementation behind us," she says.

Similarly, when Dot Foods implemented its WMS from MARC Global, "we did the putaway and receiving first, then picking, then shipping." Implementing the new system in phases facilitated training and enabled Dot employees to accept and become familiar with it.

Watch your budget.

"It's very important to do your planning, then watch your budget," Hoffman says. "If you don't plan ahead, your budget really goes nuts."

When developing your budget, plan for an implementation shakedown period, advises Nader Khalil. Regardless of what type of system or technology you implement, "the learning curve could be 60 to 90 days; you need to factor that in."

Measure results.

Track the project to determine how well you've met your goals. "It's common business sense to have data to support you down the road," says Khalil. Your ability to obtain future funding may depend on how well your current project achieves the desired results.

Make the right move.

"You have to be very careful" when investing in warehousing technology, Jim Apple notes. "But you also need to be careful not to fail to move ahead. You can be so cautious that your competition marches ahead of you."

That's not a good idea. Installing the technology that's right for today—and tomorrow—can give your company a powerful competitive edge.

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