January 2010 | Commentary | Viewpoint

Using Distribution and Fulfillment as Strategic Weapons

Tags: Warehousing, Materials Handling

Mick Mountz is CEO and Founder, Kiva Systems, 781-221-4640

Distribution center (DC) assets in the supply chain are often relegated to cost center, necessary evil, or even non-value-added status. But focusing only on costs overlooks distribution and fulfillment's value to the corporation.

In Web retailing, for example, price comparison shopping has neutralized cost advantages to the point where consumers make online buying decisions based on whether an item is immediately available and ready for delivery.

Restocking retail stores offers another example. How can one ensure timely and accurate fulfillment when new products are constantly being introduced?

The best retailers and e-commerce companies carefully select and intelligently apply automation not only to boost productivity, but also to turn the DC into a competitive weapon. How can the DC be a source of advantage when all it does is store, move, and sort the inventory? It's a matter of using the right tools to arrange and manipulate the goods cleverly and efficiently.

Consider the following factors when crafting your DC automation strategy:

  • Strategic use of capital. Many automation projects expand to include myriad factors such as network consulting, a site move, a new WMS, and multiple equipment vendors and systems integrators. All this complexity may lead management to deploy materials handling equipment sized for five years growth, though they need only 50 to 70 percent of that capacity today. For more efficient capital use, seek out automation strategies that reinvest in existing building assets, tune up zones that need a capacity boost, automate equipment charging to save labor, or divert completed orders sooner to cut cycle times.
  • Supply chain flexibility.Automation and flexibility do not often go hand-in-hand. The trick is for automation to cut out non-value-added steps and activities, yet avoid "hard-coding" the facility to one type of never-changing SKU or order profile. Look at your operation's changes for the past five years, then look forward and assume twice as much change. Challenge your automation providers with those constraints and you will find some interesting solutions.
  • Supply stream efficiencies. A well-run operation needs only to deflect inventory from the inbound dock to the outbound dock like a basketball player makes a touch pass to his teammate on a drive to the hoop. This view of supply stream deflection allows us to look upstream and down to gain further efficiencies.

For example, what if all the cases received into your building were already staged on portable racks and could slip right into your pick line? You could realize major receiving, putaway, and replenishment labor savings—as well as a tighter relationship with your supplier—that would be hard for your competitors to replicate.

On the downstream side, your automation and sortation strategies could create dramatic retail store labor savings by picking and packing products in a customized sequence that facilitates quick in-store shelf stocking.

Insist on these supply stream savings in the acceptance criteria for any automation project, and you will learn about your vendor's capabilities and your company's internal goals, priorities, and alignment.

The design and automation of your distribution and fulfillment operations can dramatically influence your customers' experience, creating a strategic advantage that is hard to crack.