Quenching the Thirst For Enhanced DC Design

A consolidated DC network combined with the right technology provides Southern comfort.

One key component of running a successful warehousing and distribution operation is constantly evaluating your network to determine how many distribution centers you need, where to locate them, and how large they should be.

That’s the process Southern Wine and Spirits of America Inc. embarked on recently when it opened a new facility in Lakeland, Fla.

Southern is one of the country’s largest domestic wine and spirits distributors, capturing more than 19 percent of the industry’s total domestic wholesale revenues.

During the past few years, annual sales have risen rapidly, currently topping $7 billion. Growth in 2006 was 10 percent and the company expected to hit 20 percent in 2007. Because Southern has expanded largely through consolidation, it recognized a need to reevaluate its distribution network.

Southern has consolidated its network from five to two DCs in Florida, both much larger than their predecessors.

“Our plan is to consolidate investments into fewer facilities but build them larger,” explains Bobby Burg, senior vice president of supply chain strategy for Southern Wine and Spirits. “At the same time, we are making those DCs more efficient and productive.”

The new Lakeland facility stands as a shining example of the “fewer-but-bigger” strategy. The 650,000-square-foot DC was built from the ground up to fit Southern’s needs.

As a facility handling some of the highest volumes of wine and spirits distribution in the country, it showcases sophisticated technology and materials handling equipment – juggling 12,000 beverage SKUs and moving 10,500 cases per hour.

Finding the Right Mix

The company represents 1,500 global wine, spirits, beer, and beverage suppliers – marketing, promoting, merchandising, and distributing approximately 5,000 brands. Southern calls on 185,000 domestic retail and restaurant customers weekly.

Southern is deeply committed to customer service and strives for next-day delivery to most customers. “Orders that come in by 5 p.m. receive next-day delivery, except for remote areas in a few states,” says Burg.

To accomplish this, the Lakeland DC’s 250 employees work three shifts, five days a week. During peak season in November and December, the DC often adds a sixth day of operations to keep up with demand. Most orders are shipped as cases; few pallet loads go out.

Hub of Activity

From its central Florida location, the Lakeland distribution center serves as the core of Southern’s hub-and-spoke distribution system. The DC moves product to cross-docking facilities using Southern’s fleet of 120 18-wheelers and 1,100 local delivery trucks. The local trucks deliver goods to customers.

Because Southern’s operations often require a high volume of split cases, the new DC needed the right equipment to properly match supply to demand.

“Our goal for the Lakeland facility was to move high volumes of product at lower costs,” says Burg. “Continued investment in technology and automation allows us to achieve that goal.”

When Southern began planning the Lakeland DC, it shopped for the best solution that would help increase throughput even as volume grew. After considerable due diligence, it settled on a system from Dematic, a global logistics and materials handling automation solutions provider with U.S. headquarters in Grand Rapids, Mich.

“Dematic’s solution offered a unique design and the company’s representatives demonstrated how its equipment could help us attain faster throughput while protecting our fragile products,” says Burg.

That level of care was key for Southern, which moves glass bottles that can break when handled roughly. The new equipment processes bottles at a rate of 150 units per minute, or 9,000 per hour – much faster than other systems Southern considered.

“Dematic performed simulations that proved how quickly it could move product without breakage,” Burg explains. “The system’s breakage rate is about 50 percent lower than the industry average.”

Top-Notch Design

The new system features three levels of pick modules and 7,000 feet of conveyors. Two-inch rollers on accumulation conveyors minimize gaps, which helps maintain low breakage rates.

The conveyors progressively release a group of products – or “slugs” – with smooth starts and stops to safely aggregate and convey the fragile loads, which weigh an average of 35 to 40 pounds.

Using the slug merge system, Lakeland’s DC can run and merge 12 lines, increasing system throughput and eliminating “bottlenecks.” The merge evens out line variances from multiple pick areas and optimizes batch cycling.

“The slug merge can handle eight to 12 cases from one line at once,” says Burg. “This has dramatically minimized gaps.”

Products are picked, put on roller conveyors, labeled with an ID tag, and sent to an accumulation area. The cartons are scanned, then released into another merge area.

This process would normally create a gap and limit throughput without reducing speed, but Dematic uses a unique technology at the merge that pre-builds slugs, then pre-sets product gaps on the slug belts.

“Releasing the slugs to the merge before going into the sorter provides more precise handling of fragile products,” says Don Passarella, business development manager for Dematic.

Before being released into the merge, cases are scanned on the conveyor in real time, creating little gap between cartons. As a result, products move faster through the sorter than they do through conventional merge systems.

At the sortation point, Dematic’s high-speed sliding shoe sorter provides quiet sortation and high throughput. Sixteen chutes come off the sorter and funnel into 12 truck lanes for shipping. System capabilities can expand to 20 chutes if needed.

The fast-moving sorter handles an hourly product volume of 10,500 cases. At the end of the sorter, a five-sided scan tunnel verifies the source classification codes against shipping links.

“This technical customization uses point-camera technology to compare the bar codes on the cases with those on the shipping label,” says Passarella. “The technology ensures that the right shipping label is applied to the right case.”

Dematic’s materials handling system has netted dramatic improvements in many areas of the Lakeland DC. “We’ve been able to reduce inventory and our fill rate is one to two percentage points better than at our older facilities,” says Burg.

In addition, the facility has been able to go completely paperless. “We scan and check all shipments as they go out the door, so accuracy is up as well,” he adds.

Shipping accuracy, in fact, is greatly improved. Before implementing the new system, Southern averaged a one- percent error rate out the door; now it averages a 0.2 percent error rate, a 60- percent reduction.

Volume increases are noteworthy as well. Before installing the new sorter, the company processed about 150 cases per man hour for the entire DC. Now, it handles 200 cases per man hour, a 33-percent productivity increase.

Southern considers its Lakeland DC to be among its first “new generation” facilities. Because it has been so successful, the company is currently constructing several more “second generation” DCs.

What Works

Building the Lakeland facility and selecting its sortation and materials handling systems has allowed Burg to learn what does and doesn’t work.

“Most importantly, make sure you find a partner that understands technology and what it can do for you,” he advises. “Technology doesn’t add value if it doesn’t fit your business. A good partner wants to find success with you.”

In addition, he recommends training employees thoroughly on any new systems.

“Don’t skimp on training time and make sure your staff understands how their training fits into the entire system,” Burg says. “Southern’s management provided on-floor direction during training, which was critical to success. You can’t implement a new system and walk away.”

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