Retrofitting a distribution center while it's still operating has been compared to changing the engine on a 747 while in flight. Words like "madness," "high risk" and "last resort" come immediately to mind. But that hasn't stopped companies from attempting that high-stakes gambit. Just two years ago, managers at closeout retailer Big Lots found themselves pondering that very course of action.
The DC in question was a facility adjacent to the company's headquarters in Columbus, Ohio. The 2.7 million-square-foot distribution center, built in the 1950s, was showing its age. Originally a White Westinghouse manufacturing plant, the building had been converted to distribution uses and added to over the years. The linchpins of the operation were two aging tilt tray sorters and some 60,000 feet of conveyor whose replacement parts were becoming difficult to find. Although the material handling systems had been adapted several times to accommodate growth, these adaptations were more patches than the realization of any master plan. "We had never taken a holistic approach [to deciding] how we would occupy this building," admits Todd Noethen, Big Lots' vice president of distribution support services. "As we expanded, we just added automation."
Still, all that might not have mattered much if the retailer hadn't opened shiny new high-tech facilities in Pennsylvania, Alabama and Oklahoma. It wasn't long before those DCs began turning in dazzling performance numbers, making Columbus suffer by comparison. Though no one expected the Columbus DC to perform on a par with the newer DCs, reports indicating that Columbus's performance lagged behind its counterparts by a whopping 50 percent brought the problem to a head. Big Lots' managers realized they could hesitate no longer: It was time to decide whether to overhaul the Columbus facility or start from scratch at a greenfield site somewhere else.
Extreme makeover, DC edition
Despite the obvious challenges of renovating an operating DC, retrofitting the Columbus facility was the overwhelming first choice. The company already owned the land and buildings and had a productive workforce in place. But renovation would be tough to justify without assurances that productivity could be brought up to the levels reported by the newer DCs. To get a better idea of what renovations would cost and what improvements they could expect, Big Lots managers sought professional help. They brought in consultant Kurt Salmon Associates to help them evaluate their options.
When the consultant's recommendations came back, any plans for moving were quickly shelved. The analysis showed that retrofitting was indeed feasible, though it wouldn't be quick and it wouldn't be easy. Unlike the earlier attempts at modernization, this wouldn't be an adaptation; it would be a complete overhaul. By the time the project was finished, says Noethen, workers would have taken down every physical piece of equipment in the building and rearranged it, moved it, or removed it for good.
What made the project particularly tricky was that the site would continue to function as a DC during the period—the only concession made was the shifting of some of the order fulfillment load so that the Columbus DC would be servicing 250, not 350, stores. Realizing that the key would be detailed advance planning, Kurt Salmon Associates worked with Big Lots to develop a schedule that would allow the renovation work to be completed in phases. To give some idea of the project's scope, the final outline identified 8,000 separate tasks that would have to be checked off by the time the overhaul was complete.
Three Big Lots employees were assigned full time to the renovation project, which would include relocating racks, building new pick modules and replacing the old tilt tray sorters with a high-speed Intelligrated sliding shoe sorter. Eventually, the old conveyors would also be replaced with more efficient units, also supplied by Intelligrated.
The first step was to remove one of the old sorters and shift all remaining sorting chores to the other tilt tray unit. Once the first tilt tray was dismantled, technicians installed the first half of the new sliding shoe sorter. Essentially, the order fulfillment work was shifted to one half of the building while the other half underwent major renovations.
Next, workers disassembled old pick modules in half the complex and replaced them with five new pick modules (eventually there would be seven new modules). In contrast to the old layout, which featured two clusters of pick modules, the new design called for the modules to be spread throughout the building. This new configuration, which has proven effective in the newer DCs, reduces travel and replenishment times because reserve products are located close to where they'll be picked. The modules are dynamically re-slotted each week to ensure that high volumes of goods can flow through with maximum efficiency.
The new pick modules feature racks that are three pallets deep, not two deep like the old modules. The dense design means the five new modules offer the same amount of pick faces as the seven original modules. Once the first five were completed, workers came in over the weekend and shifted the merchandise over to them. They then dismantled the old modules and erected two additional new modules. The building now boasts six full case modules and one split case module.
Rack 'em up
The next task was to convert the narrow-aisle racks that previously held reserve items to a standard-aisle configuration, expanding the aisle widths from six feet to 11 feet. This eliminated the need to hand the product off to narrow-aisle vehicles for putaway and retrieval. With the old narrow-aisle rack design, putting a pallet away required seven touches, including unloading, taking it from receiving to a haul point, moving it to a staging point, and moving it to a pickup-and-delivery station, where it would eventually be picked up by a narrow-aisle vehicle for putaway. Now, a reach truck simply carries the product from the dock directly to its reserve rack destination.
"We eliminated 85 pieces of equipment with this new design," notes Noethen.
While Big Lots was able to reuse most of the old racks, those racks underwent an almost total reconfiguration. Rack openings were changed to accept standard-width pallets and rack heights were increased from 60 to 74 inches. Rack uprights were replaced with sloped legs to minimize damage from lift trucks. At the same time, workers replaced the overhead lighting and sprinkler systems in the rack areas.
The rack renovations were completed in phases, one section at a time. The building was divided into 42 sections, each covering about 20,000 square feet. Total rack work took two years to complete, starting at one end of the building and progressing toward the other end. In each section, workers had to remove the merchandise, dismantle the rack, and then move, cut, weld and reconstruct the components to the new dimensions. Each section took about 30 days to complete, with work in a new section starting every two weeks.
The bulk area, where non-conveyables like furniture, ficus trees, rakes and other tools are stored, was also moved to a site adjacent to the shipping docks. This makes it easier to process these hard-to-handle items and cuts travel time. Wheeled carts now take them directly to the docks for loading onto trucks.
In the meantime, workers had begun to dismantle the entire conveyor system and replace it section by section as each of the pick modules was completed. But not all of the conveyor would need to be replaced. The building previously contained 63,000 linear feet of conveyor; it now uses only 26,000 feet. Belt accumulation has been added to some areas, and 24-volt conveyors were placed in the pick modules. An 8-to-1 merge was also installed to join products coming from processing areas before they enter sortation.
As the project progressed, workers removed the remaining tilt tray unit. They then installed additional diverts to the sliding shoe system. The new diverts connect to the previously installed portion of the sorter with a short piece of conveyor, making it one long sorting system with 52 total diverts that feed shipping lanes. This arrangement eliminated the need for a pre-sort system that had been used to divide products between the two tilt tray units.
Finally, workers turned their attention to the shipping docks, where they installed new powered loading conveyors, also supplied by Intelligrated. These units make truck loading more efficient and have enabled Big Lots to cut the number of shipping doors it uses from 77 to 52.
Engineered for speed
Despite all the dust and confusion, Big Lots remains firmly convinced that renovation was the right choice. Returns on the $25 million project have exceeded projections. Initially, the company estimated it would recoup its investment in three years, but that estimate has been revised downward to two years, thanks partly to higher-than-expected levels of productivity.
And productive it has been. Before the renovation, the facility was processing 6.8 pallets per man-hour, a rate it hoped to up to 8.8 after the retrofit. But once again, its projections proved to be conservative. The rate has already risen to an astounding 11.6. Similarly, in the selection areas, the retailer had hoped to boost the average picking rate of 175 cartons per man-hour to 216.5. To its surprise, the rate has soared to 224.1 carton picks per man-hour even though picking processes haven't changed much. The company credits better slotting and a more efficient design for the improvement.
Big Lots also credits the sliding shoe sorter for revving up productivity. The sliding shoe sorter can handle a wider variety of products than the old tilt-tray sorters could. To be precise, it can sort 92 percent of all cartons, compared to 78 percent with the tilt trays.
Throughput volumes have also increased. Some 950,000 cartons are now shipped each week from the facility, compared to 700,000 before the retrofit—and that despite an overall labor reduction of 20 percent. And for the first time, workers are answerable for their actions. Supervisors now know who touches what and when.
The facility had been operating three shifts six days a week before the renovation. This left little time for maintenance. Now, only two shifts are needed seven days a week. Maintenance costs have also dropped 35 percent. Reduced equipment downtime has raised shipping uptime from about 93 percent to 99.5 percent.
Today, just months after the overhaul was completed, the Columbus DC supports 325 stores. And there's plenty of room for growth: the operation can be expanded to accommodate up to 400 stores in the future. Not only is Columbus able to shoulder its share of the order fulfillment work, but any feelings of inferiority to its sibling sites have long since been dispelled. Today, productivity in Columbus rivals that of any other DC in Big Lots' network.
Gartner, Inc.