Lagging productivity at its '50s-era DC in Columbus, Ohio, left retailer Big Lots with two choices: renovate the aging facility or shutter it and build a new high-tech facility somewhere else. Its decision may surprise you.
David Maloney has been a journalist for more than 35 years and is currently the group editorial director for DC Velocity and Supply Chain Quarterly magazines. In this role, he is responsible for the editorial content of both brands of Agile Business Media. Dave joined DC Velocity in April of 2004. Prior to that, he was a senior editor for Modern Materials Handling magazine. Dave also has extensive experience as a broadcast journalist. Before writing for supply chain publications, he was a journalist, television producer and director in Pittsburgh. Dave combines a background of reporting on logistics with his video production experience to bring new opportunities to DC Velocity readers, including web videos highlighting top distribution and logistics facilities, webcasts and other cross-media projects. He continues to live and work in the Pittsburgh area.
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.
Most of the apparel sold in North America is manufactured in Asia, meaning the finished goods travel long distances to reach end markets, with all the associated greenhouse gas emissions. On top of that, apparel manufacturing itself requires a significant amount of energy, water, and raw materials like cotton. Overall, the production of apparel is responsible for about 2% of the world’s total greenhouse gas emissions, according to a report titled
Taking Stock of Progress Against the Roadmap to Net Zeroby the Apparel Impact Institute. Founded in 2017, the Apparel Impact Institute is an organization dedicated to identifying, funding, and then scaling solutions aimed at reducing the carbon emissions and other environmental impacts of the apparel and textile industries.
The author of this annual study is researcher and consultant Michael Sadowski. He wrote the first report in 2021 as well as the latest edition, which was released earlier this year. Sadowski, who is also executive director of the environmental nonprofit
The Circulate Initiative, recently joined DC Velocity Group Editorial Director David Maloney on an episode of the “Logistics Matters” podcast to discuss the key findings of the research, what companies are doing to reduce emissions, and the progress they’ve made since the first report was issued.
A: While companies in the apparel industry can set their own sustainability targets, we realized there was a need to give them a blueprint for actually reducing emissions. And so, we produced the first report back in 2021, where we laid out the emissions from the sector, based on the best estimates [we could make using] data from various sources. It gives companies and the sector a blueprint for what we collectively need to do to drive toward the ambitious reduction [target] of staying within a 1.5 degrees Celsius pathway. That was the first report, and then we committed to refresh the analysis on an annual basis. The second report was published last year, and the third report came out in May of this year.
Q: What were some of the key findings of your research?
A: We found that about half of the emissions in the sector come from Tier Two, which is essentially textile production. That includes the knitting, weaving, dyeing, and finishing of fabric, which together account for over half of the total emissions. That was a really important finding, and it allows us to focus our attention on the interventions that can drive those emissions down.
Raw material production accounts for another quarter of emissions. That includes cotton farming, extracting gas and oil from the ground to make synthetics, and things like that. So we now have a really keen understanding of the source of our industry’s emissions.
Q: Your report mentions that the apparel industry is responsible for about 2% of global emissions. Is that an accurate statistic?
A: That’s our best estimate of the total emissions [generated by] the apparel sector. Some other reports on the industry have apparel at up to 8% of global emissions. And there is a commonly misquoted number in the media that it’s 10%. From my perspective, I think the best estimate is somewhere under 2%.
We know that globally, humankind needs to reduce emissions by roughly half by 2030 and reach net zero by 2050 to hit international goals. [Reaching that target will require the involvement of] every facet of the global economy and every aspect of the apparel sector—transportation, material production, manufacturing, cotton farming. Through our work and that of others, I think the apparel sector understands what has to happen. We have highlighted examples of how companies are taking action to reduce emissions in the roadmap reports.
Q: What are some of those actions the industry can take to reduce emissions?
A: I think one of the positive developments since we wrote the first report is that we’re seeing companies really focus on the most impactful areas. We see companies diving deep on thermal energy, for example. With respect to Tier Two, we [focus] a lot of attention on things like ocean freight versus air. There’s a rule of thumb I’ve heard that indicates air freight is about 10 times the cost [of ocean] and also produces 10 times more greenhouse gas emissions.
There is money available to invest in sustainability efforts. It’s really exciting to see the funding that’s coming through for AI [artificial intelligence] and to see that individual companies, such as H&M and Lululemon, are investing in real solutions in their supply chains. I think a lot of concrete actions are being taken.
And yet we know that reducing emissions by half on an absolute basis by 2030 is a monumental undertaking. So I don’t want to be overly optimistic, because I think we have a lot of work to do. But I do think we’ve got some amazing progress happening.
Q: You mentioned several companies that are starting to address their emissions. Is that a result of their being more aware of the emissions they generate? Have you seen progress made since the first report came out in 2021?
A: Yes. When we published the first roadmap back in 2021, our statistics showed that only about 12 companies had met the criteria [for setting] science-based targets. In 2024, the number of apparel, textile, and footwear companies that have set targets or have commitments to set targets is close to 500. It’s an enormous increase. I think they see the urgency more than other sectors do.
We have companies that have been working at sustainability for quite a long time. I think the apparel sector has developed a keen understanding of the impacts of climate change. You can see the impacts of flooding, drought, heat, and other things happening in places like Bangladesh and Pakistan and India. If you’re a brand or a manufacturer and you have operations and supply chains in these places, I think you understand what the future will look like if we don’t significantly reduce emissions.
Q: There are different categories of emission levels, depending on the role within the supply chain. Scope 1 are “direct” emissions under the reporting company’s control. For apparel, this might be the production of raw materials or the manufacturing of the finished product. Scope 2 covers “indirect” emissions from purchased energy, such as electricity used in these processes. Scope 3 emissions are harder to track, as they include emissions from supply chain partners both upstream and downstream.
Now companies are finding there are legislative efforts around the world that could soon require them to track and report on all these emissions, including emissions produced by their partners’ supply chains. Does this mean that companies now need to be more aware of not only what greenhouse gas emissions they produce, but also what their partners produce?
A: That’s right. Just to put this into context, if you’re a brand like an Adidas or a Gap, you still have to consider the Scope 3 emissions. In particular, there are the so-called “purchased goods and services,” which refers to all of the embedded emissions in your products, from farming cotton to knitting yarn to making fabric. Those “purchased goods and services” generally account for well above 80% of the total emissions associated with a product. It’s by far the most significant portion of your emissions.
Leading companies have begun measuring and taking action on Scope 3 emissions because of regulatory developments in Europe and, to some extent now, in California. I do think this is just a further tailwind for the work that the industry is doing.
I also think it will definitely ratchet up the quality requirements of Scope 3 data, which is not yet where we’d all like it to be. Companies are working to improve that data, but I think the regulatory push will make the quality side increasingly important.
Q: Overall, do you think the work being done by the Apparel Impact Institute will help reduce greenhouse gas emissions within the industry?
A: When we started this back in 2020, we were at a place where companies were setting targets and knew their intended destination, but what they needed was a blueprint for how to get there. And so, the roadmap [provided] this blueprint and identified six key things that the sector needed to do—from using more sustainable materials to deploying renewable electricity in the supply chain.
Decarbonizing any sector, whether it’s transportation, chemicals, or automotive, requires investment. The Apparel Impact Institute is bringing collective investment, which is so critical. I’m really optimistic about what they’re doing. They have taken a data-driven, evidence-based approach, so they know where the emissions are and they know what the needed interventions are. And they’ve got the industry behind them in doing that.
The global air cargo market’s hot summer of double-digit demand growth continued in August with average spot rates showing their largest year-on-year jump with a 24% increase, according to the latest weekly analysis by Xeneta.
Xeneta cited two reasons to explain the increase. First, Global average air cargo spot rates reached $2.68 per kg in August due to continuing supply and demand imbalance. That came as August's global cargo supply grew at its slowest ratio in 2024 to-date at 2% year-on-year, while global cargo demand continued its double-digit growth, rising +11%.
The second reason for higher rates was an ocean-to-air shift in freight volumes due to Red Sea disruptions and e-commerce demand.
Those factors could soon be amplified as e-commerce shows continued strong growth approaching the hotly anticipated winter peak season. E-commerce and low-value goods exports from China in the first seven months of 2024 increased 30% year-on-year, including shipments to Europe and the US rising 38% and 30% growth respectively, Xeneta said.
“Typically, air cargo market performance in August tends to follow the July trend. But another month of double-digit demand growth and the strongest rate growths of the year means there was definitely no summer slack season in 2024,” Niall van de Wouw, Xeneta’s chief airfreight officer, said in a release.
“Rates we saw bottoming out in late July started picking up again in mid-August. This is too short a period to call a season. This has been a busy summer, and now we’re at the threshold of Q4, it will be interesting to see what will happen and if all the anticipation of a red-hot peak season materializes,” van de Wouw said.
The report cites data showing that there are approximately 1.7 million workers missing from the post-pandemic workforce and that 38% of small firms are unable to fill open positions. At the same time, the “skills gap” in the workforce is accelerating as automation and AI create significant shifts in how work is performed.
That information comes from the “2024 Labor Day Report” released by Littler’s Workplace Policy Institute (WPI), the firm’s government relations and public policy arm.
“We continue to see a labor shortage and an urgent need to upskill the current workforce to adapt to the new world of work,” said Michael Lotito, Littler shareholder and co-chair of WPI. “As corporate executives and business leaders look to the future, they are focused on realizing the many benefits of AI to streamline operations and guide strategic decision-making, while cultivating a talent pipeline that can support this growth.”
But while the need is clear, solutions may be complicated by public policy changes such as the upcoming U.S. general election and the proliferation of employment-related legislation at the state and local levels amid Congressional gridlock.
“We are heading into a contentious election that has already proven to be unpredictable and is poised to create even more uncertainty for employers, no matter the outcome,” Shannon Meade, WPI’s executive director, said in a release. “At the same time, the growing patchwork of state and local requirements across the U.S. is exacerbating compliance challenges for companies. That, coupled with looming changes following several Supreme Court decisions that have the potential to upend rulemaking, gives C-suite executives much to contend with in planning their workforce-related strategies.”
Stax Engineering, the venture-backed startup that provides smokestack emissions reduction services for maritime ships, will service all vessels from Toyota Motor North America Inc. visiting the Toyota Berth at the Port of Long Beach, according to a new five-year deal announced today.
Beginning in 2025 to coincide with new California Air Resources Board (CARB) standards, STAX will become the first and only emissions control provider to service roll-on/roll-off (ro-ros) vessels in the state of California, the company said.
Stax has rapidly grown since its launch in the first quarter of this year, supported in part by a $40 million funding round from investors, announced in July. It now holds exclusive service agreements at California ports including Los Angeles, Long Beach, Hueneme, Benicia, Richmond, and Oakland. The firm has also partnered with individual companies like NYK Line, Hyundai GLOVIS, Equilon Enterprises LLC d/b/a Shell Oil Products US (Shell), and now Toyota.
Stax says it offers an alternative to shore power with land- and barge-based, mobile emissions capture and control technology for shipping terminal and fleet operators without the need for retrofits.
In the case of this latest deal, the Toyota Long Beach Vehicle Distribution Center imports about 200,000 vehicles each year on ro-ro vessels. Stax will keep those ships green with its flexible exhaust capture system, which attaches to all vessel classes without modification to remove 99% of emitted particulate matter (PM) and 95% of emitted oxides of nitrogen (NOx). Over the lifetime of this new agreement with Toyota, Stax estimated the service will account for approximately 3,700 hours and more than 47 tons of emissions controlled.
“We set out to provide an emissions capture and control solution that was reliable, easily accessible, and cost-effective. As we begin to service Toyota, we’re confident that we can meet the needs of the full breadth of the maritime industry, furthering our impact on the local air quality, public health, and environment,” Mike Walker, CEO of Stax, said in a release. “Continuing to establish strong partnerships will help build momentum for and trust in our technology as we expand beyond the state of California.”
That result showed that driver wages across the industry continue to increase post-pandemic, despite a challenging freight market for motor carriers. The data comes from ATA’s “Driver Compensation Study,” which asked 120 fleets, more than 150,000 employee drivers, and 14,000 independent contractors about their wage and benefit information.
Drilling into specific categories, linehaul less-than-truckload (LTL) drivers earned a median annual amount of $94,525 in 2023, while local LTL drivers earned a median of $80,680. The median annual compensation for drivers at private carriers has risen 12% since 2021, reaching $95,114 in 2023. And leased-on independent contractors for truckload carriers were paid an annual median amount of $186,016 in 2023.
The results also showed how the demographics of the industry are changing, as carriers offered smaller referral and fewer sign-on bonuses for new drivers in 2023 compared to 2021 but more frequently offered tenure bonuses to their current drivers and with a greater median value.
"While our last study, conducted in 2021, illustrated how drivers benefitted from the strongest freight environment in a generation, this latest report shows professional drivers' earnings are still rising—even in a weaker freight economy," ATA Chief Economist Bob Costello said in a release. "By offering greater tenure bonuses to their current driver force, many fleets appear to be shifting their workforce priorities from recruitment to retention."