Down Under ware

In the lingerie business, support is everything. That's as true of the customer service side of the operation as it is of product design.

A few years back, New Zealand-based lingerie retailer Bendon found itself struggling to provide its customers with an uplifting experience. The problem lay not in its stores or telephone centers, as you might expect, but in its distribution operations.

The heart of the problem was Bendon's main distribution center, a facility in East Tamaki, New Zealand. Cramped conditions and a lack of automation had taken their toll on the operation, which was fast becoming a monument to inefficiency. It took days for the center to get an order out the door. And order accuracy had dropped to levels the company found unacceptable. The service problems were putting a strain on relations with the retail stores and wholesale customers the facility served.

Bendon in brief
Bendon's distribution woes were essentially a result of galloping growth. The company's business has undergone a significant expansion since 1947, when it first started selling comfortably fitting undergarments that "bend on" the body—a contrast to the corset-style undergarments of the post-war era.

Today, Bendon owns 22 retail stores and 23 outlets in New Zealand and Australia. It also runs a successful wholesale operation that sells lingerie and other apparel to about 800 clients worldwide. Its customers include leading department stores in the United States and Canada, which carry brands like the Elle Macpherson Intimates line. The U.S.-based Victoria's Secret chain recently signed on to carry some of the Bendon brands in its North American stores as well. (Most of Bendon's products are manufactured in China and distributed in North America from a third-party warehouse in Los Angeles.)

With both its retail and wholesale businesses flourishing, Bendon was growing at a rate of 25 percent a year. But the growth was severely taxing its distribution operations. The East Tamaki distribution center was bursting at the seams. Many products had to be stored offsite at two satellite facilities. The need to shuttle products back and forth between the satellite buildings and the distribution center meant double and triple handling.

On top of that, the East Tamaki operation was a manual, paper-based operation that had only limited radio-frequency (RF) picking capabilities. And it wasn't a particularly efficient operation: Associates regularly worked overtime just to get products out the door. There was little flexibility to adjust to fluctuating order demands and seasonal peaks.

And the lack of software made it difficult to get a handle on inventory.

Time to move
By mid-2005, Bendon realized that if it wanted to be more competitive in the retail marketplace, it needed some major changes to its distribution systems.

The company contacted Darroch Consulting Ltd., a New Zealand distribution design firm. After looking over Bendon's DC operations, the consultant recommended building a new, automated distribution center to replace the East Tamaki facility. Consolidating operations under one roof would eliminate the need to store inventory offsite, boosting efficiency and minimizing handling.

As the location for the new facility, Bendon and Darroch chose a site near the airport in Auckland, New Zealand's biggest city. Shortly thereafter, construction got under way on a 70,000square-foot building. In the following months, crews arrived to install a dazzling array of automated equipment: horizontal carousels, flow racks, pickto-light and put-to-light systems, and conveyors.

In July 2006, the facility began shipping products. "It was all new for us and a big gamble," says Glenys Hoffmann, the general manager of Bendon's global supply chain, "but all of our suppliers did a good job of bringing everything together."

Software for soft goods
Operations at the new facility are controlled by Diamond Phoenix's DiamondWare Warehouse Execution System, a powerful system that coordinates picking activities so that products gathered from various parts of the building arrive in a consolidation area at the same time. The software assures that the workload is balanced, taking into account the number of totes already circulating on conveyors and the sortation system.

The warehouse execution system also oversees the DC's sophisticated light-directed picking systems and links with the company's JD Edwards (Oracle) enterprise management system. The ERP system includes modules that manage procurement, sales, financials, distribution, order management, invoicing, shipping documentation, and inventory management.

The facility's slotting software optimizes the placement of inbound products into the various picking locations, which include carousels, flow racks, and shelving. Automating this function has allowed Bendon to keep close track of its inventory.

To streamline operations, Bendon now requires its vendors to use scannable bar-code labels and provide advance ship notices so that Bendon has a better idea of when products will arrive. Vendors are also asked to use standardized carton sizes, which help in handling products once they arrive at the Auckland DC. Bendon, in turn, provides its own customers with information on how their orders are being processed.

"We have a lot more control of what we are doing and have more visibility," says Warren Butcher, Bendon's supply centre operations manager. "We can now stay on top of orders. The orders come in and drop into the system overnight. Then they are picked and out the same day. That used to take two to three days in the old facility."

The light fantastic
New light-directed systems have also revved up operations in Bendon's DC. The systems, both pick-to-light and put-to-light from Diamond Phoenix, are used to process products from horizontal carousels and flow racks.

The Diamond Phoenix carousels hold the core inventory items that are continuously stocked in the company's retail stores and outlets. Some 70 to 80 percent of all stock-keeping units (SKUs) to be picked come from the carousels. This storage and order filling system consists of four pods of three carousels each, for a total of 12 storage units with 7,200 locations. One worker mans each pod. While the employee is selecting products from one carousel, the other two units in the pod spin to bring the next products to be picked within easy reach of the selector.

Lights and quantity indicators identify which items from the storage locations should be selected. Nearby, as many as 18 totes representing orders are staged at a put-to-light station. As the items are selected in bulk from the carousel, lights at the put station specify the number of products to place into each staged tote. Completed orders are pushed off onto a conveyor for transport to the consolidation area. Using this system, the average picker selects 600 units and 300 lines per hour.

Fast-moving items primarily consist of new SKUs and fashion items with a short shelf life. These are brought to the 252 flow rack locations for fast processing of what are known as Indent Orders. This area is replenished from reserve storage with "ranges" throughout the day, based on profiles of items needed for that wave of orders. This area accounts for 50 percent of the total volume picked in the facility.

In the old distribution center, the products were brought to an open area on the floor for picking. In the new building, the flow racks are equipped with pick-to-light systems that direct simultaneous picking for multiple customers into staged totes. The employee simply follows the lights in selecting the needed quantities of items from the indicated locations. This system results in average pick rates of as high as 1,000 units an hour per picker. The selected items are then conveyed to the consolidation area, while any products remaining in the flow racks are reallocated elsewhere in the building so that the racks are clear to receive a new range of SKUs from bulk storage.

Slower at the top
Located above the carousels is a mezzanine where slowermoving items are picked from 12,125 shelf locations onto 10 trolley carts. Twelve orders at once can be selected into order totes resting on each of the trolleys. RF devices direct picking, with instructions delivered to indicate the location of each needed SKU along with the order totes requiring that item. Pick rates here average 200 units and 80 lines per hour per picker. Once the order picking is complete, workers roll the trolleys to a conveyor line and place the totes on the conveyor, which whisks them to the consolidation area.

At the same time, full-case items are being picked from the nearly 49,000 storage locations of the bulk (reserve) racks using man-up order picker trucks. These items are then transported to consolidation and/or shipping.

The warehouse execution system times the picks in the various areas so that the items can be delivered simultaneously to consolidation. Conveyors (which were supplied by Dematic) transport the totes from the various picking regions to a pop-up sorter that directs the totes down 22 consolidation lanes to 11 work stations (one station covers two lanes). Each lane can accommodate several orders at a time, up to a total of 27 totes.

When all totes for an order have arrived in consolidation, the system notifies the operator by means of a green light. Then, a computer at the work station tells the operator the purchase order number, the number of totes in the order, and which ones they are. The worker next selects from four sizes of shipping cartons to pack the products, verifying each item as it is placed into a carton. Using the standardized carton sizes allows Bendon to better "cube" its loads and minimize its freight costs.

Filled cartons are then readied for loading onto outbound trucks based on whether they are destined for a local or export transportation hub. Items for export are placed in custom-designed cages that can be simply loaded onto the trucks and scanned for tracking purposes.

Fast and flexible
The facility, which now services Bendon's retail stores and about 70 percent of its global wholesale business (including merchandise bound for the Victoria's Secret stores), recently won the prestigious Chartered Institute of Logistics and Transport Award for Supply Chain Innovation. The award recognized the new facility's role in enhancing Bendon's supply chain operations. "A lot of blood, sweat, and tears went into transforming the center and supply chain systems from an overloaded and inefficient source of customer dissatisfaction to a leading-edge system that is now a jewel in the crown of Bendon," said Bendon's chairman, George Brooks, in prepared remarks.

Opening the Auckland DC has allowed Bendon to double its daily throughput volume. At the East Tamaki DC, 20,000 units were picked and shipped daily. At the Auckland site, the daily average is about 45,000 units. Despite the added volume, fewer workers are needed. Labor requirements have dropped by one-third, from 32 full-time and 20 temporary workers in East Tamaki to 22 full-time and 8 part-timers.

The new facility also offers Bendon more operational flexibility than the former site did. The building can move to 24/7 operation if demands dictate. It currently handles about 10 million units annually and can ramp up to 15 million before any additional storage is required. (The center is designed to accommodate as many as 20 million units annually with the installation of additional equipment.) "We are now also able to handle the peaks, which can be as much as 75,000 units a day," reports Hoffmann. "And as we grow our volumes, we have been able to further reduce our operational costs per unit."

Even with the expenses associated with construction and operation of the new automated facility, average unit processing costs have dropped significantly. At the same time, Bendon has gotten a better grip on its supply chain and, perhaps most importantly of all, has boosted customer satisfaction.

"Our customers have given us great feedback on the way we pack our goods and on our accuracy. And we have not had a penalty since we went live," says Hoffmann. "I did not think we would be 12 months down the track with a fully optimized facility, but we are. It has absolutely more than met our expectations."