Automated system helps grocery DC make smarter picks
An integrated order picking system has slashed labor costs, boosted throughput, and virtually eliminated errors at KeHe Distributors' new DC. And it used ordinary technologies to do it.
Peter Bradley is an award-winning career journalist with more than three decades of experience in both newspapers and national business magazines. His credentials include seven years as the transportation and supply chain editor at Purchasing Magazine and six years as the chief editor of Logistics Management.
Speed and efficiency are crucial to every DC operation, of course, but the pressure to achieve ever-higher productivity levels is greater in some industries than in others. The grocery business, with its razor thin margins, is a good example. As Craig Turner, vice president of operations for specialty food supplier KeHe Distributors, puts it, "The ability to reduce time and motion in a low-margin environment is extremely important in order to remain competitive in our market."
So it's no surprise that when the company began planning for a new DC in Allentown, Pa., it made productivity a priority. The project was part of a larger DC consolidation effort aimed at eliminating redundant operations. The distributor had already completed a similar project in the Dallas area, combining several operations into a single DC in Dallas. The Allentown distribution center, in turn, would absorb operations from an Albany, N.Y., facility once construction was finished.
At the same time, KeHe began looking into systems that would boost efficiency and make maximum use of capacity in the facilities it would retain. The mission took on particular urgency late last year as the company prepared to acquire competitor Tree of Life—an acquisition it completed this past February.
Tall order
Founded in 1952, Romeoville, Ill.-based KeHe has grown into a $2 billion company today. As one of the largest suppliers of natural and specialty foods, it distributes dry goods, frozen foods, and perishables—about 60,000 SKUs in total—to some 33,000 retail outlets throughout North America and the Caribbean. Its customers include some of the largest food retailers as well as independently owned natural and organic food stores.
Like its counterpart in Dallas, the consolidated Allentown operation would serve both types of customers—the big mass marketers and the independent retailers. As Gene Carter, KeHe's executive vice president of distribution and supply chain, explains: "We wanted to take two environments and combine them in a sort of hybrid DC that would support both specialty and national channel sales."
That had implications for the order picking end of the Allentown operation. To be precise, it meant the facility would have to be able to handle orders for full pallet and full case quantities as well as orders for individual items, or "eaches." And it would have to do it cost-effectively. "We had to improve our throughput sales per square foot, which are now up 50 percent," says Carter. "Reduction of fixed-cost expenses was a priority for us."
It was clear from the outset that one of the key parts of the project would be revamping the facility's each-picking system. In the past, less-than-case order picking had been a manual operation, with workers selecting items from mezzanines and flow racks with paper pick lists. But a more efficient process would be required at the new DC. It was time to automate.
To design and implement an automated each-picking system in Allentown, KeHe called on two partners: Automation Dynamics, a Wylie, Texas-based material handling systems integrator that had overseen a similar project at KeHe's Dallas DC, and Intelligrated, a Mason, Ohio-based firm that designs and produces automated material handling systems.
Turner set the bar high for the design project. The solution had to boost productivity, assure high levels of order accuracy, and do it all efficiently. The DC has a tight window for processing orders, he explains. "When orders are dropped in our environment, we have less than eight hours before the first truck goes out. We cannot waste time chasing a box through the system in order to get a 99.9-percent accuracy rate."
The solution also had to be compact. Intelligrated and Automation Dynamics would have to take an each-pick operation that had filled 50,000 square feet of space and fit it into 20,000 square feet.
On top of that, the design team would have to devise a system that could efficiently handle both fast- and slow-moving items—that is, the 2,000 SKUs that account for 80 percent of the facility's orders as well as tens of thousands of slower movers. Turner sums up the challenge this way: "How were we going to take these eaches and create a dense pick area that did not have to have levels and levels of pick modules?"
Custom package
The solution the team came up with is a customized design that combines pick-to-light technology (which is used in conjunction with flow racks) and carousels. The setup allows the company to use the optimal picking method for each kind of item, Turner says. "We took the carousel system and used that for what I call the long tail, those C and D items that have minimal movement, and integrated it with a multi-level pick-to-light system that handles [the fast-moving SKUs]," he explains.
As for equipment, the system incorporates photo-eye accumulation conveyor, spiral conveyor, and a two-level pick- and put-to-light mezzanine (to take advantage of vertical space). It also includes a warehouse management system (WMS) and eight eight-foot horizontal carousels.
Turner emphasizes that there was much more to the project than just installing the automated equipment. "We did a lot of due diligence on the application of these two technologies," he says. "We didn't just say, 'Let's take a carousel and let's take a pick to light and slap them together,' because that in itself would not be faster than what we were already dealing with. We had to get into the heart of it and actually retool each pick solution."
Orders by the batch
Because the orders handled in Allentown are relatively small, the system designers opted for a batch processing approach. For example, instead of sending a worker with a single order tote through the whole pick-to-light setup, the system is programmed to process multiple orders simultaneously. "We'll go into a zone and scan 12 boxes at a time, and lights will light up for all 12," Turner says. "We'll pick to light, then put to light. A light bar under the conveyor tells the worker which box to drop it into. So we're able to batch pick 12 orders at a time through the entire system."
He adds that the pick-to-light zones are designed with multiple entry and exit points for containers. "If a box is completed, it can exit early, which gets it quickly through the system. It also lets us introduce new boxes with different start points. The selectors can maximize their batches at all times to maintain efficiencies."
KeHe's WMS monitors the picking activity to ensure operations stay on track. For instance, the system is able to recognize immediately if a container is moved out of a zone before picks in that zone for that order have been completed. "It returns the tote back into the zone before it exits the pick-to-light environment so we don't waste time allowing a tote to travel through the whole system before we recognize something is missing," Turner says.
To assure order accuracy, each container automatically undergoes inspection as it leaves the each-pick area. A check-weight system determines if the box is within a small tolerance based on the goods ordered. If it determines a box is out of tolerance, the system diverts it to a control area for further examination. While the box is being weighed, a digital camera snaps a photo of the open container—the average box has about a dozen items—and archives the photo for future reference. "We've seen tremendous improvements in our order accuracy thanks to the various controls installed on this system," Turner says. "It has allowed us to produce nearly perfect orders."
Productivity gains have been substantial as well. "When we were in traditional flow rack with manual picking, [employees] who had been there for 10 years averaged about 110 lines an hour. Now, we're [averaging] three to four times that," Turner says. He adds that another advantage of the pick-to-light system is that minimal training is required. "New employees can now reach this level of productivity and accuracy within a few weeks," he says.
Riding along on a carousel
Orders filled from Allentown's carousel units are also handled in batches, with workers picking into as many as 16 totes at a time. When a container is completed, they move it across cantilevered racks onto the conveyor system for movement through the check-weight system and on to shipping. (In both the pick-to-light and carousel operations, workers pick directly into the shipping containers.)
To avoid having workers wait around while a carousel's bins rotate into position, the system designers programmed the WMS to automatically track how quickly goods are moving and assign the fastest movers to multiple bins. "We balance [the faster-moving items] out among a number of carousels so we're never waiting for a carousel to spin," Turner explains. The result has been a significant uptick in speed. "We are getting 400 lines per hour in an environment where in the past, the best we could do was 110," he says.
In another bid to boost efficiency, the system designers engineered a way to replenish the carousels from the rear. Restocking through the back assures that replenishment operations won't interfere with the picking process.
For all their benefits, the carousels do have one minor drawback. Replenishment requires workers to remove goods from cases before depositing them in the carousel bins, rather than just opening the cases as they did with the flow racks. But that appears to have had a minimal effect on productivity. All in all, the Allentown site has been able to reduce labor by 35 to 40 percent.
Room for expansion
While the carousel and pick-to-light systems deserve most of the credit for the productivity gains at the Allentown DC, the operation has benefited from some minor changes as well. A case in point is a relatively simple change made to the labels that are printed when the WMS "drops" an order. Each label is now color coded by customer via a colored band at the bottom. "We may print customer A in red and customer B in green, so when you go to apply a label, you can quickly match colors rather than having to look at the customer ID number," Turner says. "If you watch someone picking and see a red label on a box on a green pallet, you know there's a mistake. It has helped our quality control."
Now that the new systems are in place, Allentown is ramping up to take on more work. The facility, which ships out about 2,000 totes a day on average, will soon absorb operations from a nearby third-party DC. As business expands, the facility should have no trouble accommodating additional volume. All it has to do is install more levels of carousels and pick-to-light racks.
Asked how the new picking system is working out to date, Carter, Turner, and other company officials say they're delighted with the results. Carter says, "Being able to take an old bit of technology and retool it to a design that is very applicable and very efficient for us, we couldn't be more excited." The gains have been impressive enough, in fact, that KeHe may soon go a step further. The company is considering launching a similar project at its 1 million-square-foot DC in Romeoville, Ill.
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."