If your DC serves retail outlets, you're probably getting more requests for pre-assembled orders that cut down on the labor needed to stock store shelves. The question is, how do you do that without blowing your own budget?
Susan Lacefield has been working for supply chain publications since 1999. Before joining DC VELOCITY, she was an associate editor for Supply Chain Management Review and wrote for Logistics Management magazine. She holds a master's degree in English.
It used to be that a distribution center's main concern was getting orders out the door as quickly and efficiently as possible. What happened after the truck left the dock was not its problem.
Not so anymore. In many retail companies today, the focus has shifted to improving efficiencies at the other end of the supply chain—that is, in activities like unloading and putaway that take place after the truck reaches the store.
As a result, DCs are increasingly being asked to provide "store ready" shipments, with merchandise packed and loaded with an eye toward streamlining the receiving and putaway processes. That might mean, for example, loading orders into trucks in a particular sequence or shipping more mixed-case pallets, with items that are sold in the same department grouped together—say, dog and cat food, with no cleaning products packed in between. "It's all about reducing the time, labor, and complexity required to re-stock the shelves at the retail store," says Ken Ruehrdanz, market manager, distribution and warehouse systems for Dematic, a material handling and logistics automation company.
The reason behind this shift is simple math. Anything that cuts labor costs at 100 stores will save big bucks, even if it means higher labor costs at the DC that serves those stores, says Lance Reese, technical solutions director for Intelligrated, a provider of material handling solutions.
To be sure, the store-ready concept is not new. Consumer packaged goods companies have been building mixed-case pallets and loading trucks in reverse stop sequence (with orders for the last stop on the truck's route loaded first) for years. But the practice is now spreading beyond grocery, convenience, and drug stores to other kinds of retail establishments, like consumer electronics and club stores.
The store-ready trend is also deepening: In addition to store-ready pallets, some companies are now asking for store-ready cartons and totes. Others are experimenting with store-ready packaging, a concept popular in Europe, where products are packaged to go straight from the truck to the shelf.
Keep the cost down
All of this, of course, has the potential to add significant costs to DC operations. For starters, there's the additional labor required to pick orders in a "store friendly" sequence as well as the labor needed to break down full pallets and build new, mixed-case loads. "The distribution center is now going to cost more to operate," Ruehrdanz says.
For managers whose sole focus up to now has been on optimizing DC costs, this isn't always an easy adjustment, says Tom Kozenski, vice president of product strategy at software vendor RedPrairie. "I've been in meetings with senior executives of logistics who say, 'I'm willing to do things to help [the stores] but at relative cost,'" he says. "In other words, they're saying, 'I'd love to pick these pretty packages for you, but it costs me money to pick them in that order and to ... have my workers walk around instead of yours,'" he explains.
Still, there are ways to accommodate these requests without being killed by the added costs. Ruehrdanz warns, however, that it will take some work. In fact, for a lot of companies, it will most likely mean analyzing and re-engineering the order assembly process, he says.
For instance, if increased worker travel time is a concern, the solution may be to change the warehouse layout to emulate the layout of the store. Essentially, this would mean adopting a whole new slotting strategy, with storage locations determined not by SKU velocity but by the store's planogram (a visual plan that designates the placement of products on a retail store's shelves and displays). So, for example, all men's personal care items would be grouped in the same aisle, even if razor blades move faster than hair-growth treatments. SKU velocity would still be taken into account, but in this case it might mean slotting razor blades and other fast movers in the middle of the storage racks, with the slower-moving SKUs at the top or bottom.
Kozenski sees slotting as a big area of opportunity for controlling labor costs. "That's where the magic bullet is," he says. Kozenski adds that it's not even necessary to follow a standard store layout. "If I'm truly slotting by department, I can pick by department no matter what the sequence of those departments might be from a planogram standpoint," he says. In other words, even if dog food is not located in aisle 5 at all grocery stores, dog food will always be stored adjacent to cat food.
One big exception would be special promotional displays that change weekly. For these items, Kozenski recommends setting up a short line in the warehouse for that week's specials. At the end of the week, the line can be torn down and reset for the next week's promotions.
Man vs. Machine
While a change in slotting strategy can do much to promote picking efficiency, it still leaves another part of the labor problem unaddressed. Typically, creating store-ready pallets requires breaking down single-SKU pallets and then repacking the cases in a specific order on mixed-case pallets. That can be a significant drag on an operation's efficiency. "You don't have full-throttle continuous movement any more [when you're building mixed-case pallets]," says Dan Labell, president of Westfalia, a manufacturer of automated material handling equipment. "Instead, products have to be married up with other products coming from another part of the warehouse."
In some cases, the solution may be automation—whether it's the fully automated route or partial automation. An example of a fully automated system would be a solution that uses an automated storage and retrieval system (AS/RS) for storing full pallets of goods and a robot for order picking. To fill an order, the robot would remove a layer from the appropriate pallet and deposit the merchandise (which may be further broken down into cases) onto a conveyor for transport to an automated sequencing buffer area. There, it would be married up with the other SKUs required for the order.
In the more common, partially automated approach, employees might pick cases to a conveyor belt. The order would then either be automatically palletized or assembled by workers using pallet lifts to make the process more efficient and ergonomic. Sometimes, companies will use robots to build the layers for the mixed-case pallets, with workers manually "topping off" the order with individual cases.
Because of the complexities involved, these automated approaches require sophisticated IT support, whether it's slotting software or a warehouse control system to sequence the orders. Indeed, the algorithms for mixed-pallet sequencing can be quite complex, especially if products of different sizes, shapes, and weights are being packed on the same pallet, says Labell. Kozenski adds that performance management software can be helpful in determining how much labor is truly being saved at the store and how much more is required at the DC.
A mental shift
In at least one corporation, the move to store-ready shipping is affecting more than just the operations at individual DCs. It has led the company to rethink the way it runs its distribution network. As part of a push to improve its direct-to-store delivery process, Pepsi Beverages Co. is piloting a two-tiered distribution network strategy. Under this model, mixed-layer pallets are built by automated equipment at a plant or centralized DC. These pallets are then shipped in full truckloads to satellite DCs or cross-dock facilities, where the pallets are "topped off" with individual cases, said Tim Thornton, vice president of warehouse and logistics for Pepsi Beverages, during a presentation at the 2010 Council of Supply Chain Management Professionals' annual conference.
The prospect of a network overhaul aside, for most companies, the biggest adjustment when moving to store-ready shipping will be the change in mindset required. After years of talking about the savings that can be achieved through integrated supply chain management, distribution and logistics professionals are learning what it's like to take a cost hit for the team. "It's a real paradigm shift," says Ruehrdanz, "and staff [members] are going to have to get used to a whole new way of doing things."
Supply chain planning (SCP) leaders working on transformation efforts are focused on two major high-impact technology trends, including composite AI and supply chain data governance, according to a study from Gartner, Inc.
"SCP leaders are in the process of developing transformation roadmaps that will prioritize delivering on advanced decision intelligence and automated decision making," Eva Dawkins, Director Analyst in Gartner’s Supply Chain practice, said in a release. "Composite AI, which is the combined application of different AI techniques to improve learning efficiency, will drive the optimization and automation of many planning activities at scale, while supply chain data governance is the foundational key for digital transformation.”
Their pursuit of those roadmaps is often complicated by frequent disruptions and the rapid pace of technological innovation. But Gartner says those leaders can accelerate the realized value of technology investments by facilitating a shift from IT-led to business-led digital leadership, with SCP leaders taking ownership of multidisciplinary teams to advance business operations, channels and products.
“A sound data governance strategy supports advanced technologies, such as composite AI, while also facilitating collaboration throughout the supply chain technology ecosystem,” said Dawkins. “Without attention to data governance, SCP leaders will likely struggle to achieve their expected ROI on key technology investments.”
The British logistics robot vendor Dexory this week said it has raised $80 million in venture funding to support an expansion of its artificial intelligence (AI) powered features, grow its global team, and accelerate the deployment of its autonomous robots.
A “significant focus” continues to be on expanding across the U.S. market, where Dexory is live with customers in seven states and last month opened a U.S. headquarters in Nashville. The Series B will also enhance development and production facilities at its UK headquarters, the firm said.
The “series B” funding round was led by DTCP, with participation from Latitude Ventures, Wave-X and Bootstrap Europe, along with existing investors Atomico, Lakestar, Capnamic, and several angels from the logistics industry. With the close of the round, Dexory has now raised $120 million over the past three years.
Dexory says its product, DexoryView, provides real-time visibility across warehouses of any size through its autonomous mobile robots and AI. The rolling bots use sensor and image data and continuous data collection to perform rapid warehouse scans and create digital twins of warehouse spaces, allowing for optimized performance and future scenario simulations.
Originally announced in September, the move will allow Deutsche Bahn to “fully focus on restructuring the rail infrastructure in Germany and providing climate-friendly passenger and freight transport operations in Germany and Europe,” Werner Gatzer, Chairman of the DB Supervisory Board, said in a release.
For its purchase price, DSV gains an organization with around 72,700 employees at over 1,850 locations. The new owner says it plans to investment around one billion euros in coming years to promote additional growth in German operations. Together, DSV and Schenker will have a combined workforce of approximately 147,000 employees in more than 90 countries, earning pro forma revenue of approximately $43.3 billion (based on 2023 numbers), DSV said.
After removing that unit, Deutsche Bahn retains its core business called the “Systemverbund Bahn,” which includes passenger transport activities in Germany, rail freight activities, operational service units, and railroad infrastructure companies. The DB Group, headquartered in Berlin, employs around 340,000 people.
“We have set clear goals to structurally modernize Deutsche Bahn in the areas of infrastructure, operations and profitability and focus on the core business. The proceeds from the sale will significantly reduce DB’s debt and thus make an important contribution to the financial stability of the DB Group. At the same time, DB Schenker will gain a strong strategic owner in DSV,” Deutsche Bahn CEO Richard Lutz said in a release.
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.
Serious inland flooding and widespread power outages are likely to sweep across Florida and other Southeast states in coming days with the arrival of Hurricane Helene, which is now predicted to make landfall Thursday evening along Florida’s northwest coast as a major hurricane, according to the National Oceanic and Atmospheric Administration (NOAA).
While the most catastrophic landfall impact is expected in the sparsely-population Big Bend area of Florida, it’s not only sea-front cities that are at risk. Since Helene is an “unusually large storm,” its flooding, rainfall, and high winds won’t be limited only to the Gulf Coast, but are expected to travel hundreds of miles inland, the weather service said. Heavy rainfall is expected to begin in the region even before the storm comes ashore, and the wet conditions will continue to move northward into the southern Appalachians region through Friday, dumping storm total rainfall amounts of up to 18 inches. Specifically, the major flood risk includes the urban areas around Tallahassee, metro Atlanta, and western North Carolina.
In addition to its human toll, the storm could exert serious business impacts, according to the supply chain mapping and monitoring firm Resilinc. Those will be largely triggered by significant flooding, which could halt oil operations, force mandatory evacuations, restrict ports, and disrupt air traffic.
While the storm’s track is currently forecast to miss the critical ports of Miami and New Orleans, it could still hurt operations throughout the Southeast agricultural belt, which produces products like soybeans, cotton, peanuts, corn, and tobacco, according to Everstream Analytics.
That widespread footprint could also hinder supply chain and logistics flows along stretches of interstate highways I-10 and I-75 and on regional rail lines operated by Norfolk Southern and CSX. And Hurricane Helene could also likely impact business operations by unleashing power outages, deep flooding, and wind damage in northern Florida portions of Georgia, Everstream Analytics said.
Before the storm had even touched Florida soil, recovery efforts were already being launched by humanitarian aid group the American Logistics Aid Network (ALAN). In a statement on Wednesday, the group said it is urging residents in the storm's path across the Southeast to heed evacuation notices and safety advisories, and reminding members of the logistics community that their post-storm help could be needed soon. The group will continue to update its Disaster Micro-Site with Hurricane Helene resources and with requests for donated logistics assistance, most of which will start arriving within 24 to 72 hours after the storm’s initial landfall, ALAN said.