March 17, 2014
special report | Automation

Great Dane distribution

No, we're not talking about canine logistics, but rather, Denmark's leading retailer, which slashed distribution costs 9 percent by automating its operations.

By David Maloney

Denmark may seem like a small country, but from a logistics standpoint, it can be a challenge. Most of its population lives on the Jutland peninsula, which extends northward from Germany, or on the main islands of Zealand and Funen. But the country also includes over 400 other islands, some inhabited and some not. Adding to that are denizens of distant Greenland and the Faroe Islands.

For Coop, Denmark's largest retailer, serving that diverse geography is not easy.

Coop is similar in scope to Wal-Mart in the United States. It sells a mix of grocery and general merchandise, with retail outlets varying in size from large department stores to compact convenience shops in the smaller towns. Overall, the chain consists of 1,200 stores over five brands, which are located on Denmark's home islands, Greenland, and the Faroe Islands.

Up until a few years ago, Coop used a regional approach to distribution to its many stores. But it has since consolidated seven mostly manual operations into one automated facility for distributing its nonfood products—a move that has boosted productivity, cut costs, and reduced labor needs.

The new 51,000-square-meter (549,000-square-foot) facility is centrally located in the city of Odense, which is situated on the middle island of Funen. From this strategic location, Coop can easily reach stores in Jutland to the west and Zealand to the east by truck. Greenland and the Faroe Islands are served by ship.

The building that houses the new DC was previously a factory for AP Møller Maersk. It currently handles about 9,000 stock-keeping units (SKUs) of nonfood items, such as electronics, housewares, yard products, textiles, shoes, and clothing. (Food products are distributed from other facilities.) The site also processes all Internet-based orders for Danish customers.

To design the material handling system for the new DC, Coop contracted with Schaefer Systems. When it came to the project's requirements, the retailer wanted a fulfillment system that would allow it to process orders more efficiently and accurately than was possible at the former sites. It also needed a system with the flexibility to handle a wide range of products, large and small.

Schaefer's solution was an automated system that consists of a high-bay warehouse, ergonomic picking stations, shuttle cars, and voice picking technology. The heart of the system is an automated storage and retrieval system (AS/RS) that holds most goods and provides timely replenishment to various order fulfillment areas. Schaefer also supplied the equipment as well as the management and control software.

Moving from manual facilities to a sophisticated automated operation required more than just turning on a switch. It also meant a new way of thinking about how goods are processed.

"We had to learn how to have a high bay," explains Henrik Dalsgaard, distribution manager at the Odense facility. "We had to learn how to use the technology. For us, it was like learning how to use a hammer."

Today, the fulfillment process unfolds swiftly with minimal human intervention. Upon arrival at the facility, all pallet loads are checked for structural integrity to ensure they can stand up to automated processing. If a problem is discovered, the load is transferred to a slave pallet, which is a non-shipping pallet reserved for internal use. Pallet conveyors then whisk most of the received goods directly to storage in the high-bay warehouse.

The rack-supported building that surrounds the high bay was added to the original factory building in 2010. The high bay itself consists of 12 aisles divided into three blocks. Twelve storage cranes travel along the aisles to gather inbound pallets and retrieve other loads needed for orders. The cranes can handle about 500 pallets an hour, moving them in and out of the more than 36,000 storage positions found on 17 rack levels.

Some of the higher-demand products from the high bay ship as full pallets to the stores. Other pallets are pulled from the high bay to restock a three-level low-bay warehouse, where case-level picking of slower-moving items is performed. Conveyors transport pallets of faster-moving SKUs to goods-to-person workstations, where case and piece picking take place. Replenishment of the various picking areas is accomplished quickly, as a pallet can be pulled from AS/RS storage and be readied for picking within six to 11 minutes, depending on the destination.

The Odense facility operates three shifts daily, five days a week. Order fulfillment is prioritized based on cut-off times, which depend on the distance the order has to travel.

Approximately 600 orders are filled daily at the Odense facility. Each of the three blocks of the high-bay AR/RS warehouse has a goods-to-person picking station attached to it. Up to two workers can be assigned to each of the three stations. Source pallets containing needed items are pulled by the AS/RS and fed to six staging positions at each station.

Lights then direct the building of up to seven order pallets at a time at each station. Both full-case and piece picking are performed here. Lights and quantity indicators above the source pallet tell the worker which items to pull. Computer screens also inform the worker whether a full-case pick or a piece pick is required from a source case. Photos are taken of all new receipts, which are then displayed on the screen to help assure accuracy.

Once the items are selected, lights above the order pallets indicate which pallets need the items. The pallets rest upon ergonomically adjustable positioners that move up and down to keep the pallet at the optimal height. Between the three goods-to-person areas, six workers can build 21 order pallets at a time, at a rate of 60 pallets an hour. Pallet conveyors transport completed pallets to consolidation areas, where they are prepared for shipping.

Partially used source pallets may travel to another workstation if that SKU is required for other orders. If items still remain on the pallet after picking is completed, it heads back to storage in the AS/RS until needed. Some order pallets may be picked well before they're scheduled to ship. Picking them early helps balance workload and flow. Upon completion, the pre-picked orders are moved to the high-bay warehouse for temporary storage.

In addition to the goods-to-person pick stations, some slower-moving items are picked in a small area containing flow racks. The racks consist of three levels of flow, decked over each other but with a gap of approximately two feet between them. An operator standing in front of them can easily reach all three levels. Lights direct the selection of items into staged cartons or totes.

In the three-level low-bay warehouse, workers pick cases from the bottom rack. (The top two levels hold slow-moving store display products and supplies.) Display screens attached to walkie rider pallet trucks are used in conjunction with bar-code scanners to direct the case picking. Workers scan the bar codes on the cases as they pull them from the pallets and deposit them onto the order pallets on the walkie riders. In addition to the scanners, some workers here are equipped with voice units that direct their picks.

When the picking process is complete, orders are dispatched to consolidation areas, where five transfer shuttle cars take them to wrapping and staging stations. Black stretch wrap is used for security purposes, as loads may contain electronics and other high-value items.

Once the pallets are wrapped, the shuttles move them to various staging positions, where they await loading onto outbound trucks. About 3,200 pallets are shipped weekly. Stores receive one to three deliveries each week, depending on the store size and brand. The majority of store orders consist of about five pallets, although some larger stores may receive as many as 25 pallets in a shipment. Vehicles hold 33 pallets each.

Since the former manual operations were consolidated into the Odense facility, Coop has seen bottom-line distribution savings of about 9 percent, while improving the quality of its processing.

"We are faster, more efficient, and cheaper," notes Dalsgaard. "Our ability to handle complexity has been raised, and we can handle a wider range of products while gaining higher productivity and shorter order cycles."

About the Author

David Maloney
Chief Editor
David Maloney has been a journalist for more than 30 years and has been with DC VELOCITY since April of 2004. Prior to joining DCV, David was senior editor for Modern Materials Handling, where he reported extensively on distribution and supply chain operations. David also has extensive experience as a broadcast journalist. Before writing for supply chain publications, he was a journalist, television producer and director in Pittsburgh. David combines a background of reporting on logistics with his video production experience to bring new opportunities to DC VELOCITY readers, including Web-based videos highlighting top distribution and logistics facilities, Webcasts and other cross-media projects. He also is the host and producer/director of Move It!, DC VELOCITY's online program that explains "how the stuff we use everyday gets to us." David continues to live and work in the Pittsburgh area.

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