April 1, 2004
vertical focus | Electronics
Built on the site of an abandoned military airport, a DC run by PC Connection fulfills dreams of geeks everywhere by shipping everything from GPS-equipped PDAs to memory cards overnight.
Time was when the aircraft taking off from Wilmington, Ohio, carried gunship crews bound for deployment in Viet Nam. Today, nearly 40 years later, the aircraft that lift off from the dusty tarmac in southwestern Ohio carry not military personnel but the stuff of dreams. Techno junkies' dreams, that is. Packed into the holds of aircraft leaving the Airborne Airpark are flash drives, notebook computers, digital cameras and surge protectors ordered only hours earlier by customers of PC Connection.
PC Connection's customers are the kind who want their stuff now—no excuses. Some of them are businesses anxiously awaiting the arrival of a replacement part or a desperately needed upgrade. Others are techno junkies looking for a fix in the form of high-tech gadgetry discovered in a weehours surfing session.Whoever they may be, customers can go online and place their orders—as late as 2:00 in the morning—with the assurance that the package will be in the office (or on their doorstep) in the morning.
It goes without saying, those high expectations create a tall order for the distribution people who must fill the thousands of orders each day. And do it right. And do it quickly. But that's their mission. "We have a saying around here," says Tom Kennedy, vice president of distribution for PC Connection. "Sales creates dreams. Distribution creates reality. Sales is making the contacts, saying what we can do.We're the ones who make the dreams come true.We can screw up a sale for the next time around. But if we outperform our competitors, we give customers a reason to come back."
It's all about the process
One way to outperform those competitors is to promise overnight fulfillment. "Any order we get today, we'll ship today," Kennedy pledges. And though you might assume that he uses the latest whiz-bang technology to carry out that promise, that's not the case. "We're old school," says Tom Dumais, the company's director of shipping and receiving. "We do it with a low-budget, low-tech operation," adds Kennedy. "We're not real high on glitz and glamour."
What makes the distribution system work, Kennedy says, is an intense concentration on process. "Process is what we preach all the time," he emphasizes. "While we're serving the customer, we're doing it with a high rate of accuracy while containing costs." (Labor costs, he reports, total less than 1 percent of sales.) It also means minimizing the need to hold inventory. "All our processes promote flow through," Dumais adds.
The story begins on the inbound side. Most inbound shipments arrive via less-than-truckload carrier or UPS and FedEx, although a few suppliers send daily truckloads. Each day, employees process about 1,500 lines. Dumais says processing these shipments—a mix of pallets and cartons— consumes most of an eight-hour work shift.
All inbound shipments are scanned as they arrive, allowing the system to match the inbound scan with a PC Connection purchase order. "We use UPC codes on everything," Kennedy says. Even items like connectors that are too small for codes are accompanied by labels with UPC codes affixed to them. Shipments that show up without bar codes are given a label with a UPC look-alike code that includes the PC Connection SKU number. Strict adherence to the coding policy has brought the inbound data's accuracy rate up to 99.5 percent, Kennedy says.
As for the scanners themselves, the company began using radio frequency-enabled scanners about five years ago. "It's been a plus since day one," Dumais says. He adds that the receiving staff just recently began using wearable scanners.
Receivers do much more than scan arriving shipments, however. As items come in, workers with vacuum equipment converge on the area to remove "packing peanuts" and other dunnage from the delicate electronics. (PC Connection, which doesn't use the peanuts, ships its outbound products using recycled newsprint for protection.) "When goods go onto the shelf or to a secondary area, they are clean," Kennedy says.
Once scanned and cleaned, inbound goods receive a label indicating where they should be sent next. That could be one of several places, Kennedy explains: If the system determines that the primary pick location for that product has space, it will direct inbound products to that particular aisle and zone until the bin is filled. If the slot is already at maximum capacity, the goods are sent to a secondary holding area. And if the system shows that an item is completely out of stock, the label prints the destination in a reverse typeface so that the item can be "hot shotted" to the shelf. The system also allows goods to be redirected if they do not fit in the suggested location.
Workers can replenish at the pick faces hourly if needed, with a full letdown once a day. Generally, the hourly replenishments take place only if the shelf stock falls below levels needed to fill current orders. "We're not replenishing a massive amount of stock in the heat of battle," Kennedy says.
No sooner do products arrive than the company starts gearing up to send them out again. As with the receiving process, no time is wasted: The moment pick lists have been generated from orders in the PC Connection enterprise system, the picking process begins.
The process used today is light years ahead of the one in place just six years ago, says Dumais. Plagued by problems such as mislaid paper pick lists, a burgeoning volume of single item picks and a long narrow building that put serious constraints on the work flow, PC Connections has implemented what it calls the FAST system—an acronym for Fast Accurate Shipping Technology. The FAST system makes use of batch picking, automated picking instructions, and scanners to verify picks at the end of the line. It also provides a single place near the end of the process for capturing serial numbers (a request from the sales group). "With FAST, we put all that on the back end," Kennedy says. "We also put in an audit system. Both of those are overlays to the existing system."
Under the current system, items are batch picked into totes that move by conveyor to the FAST area set up in the DC. There, each item is scanned. Every time an object is scanned, the system searches its database for orders containing that item and notes how many of that item each order calls for. At the same time, the system checks to see if the item is flagged for a serial number capture and records that serial number if necessary.
The system also estimates the cube of each item for packing into a carton. Should a carton cube out before it's projected to, the worker at the station can simply push a button to split the order into two cartons.
Should an incorrect item show up in a bin, the scan will signal a wrong pick. Any missing items are noted when the associate tells the system an order is completed. The system also alerts associates if catalogs or other printed material should be included with an order. Once the order is complete, the associate requests a label that is a combination shipping label and packing slip. Completed orders are packed and sent through an in-line scale, at which point the orders are confirmed as being shipped for billing purposes.
By all accounts, the FAST system has transformed the operation. "We were at the point where we looked like Lucy in the chocolate factory," Kennedy says. "We needed to increase the volume. FAST allowed us to double output."
Still, not all orders are processed via FAST at this time. Picking for multi-line orders follows more traditional procedures. "We use a pick and pass method," says Dumais. Orders move from zone to zone along a gravity conveyor.
Orders are audited at the end of the line, where all items are rescanned. Any missing items are handled through an exception process. The result is that order accuracy that was at 99.8 percent five years ago is now 99.92 percent.
Yet that's not quite good enough for PC Connection. "There's still room to grow," says Dumais. He and Kennedy would also like to eliminate the end-of-the-line verification process. "We want to work toward verification at pick," Kennedy says.
Special orders don't upset us
It's one thing to move components and accessories through the DC at warp speed. It's another to promise overnight delivery on custom systems configured from scratch. Nonetheless, it's normal procedure for PC Connection employees to process these orders for overnight delivery too. (The company notifies customers if the work will take longer.)
When an order for a configured system comes through, labels are generated in batches for the necessary components. Associates take the labels from sheets and place them on components as they are picked and sent to a staging area, from which they move on to a configuration room. The systems are configured by technicians, all of whom are certified by vendors. "People who work in that area continually upgrade their skills," Kennedy says. "We can configure the most complex systems imaginable."
On average, 300 to 400 systems require configuration on a normal day, with peaks of about 700. "We can sustain over 600 a day," Kennedy says. To speed things along, the company keeps specific configurations on file to allow relatively simple repetition of the orders.
For many workers, the configuration department has provided an opportunity for advancement. "A lot of the people in the room came off the floor as material handlers," Kennedy says. It's in the company's interest to promote from within where possible, he notes. "Our associates are what make this place run," he says. "We work hard to make people happy."
Part of that is in the pay system: Hourly workers receive incentive pay for performing above standards. The company uses a formalized system of performance metrics, measuring everything from order completeness, accuracy and rates to safety and attendance. Hourly employees receive incentive pay weekly, while managers and supervisors, who have additional measures to meet based on labor turnover and cost per package, receive quarterly bonuses.
"Everybody has metrics," Kennedy says. "We'll put ours up against anybody's for the dollars spent and the output. We're one of the top dogs."
PC Connection Inc., based in Merrimack, N.H., reported $1.31 billion in sales last year, making it one of the nation's largest direct marketers of computers and related hardware and software. Organized into subsidiaries that cater to different customer types, the company sells its electronic wares through PC Connection (which serves consumers and small to mediumsized businesses), GovConnection (which serves local, state and federal governments and educational institutions) and MoreDirect (which serves large corporations). Another division, MacConnection, sells Apple software, systems and peripherals. Products for all divisions—about 13,000 of the 100,000 listed in PC Connection's catalog—are shipped from a single DC in Wilmington, Ohio. (The remainder are shipped directly from PC Connection's suppliers.) Here's a look at that DC operation: