By investing in some new conveyors and a pop-up sorter, online grocer Peapod eliminated a notorious bottleneck in its DC operation and boosted capacity by 50 percent.
You may not be thinking about what you'll be eating on Thanksgiving, but the logistics executives at Peapod have already given the matter a lot of thought. The day before Thanksgiving is the busiest day of the year for the online grocer's distribution facilities, and the preparations get under way early. By now, the planning process has become a pretty routine affair, with little in the way of variation from one year to the next. But this year, there's one important difference: the planners no longer have to worry about bottlenecks at the company's Gaithersburg, Md., DC.
Up until it was renovated last fall, the Gaithersburg facility had been a largely manual operation with serious capacity limitations. Most of its woes could be traced to logjams in the staging and shipping areas, where customer orders are sorted and staged for delivery.
The problem lay in the way the facility was set up. Peapod had acquired the distribution center from failed dot-com grocer Streamline.com in 2000, but it wasn't properly configured for Peapod's operations. Streamline had designed the facility for sequential order picking; Peapod's distribution model calls for batch picking. Because the staging and shipping areas weren't designed to accommodate large-scale sorting and order consolidation activity, they invariably became the operation's chokepoint. "It was taking forever to stage and load," recalls Thomas Parkinson, who is Peapod's senior vice president and chief technology officer as well as one of the company's founders.
Anxious to eliminate the bottlenecks and increase throughput, Peapod called Inther Integrated Systems, a Dutch-based design and systems integration firm that has been working in the United States for about four years. After looking over the operation, Inther concluded that it was high time that Peapod automated the staging and shipping operations.
On Inther's recommendation, Peapod installed 1,320 linear feet of new conveyor to whisk products from various picking areas of the building to the staging area, as well as a pop-up sorter to divert order totes to staging zones. (Both the conveyors and the sorter were supplied by New Berlin, Wis.-based HK Systems.) Along with designing the system and integrating the components, Inther provided the warehouse control system that allows Peapod's homegrown warehouse management system to communicate with the conveyor and sorter PLC controls. In addition, a new pick area was set up on a mezzanine for the batch picking of slower-moving items.
- Since it was founded in 1989 by brothers Andrew and Thomas Parkinson, Peapod has delivered more than 10 million orders. The Skokie, Ill.-based company, which is growing at a 25-percent annual rate, is now the nation's largest online grocer.
- International food company Royal Ahold acquired Peapod in 2000. Ahold also operates U.S. food chains Giant Food Stores, Stop & Shop, Tops, and Martin's Food Stores.
- Also in 2000, Peapod purchased two distribution centers from defunct Internet grocer Streamline.com: one in Lake Zurich, Ill. (which serves the Chicago and Milwaukee metro areas) and one in Gaithersburg, Md. (which serves customers in Washington, D.C., and Baltimore). The Gaithersburg, Md., distribution center occupies 100,000 square feet and has 300 employees. It processes an average of 1,200 orders per day.
- In addition to the two DCs, Peapod operates 16 "wareroom" facilities in New England. These smaller warehouses, which measure about 8,000 to 10,000 square feet, are attached to Stop & Shop stores.
- Currently Peapod has 280,000 customers, serving markets in Chicago, Milwaukee, and Washington, D.C., as well as parts of Maryland, Virginia, New York, New Jersey, Massachusetts, Rhode Island, and Connecticut.
Picking more than just peas
Today, the new conveyors and sorter have all but eliminated the logjams. As workers pick products from locations throughout the 100,000-square-foot building, the new takeaway conveyors whisk them to the central staging area. There, the items are fed into the sorter, which swiftly diverts them into the appropriate delivery lanes.
In all, four new conveyor lines were installed, each serving a different picking zone. One is used to transport products picked in the DC's freezer area, where ice cream and other frozen goods are stored at a frosty minus 20 degrees Fahrenheit. Workers equipped with handheld radio-frequency (RF) terminals batch pick items—six orders at a time—into foam coolers packed with dry ice to keep items frozen during the journey to customers' homes.
Other takeaway conveyors serve the refrigerated area, where workers pick items like milk, meats, and cheeses into foam containers, and the fast-moving dry goods area. The fast-movers zone, which is located at floor level immediately below the mezzanine where slower-moving items are picked, is equipped with flow racks that hold items like Diet Coke and Tide laundry detergent, which are among the top 20 percent of SKUs by velocity at Peapod.
Yet another new conveyor serves both the slow-moving dry goods zone, which is located on the upper level of a mezzanine, and an area known as the "banana room." Workers assigned to the slow-moving dry goods area pick items like spices and health and beauty products into reusable waxed-corrugated totes, nine totes at a time (each of those totes represents a customer order). As they pick, they deposit the items into a plastic grocery bag inside each tote. The bags make delivery of the goods easier once they reach customers' homes.
When workers have completed the picks in the slowmovers area, the tote is pushed off onto a new takeaway conveyor that spirals down to floor level, where it enters the banana room. As the name implies, this area is a cool room that houses bananas and other fruits as well as perishable items like onions and bread. Here, workers pick additional items into the same totes.
As orders are completed, workers place the totes onto a takeaway conveyor that merges with the conveyors from the freezer, the refrigerated area, and the fast-movers pick lines to form a single lane. All totes then enter the new pop-up sorter, where they are diverted according to delivery route onto the 15 lanes in the staging area.
Roll 'em in and move 'em out
As the totes for an individual customer's order arrive in the staging area, workers look them over for consolidation opportunities. "In the end, we want to reduce the number of totes per order so that we can get more orders onto a truck," notes Parkinson. (The average customer order totals $150 and consists of about four totes' worth of items.)
The stager loads the totes into rolling racks that hold 36 totes apiece, scanning both the tote and a bar code at each rack slot to confirm that the tote was placed on the correct rack. This information is also used to create a delivery manifest for the driver. Once the racks are filled, they are rolled directly onto delivery trucks, eliminating the need to transfer the totes into other storage systems inside the trucks. Each truck carries four racks and a total of 144 totes.
Along with the racks, workers load up the trucks with carts full of what Parkinson calls "uglies." Uglies are hard-to-handle products that will not fit into totes—like large bags of dog food, and multiple rolls of toilet paper and paper towels—which are picked from a bulk area directly onto the picking carts.
Peapod uses bread trucks for its deliveries. Anywhere from 50 to 65 trucks fan out from the Gaithersburg facility each day for home deliveries. If the customer is at home when the truck pulls up, the driver simply pulls the grocery bags out of the totes and hands them to the customer. If no one's home, the driver leaves the totes at the house and picks up any empty totes from previous deliveries.
The $1.4 million project, which was completed in October, has both increased capacity and improved accuracy. Since installing the new conveyors and sorter, and setting up the new picking zone, Peapod has been able to increase accuracy to well above 99 percent. "We had a big missing tote problem that we resolved when we [automated] the sorting," says Parkinson. "The changes have just made everyone's life easier," he adds. "Before, we were so constrained by space at the docks. Now the process there is much simpler."
The new system has also reduced labor requirements in the staging and shipping areas. The number of workers assigned to those sections has dropped from 21 people to eight—and those eight employees now handle 20 percent more volume. On a typical day, Gaithersburg processes about 1,200 orders, up from 1,000 orders before the upgrade. It also has the ability to handle as many as 1,500 orders and should have no trouble handling peak holiday demand.
Now, will somebody please pass the stuffing?
About the Author
David Maloney has been a journalist for more than 35 years and is currently the editorial director for DC Velocity and Supply Chain Quarterly magazines. In this role, he is responsible for the editorial content of both brands of Agile Business Media. Dave joined DC Velocity in April of 2004. Prior to that, he was a senior editor for Modern Materials Handling magazine. Dave also has extensive experience as a broadcast journalist. Before writing for supply chain publications, he was a journalist, television producer and director in Pittsburgh. Dave combines a background of reporting on logistics with his video production experience to bring new opportunities to DC Velocity readers, including web videos highlighting top distribution and logistics facilities, webcasts and other cross-media projects. He continues to live and work in the Pittsburgh area.
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