A top-shelf solution
For the U.K.'s largest grocer, the key to a successful distribution network redesign turned out to be warehouse management software.
When most folks think about warehouse management systems (WMS), they assume the software's job is keeping tabs on what goes on inside the warehouse's walls. But for companies running a high-velocity distribution system, it's just as important to have the WMS looking beyond those walls, and keeping track of what products will be arriving and when.
The Manchester, England-based grocer The Co-operative can attest to that. Up until a year and a half ago, it didn't have those capabilities, despite its stature as the largest grocer in the United Kingdom. With annual revenues exceeding 9 billion pounds (U.S. $17 billion), the Co-op also happens to be the world's largest consumer cooperative, a retailer that's owned by its members—in this case, some 4.5 million members.
But software was hardly the most pressing distribution challenge the Co-op was facing at the time. Founded in 1863, the Co-op had grown over the past century and a half through the merger of small cooperative groups. Trouble was, its distribution network had evolved without any planned national infrastructure, and about three years ago, the problems started coming to a head.
At that time, the Co-op was trying to serve the 3,300 stores in its network, many of which are neighborhood shops of less than 3,000 square feet, from 20 warehouses. Some of those warehouses were running short on space. On top of that, it was essentially operating three separate networks for the three types of products that move through its supply chain— ambient goods, which are dry groceries; chilled goods, essentially meats, produce, and dairy items; and frozen foods. The flows were further complicated by the Co-op's tendency to buy the majority of its chilled products in the region of the country where the stores were located.
Delivery zones overlapped and distribution routes weren't optimized, which meant trucks were logging unnecessary miles, reports Trevor Ashworth, the Co-op's director of food retail logistics. Stores were receiving frequent deliveries of ambient items but few of chilled goods. There were also mounting concerns about stock-outs, which can be disastrous for small stores that lack the shelf space to offer an array of brands. The Co-op's management realized it needed to streamline the delivery process to improve goods availability while, ideally, handling store replenishment through a single delivery by a multi-temperature truck. In short, it was time for a distribution network overhaul.
In redesigning its network, the Co-op began by building a large national distribution center in Coventry, 95 miles northwest of London. The new facility would be used to store slowmoving products, particularly ambient goods, which would solve the immediate problem of inadequate capacity at some of the other sites.
Before it could move on to the next step in its redesign, however, the Co-op would need a more capable WMS—one that could manage the complex nationwide network. After evaluating several solutions, it chose Manhattan Associates' Warehouse Management solution.
For its WMS pilot, the Co-op selected a new regional distribution center located in Thurrock, just east of London. Built to serve 700 stores in southeastern England, the 325,000-square-foot facility was designed to handle 50 million cases a year and store 14,000 stock-keeping units (SKUs). "We didn't want to put the Manhattan WMS into legacy sites that would be retiring [as part of the DC network redesign]," explains Ashworth.
By building a regional DC in Thurrock, the Co-op hoped to address problems with stock-outs in its stores in the southeastern region, where deliveries are often hampered by congested roadways. Goals included increasing the frequency of store deliveries, improving order lead time, and loading trucks to expedite the unloading and shelf-replenishment processes. "We also wanted to reduce [shipping and order] errors," adds Ashworth.
The WMS went live as soon as the Thurrock facility opened in the first quarter of 2006. Initially, the application was used to assemble loads of ambient products for store deliveries. Later on, chilled and frozen items were added to the mix.
Looking beyond the DC's walls
Today, the WMS oversees the entire receiving process at the Thurrock DC. As suppliers deliver pallets of products, workers verify receipt of the goods by scanning the items' bar codes with radio-frequency terminals. The RF guns transmit information on inbound product to the WMS. The WMS, in turn, sends putaway instructions to forklift drivers, whose vehicles are equipped with RF terminals. The system also manages "let down," when the forklift drivers bring down pallets of product from the upper rack shelves to a low one for pallet or case picking.
In addition, the system oversees the complex order assembly process, which involves building store-replenishment shipments from an assortment of ambient, chilled, and even frozen products. "At any one point in time, the Manhattan WMS has to manage 11 to 13 product categories that have to come together at a single point in time to load the truck," says Ashworth. "It's merging all these types of streams of product together."
The system must also take truck size into account. The Co-op uses a private fleet of 200 multi-temperature vehicles for store deliveries. The trucks range in size from 4.0 to 7.5 metric tons (approximately 8,818 to 16,535 pounds) and have varying load capacities, although the average vehicle can accommodate 26 roll cages. Commonly used in the United Kingdom, roll cages are wheeled containers used to move product off a truck and into a store.
Besides marshaling products and cases to fill a specificsize vehicle, the system has to keep tabs on the different types of products (ambient, chilled, and frozen)—both in storage and en route to the facility—that will be required for the daily fulfillment of store orders. Most stores receive replenishment shipments six days a week, while the largest stores get daily deliveries.
The Thurrock facility itself stocks only fast-moving dry grocery items. Slow-moving ambient items, frozen foods, and special seasonal items are shipped in from the national distribution center in Coventry for reloading onto local delivery trucks. In addition, local suppliers of meat, produce, and dairy items ship product to Thurrock on a justin- time basis for local store replenishment.
The WMS must match up items from all of the various categories that will be needed for a truck delivery to an individual store. Using voice technology from Vocollect, the warehousing application first directs the "assembly operatives" or order pickers to take the fast-movers out of storage and place them in the lane designated for a specific store's shipment. It then provides instructions on which items to pick from the temporary storage chamber where frozen foods are held. Finally, any roll cages or pallets of slowmoving or chilled products needed for the order are crossdocked for inclusion in the store's shipment. "The Manhattan system must control the product over a network rather than just a single DC," says Ashworth. "It has to know how to allocate the stock across our store base."
From worst to best
As for the WMS pilot's results, the Co-op can point to a number of benefits. Product on-shelf availability has improved at its outlets in southeastern England. And Ashworth reports that shipping errors have dropped from two to three parts per 10,000 orders to less than one part, transforming what had been the Co-op's worst-performing region into the best.
On top of that, the WMS, in conjunction with radio-frequency and voice technology, has improved worker productivity in Thurrock by 15 percent. Ashworth notes that the combined use of voice and RF technology has eliminated travel time as well as the need for warehouse workers to stop at the office to obtain paper picking instructions.
The technology has also enabled what Ashworth calls "hot-truck handling." In the past, there was a transition period at the beginning of each shift as incoming workers figured out what work had been done and what tasks remained. "When you have 120 people on a shift—with 120 people coming in and another 120 going out—you lose 10 minutes per person at change-over time; that adds up to a lot of minutes," says Ashworth. Nowadays, the WMS keeps track of what tasks have been completed, which means that as one worker steps off a forklift, the next one can climb right on and pick up where the last worker left off.
The WMS has worked out so well in the Thurrock facility that the Co-op has since deployed it in two other DCs: a new regional DC in Nottingham, England, in January 2007, and the national DC in Coventry in March 2007. The software will be expanded to other regional DCs as they are built up as part of the supply chain redesign, which is scheduled for completion in 2012.
Ashworth says the WMS provides the underpinning for the Co-op's shift in distribution strategy. "We couldn't do this with our old legacy system," he says. "The two go hand in glove—the change in the physical infrastructure with the new information systems."
About the Author
James Cooke is a principal analyst with Nucleus Research in Boston, covering supply chain planning software. He was previously the editor of CSCMP’s Supply Chain Quarterly and a staff writer for DC Velocity.
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