There's no standing in the aisles at Schenker's two Toronto-area DCs. There's no stacking pallets of detergent or cases of tea in the aisles either. In fact, there are no aisles in the storage areas of either of these facilities. The two DCs, through which Schenker distributes Unilever's packaged foods and personal care products across Canada, boast ultra-dense storage systems that store pallets 24 positions deep using sophisticated mechanical devices. And because their operations require no assistance from humans, the systems require no aisles.
These distribution systems—designed jointly by Schenker of Canada and its client, Unilever Canada—were chosen for their ability to accommodate Unilever's need for high-volume order fulfillment while preserving the flexibility required by a third-party logistics service provider (3PL) like Schenker. They incorporate several innovative material handling technologies new to the North American market, which required a substantial investment on Schenker's part. But the 3PL didn't let that stand in its way. "They wanted to take their distribution to the next level," says Jason Cunneyworth, senior director of logistics and general manager of Schenker Distribution in Canada, "so we were willing to spend the money to provide the service levels they desired."
As may have become evident, this is no ordinary third-party partnership. For one thing, its roots run deep. The relationship between the two companies dates back to the early 1990s when Schenker began distributing powdered laundry detergent for one of Unilever's divisions. That wasn't an exclusive arrangement, however. At the time, each of Unilever's divisions made its own deals, which meant the company ended up using an array of vendors. That made it tough for Unilever to optimize its processes and manage its inventory levels.
And it prevented the conglomerate from leveraging its size to reduce distribution and transportation costs.
When it acquired Best Foods brands in 2000, Unilever seized the opportunity to centralize its business. It would contract with just one third party, Schenker, consolidating its Lipton and Best Foods brands in a DC Schenker would build in Brampton, Ontario, and consolidating its consumer goods in an older Schenker facility in Mississauga. This deal, through which Schenker became Unilever Canada's largest logistics service provider, would be a long-term agreement. In contrast to the standard five-year 3PL contract, this arrangement would run for double that term, 10 years.
It's important to note that the goal was not a completely mechanical operation."We did not go with full automation in the facilities," says Leonard Bayard, manager for third-party warehousing at Unilever. "It was more of a 'strategic' automation approach." That strategic automation would include major upgrades to storage systems to create semi-automated storage, installation of a layer picking system capable of selecting layers of products for building mixed pallets, and upgrades to warehouse management software and IT systems.
Today, Schenker distributes everything from Lipton's soups and Red Rose Tea to Ragu sauces through the Brampton DC. The 288,000-square-foot center processes 100 orders per day, amounting to some 17 million cases each year. Though the center has only been open a few years, Schenker has already made some modifications. For example, this past April, it dismantled one of the two-level pick towers used for selecting full cases and replaced it with a more efficient layer picker. This unit, which is basically a rail-guided counter-balanced vehicle, uses four-sided clamps to select layers of cases from product pallets and place those full layers onto an order pallet to create rainbow loads of mixed SKUs. The system, which can pick up to 1,400 cases per man-hour, has cut labor needs and reduced damages and is well on its way to achieving its projected return on investment of two years.
The other facility, the 480,000-square-foot Mississauga DC, handles all of Unilever's personal care consumer products, including the Vaseline, Dove, Sunlight, Pond's, Degree deodorant, Suave, Lever 2000, Q-Tips and Salon Selectives brands. This facility processes 50 orders daily, which translates to 13 million cases annually. Like the Brampton site, the Mississauga DC ships about 45 percent of its items as full pallets and 55 percent as case picks.
Although the facility itself is 30 years old, it houses some of the most up-to-date technology on the continent. When it underwent renovations in the late '90s, Mississauga became the first site in North America to feature a semi-automated storage system known as a Pallet Runner system. This technology, which has been used for several years in Europe, was later replicated in Brampton.
The Pallet Runner system, supplied by Pacific Westeel, provides high-density storage of pallets 10 to 24 positions deep and requires a very small footprint. The system, which offers the density of drive-in racking without the need to drive a vehicle into it, could basically be described as a storage area without aisles—you can't get any denser than that. The system operates using small shuttle carts, known as pallet runners, which carry pallet loads deep into the racking.
In operation, lift trucks carry pallets of incoming products to the end of the storage racks. The driver scans a pallet and receives instructions via an RF device telling him which end row the pallet should enter. He then uses the lift truck to place a pallet runner shuttle (there are six of these shuttles in the Mississauga facility) into the slot at the end of the rack where that SKU will be stored. He next deposits the pallet load on parallel rails just above the pallet runner. The driver then presses the "In" button on a remote control that directs the hydraulic lifts on the pallet runner to lift the load a few inches above the rails. The battery-operated pallet runner then shuttles the load down its row to the next available position and hydraulically lowers the pallet onto the rack rails for storage. Once the load is deposited, the pallet runner returns to the beginning of the row to repeat the process until all positions are filled.
When it comes time to retrieve items to fill orders, the products are extracted from the opposite end of the racking. Once the first pallet of an SKU row is removed, a shuttle is inserted to bring the next pallet to the end position, where a lift truck can gather it as well. The system is also capable of performing a "shuffle." In this function, a shuttle is inserted into the racks to automatically index all pallets forward toward the end positions, keeping products ready to be quickly pulled from the storage area.
Saving space and time
The beauty of this system is that it promotes first in/first out processing while still providing very dense storage. The Mississauga Pallet Runner system is five levels high and stores 8,900 pallets that normally contain about 100 different SKUs (one SKU per storage row). That represents an enormous improvement in space utilization. "Within the same footprint, we can store 4,000 more pallets than we could with floor stacking," says Cunneyworth. That's a big plus in Schenker's eyes. "Real estate is an expensive commodity," he notes. "We have to use our space wisely."
The system has proved productive, too. "We're two pallets per man-hour more productive with this system than we were before," reports Cunneyworth. That's because lift truck drivers no longer spend time in the racks performing putaway and picking duties. The pallet runners now take care of those tasks. Plus the lift trucks don't have to wait around while the shuttles carry products to their storage positions deep within the racks; they can be off retrieving more loads from the docks.
Along with improving productivity, the new system has improved safety and reduced product damage. The pallet runner system is more accurate than lift trucks when it comes to placing pallets into their storage positions, which means products are less likely to bump into the racks' sides when entering and exiting. The system doesn't require the high ceilings typically found in dense storage systems. The clear ceiling height in Mississauga is only 28 feet.
Elsewhere in the building, full cases are selected in the pick towers from racks. These cases are placed directly onto a conveyor belt that feeds a shipping sorter. Using recirculation, the sorter can be programmed to route products down shipping spurs according to a particular sequence, such as delivering a single SKU to a pallet or sorted according to expiration dates. The sequence can also reflect the order in which cases are to be stacked, with heavier items, for instance, sorted first so that they can be manually placed on the bottom of a pallet load.
Only the beginning
Along with boosting productivity and improving both safety and handling, the new systems have increased accuracy. Schenker reports that accuracy has increased to better than 99.5 percent from the low 90s just a few years ago. As a result, returns have dropped to about half the former levels.
The efficiencies have also allowed better labor management. "Our labor force has been where the real reductions have occurred," says Unilever's Bayard. "I can't believe how few people work in our warehouses." Those labor savings have contributed to a reduction in overall costs of as much as 20 percent.
Cunneyworth credits communication for the success. "You have to be very involved with your client to understand their business and make sure the cultures fit," he says. Apparently, the cultures have been a good fit. Both companies hope their 10-year deal will be only the beginning of many years of successful collaboration.