Three years ago, California-based distributor Frozen Gourmet Inc. found itself facing the classic small business growth challenge, at least where its warehouse operations were concerned. In the past decade, the distributor's sales had grown 80 percent—a welcome development, to be sure, but one that left the company struggling to keep track of its fast-moving inventory. As volume grew, the inadequacies of its manual tracking system became increasingly apparent, often in the form of stock-outs and other inventory errors. Yet the operation was still too small to justify an expensive warehouse management system (WMS).
But luck was on the distributor's side. At about that time, a supplier tipped it off to a possible solution— one that had just recently been introduced to the market. The solution promised to give Frozen Gourmet the inventory-tracking capabilities it needed—and at a relatively modest cost.
The solution in question was an "on-demand" WMS recently brought to market by San Francisco-based SmartTurn Inc. Like the warehouse management systems big companies have been using for years, this new solution was designed to automate warehouse processes and provide real-time inventory visibility. But there was one important difference: the method of delivery. Instead of buying a costly software license and installing the program on its own servers, Frozen Gourmet would be able to "rent" the Web-based WMS for a modest monthly fee. The vendor would host and maintain the application on its own servers, and deliver it over the Internet. There would be no hardware to buy, no software to install, and no IT staff to maintain.
In the end, the prospective advantages proved too much to resist. Frozen Gourmet signed on to become one of SmartTurn's first customers.
Although they're marketed to companies of all sizes, on-demand WMS applications are best suited to simple to moderately complex operations that do not rely heavily on automation—a profile that Frozen Gourmet fits to a T. The Redding, Calif.-based distributor employs just 25 people and is strictly a regional operation, distributing frozen goods to major grocery stores, convenience stores, and mom-and-pop stores in a territory that stretches from California's northern border with Oregon to Yuba City, Calif., 200 miles to the south. The distributor mostly handles Dreyer's Grand Ice Cream Holdings products, which include the Nestlé and Häagen-Dazs brands. In addition to ice cream, Frozen Gourmet distributes frozen pizza, carrying Kraft Pizza Co.'s Tombstone and DiGiorno lines.
Distribution at Frozen Gourmet follows a pretty straightforward process. Suppliers ship merchandise in truckload quantities to the distributor's 10,000-square-foot warehouse in Redding, which holds about 175 mixed-load pallets in two-level rack storage at a temperature of minus 20 degrees. There, a crew of eight warehouse employees receive, pick, and ship products in two shifts.
Workers fill orders by selecting boxes from the pallets and then loading the boxes on transport racks (each rack is designated for a specific store). They then load the transport racks onto the route trucks. The company makes deliveries at night using its 10-vehicle private fleet.
Although Frozen Gourmet's operation is relatively uncomplicated, it's a fast-paced process. Inventory turns are high, with 80 percent of the warehouse stock turning each week, according to David McDaniel, the company's warehouse manager. In the past, keeping track of all of that fast-moving inventory was something of a nightmare—for example, if the distributor wanted to check on product availability, it often had to resort to walk-around checks. So when a manager at Dreyer's mentioned the SmartTurn solution, Frozen Gourmet was ready to listen.
The ins and outs
Today, there's no longer any confusion about what's on hand in the warehouse. The WMS automatically keeps tabs on what goods have arrived and what's been shipped. "I now have daily visibility into inventory status," says McDaniel.
The WMS also keeps an updated record of what inventory items have been allocated to specific orders, so the distributor always has current information on actual product availability. The WMS tracks orders by interfacing with the company's existing Direct Store Delivery (DSD) application, which functions like an order management system. As they make their rounds, salesmen or "pre-writers" record orders from their grocery and convenience store customers on handheld computers, downloading those orders into the DSD at the end of the day. At the same time, the route drivers who service mom-and-pop stores are out replenishing their customers' stocks with product from the back of their trucks, recording the transactions on their handheld devices for later DSD download. The DSD outputs the customer orders into an Excel spreadsheet that's imported into the on-demand WMS.
On the inbound side, the on-demand WMS maintains an automatic record of warehouse stock based on the information workers enter as goods arrive. It has also allowed the company to automate its purchasing process. In the past, McDaniel faxed orders to Dreyer's in Bakersfield, Calif., or Kraft Pizza Co. in Little Chute, Wis. But that sometimes led to errors, particularly with the Dreyer's orders. Frozen Gourmet and Dreyer's use different item numbers for products (Frozen Gourmet uses a six-digit code, while Dreyer's uses a four-digit one). That meant that whenever he placed an order with Dreyer's, McDaniel had to look up the corresponding numbers in a Dreyer's catalog. "If I made a mistake, I [ended up] getting something I didn't want," he says.
Nowadays, the WMS issues the purchase orders, automatically translating Frozen Gourmet's item numbers into the corresponding Dreyer's numbers. After it generates a purchase order, the WMS e-mails it to a supplier. "It's much easier than writing everything down and faxing it," McDaniel says.
When the merchandise arrives at the Redding facility, workers use a copy of that purchase order to verify receipt of the merchandise. They then enter the receipt information into the WMS, and the cycle begins again.
Since it began using the on-demand WMS, Frozen Gourmet has seen stock-outs decline, even during the peak summer season. The distributor also is able to respond to queries about product availability more quickly and with greater confidence. And there's no longer any need to send someone into the minus 20-degree freezer to do a walk-around inventory check.
Now, all McDaniel has to do is type a product code into the WMS. "If there's going to be a big sale and someone asks, 'Do you have enough?'" he says, "I can look in [the WMS] and see I have this much on hand and this much on order, so I'm going to be OK."