Several years of double-digit growth left Frozen Gourmet, a small California frozen food distributor, scrambling to keep tabs on inventory. Then it learned about a promising—but untried—new solution.
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.
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.
Fast turnaround
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.
High visibility
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."
Robotic technology has been sweeping through warehouses nationwide as companies seek to automate repetitive tasks in a bid to speed operations and free up human labor for other activities. Many of those implementations have been focused on picking tasks, a trend driven largely by the need to fill accelerating e-commerce orders. But as the robotic-picking market matures and e-commerce growth levels off, the robotic revolution is shifting behind the picking lines, with many companies investing in pallet-handling robots as a way to keep efficiency gains coming.
“Earlier in this decade and the previous decade, we [saw] a lot of [material handling] transformation around e-commerce and the handling of goods to order,” explains Josh Kivenko, chief marketing officer and senior vice president at Vecna Robotics, which provides autonomous mobile robots (AMRs) for pallet handling and logistics operations. “Now we’re talking about pallets—moving material in bulk behind that line.”
Kivenko explains that whether items are being packaged and shipped directly to a customer’s home address or moved as finished goods to a shipping bay for store delivery, those items are first moved in bulk in some way, often by human hands and with human-operated equipment. He describes warehouses as chaotic environments in which humans move pallets and cartons in multiple ways—up and down, side to side, from receiving to storage, from storage to shipping, or via cross-docking. Automation can help bring order to that chaos.
“What we’re trying to do is relieve some of the pressure [on the] humans [doing] this work,” Kivenko says of companies that develop pallet-handling robotic technologies. “At the end of the day, we’re trying to automate some of those flows, relieve labor pressure, save costs, and keep the goods flowing.”
But automated pallet handling isn’t right for every situation, so it’s important to understand the warehouse conditions required and the protocols and best practices needed to make it a win. Here are some guidelines for applying pallet-handling robots and gaining the most from your investment.
FIRST, UNDERSTAND THE TECHNOLOGY
Pallet-handling robots fall into four general categories, explains Rich O’Connor, vice president of storage and automation for Raymond West Group, a business unit of lift truck manufacturer The Raymond Corp. They include:
Palletizing/depalletizing robots, which are used to load or unload items onto and off of pallets, usually with the use of a robotic arm for picking and placing. Today, these systems are being increasingly integrated with automated storage and retrieval systems (AS/RS) to further streamline pallet handling in the warehouse, O’Connor explains.
Autonomous guided vehicles (AGVs) and autonomous mobile robots (AMRs), which are used to transport pallets within the warehouse. Often outfitted with lift decks or conveyors, or designed to tug or tow items, these robots move pallets from point A to B within a facility. AGVs, which often follow a marked guide-path or wire in the floor, have been around for many years, but the advent of high-performance guidance and vision systems is allowing them more flexibility today, O’Connor says. AMRs are self-guided vehicles that use software and sensors to navigate their way through the warehouse.
Forklift AGVs and AMRs, which can move products both horizontally, from place to place, and vertically, into and out of storage racks. They come in various styles—including stackers, counterbalanced trucks, reach trucks, and even very narrow aisle (VNA) vehicles for use in densely packed warehouses. These vehicles are more complex than those used only for horizontal transport, O’Connor explains. They must be “highly integrated” into the facility’s warehouse management system (WMS) or warehouse execution system (WES) so that they know precisely where to retrieve and deliver pallets within the facility.
Robotic pallet shuttles, which move pallets into, out of, and within dense storage racking. The Raymond Corp. describes such a system as “a standalone, automated deep-lane pallet storage system that utilizes self-powered shuttle carriages to move pallets toward the back or front in a racking channel. Shuttles are motor driven and travel along rails within a storage lane.”
O’Connor and others say that no matter which of these technologies you’re investing in, it’s important to remember that they are all part of a larger system designed to optimize operations throughout the warehouse.
“The expanding role of all these different styles working together is what’s amazing today,” O’Connor says.
SECOND, ENSURE THE TECHNOLOGY IS A FIT
Kivenko, of Vecna, also emphasizes the importance of pallet-handling robots working in concert, particularly AMRs and AGVs.
“The magic isn’t just that the robots are autonomous and driving by themselves. The magic is multiple robots—when you have a [whole integrated] system [in place],” he says. “[It’s] how the fleet operates autonomously and optimizes itself for continuous improvement. That’s where the exponential gains are. [It’s] not just about automating what a worker does; it’s about automating a system.”
But you can’t install these systems in just any warehouse and expect magic. Kivenko and others point to certain conditions that enable the best robotic pallet-handling outcomes, especially when it comes to transportation-based and forklift-type AMRs and AGVs.
“The robots that I sell are large-load machines with very expensive technology,” Kivenko explains. “They move material, generally, in larger facilities. And in order for them to produce a return [on investment]—because that’s the name of the game here—they have to be higher-velocity facilities.”
He says pallet-handling robots work best in large facilities running multiple shifts, usually more than five days a week. Wider aisles allow the equipment to move more freely through the facility and at higher speeds, to optimize efficiency and productivity. Strong Wi-Fi networks and clean, dry environments also help keep equipment running at top performance.
O’Connor agrees that pallet-handling robots are best suited to facilities with multishift operations, where they can ease labor constraints and boost productivity. And he says many customers are willing to extend the typical two- to three-year ROI period to five years in order to achieve those gains. But there is even more to it than that. O’Connor’s colleague John Rosenberger says customers must first step back and analyze their processes to ensure that, even if they have the right facility for pallet-handling AMRs or AGVs, they are moving material in the most efficient way to begin with.
“Many times, we find that the processes in place [are inefficient],” says Rosenberger, who is director of iWarehouse Gateway and global telematics for The Raymond Corp. He emphasizes the importance of analyzing existing data—from an equipment telematics system or similar—to determine the best path toward automation.
“Do you have congestion zones now?” he asks. “They’ll still exist if you automate [those processes exactly].”
THIRD, MAKE SIMPLICITY A PRIORITY
Another basic rule of thumb when implementing pallet-handling robotics: Keep it simple.
Andy Lockhart, director of strategic engagement for global warehouse and logistics process automation company Vanderlande, says that when designing a pallet-handling robotics system, “you want to minimize the processes you [automate]. When you can create [an automated system] that focuses on one task—for example, AMRs delivering pallets from a high-bay [storage rack] directly to the palletizing cell—you can do that efficiently and effectively. When you ask the AMR to do this and this and this … you are adding risk of failure.”
Lockhart’s colleague Jake Heldenberg advises customers to first test their target processes via pilot programs within the warehouse or DC. Heldenberg is Vanderlande’s head of solution design, warehousing, North America.
“If AGVs or AMRs for pallet handling are interesting [to a customer], the best thing to do is pilot one or two in an existing DC,” he says, explaining that the process can help companies troubleshoot, understand integration timelines, and gauge ROI. But pilot programs can add expense to a project, making it unaffordable for some.
“If that’s the case, then the best advice is work with a vendor who has experience integrating [the technology],” Heldenberg says. “Use their experience to benefit your business. You won’t have the same hiccups and challenges you would with a less-experienced vendor.”
Jeremy Van Puffelen grew up in a family-owned contract warehousing business and is now president of that firm, Prism Logistics. As a third-party logistics service provider (3PL), Prism operates a network of more than 2 million square feet of warehouse space in Northern California, serving clients in the consumer packaged goods (CPG), food and beverage, retail, and manufacturing sectors.
During his 21 years working at the family firm, Van Puffelen has taken on many of the jobs that are part of running a warehousing business, including custodial functions, operations, facilities management, business development, customer service, executive leadership, and team building. Since 2021, he has also served on the board of directors of the International Warehouse Logistics Association (IWLA), a trade organization for contract warehousing and logistics service providers.
Q: How would you describe the current state of the contract warehouse industry?
A: I think the current state of the industry is strong. For those that have been focused on building good client relationships over the years, I think it’s a really exciting time. Coming out of all the challenges of the past few years, I think there’s a lot of opportunity for growth and deeper partnerships. It’s fun to see the automation and AI (artificial intelligence) integration starting to evolve [in a way that’s] similar to what we saw with WMS (warehouse management systems) in the early 2000s.
Q: You are now president of your family firm. Is it an advantage having grown up in the business as opposed to working elsewhere?
A: I definitely believe it was an advantage growing up in the business. Whether it’s working with family or someone else in the industry, there’s always an advantage when you have mentors[to guide] you. I’ve been blessed to have several mentors, some in the industry, others just in life, and I’m thankful that they were willing to mentor me and that I was willing to listen to them.
Q: What are the biggest challenges currently facing 3PLs, and how are you addressing them?
A: Labor and legislation are both tough right now. The two seem to have a lot to do with each other, and it can make it tough to find and retain people. So I think we’ll see more and more automation of processes industrywide.
Q: Third-party service providers often must handle a wide variety of products for a lot of different clients. Does this variety make it difficult to invest in automation and other new technologies?
A: It can make things more difficult when looking at certain automation, but it’s in the “difficult” that a lot of opportunities lie. It would be tough to find a single solution that fits every client’s needs, but there are always opportunities to improve in certain areas. It just takes a bit of vision and commitment, and a willingness to invest in your own long-term success.
Q: As a 3PL, what do you look for when selecting the clients you work with?
A: Quality relationships that will last a long time. When both parties are happy and working together in the same direction, everyone wins.
Q: You’ve been a board member of the International Warehouse Logistics Association since 2021. Why is your involvement with this organization important to you?
A: I think it’s important to understand what’s happening in the industry. IWLA is a great resource for staying up to date and getting a solid education when it comes to the latest logistics trends. I also think it’s important to give back and pass along what we’ve learned to those just getting started in the business. As important as it is to have a mentor, it’s just as important to mentor and help others.
“While there have been some signs of tightening in consumer spending, September’s numbers show consumers are willing to spend where they see value,” NRF Chief Economist Jack Kleinhenz said in a release. “September sales come amid the recent trend of payroll gains and other positive economic signs. Clearly, consumers continue to carry the economy, and conditions for the retail sector remain favorable as we move into the holiday season.”
The Census Bureau said overall retail sales in September were up 0.4% seasonally adjusted month over month and up 1.7% unadjusted year over year. That compared with increases of 0.1% month over month and 2.2% year over year in August.
Likewise, September’s core retail sales as defined by NRF — based on the Census data but excluding automobile dealers, gasoline stations and restaurants — were up 0.7% seasonally adjusted month over month and up 2.4% unadjusted year over year. NRF is now forecasting that 2024 holiday sales will increase between 2.5% and 3.5% over the same time last year.
Despite those upward trends, consumer resilience isn’t a free pass for retailers to underinvest in their stores by overlooking labor, customer experience tech, or digital transformation, several analysts warned.
"The 2024 holiday season offers more ‘normalcy’ for retailers with inflation cooling. Still, there is no doubt that consumers continue to seek value. Promotions in general will play a larger role in the 2024 holiday season. Retailers are dealing with shrinking shopper loyalties, a larger number of competitors across more channels – and, of course, a more dynamic landscape where prices are shifting more frequently to win over consumers who are looking for great deals,” Matt Pavich, senior director of strategy & innovation at pricing optimization solutions provider Revionics, said in an email.
Nikki Baird, VP of strategy & product at retail technology company Aptos, likewise said that retailers need to keep their focus on improving their value proposition and customer experience. “Retailers aren’t just competing with other retailers when it comes to consumers’ discretionary spending. If consumers feel like the shopping experience isn’t worth their time and effort, they are going to spend their money elsewhere. A trip to Italy, a dinner out, catching the latest Blake Lively and Ryan Reynolds films — there is no shortage of ways that consumers can spend their discretionary dollars,” she said.
Editor's note:This article was revised on October 18 to correct the attribution for a quote to Matt Pavich instead of Nikki Baird.
A real-time business is one that uses trusted, real-time data to enable people and systems to make real-time decisions, Peter Weill, the chairman of MIT’s Center for Information Systems Research (CISR), said at the “IFS Unleashed” show in Orlando.
By adopting that strategy, they gain three major capabilities, he said in a session titled “Becoming a Real-Time Business: Unlocking the Transformative Power of Digital, Data, and AI.” They are:
business model agility without needing a change management program to implement it
seamless digital customer journeys via self-service, automated, or assisted multi-product, multichannel experiences
thoughtful employee experiences enabled by technology empowered teams
And according to Weill, MIT’s studies show that adopting that real-time data stance is not restricted just to digital or tech-native businesses. Rather, it can produce successful results for companies in any sector that are able to apply the approach better than their immediate competitors.
“ExxonMobil is uniquely placed to understand the biggest opportunities in improving energy supply chains, from more accurate sales and operations planning, increased agility in field operations, effective management of enormous transportation networks and adapting quickly to complex regulatory environments,” John Sicard, Kinaxis CEO, said in a release.
Specifically, Kinaxis and ExxonMobil said they will focus on a supply and demand planning solution for the complicated fuel commodities market which has no industry-wide standard and which relies heavily on spreadsheets and other manual methods. The solution will enable integrated refinery-to-customer planning with timely data for the most accurate supply/demand planning, balancing and signaling.
The benefits of that approach could include automated data visibility, improved inventory management and terminal replenishment, and enhanced supply scenario planning that are expected to enable arbitrage opportunities and decrease supply costs.
And in the chemicals and lubricants space, the companies are developing an advanced planning solution that provides manufacturing and logistics constraints management coupled with scenario modelling and evaluation.
“Last year, we brought together all ExxonMobil supply chain activities and expertise into one centralized organization, creating one of the largest supply chain operations in the world, and through this identified critical solution gaps to enable our businesses to capture additional value,” said Staale Gjervik, supply chain president, ExxonMobil Global Services Company. “Collaborating with Kinaxis, a leading supply chain technology provider, is instrumental in providing solutions for a large and complex business like ours.”