In the highly competitive world of pharmaceutical distribution, regional players must find a way to differentiate themselves if they hope to compete with the big national firms. Such is the case with Smith Drug. The Spartanburg, S.C.-based distributor operates in the Southeast, serving 1,200 independent pharmacies, regional hospitals, and long-term care facilities. To separate itself from the pack, the company has chosen to play the service card, filling orders with speed and accuracy that's second to none.

"Our primary focus is customer service. We have to be better than others to compete," explains Isaac Rogers, the company's vice president of operations.

For that reason, Smith Drug hasn't been shy about introducing process improvements aimed at helping the company maintain its competitive edge. In fact, operations at its 240,000-square-foot Spartanburg DC have undergone several major overhauls in the past seven years—all designed to increase accuracy and turn customer orders faster.

Phase one
The first of those projects took place in 2004, when the company retooled the facility's picking area to convert it over from a pick-and-pass setup to a zone-bypass design. The goal in this case was to speed up the order fulfillment process. "With pick-and-pass, you're only as fast as your slowest picker," says Rogers.

One drawback of the pick-and-pass workflow was that it required order totes to be routed through all of the zones whether items were needed from those areas or not. With the revamped system, which was designed and implemented by SSI Schaefer, an order can bypass a zone if no stock-keeping units (SKUs) from that section are required. And if work is backed up in a zone, the order tote can bypass that zone and return later when the bottleneck is cleared up. (Picking in the zone bypass area is directed by a voice system supplied by Vocollect.)

Along with retooling the pick area, Schaefer supplied three A-frame automated order picking units for the facility's fast movers. Together, the units feature 6,300 channels that hold 4,600 different products—mostly small bottles and boxes. Fast movers in Spartanburg account for about 22 percent of total SKUs, including 92 percent of prescription drugs.

A conveyor belt runs under the A-frames. When products are needed for orders, they're dropped onto the belt and then gently deposited into an order tote that waits at the end of the line. Approximately 78 percent of picks in the building occur within the A-frames, which can service up to 1,800 totes per hour.

Along with these process improvements, Schaefer added a tote buffer system, two tote destackers, an automated tote labeling system, and software that cubes the totes. In combination, these systems have virtually eliminated the need to handle totes manually.

"We have to be more efficient here to offset decreased margins and higher labor costs," says Rogers. "The automatic label machines and the zone bypass are where we gained most of our labor productivity, saving the equivalent of 16 positions."

No resting on laurels
These productivity gains notwithstanding, the facility was not done with improvements. In 2008, it embarked on another round, installing eight Schaefer carousels containing 43,000 dense storage locations. This system, which is arranged in two pods of four units each, has a footprint of only 6,600 square feet. Storing the same amount of inventory on static shelving would require more than 45,000 square feet. On top of that, a mezzanine was installed over the carousels, further boosting capacity.

When items are needed for orders, the carousels spin to make the required storage tubs accessible to a worker stationed at each pod. Lights direct the picking, indicating the location and quantity of items needed. Since a single storage bin might have as many as eight compartments, the system is set up with an additional light to indicate which compartment holds the required SKU. Up to seven orders can be selected at once.

Workers gather the picked items into order totes located at a lower put station, following directions provided by lights. Smith Drug has workers deposit items one at a time, with a light barrier above each tote keeping count of how many times the worker reaches across. This assures that the correct quantity is placed into the tote.

With the new system, a single worker can complete 1,000 picks an hour, compared with 175 picks per hour with manual picking. Not only is the process faster; it's also more accurate. In fact, inventory tracking with the carousel system has proved to be so good that Smith Drug now uses the equipment to process and hold returns. "The system knows when an item is a return, and which customers we can assign a return to and which customers won't accept a returned item," says Rogers.

So far, so good
As for the results, the process improvements introduced over the past seven years have allowed Smith Drug to accommodate volume growth that prior to the recession, averaged 20 percent annually. Better yet, the facility was able to absorb the added volume without any loss of productivity or accuracy. In fact, Rogers reports that productivity at the Spartanburg DC jumped 55 percent after installing the A-frames, zone-pass picking, carousels, and the automatic tote labeling equipment. Order accuracy now stands at 99.99 percent.

The system has also helped alleviate backups during peak periods—typically, Sunday and Monday nights. "Before, we had two or three nights a week when trucks would always go out late. Now, that happens only about five times a year total," says Rogers. "And often on those days, workers would be here 12 to 14 hours to get the orders out. With the automation, we rarely have any overtime now."

The success of the Spartanburg projects led Smith Drug to duplicate many of the automated processes at a facility it opened in Valdosta, Ga., in 2009. Among other benefits, the system's space-saving features enabled the company to keep the building's footprint to just 108,000 square feet. "The carousels paid for themselves the first day because they allowed us to build a smaller facility," says Rogers.

Not satisfied with standing pat, Rogers says he has Schaefer working on automating the quality control area, where prescription drug orders are verified. It will be just the latest chapter in Smith Drug's ongoing search for ways to reduce costs, create efficiencies, and improve customer service.