Yogurt has cachet. It's widely seen as a health food. It's tasty. And its sales, led by consumption of Greek yogurt, continue to climb faster than most other categories of packaged food.
For yogurt producers, managing that growth means, among other things, ensuring that distribution can keep up. Dannon, the leading producer of yogurt in the U.S., is among the companies experiencing solid growth, and its Oikos brand Greek yogurt is the fastest-growing brand in that rapidly expanding segment. Ensuring that distribution can keep up with demand, among other factors, led Dannon to make a major investment in a new warehouse attached to its production facility in West Jordan, Utah.
The new warehouse, which distributes Dannon products to company DCs nationwide, opened last year. It includes a deep-lane automated storage and retrieval system (AS/RS) that can store 7,000 pallets. But automation was by no means a certainty when Dannon began planning the project. In fact, it marks the company's first venture into automation in the U.S.
The previous cooler warehouse had 1,000 storage locations for pallets—only half the production capacity of the plant. Those storage limitations forced Dannon to do some things that were less than optimal. It required shipping some product as soon as it came off the production line whether its DCs were ready for it or not. Other finished product had to be shipped to a third-party warehouse in the area and then on to the DCs, adding to transportation, handling, and storage costs.
FROM PUSH TO PULL
With the new warehouse, those problems have been eliminated. "Now we can use a pull model," says Aaron Anderson, senior manager of flow chain at the Dannon plant. "We can hold product until the DCs want it based on the forecast and existing customer orders. That gives us better accuracy on deployment, and direct plant shipping saves us a ton of money."
Anderson is responsible for managing finished-goods pallets that come off the 10 production lines in the manufacturing plant (an 11th will be installed next year) and for raw materials heading into production. As a result, he has a close-up view of distribution operations. He was directly involved in planning the new facility, along with Simon Osborn, Dannon's vice president of supply chain strategies, and other members of the team. He also worked closely with Peach State Integrated Technologies, an Atlanta-based systems integrator, to develop and execute the construction and launch of the warehouse.
Peter Sobol, the Peach State project director who worked with Dannon, says the yogurt company initially looked at building a conventional cooler warehouse that would expand on the existing 1,000-pallet capacity. It even had a prospective design for an automated operation when it stepped back and engaged Peach State in January 2011 to prepare a study on what a new optimal design might be. That consulting project eventually evolved into a full-scale systems integration project that included overseeing development of the new warehouse, which is a food-grade cooler operated at 38 degrees F.
The site for the warehouse, adjacent to the production plant, posed some design challenges for the team. For one thing, there was the matter of space. To accommodate the plant's production volume—a volume that continues to expand—the facility would require a great deal of storage capacity, says Sobol. But the design was constrained by the small footprint available on the site. The site is also in an active seismic area, which demanded a building that could withstand any temblors the area might sustain. And, with heavy snowfall each winter, the warehouse roof had to be able to stand up to a substantial snow load.
More important than the design considerations were Dannon's business goals. Dannon wanted more efficient shipping, close control over inventory, and more flexibility in storage. The company was already making use of plastic pallets provided by iGPS, and it wanted to take full advantage of the RFID chips embedded in those. The warehouse had to be able to handle manufacturing throughput rates of 85 to 125 pallets per hour. The design had to ensure that whatever material handling system was selected would have access to most of the perishable inventory at all times, even if part of the system went down.
GO HIGH AND DEEP
The ultimate solution was to construct a 35,000-square-foot rack-supported building with 90-foot interior clearance and installation of a large-scale deep-lane AS/RS that could handle 7,000 pallets. "The idea of a smaller footprint and a taller building drove much of the project," Sobol says.
After its analysis, Peach State proposed installing an AS/RS designed by Dambach Lagersysteme, a German manufacturer of material handling systems. Dannon executives and managers visited several Dambach installations in Europe, including one dairy company that had a deep-lane system similar to the one proposed. Sobol says those visits gave Dannon executives confidence in the proposal.
Prior to launching the system, Peach State and Dannon put it through its paces in a simulation developed by Design Rate Simulations, a Salt Lake City simulation specialist. That gave them great confidence that the system would meet or exceed expectations. "We were pleased to see that it blew the project rates out the window," Sobol says. "The retrieval and putaway rates were way beyond the rates we expected."
The system employs three cranes: two storage and retrieval cranes with two shuttles each and a smaller crane used for shipping. It is capable of handling 120 pallets per hour. Perhaps one of the most important aspects of the design is that either of the storage and retrieval cranes can reach most of the inventory even if one of the cranes is out of operation—critically important for Dannon's perishable goods. "It gives us a huge amount of flexibility in case something does happen since our products have a very short shelf life," Anderson says. "Product sits here a maximum of three days."
Either crane can reach as much as 80 percent of the pallet positions. Anderson explains that the racks are 11 positions deep. In normal operation, one crane handles six positions and the other, five. But because the racks are in a single channel, either crane can reach up to 10 positions deep, providing access to nearly all of the pallets. "The only reason we didn't go to 11 is that we don't want to risk the shuttle driving out of the rack," Anderson says.
Sobol adds that allowing access from both sides also offered storage flexibility for Dannon. It enables Dannon to vary the number of products from a single lot in any one lane. For example, one side could be eight pallets deep with one product, while the other could hold two pallets of a different product.
The AS/RS system itself is 31 pallet positions deep and 10 positions high. The shuttles that lift the pallets for storage or retrieval operate separately from the cranes. Shuttles glide under the pallets, lift them and carry them into the assigned storage position, and set them on rails within the racks or, for shipping, lift them from the racks and bring them to the cranes. "That leaves the cranes independent," Anderson says.
MAKE, COOL, STORE, RETRIEVE
The process starts back at the end of the manufacturing line. Production runs of between 20 and 50 pallets of a particular item move from the production lines to the warehouse, carried by Dematic automated guided vehicles (AGVs). Before going to storage, the yogurt must go through a cooling process: It comes off the production line at about 60 degrees F and must be cooled to between 36 and 45 degrees F. The AGVs drop the pallets into cooling cells, each of which holds a single pallet, or a cooling tunnel, through which up to 45 pallets move via conveyor. After the cooling process, the AGVs move the pallets to a conveyor for induction into the AS/RS.
To track the pallets as they move from production to the AS/RS, Dannon employs SAP's enterprise resource planning system as well as its own warehouse management system (WMS), called Tek Dan. Developed by the company's French parent, Danone, Tek Dan captures production data from the SAP system and then links the RFID-enabled pallets with the lot code and time from production. As the pallets move into storage, the facility's warehouse control system (WCS) reads their RFID tags, matching them with the lot code and number of cases retrieved from the WMS. The WCS was developed for Dannon and Peach State by Georgia-based engineering services and systems development firm Atronix Engineering.
After reading the pallet tag, the WCS produces a print-and-apply label, a pallet license plate with product information embedded in a bar code. In the meantime, the pallets go through one of the two stretch wrap machines before induction into the AS/RS racks. The pallets then move through a sizing station that ensures each pallet is square.
Having the WCS capture lot data on every pallet is crucial for efficient operation of the AS/RS because the WMS cannot see specific locations in the automated system. "It knows that it has X number of pallets of this material at this quantity, but it doesn't know a given pallet's position," Anderson says. "That's embedded in the WCS. The system will call for a specific pallet, but the WCS is designed to say, 'OK, you requested this pallet with this material and this code date and quantity, but we'll give you another pallet instead.' It gets the same material, but it might not be the specific pallet requested."
He explains that the Tek Dan system keeps close track of the time of production. So it may call for the first pallet produced in a run ahead of any others. But that first pallet into the AS/RS is likely to be deep in the rack. "We didn't want to have a system that would have to shuffle four or five pallets," he says. "Those are all wasted moves. If that pallet in front is exactly the same, I'm going to give it that instead."
The WCS also offers another redundancy important to Dannon, Sobol says. Should the Tek Dan system be down for any reason, the WCS can still keep the system running. "They can reconcile information after the fact," Sobol says. "The WCS acts much like a WMS."
Eighty-five percent of the shipments from the warehouse go by truckload carrier to Dannon DCs around the country, mostly to a DC in Salt Lake City, but also to facilities in Allentown, Pa.; Dayton, Ohio; and Fort Worth, Texas. The other 15 percent moves directly to end customers' DCs. The shipments are all managed from Dannon's U.S. headquarters in White Plains, N.Y.
The system feeds pallets to the shipping crane in the correct sequence for trailer loading. "It can queue those up in advance of the truck's arrival at the dock," says Sobol. (The system can configure up to 13 trailer loads in advance.) As a result, the warehouse can now load a 30-pallet outbound truck in 20 minutes, Sobol says. In fact, the system can outpace the forklift drivers who load the trailers. The fast shipping rate was one of Dannon's major goals. The system is currently able to move two trailer loads an hour out of each dock. Dannon ships 35 to 45 trailer loads out of the facility each day.
The system has provided Dannon with substantial cost savings. "The biggest things are the transportation and storage and handling savings we've been able to achieve by shipping direct," Anderson says. Another advantage: The old cooler space can now be used for raw materials, specifically the large stainless steel totes of fruit used in many of the products. That has saved Dannon much of the cost of storing goods at a third-party warehouse and the cost of shipping them daily to the plant.
Ultimately, Anderson expects the new warehouse and AS/RS will save Dannon $3 million to $4 million a year. "That will grow as our business grows," he says. And that growth is substantial: 20 percent per year, he says.