UTi Pharma knew its web of DCs could not keep up with business. Careful planning and construction of a new facility led to a healthy boost in productivity and left room for growth.
Peter Bradley is an award-winning career journalist with more than three decades of experience in both newspapers and national business magazines. His credentials include seven years as the transportation and supply chain editor at Purchasing Magazine and six years as the chief editor of Logistics Management.
Any time a resident of South Africa calls on a local pharmacy for a prescription medication, chances are the drug in question passed through a new 32,000-square-meter (344,445-square-foot) distribution center near Johannesburg operated by UTi Pharma, the company that distributes 55 percent of the pharmaceuticals in that country.
The story of how that facility came to be, consolidating several other operations, is a lesson in careful planning and execution. The process was not without hiccups—nothing that large could be—but the initiative has proved a remarkable success for the company.
UTi Pharma is the largest distributor of pharmaceuticals in the nation, managing shipments to 10,000 pharmacies, 400 private hospitals, 2,600 laboratories, 6,800 retailers, 400 wholesalers, 1,900 state-operated facilities, and 840 exporters. In other words, a vast customer base. It handles products on behalf of 41 local and multinational manufacturers of both brand name and generic products, including medical devices and products for human and animal health. That large customer base, along with rapid growth and the strict requirements for handling pharmaceuticals, were proving a challenge for UTi Pharma's existing DC network, leading the company to begin considering significant changes in 2009. The end result was the new DC.
The Meadowview facility, as it is called, is located in Gauteng province near Johannesburg, South Africa's largest city. The DC represents a major step forward for UTi Pharma's operations. The new building replaces eight of the nine DCs the company previously operated in the region. But its importance reaches far beyond consolidating operations. It brings together modern material handling and management techniques that allow compliance with the stringent requirements demanded of pharmaceutical distribution. It provides the company with space to grow over the next 10 years or so. It provides substantially faster throughput rates than the facilities it replaced while reducing manual processes and overall staffing. And it provides greater security than the company could guarantee in its formerly scattered operations, thus reducing shrinkage. Morne van Rensburg, general manager of projects and engineering, expects the remaining facility in the region, a cold-room operation, will be brought under the roof of the new DC by 2017.
GROWING PAINS
Back in 2009, the company, an operating unit of UTi Worldwide, was running a dozen distribution centers, nine of them located in and around the Gauteng region. The fact that the company had so many operations to begin with was a result of UTi's growth, both organic and through acquisitions, says van Rensburg, one of the three primary project managers on the development of the new DC. The company has averaged 13 percent growth every year since 2004.
"We ran out of space," van Rensburg says. "We were running at 95 percent. That meant we couldn't take new clients on. Just looking at generic growth, we would have been out of space by [the end of last year]." Changing business requirements also led UTi to look to develop a more modern and agile operation. The company's expectation was that order profiles were likely to shift, with a changing mix of pallet, unit, and case shipping. It needed an operation that could adapt quickly to changes in customers' demands.
All that led the company to begin the process of revamping its distribution, an undertaking that eventually led to its bringing the operations of eight of those nine DCs under one roof in the new highly automated DC.
But UTi was cautious in making changes, considering other options before making a major capital commitment to a new building. Throughout the process, UTi worked closely with Fortna, an international supply chain consulting firm whose services include distribution center planning. Fortna had long been a partner of UTi's, van Rensburg says.
The objective was to develop a distribution solution that would meet the company's requirements at least through 2025 at the projected growth rates of 13 percent a year, he explains. Sensitivity analysis was completed to understand requirements if growth were limited to 5 percent a year. Those analyses showed the company would require between 38,000 and 50,000 pallet locations by 2025. In addition to meeting growth requirements, the solution would need to provide for greater operational efficiency than the existing operating practices. Included in this were faster throughput, fewer manual processes, lower staff costs, improved security, and "greener" operations. It would have to comply with the most stringent requirements for pharmaceutical DCs demanded by UTi's own clients as well as the World Health Organization, the Medicines Control Council of South Africa, and the South African Pharmacy Council.
REVAMP, EXPAND, OR BUILD NEW?
The company first considered whether revamping or expanding existing operations would meet its requirements, but it soon determined that would not be feasible. At best, its analysis showed, by taking on an adjacent site at one of the facilities and installing a bulk automated storage and retrieval system (AS/RS), the existing operations could provide just under 30,000 pallet positions—far short of expected requirements. Further, adapting the existing facilities would not provide the flexible order picking systems needed. That led to the decision to explore construction of a greenfield facility—and building the business case to persuade UTi's board that the investment made sense.
As for how big the new facility would be, the initial design concept indicated that a 50,000-square-meter (538,195-square-foot) building would meet UTi's needs. In late 2009, the company began soliciting proposals from construction firms for the building and proposals from three major material handling equipment manufacturers it had worked with in the past for the equipment.
Van Rensburg emphasizes that UTi left it up to the equipment manufacturers to suggest what specific technology would work best. The initial design proposals came back in April 2010. Those proposals provided UTi with options that varied from a very-narrow-aisle operation to a wide-aisle concept to an AS/RS-centric operation. The AS/RS proposal had the lowest staff requirements of the three, would limit access to stock (important for security reasons), could be operated with the lights out in much of the building, and was overall, the lowest-cost solution, and that's what the company selected. The final design included a large bulk AS/RS, a cross-belt sorter, and other technologies.
The property developer broke ground in May 2011, and the facility began operations in October 2012. The old facilities were completely closed by February 2013. One key requirement in the process of shifting operations was to minimize disruption to daily activities. "That was quite interesting and quite stressful," van Rensburg says. "We distribute around 55 percent of all pharmaceuticals in South Africa. We could not disrupt the market." But in the end, the process worked. While there were some disruptions, he says, they were not significant.
Construction delays, though, did lead to one problem that in retrospect, the managers would have handled differently. Adrienne Youell, one of the UTi managers who led the project, explains that the original plan provided for three months of testing before opening the facility. But the construction delays cut into that time. And failure to vacate the facilities the company was leaving would have been costly. That forced UTi into running double shifts to complete the testing, a highly stressful period. "One big lesson we learned is to not make up time from construction delays in your testing phase," she says. Van Rensburg adds that if he had to do it again, he would have absorbed the costs for staying in the existing facilities a while longer.
ROOM FOR EXPANSION
But those problems are behind the company now. Today, the facility receives and puts away an average of 400 pallets a day. It is central to UTi Pharma's operations around the country, as all products bound either for customers or for other UTi Pharma DCs pass through the Meadowview distribution center. It is at Meadowview where imported goods reside during government-mandated quarantine periods.
The building, which is temperature- and humidity-controlled throughout, is divided into receiving, bulk storage, unit pick, and shipping areas. The 4,220-square-meter (45,424-square-foot) receiving area has a pallet conveyor that flows into the bulk storage AS/RS. Euro pallets, which measure 800 by 1,200 by 120 millimeters (31 by 47 by 5 inches), can go directly into the system. Non-Euro pallets must be repalletized first. The 10-aisle AS/RS has 38,400 pallet locations but is designed to be expanded to as many as 58,000. The unit-picking area adjacent to the AS/RS consists of 11 double-layer carousels feeding seven pick-to-tote stations.
The system uses weight validation in both the receiving and picking processes. In the unit-pick area, workers are offered a single product at a time, further reducing the opportunity for errors, according to Fortna. Compared with the previous operations, manual processes have been cut in half, with the automated processes sharply accelerating throughput. In fact, the pick-to-tote technology increased unit-picking productivity by 342 percent.
The planning and execution of the project may have been arduous, but the results indicate it was a worthwhile endeavor for UTi Pharma, providing the company with an efficient, productive, and secure facility with room to accommodate its continued rapid growth.
E-commerce activity remains robust, but a growing number of consumers are reintegrating physical stores into their shopping journeys in 2024, emphasizing the need for retailers to focus on omnichannel business strategies. That’s according to an e-commerce study from Ryder System, Inc., released this week.
Ryder surveyed more than 1,300 consumers for its 2024 E-Commerce Consumer Study and found that 61% of consumers shop in-store “because they enjoy the experience,” a 21% increase compared to results from Ryder’s 2023 survey on the same subject. The current survey also found that 35% shop in-store because they don’t want to wait for online orders in the mail (up 4% from last year), and 15% say they shop in-store to avoid package theft (up 8% from last year).
“Retail and e-commerce continue to evolve,” Jeff Wolpov, Ryder’s senior vice president of e-commerce, said in a statement announcing the survey’s findings. “The emergence of e-commerce and growth of omnichannel fulfillment, particularly over the past four years, has altered consumer expectations and behavior dramatically and will continue to do so as time and technology allow.
“This latest study demonstrates that, while consumers maintain a robust
appetite for e-commerce, they are simultaneously embracing in-person shopping, presenting an impetus for merchants to refine their omnichannel strategies.”
Other findings include:
• Apparel and cosmetics shoppers show growing attraction to buying in-store. When purchasing apparel and cosmetics, shoppers are more inclined to make purchases in a physical location than they were last year, according to Ryder. Forty-one percent of shoppers who buy cosmetics said they prefer to do so either in a brand’s physical retail location or a department/convenience store (+9%). As for apparel shoppers, 54% said they prefer to buy clothing in those same brick-and-mortar locations (+9%).
• More customers prefer returning online purchases in physical stores. Fifty-five percent of shoppers (+15%) now say they would rather return online purchases in-store–the first time since early 2020 the preference to Buy Online Return In-Store (BORIS) has outweighed returning via mail, according to the survey. Forty percent of shoppers said they often make additional purchases when picking up or returning online purchases in-store (+2%).
• Consumers are extremely reliant on mobile devices when shopping in-store. This year’s survey reveals that 77% of consumers search for items on their mobile devices while in a store, Ryder said. Sixty-nine percent said they compare prices with items in nearby stores, 58% check availability at other stores, 31% want to learn more about a product, and 17% want to see other items frequently purchased with a product they’re considering.
Ryder said the findings also underscore the importance of investing in technology solutions that allow companies to provide customers with flexible purchasing options.
“Omnichannel strength is not a fad; it is a strategic necessity for e-commerce and retail businesses to stay competitive and achieve sustainable success in 2024 and beyond,” Wolpov also said. “The findings from this year’s study underscore what we know our customers are experiencing, which is the positive impact of integrating supply chain technology solutions across their sales channels, enabling them to provide their customers with flexible, convenient options to personalize their experience and heighten customer satisfaction.”
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.
National nonprofit Wreaths Across America (WAA) kicked off its 2024 season this week with a call for volunteers. The group, which honors U.S. military veterans through a range of civic outreach programs, is seeking trucking companies and professional drivers to help deliver wreaths to cemeteries across the country for its annual wreath-laying ceremony, December 14.
“Wreaths Across America relies on the transportation industry to move the mission. The Honor Fleet, composed of dedicated carriers, professional drivers, and other transportation partners, guarantees the delivery of millions of sponsored veterans’ wreaths to their destination each year,” Courtney George, WAA’s director of trucking and industry relations, said in a statement Tuesday. “Transportation partners benefit from driver retention and recruitment, employee engagement, positive brand exposure, and the opportunity to give back to their community’s veterans and military families.”
WAA delivers wreaths to more than 4,500 locations nationwide, and as of this week had added more than 20 loads to be delivered this season. The wreaths are donated by sponsors from across the country, delivered by truckers, and laid at the graves of veterans by WAA volunteers.
Wreaths Across America
Transportation companies interested in joining the Honor Fleet can visit the WAA website to find an open lane or contact the WAA transportation team at trucking@wreathsacrossamerica.org for more information.
Krish Nathan is the Americas CEO for SDI Element Logic, a provider of turnkey automation solutions and sortation systems. Nathan joined SDI Industries in 2000 and honed his project management and engineering expertise in developing and delivering complex material handling solutions. In 2014, he was appointed CEO, and in 2022, he led the search for a strategic partner that could expand SDI’s capabilities. This culminated in the acquisition of SDI by Element Logic, with SDI becoming the Americas branch of the company.
A native of the U.K., Nathan received his bachelor’s degree in manufacturing engineering from Coventry University and has studied executive leadership at Cranfield University.
Q: How would you describe the current state of the supply chain industry?
A: We see the supply chain industry as very dynamic and exciting, both from a growth perspective and from an innovation perspective. The pandemic hangover is still impacting decisions to nearshore, and that has resulted in a spike in business for us in both the USA and Mexico. Adding new technology to our portfolio has been a significant contributor to our continued expansion.
Q: Distributors were making huge tech investments during the pandemic simply to keep up with soaring consumer demand. How have things changed since then?
A: The consumer demand for e-commerce certainly appears to have cooled since the pandemic high, but our clients continue to see steady growth. Growth, combined with low unemployment and high labor costs, continues to make automation a good investment for many companies.
Q: Robotics are still in high demand for material handling applications. What are some of the benefits of these systems?
A: As an organization, we are investing heavily in software that will allow Element Logic to offer solutions for robotic picking that are hardware-agnostic. We have had success deploying unit picking for order fulfillment solutions and unit placing of items onto tray-based sorters.
From a benefit point of view, we’ve seen the consistency of a given operation improve. For example, the placement accuracy of a product onto a tray is far higher from a robotic arm than from a person. In order fulfillment applications, two of the biggest benefits are reliability and hours of operation. The robots don't call in sick, and they are happy to work 22 hours a day!
Q: SDI Element Logic offers a wide range of automated solutions, including automated storage and sortation equipment. What criteria should distributors use to determine what type of system is right for them?
A: There are a significant number of factors to consider when thinking about automation. In my experience, automation pays for itself in three key ways: It saves space, it increases the efficiency of labor, and it improves accuracy. So evaluating which of these will be [most] beneficial and quantifying the associated savings will lead to a “right sized” investment in technology.
Another important factor to consider is product mix. With a small SKU (stock-keeping unit) base, often automation doesn’t make sense. And with a huge SKU base, there will be products that don’t lend themselves to automation.
With any significant investment, you need to partner with an organization that has deep experience with the technologies that are being considered and … in-depth knowledge of the process that is being automated.
Q: How can a goods-to-person system reduce the amount of labor needed to fill orders?
A: In most order picking operations, there is a considerable amount of walking between pick faces to find the SKUs associated with a given order or set of orders. Goods-to-person eliminates the walking and allows the operator to just pick. I have seen studies that [show] that 75% of the time [required] to assemble an order in a manual picking environment is walking or “non-picking” time. So eliminating walking will reduce the amount of labor needed.
The goods-to-person approach also fits perfectly with robotic picking, so even the actual picking aspect of order assembly can be automated in some instances. For these reasons, [automation offers] a significant opportunity to reduce the labor needed to fulfill a customer order.
Q: If you could pick one thing a company should do to improve its distribution center operations, what would it be?
A: Evaluate. Evaluate the opportunities for improving by considering automation. In my experience, the challenge most companies have is recognizing that automation is an alternative. The barrier to entry is far lower than most people think!
Toyota Material Handling and its nationwide network of dealers showcased their commitment to improving their local communities during the company’s annual “Lift the Community Day.” Since 2021, Toyota associates have participated in an annual day-long philanthropic event held near Toyota’s Columbus, Indiana, headquarters. This year, the initiative expanded to include participation from Toyota’s dealers, increasing the impact on communities throughout the U.S. A total of 324 Toyota associates completed 2,300 hours of community service during this year’s event.
The PMMI Foundation, the charitable arm of PMMI, The Association for Packaging and Processing Technologies, awarded nearly $200,000 in scholarships to students pursuing careers in the packaging and processing industry. Each year, the PMMI Foundation provides academic scholarships to students studying packaging, food processing, and engineering to underscore its commitment to the future of the packaging and processing industry.
Truck leasing and fleet management services provider Fleet Advantage hosted its “Kids Around the Corner Foundation” back-to-school backpack drive in July. During the event, company associates assembled 200 backpacks filled with essential school supplies for high school-age students. The backpacks were then delivered to Henderson Behavioral Health’s Youth & Family Services location in Tamarac, Florida.
For the past seven years, third-party logistics service specialist ODW Logistics has provided logistics support for the Pelotonia Ride Weekend, a campaign to raise funds for cancer research at The Ohio State University’s Comprehensive Cancer Center–Arthur G. James Cancer Hospital and Richard J. Solove Research Institute. As in the past, ODW provided inventory management services and transportation for the riders’ bicycles at this year’s event. In all, some 7,000 riders and 3,000 volunteers participated in the ride weekend.