In a reversal of the usual chain of events, e-tailer Dollar Shave Club cut ties with its 3PL and built two automated DCs so it could take charge of its own fulfillment operations.
David Maloney has been a journalist for more than 35 years and is currently the group editorial director for DC Velocity and Supply Chain Quarterly magazines. In this role, he is responsible for the editorial content of both brands of Agile Business Media. Dave joined DC Velocity in April of 2004. Prior to that, he was a senior editor for Modern Materials Handling magazine. Dave also has extensive experience as a broadcast journalist. Before writing for supply chain publications, he was a journalist, television producer and director in Pittsburgh. Dave combines a background of reporting on logistics with his video production experience to bring new opportunities to DC Velocity readers, including web videos highlighting top distribution and logistics facilities, webcasts and other cross-media projects. He continues to live and work in the Pittsburgh area.
In order to succeed, an e-commerce company must excel on two fronts: delivering quality products and providing superior customer service. That's how it can differentiate itself from its brick-and-mortar competitors.
Dollar Shave Club, a company specializing in grooming and personal care products, was built on this principle. Its founders saw a wide-open market opportunity in giving consumers an alternative to buying high-priced shaving products in stores. In 2011, it launched a direct-to-consumer subscription razor blades service, shipping high-quality products at low prices—just a few bucks a month—right to the customer's door. Subscribers receive monthly deliveries of shaving supplies, including razors, creams, and lotions, with the option of canceling at any time. In order to retain these customers, the company must deliver high-quality products on time and with 100-percent order accuracy.
Like many e-commerce startups, Venice, Calif.-based Dollar Shave Club initially contracted with a third party to handle its order fulfillment. That worked well enough for a time. But as business took off, the company grew increasingly dissatisfied with the arrangement. Eventually, it became clear that the retailer had outgrown its third-party provider, says Lori Jackson, Dollar Shave's director of operations and fulfillment.
More importantly, the company felt the arrangement did not guarantee the kind of service it felt it needed to provide. (Dollar Shave Club's objective is to ship every order within 24 hours of receipt.) After giving the matter due consideration, the company decided that the best way to gain the flexibility—as well as the level of inventory control, speed, and accuracy—it sought was to cut the third party loose and bring distribution in house.
ABOUT FACE
Today, Dollar Shave Club has full control of its own distribution destiny, handling all of its order fulfillment out of two company-run DCs. It opened its first distribution center, a 110,000-square-foot operation in nearby Torrance, Calif., in December 2015. That was quickly followed by the opening of a second facility, a 280,000-square-foot building in Grove City, Ohio, near Columbus, this past July.
As for what tipped the hand in favor of the Columbus area for its second facility, Jackson says Dollar Shave Club weighed a number of factors in choosing the site. "We looked at our customer base, distribution shipping costs, and the ability to service our customers, as well as for an area with a good labor pool," she recalls.
Jackson says the search covered a territory bounded by Indiana to the west, Pittsburgh on the east, Michigan to the north, and Kentucky on the south before settling on the site near Columbus. Among the factors that worked in Ohio's favor were good highway access, proximity to major carrier hubs, and 11 area colleges that could feed a steady stream of graduates to the region's already diverse labor pool. (Currently, about 110 employees work in the Ohio facility.) It also helps that 75 percent of the U.S. population can be easily reached within three to four days from the Buckeye State.
Distribution territory is roughly split at the Rocky Mountains. Torrance serves customers west of the range plus Texas, which accounts for about 30 percent of total volume. The larger Ohio facility handles the remaining 70 percent. Both facilities process only direct-to-consumer orders.
"We distribute and fulfill the same products from both facilities," says Jackson. "Both are highly automated, though Ohio has higher capacities and can handle a little more scale."
NEAT AND TRIM
Even though the Torrance facility had opened just a year earlier, the company incorporated some design improvements into the plans for its new Columbus DC, according to Jackson. Many of those changes were made to accommodate the operation's scale. Because it would be processing higher volumes than its counterpart in California does, the Ohio facility would require automated systems with higher throughput and speed to ensure that it could turn orders around in the desired timeframe.
Bastian Solutions served as the designer and integration partner in both operations. It also provided some of the equipment, integrating its own conveyors and pick-to-light systems with systems from other manufacturers.
Finding the right integration partner was key to Dollar Shave Club's ability to bring distribution in house. "As a startup company, it was important to find partners who can flex with us. It's how we chose all vendors," Jackson says. "We don't have the standard distribution model. We need the ability to change what we do easily. That is huge and has been a big part of our success. We don't want to be locked in."
It's important to note that when it comes to fulfillment, Dollar Shave Club enjoys one huge advantage over most e-tailers in that it handles only a small number of SKUs (stock-keeping units). This was a strategic decision arrived at early on. While many online companies compete by offering a vast selection of products, Dollar Shave Club has chosen a different route: selling a limited number of quality products. It currently offers a menu of about 30 items, including three types of razors; blades; shaving, cleaning, and styling products; and skin care lotions, lip balms, and wipes. Some of these goods are also bundled with other items for sale in packages—for example, a pack that combines a washcloth with body and face cleansers.
Among other advantages, the low SKU count—coupled with high demand density—has simplified order fulfillment and minimized the need for rack storage. Most inventory is stored as cases in forward locations.
SMOOTH OPERATOR
Daily operations at the Ohio fulfillment center are directed by a HighJump warehouse management system (WMS). Early on in the process, the software determines where the various orders will be filled. Orders that have a similar profile and contain the same SKUs are directed to batch pick stations. (These orders are batched into waves based on which SKU they contain.)
For these orders, the fulfillment process starts with the pre-labeling of shipping cartons and envelopes using print-and-apply machines. After labeling, the cartons and envelopes are sent to 36 packing stations. Meanwhile, cases of SKUs needed for batches are selected from the forward rack locations according to directions transmitted by radio-frequency (RF) devices. The cases are then sent to the packing stations, with each station receiving only the products needed for a single batch.
At the pack station, a worker removes the product (or products) from the case and places them into the prelabeled cartons and envelopes. All of the orders being processed at a pack station at any one time contain the same items in the same quantity to expedite the packing process and minimize the chance of errors. "It's easily controllable," notes Jackson. Completed orders are then placed onto takeaway conveyors for transport to sorting.
Orders that don't fit the profile of the batch orders being processed at that time—either because they contain different products or because they include multiple SKUs—are processed in a pick-to-light area that includes about 100 locations in flow racks. Lights illuminate in the pick-to-light area to direct the picking of orders into totes, which are then taken to 28 dedicated pack stations. This pack area can scale to 34 stations to allow for growth.
At the pack stations, shipping cartons are labeled using Zebra label printers and the orders are packed. After the finished cartons are weighed on Mettler Toledo scales, they're placed onto a takeaway conveyor that feeds a vertical lifting conveyor supplied by Qimarox. The lift is used to raise the cartons to an overhead conveyor line that's high enough to allow lift trucks to transport products needed to replenish the pick-to-light flow racks below. In Ohio, Crown lift trucks are used, while Toyota forklifts are deployed in the California DC.
Completed cartons and envelopes from both the main packing area and the pick-to-light packing stations are transported via roller conveyors to a sliding shoe sorter supplied by Hytrol. The cartons are sorted to 36 destination bins based on ZIP code. (The company also employs routing software from Creative Logistics Solutions.)
Bastian used a similar sorting layout in the California facility, with one difference. At the Torrance building, it installed a Bastian ZiPline high-speed cross-belt sorter, rather than the sliding shoe model. (The sliding shoe sorter, which has a high capacity, was chosen for Ohio to accommodate the higher volumes processed at that facility.)
As for how it has all worked out, Dollar Shave Club says it has been very pleased with the productivity and flexibility it gained by opening its own distribution facilities. The company is meeting its goal of shipping orders within 24 hours of receipt, and it views both operations as a step up from the days when the e-tailer relied on a third party for fulfillment.
"It's all about the member experience. When they place an order, we can ship it as quickly and efficiently as possible," says Jackson. "We are able to now offer the same high level of service to all of our members across the country."
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.”