Fast-paced automated DC meets growing grocer's need for speed
For a Japanese wholesaler, automated storage systems and other sophisticated technology speed up the distribution of food and household goods to the nation's biggest grocery chain.
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.
The distribution business rarely stands still for long, especially when your major clients alter their own distribution patterns. Growth often spurs change. Requirements for greater accuracy and throughput can also be drivers. So can concerns about the availability of a suitable workforce. And sometimes, it is all of the above.
Such was the case with Itochu-Shokuhin Co. (ISC), a Japanese wholesaler founded in 1886. Among its leading clients is Seven & i Holdings, which is the largest retailer in Japan and fifth largest in the world. In addition to department stores, grocery stores, and restaurants, Seven & i owns convenience stores, including Japan's 7-Eleven stores, a familiar brand in the United States. Seven & i also added the U.S. 7-Eleven stores to its fold in 2005.
As Seven & i has grown over the years, ISC has had to adjust its network to keep pace. One example of that is the upgrade ISC made to the facility it manages in Sagamihara City in Kanagawa prefecture. The building, a grocery distribution center dedicated to the supermarket chain Ito-Yokado (a company within the Seven & i Holdings group), is relatively new, having opened in 1999. Nonetheless, it has already undergone a renovation. A few years back, the center was outfitted with new automated systems to accommodate its client's rapidly growing volume demands.
"We were stretched before, and we knew we needed the automation to maintain quality while handling more customer orders and a wider range of products. Automation reduces the risk," says Logistics Manager Shintaro Kakoi.
The multilevel facility covers a footprint of nearly 22,000 square meters (237,000 square feet) and serves 80 grocery stores in the Tokyo area. The new technologies have increased speed and accuracy, but they were also implemented to address the shortage of available labor in Japan's aging population.
"Automation makes the work simpler, so it opens jobs up to a wider range of workers," says Kakoi. It also makes the work easier—especially in the case of jobs that would normally require significant physical strength. "We can now hire people who are older to do that work because of the automation," he adds.
The Sagamihara building's automation, supplied by Daifuku, is quite extensive. The facility boasts five different automated storage systems, including three pallet automated storage and retrieval systems (AS/RS), a miniload for cases, and a shuttle storage system. A fleet of sorting transfer vehicles that ride on rails connects many of the storage areas to order fulfillment areas. Other operations in the building are fed by more than 5,500 meters (approximately 3 1/2 miles) of conveyors. A sliding shoe sorter with 42 diverts serves the shipping area, and a number of vertical lifts raise and lower products to the building's different floors. On average, the automated system holds nearly 400,000 cases at any given time.
The facility also relies on technology to direct picking, using both pick-to-light and radio-frequency (RF)-directed systems. All together, the automation allows the facility to process over 145,000 lots daily, composed of both food and non-food products.
TAILOR-MADE STORAGE
Although the Sagamihara facility does not handle fresh foods, many of the goods it distributes do have a short shelf life. As a result, products typically remain in the facility no longer than 10 days. The operation processes goods on a first-in/first-out basis to assure freshness. About 13,000 stock-keeping units (SKUs) are housed in the building at any given time—about 9,600 food items and 3,400 non-food products.
The facility has a total of 105 truck positions used for receiving and shipping. Products typically arrive in the morning, while orders are filled in the afternoon and delivered to stores that evening or the next morning.
Forklifts supplied by UniCarriers unload pallets from arriving trucks at ground level for transport to the vertical lifts, which raise them to the three AS/RSs located on the building's third floor. Two of the AS/RS systems store unit loads (pallets) of food products, while the third handles non-food pallets.
The largest of the food AS/RS units holds 9,792 pallets of faster-moving "A" products. Each of the nine aisles has two cranes that work in concert to deliver products to opposite ends of the aisles. Having more than one crane per aisle increases uptime and access to the storage positions, and also results in greater throughput for the system. Pallets that are discharged from the AS/RS are raised by pallet lifters to the fourth floor, where they are rolled onto 15 sorting transfer vehicles (STVs) that ride on rails. The STVs deliver the pallets to either the food miniload (case unit-load AS/RS) or one of six stations where workers batch-pick cases from the pallets, labeling them for Ito-Yokado's stores as they deposit them on an adjacent conveyor. Some of these cases will also be used to replenish the split-case picking areas.
Pallets that still contain more than two cases after picking go back onto the STVs to be returned to the AS/RS. If a pallet contains just one or two cases, however, the worker may be instructed to pick these items rather than return a nearly empty pallet to unit-load storage. In this case, the system will divert the cases to the miniload automated storage system to be held until needed.
The smaller food AS/RS holds 4,986 pallets and contains four aisles, with a single crane that has access to all nine levels of the system operating in each aisle. This area holds slower-moving foods and is served by the STVs, which also deliver pallets to the adjacent large AS/RS for case picking.
The third AS/RS holds pallets of "everyday products," which are household and non-food items sold in the grocery stores. The DC does not ship full cases of these products to the stores, so this system holds products used to replenish a separate split-case processing area.
Individual cases of slower-moving food items are stored in the 19-level automated miniload, which has the capacity to store 42,408 cases. The cases are removed from their pallets in receiving and automatically conveyed into this system, which features 12 rows equipped with cranes for putaway and retrieval. Cases are removed from the system when needed for an order that will ship directly to a store. The case is retrieved and its bar code scanned by a fixed reader. A label is generated and automatically applied, and the case is then conveyed to the shipping sorter. Cases needed to replenish picking areas are conveyed to the facility's pick modules.
Medium-fast-moving ("B") cases of food products are stored in yet another automated system—in this case, a shuttle system. The system contains four rows and 17 levels where 34 shuttles (two per level) store and retrieve goods. The shuttles discharge cases onto vertical lifters at each end. As with the miniload, products from this area can be sent directly to the shipping sorter.
SPLIT-SECOND PRECISION
The split-case picking area for food products is housed in a two-level module. The cases here are stored by food type in flow racks. Fifty manual pick carts are used to gather items into four staged totes that ride along on each cart. Totes holding food products are colored green to differentiate them from other totes in the facility.
A display mounted on the cart tells the associate the location of a needed item and the quantity to select. After selecting the specified number of items, the worker scans them to confirm the right product has been chosen. Lights on the cart indicate which tote should receive the items. The carts are designed so that each tote sits on a scale that tracks the weight of the gathered load and compares the total with the expected weight. Once picking is complete, the associate wheels the cart to a takeaway conveyor for transport to the shipping sorter.
A separate two-level picking area is used for split-case picking of non-food items. The process is identical to the procedure followed in the food picking zones, using the carts, displays, and indicator lights, except that non-food items are picked into orange-colored totes.
The fastest-moving items are selected as full cases on the first floor of the building in a separate area designed for this purpose. In this zone, known as the Food Case SA area, products can be picked in one of two ways. The highest-demand products are placed next to conveyors so they can be quickly picked onto a belt using pick lists. These products will later be transferred onto wheeled delivery trolleys that can be rolled right onto trucks. Slower-moving items that are not located near the belt conveyor are also selected using pick lists. They are then checked with RF devices and placed directly onto trolleys for shipping.
An additional area on the first floor houses pharmaceutical items, which for security and tracking purposes are kept separate from the other product storage and picking areas. Between 200 and 300 different SKUs are typically processed in this area on any given day. By the end of the day, every item from the pharmaceutical area will be picked. Nothing remains for the next day.
Finally, a temperature-controlled area on the first floor holds products like sweets and chocolates, which are stored at a temperature of 55 degrees Fahrenheit. In this area, workers either pick full cases onto trolleys or gather single items into green totes sitting on the trolleys. Insulated blankets are draped over the trolleys to keep the items cool during transport.
All of these picking activities are timed to bring products together at the shipping area to meet a dispatch schedule. Items from the automated storage systems and the picking areas converge into the sliding shoe "surfing" sorter, which can handle 10,000 cases per hour. The sorter has 42 divert lanes to gather cases and totes. Each of the divert lanes is dedicated to collecting products for specific stores. Because there are 80 stores to serve, each lane must handle two or more stores. However, products are gathered for one store at a time.
Once diverted to the lanes, the cases and totes are manually placed onto trolleys. The worker hand scans each case as it is loaded as a final accuracy check. The trolleys are then rolled onto delivery trucks. When the trucks arrive at their destination, the trolleys can be rolled right into the stores for direct putaway on store shelves.
About 10 percent of the products that enter the facility are simply cross-docked upon arrival. These cases are placed onto conveyors in receiving and then pass through the sliding shoe sorter to the store divert lanes, where they are gathered with the rest of the cases and totes.
PRODUCTIVE AND ACCURATE
Each day, the facility ships between 100,000 and 120,000 cases with a high degree of accuracy, thanks to the scanners, weigh systems, and software that tracks them all. Without the degree of automation found in the Sagamihara facility, Itochu-Shokuhin would not be able to meet the growing demands of Seven & i Holdings.
"The facility has met our goals," says Kakoi. "From receiving to shipping, our productivity has doubled with the automation."
Kakoi says the automation in the Sagamihara facility will be the model for the company's future distribution operations. He adds that working with Daifuku through the years has been important to the company's success.
"They understand what we do and how our business works. And they know the best system for our operations. They were able to look at the greater picture to understand our needs," he says. "And we also have systems now that older associates can work with—without the heavy lifting."
Economic activity in the logistics industry expanded in January, growing at its fastest clip in more than two years, according to the latest Logistics Managers’ Index (LMI) report, released this week.
The LMI jumped nearly five points from December to a reading of 62, reflecting continued steady growth in the U.S. economy along with faster-than-expected inventory growth across the sector as retailers, wholesalers, and manufacturers attempted to manage the uncertainty of tariffs and a changing regulatory environment. The January reading represented the fastest rate of expansion since June 2022, the LMI researchers said.
An LMI reading above 50 indicates growth across warehousing and transportation markets, and a reading below 50 indicates contraction. The LMI has remained in the mid- to high 50s range for most of the past year, indicating moderate, consistent growth in logistics markets.
Inventory levels rose 8.5 points from December, driven by downstream retailers stocking up ahead of the Trump administration’s potential tariffs on imports from Mexico, Canada, and China. Those increases led to higher costs throughout the industry: inventory costs, warehousing prices, and transportation prices all expanded to readings above 70, indicating strong growth. This occurred alongside slowing growth in warehousing and transportation capacity, suggesting that prices are up due to demand rather than other factors, such as inflation, according to the LMI researchers.
The LMI is a monthly survey of logistics managers from across the country. It tracks industry growth overall and across eight areas: inventory levels and costs; warehousing capacity, utilization, and prices; and transportation capacity, utilization, and prices. The report is released monthly by researchers from Arizona State University, Colorado State University, Rochester Institute of Technology, Rutgers University, and the University of Nevada, Reno, in conjunction with the Council of Supply Chain Management Professionals (CSCMP).
As commodities go, furniture presents its share of manufacturing and distribution challenges. For one thing, it's bulky. Second, its main components—wood and cloth—are easily damaged in transit. Third, much of it is manufactured overseas, making for some very long supply chains with all the associated risks. And finally, completed pieces can sit on the showroom floor for weeks or months, tying up inventory dollars and valuable retail space.
In other words, the furniture market is ripe for disruption. And John "Jay" Rogers wants to be the catalyst. In 2022, he cofounded a company that takes a whole new approach to furniture manufacturing—one that leverages the power of 3D printing and robotics. Rogers serves as CEO of that company, Haddy, which essentially aims to transform how furniture—and all elements of the "built environment"—are designed, manufactured, distributed, and, ultimately, recycled.
Rogers graduated from Princeton University and went to work for a medical device startup in China before moving to a hedge fund company, where he became a Chartered Financial Analyst (CFA). After that, he joined the U.S. Marine Corps, serving eight years in the infantry. Following two combat tours, he earned an MBA from the Harvard Business School and became a consultant for McKinsey & Co.
During this time, he founded Local Motors, a next-generation vehicle manufacturer that launched the world's first 3D-printed car, the Strati, in 2014. In 2021, he brought the technology to the furniture industry to launch Haddy. The father of four boys, Rogers is also a director of the RBR Foundation, a philanthropic organization focused on education and health care.
Rogers spoke recently with DC Velocity Group Editorial Director David Maloney on an episode of the "Logistics Matters" podcast.
Q: Could you tell us about Haddy and how this unique company came to be?
A: Absolutely. We have believed in the future of distributed digital manufacturing for a long time. The world has gone from being heavily globalized to one where lengthy supply chains are a liability—thanks to factors like the growing risk of terrorist attacks and the threat of tariffs. At the same time, there are more capabilities to produce things locally. Haddy is an outgrowth of those general trends.
Adoption of the technologies used in 3D printing has been decidedly uneven, although we do hear about applications like tissue bioprinting and food printing as well as the printing of trays for dental aligners. At Haddy, we saw an opportunity to take advantage of large-scale structural printing to approach the furniture and furnishings industry. The technology and software that make this possible are already here.
Q: Furniture is a very mature market. Why did you see this as a market that was ripe for disruption?
A:The furniture market has actually been disrupted many times in the last 200 years. The manufacturing of furniture for U.S. consumption originally took place in England. It then moved to Boston and from there to New Amsterdam, the Midwest, and North Carolina. Eventually, it went to Taiwan, then China, and now Vietnam, Indonesia, and Thailand. And each of those moves brought some type of disruption.
Other disruptions have been based on design. You can look at things like the advent of glue-laminated wood with Herman Miller, MillerKnoll, and the Eames [furniture design and manufacturing] movement. And you can look at changes in the way manufacturing is powered—the move from manual operations to machine-driven operations powered by steam and electricity. So the furniture industry has been continuously disrupted, sometimes by labor markets and sometimes by machines and methods.
What's happening now is that we're seeing changes in the way that labor is applied in furniture manufacturing. Furniture has traditionally been put together by human hands. But today, we have an opportunity to reassign those hands to processes that take place around the edges of furniture production. The hands are now directing robotics through programming and design; they're not actually making the furniture.
And so, we see this mature market as being one that's been continuously disrupted during the last 200 years. And this disruption now has a lot to do with changing the way that labor interacts with the making of furniture.
Q: How do your 3D printers actually create the furniture?
A:All 3D printing is not the same. The 3D printers we use are so-called "hybrid" systems. When we say hybrid, what we mean is that they're not just printers—they are holders, printers, polishers, and cutters, and they also do milling and things like that. We measure things and then print things, which is the additive portion. Then we can do subtractive and polishing work—re-measuring, moving, and printing parts again. And so, these hybrid systems are the actual makers of the furniture.
Q: What types of products are you making?
A: We've started with hardline or case goods, as they're sometimes known, for both residential and commercial use—cabinets, wall bookshelves, freestanding bookshelves, tables, rigid chairs, planters, and the like. Basically, we've been concentrating on products that don't have upholstery.
It's not that upholstery isn't necessary in furniture, as it is used in many pieces. But right now, we have found that digital furniture manufacturing becomes analog again when you have to factor in the sewing process. And so, to move quickly and fully leverage the advantages of digital manufacturing, we're sticking to the hardline groups, except for a couple of pieces that we have debuted that have 3D-printed cushions, which are super cool.
Q: Of course, 3D printers create objects in layers. What types of materials are you running through your 3D printers to create this furniture?
A: We use recycled materials, primarily polymer composites—a bio-compostable polymer or a synthetic polymer. We look for either recycled or bio-compostable [materials], which we then reinforce with fibers and fillers, and that's what makes them composites. To create the bio-compostables, we marry them with bio-fibers, such as hemp or bamboo. For synthetic materials, we marry them with things like glass or carbon fibers.
Q: Does producing goods via 3D printing allow you to customize products easily?
A: Absolutely. The real problem in the furniture and furnishings industries is that when you tool up to make something with a jig, a fixture, or a mold, you tend to be less creative because you now feel you have to make and sell a lot of that item to justify the investment.
One of the great promises of 3D printing is that it doesn't have a mold and doesn't require tooling. It exists in the digital realm before it becomes physical, and so customization is part and parcel of the process.
I would also add that people aren't necessarily looking for one-off furniture. Just because we can customize doesn't mean we're telling customers that once we've delivered a product, we break the digital mold, so to speak. We still feel that people like styles and trends created by designers, but the customization really allows enterprise clients—like businesses, retailers, and architects—to think more freely.
Customization is most useful in allowing people to "iterate" quickly. Our designers can do something digitally first without having to build a tool, which frees them to be more creative. Plus, because our material is fully recyclable, if we print something for the first time and find it doesn't work, we can just recycle it. So there's really no penalty for a failed first printing—in fact, those failures bring their own rewards in the form of lessons we can apply in future digital and physical iterations.
Q: You currently produce your furniture in an automated microfactory in Florida, with plans to set up several more. Could you talk a little about what your microfactory looks like and how you distribute the finished goods?
A: Our microfactory is a 30,000-square-foot box that mainly contains the robots that make our furniture along with shipping docks. But we don't intend for our microfactories to be storage warehouses and trans-shipment facilities like the kind you'd typically see in the furniture industry—all of the trappings of a global supply chain. Instead, a microfactory is meant to be a site where you print the product, put it on a dock, and then ship it out. So a microfactory is essentially an enabler of regional manufacturing and distribution.
Q: Do you manufacture your products on a print-to-order basis as opposed to a print-to-stock model?
A: No. We may someday get to the point where we receive an order digitally, print it, and then send it out on a truck the next day. But right now, we aren't set up to do a mini-delivery to one customer out of a microfactory.
We are an enterprise company that partners with architects, designers, builders, and retailers, who then distribute our furnishings to their customers. We are not trying to go direct-to-consumer at this stage. It's not the way a microfactory is set up to distribute goods.
Q: You've mentioned your company's use of recycled materials. Could you talk a little bit about other ways you're looking to reduce waste and help support a circular economy?
A: Yes. Sustainability and a circular economy are really something that you have to plan for. In our case, our plans call for moving toward a distributed digital manufacturing model, where we establish microfactories in various regions around the world to serve customers within a 10-hour driving radius of the factory. That is a pretty large area, so we could cover the United States with just four or five microfactories.
That also means that we can credibly build our recycling network as part of our microfactory setup. As I mentioned, we use recycled polymer stock in our production, so we're keeping that material out of a landfill. And then we tell our enterprise customers that while the furniture they're buying is extremely durable, when they're ready to run a special and offer customers a credit for turning in their used furniture, we'll buy back the material. Buying back that material actually reduces our costs because it's already been composited and created and recaptured. So our microfactory network is well designed for circularity in concert with our enterprise customers.
Generative AI (GenAI) is being deployed by 72% of supply chain organizations, but most are experiencing just middling results for productivity and ROI, according to a survey by Gartner, Inc.
That’s because productivity gains from the use of GenAI for individual, desk-based workers are not translating to greater team-level productivity. Additionally, the deployment of GenAI tools is increasing anxiety among many employees, providing a dampening effect on their productivity, Gartner found.
To solve those problems, chief supply chain officers (CSCOs) deploying GenAI need to shift from a sole focus on efficiency to a strategy that incorporates full organizational productivity. This strategy must better incorporate frontline workers, assuage growing employee anxieties from the use of GenAI tools, and focus on use-cases that promote creativity and innovation, rather than only on saving time.
"Early GenAI deployments within supply chain reveal a productivity paradox," Sam Berndt, Senior Director in Gartner’s Supply Chain practice, said in the report. "While its use has enhanced individual productivity for desk-based roles, these gains are not cascading through the rest of the function and are actually making the overall working environment worse for many employees. CSCOs need to retool their deployment strategies to address these negative outcomes.”
As part of the research, Gartner surveyed 265 global respondents in August 2024 to assess the impact of GenAI in supply chain organizations. In addition to the survey, Gartner conducted 75 qualitative interviews with supply chain leaders to gain deeper insights into the deployment and impact of GenAI on productivity, ROI, and employee experience, focusing on both desk-based and frontline workers.
Gartner’s data showed an increase in productivity from GenAI for desk-based workers, with GenAI tools saving 4.11 hours of time weekly for these employees. The time saved also correlated to increased output and higher quality work. However, these gains decreased when assessing team-level productivity. The amount of time saved declined to 1.5 hours per team member weekly, and there was no correlation to either improved output or higher quality of work.
Additional negative organizational impacts of GenAI deployments include:
Frontline workers have failed to make similar productivity gains as their desk-based counterparts, despite recording a similar amount of time savings from the use of GenAI tools.
Employees report higher levels of anxiety as they are exposed to a growing number of GenAI tools at work, with the average supply chain employee now utilizing 3.6 GenAI tools on average.
Higher anxiety among employees correlates to lower levels of overall productivity.
“In their pursuit of efficiency and time savings, CSCOs may be inadvertently creating a productivity ‘doom loop,’ whereby they continuously pilot new GenAI tools, increasing employee anxiety, which leads to lower levels of productivity,” said Berndt. “Rather than introducing even more GenAI tools into the work environment, CSCOs need to reexamine their overall strategy.”
According to Gartner, three ways to better boost organizational productivity through GenAI are: find creativity-based GenAI use cases to unlock benefits beyond mere time savings; train employees how to make use of the time they are saving from the use GenAI tools; and shift the focus from measuring automation to measuring innovation.
According to Arvato, it made the move in order to better serve the U.S. e-commerce sector, which has experienced high growth rates in recent years and is expected to grow year-on-year by 5% within the next five years.
The two acquisitions follow Arvato’s purchase three months ago of ATC Computer Transport & Logistics, an Irish firm that specializes in high-security transport and technical services in the data center industry. Following the latest deals, Arvato will have a total U.S. network of 16 warehouses with about seven million square feet of space.
Terms of the deal were not disclosed.
Carbel is a Florida-based 3PL with a strong focus on fashion and retail. It offers custom warehousing, distribution, storage, and transportation services, operating out of six facilities in the U.S., with a footprint of 1.6 million square feet of warehouse space in Florida (2), Pennsylvania (2), California, and New York.
Florida-based United Customs Services offers import and export solutions, specializing in remote location filing across the U.S., customs clearance, and trade compliance. CTPAT-certified since 2007, United Customs Services says it is known for simplifying global trade processes that help streamline operations for clients in international markets.
“With deep expertise in retail and apparel logistics services, Carbel and United Customs Services are the perfect partners to strengthen our ability to provide even more tailored solutions to our clients. Our combined knowledge and our joint commitment to excellence will drive our growth within the US and open new opportunities,” Arvato CEO Frank Schirrmeister said in a release.
And many of them will have a budget to do it, since 51% of supply chain professionals with existing innovation budgets saw an increase earmarked for 2025, suggesting an even greater emphasis on investing in new technologies to meet rising demand, Kenco said in its “2025 Supply Chain Innovation” survey.
One of the biggest targets for innovation spending will artificial intelligence, as supply chain leaders look to use AI to automate time-consuming tasks. The survey showed that 41% are making AI a key part of their innovation strategy, with a third already leveraging it for data visibility, 29% for quality control, and 26% for labor optimization.
Still, lingering concerns around how to effectively and securely implement AI are leading some companies to sidestep the technology altogether. More than a third – 35% – said they’re largely prevented from using AI because of company policy, leaving an opportunity to streamline operations on the table.
“Avoiding AI entirely is no longer an option. Implementing it strategically can give supply chain-focused companies a serious competitive advantage,” Kristi Montgomery, Vice President, Innovation, Research & Development at Kenco, said in a release. “Now’s the time for organizations to explore and experiment with the tech, especially for automating data-heavy operations such as demand planning, shipping, and receiving to optimize your operations and unlock true efficiency.”
Among the survey’s other top findings:
there was essentially three-way tie for which physical automation tools professionals are looking to adopt in the coming year: robotics (43%), sensors and automatic identification (40%), and 3D printing (40%).
professionals tend to select a proven developer for providing supply chain innovation, but many also pick start-ups. Forty-five percent said they work with a mix of new and established developers, compared to 39% who work with established technologies only.
there’s room to grow in partnering with 3PLs for innovation: only 13% said their 3PL identified a need for innovation, and just 8% partnered with a 3PL to bring a technology to life.