Victoria Kickham started her career as a newspaper reporter in the Boston area before moving into B2B journalism. She has covered manufacturing, distribution and supply chain issues for a variety of publications in the industrial and electronics sectors, and now writes about everything from forklift batteries to omnichannel business trends for DC Velocity.
What’s the best way to address double-digit growth in a high-velocity distribution center (DC)? For many companies, an automated storage and retrieval system (AS/RS) is the answer because it can provide both the high-density storage and automated picking needed for high-volume operations—allowing them to get more orders out the door at a faster clip.
The fast-paced foodservice equipment and pharmaceutical industries offer pointed examples of just how big a difference an AS/RS can make when business accelerates. Illinois-based foodservice equipment replacement parts company Parts Town is on its third expansion with the AutoStore AS/RS solution, and India-based pharmaceutical company Aurobindo Pharma has expanded with a StorFast AS/RS at its New Jersey DC, for example. Leaders at both companies say their investments have paid off in space savings, enhanced throughput, and improved accuracy—which have helped set the stage for more growth ahead.
MULTIPHASED EXPANSION
Addison, Illinois-based Parts Town has been selling replacement parts to the commercial foodservice industry for 35 years. According to Senior Director of Process Improvement Kenny William, the company has experienced between 20% and 40% growth annually since 2004—with the exception of 2020, when the pandemic drastically slowed business for restaurants nationwide. But business was booming in 2016, when company leaders began to explore expansion options at the operation’s Addison DC, where small parts were flying out the door at record speed.
“With all of our growth, we were looking at what our future would look like when we were four times larger,” explains William, noting that at the time, Parts Town utilized 16 pickers per day, working staggered shifts, who filled orders using a mostly manual, grocery-style picking process. “[Expanding] wouldn’t work without gridlock. So we determined we needed an accelerator—some sort of automated system.”
Parts Town teamed up with material handling systems integrator Bastian Solutions and warehouse automation specialist AutoStore to implement AutoStore’s AS/RS, which combines product bins, robots, picking and putaway ports, a storage and retrieval “grid,” and a software-based controller to move inventory in and out of storage for automated fulfillment. The partners built the AS/RS inside a 300,000-square-foot, state-of-the-art DC designed to accommodate Parts Town’s future growth.
The new facility was up and running by the end of 2017, with an AutoStore that had a relatively small footprint, according to William—the AS/RS had about 15,000 bins and featured three picking ports, two putaway ports, and 21 robots to transport items through the system. Parts Town has expanded the system a few times since then. A large project that went live in August 2019 increased the bin count to more than 40,000, and added 16 picking ports and more than 100 robots.
Accuracy and storage optimization are the hallmarks of the project to date: Parts Town’s picking accuracy has improved by more than 50% since implementing AutoStore, and the robots handle roughly 75% of parts picks in just 7% of the total DC space.
“The combination of saving space and increasing efficiency quickly became the most apparent benefit,” William explains.
The AS/RS has allowed Parts Town to consolidate parts storage and picking, improve order quality and accuracy, and reduce its need to hire in a tough labor market. Operating on its previous model, the company would have needed to go from 16 pickers per day in 2016 to 170 pickers per day today in order to handle the increased volume—Parts Town filled an average 6,000 lines per day in 2016 compared with about 24,000 lines per day currently. Thanks to the AutoStore, Parts Town has only had to grow to 80 pickers per day.
“It’s labor, it’s consolidation of orders, it’s quality,” adds William. “Our labor savings will be in the millions of dollars when we are done. I think the way to say it is this: If all your inventory was in the AutoStore, you could pick four to five times faster.”
A portion of Parts Town’s inventory is stored outside the AS/RS. Oversized and slow-moving items, for example, are housed in floor-to-ceiling narrow-aisle racking accessed by wire-guided, very narrow-aisle (VNA) forklifts.
“That space is made available by the very fact that we have so much in the AutoStore,” William adds.
With the 2020 slowdown in its rearview mirror, Parts Town is back to double-digit growth and in need of another AutoStore expansion. Bastian Solutions began a project this past summer that will bring the size of Parts Town’s AutoStore to 55,000 bins, 29 ports, and 125 robots.
MANAGING INTERNATIONAL GROWTH
Aurobindo Pharma has a similar growth story. Faced with double-digit increases year over year and an expanding international business, the maker of generic pharmaceuticals has turned to warehouse automation to speed throughput and improve performance globally. In 2016, the company broke ground on a 567,000-square-foot facility in East Windsor, New Jersey, to serve as the distribution hub for its U.S. division, Aurobindo Pharma USA. The facility ships more than 200 million units per year to hospitals, doctors’ offices, commercial pharmacies, and retail outlets nationwide. The only way to meet that volume and expected future demand was an AS/RS, according to company leaders.
So they turned to industrial packaging equipment manufacturer Signode and its StorFast AS/RS. Aurobindo had implemented a StorFast system at one of its manufacturing sites in India and sought to replicate the success at the New Jersey DC. The shuttle- and cart-based system provides high-density storage and movement of pallets in and out of the DC, forming the core of a larger operating system that manages and tracks the location of every pallet. The system is integrated with Aurobindo’s enterprise resource planning (ERP) and warehouse management system (WMS) to protect and secure products throughout their journey.
All of Aurobindo Pharma USA’s products arrive from India and are tracked and traced in the system. Pallets are sorted and placed in the most appropriate location—based on volume, product type, expiration date, and other factors—and then stored until needed based on order fulfillment requirements. As one example, high-demand products are positioned closer to the front of the DC.
Aurobindo fills large and small orders from the New Jersey facility, including full pallets and cases for wholesalers and retailers as well as individual cartons for doctors’ offices and pharmacies. Some orders will contain multiple products and must be assembled by pulling from various pallets. The StorFast system knows which pallet to pull from, and if there is a pre-picked partial pallet that meets the need, it pulls from there instead of retrieving a full pallet.
“AS/RS is the best thing we’ve ever invested in,” Lorie Johnson Lawson, Aurobindo’s distribution manager for inbound import receiving, said in a statement describing the project. “From where we are now, we can move more product faster and with greater accuracy to our customers.”
And they also have room to grow. The StorFast system increased Aurobindo’s warehouse storage capacity to 34,000 pallets from 7,000 pallets, and the company is currently using about 55% of that storage space. Future plans include expanding the system to hold more than 40,000 pallets.
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.
The market for environmentally friendly logistics services is expected to grow by nearly 8% between now and 2033, reaching a value of $2.8 billion, according to research from Custom Market Insights (CMI), released earlier this year.
The “green logistics services market” encompasses environmentally sustainable logistics practices aimed at reducing carbon emissions, minimizing waste, and improving energy efficiency throughout the supply chain, according to CMI. The market involves the use of eco-friendly transportation methods—such as electric and hybrid vehicles—as well as renewable energy-powered warehouses, and advanced technologies such as the Internet of Things (IoT) and artificial intelligence (AI) for optimizing logistics operations.
“Key components include transportation, warehousing, freight management, and supply chain solutions designed to meet regulatory standards and consumer demand for sustainability,” according to the report. “The market is driven by corporate social responsibility, technological advancements, and the increasing emphasis on achieving carbon neutrality in logistics operations.”
Major industry players include DHL Supply Chain, UPS, FedEx Corp., CEVA Logistics, XPO Logistics, Inc., and others focused on developing more sustainable logistics operations, according to the report.
The research measures the current market value of green logistics services at $1.4 billion, which is projected to rise at a compound annual growth rate (CAGR) of 7.8% through 2033.
The report highlights six underlying factors driving growth:
Regulatory Compliance: Governments worldwide are enforcing stricter environmental regulations, compelling companies to adopt green logistics practices to reduce carbon emissions and meet legal requirements.
Technological Advancements: Innovations in technology, such as IoT, AI, and blockchain, enhance the efficiency and sustainability of logistics operations. These technologies enable better tracking, optimization, and reduced energy consumption.
Consumer Demand for Sustainability: Increasing consumer awareness and preference for eco-friendly products drive companies to implement green logistics to align with market expectations and enhance their brand image.
Corporate Social Responsibility (CSR): Companies are prioritizing sustainability in their CSR strategies, leading to investments in green logistics solutions to reduce environmental impact and fulfill stakeholder expectations.
Expansion into Emerging Markets: There is significant potential for growth in emerging markets where the adoption of green logistics practices is still developing. Companies can capitalize on this by introducing sustainable solutions and technologies.
Development of Renewable Energy Solutions: Investing in renewable energy sources, such as solar-powered warehouses and electric vehicle fleets, presents an opportunity for companies to reduce operational costs and enhance sustainability, driving further market growth.
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.”