Short Takes: Genie in the Bottleneck

It may be a cliché to say that business savvy lies in managing people, processes, and technology properly, but it’s still remarkable that some companies handle this combination so much better than others. And a few are so successful that you wonder just what magic ingredient they use to bewitch the brew.

Chances are that the formula is often a mix of old and new, simple and complex. That recipe certainly works for CDW Computer Centers Inc., a technology products merchandiser based in Vernon Hills, IL. For a venture that entrepreneur Michael Krasny started in 1982 by selling his own used personal computer (hence the abbreviation, which stood for Computer Discount Warehouse), CDW has come a long way — all the way to a spot on the Fortune 500, and for three years in a row since 1998, to the Fortune 100 list of best companies in the country to work for.

To sell brands like Cisco, Compaq, and Hewlett-Packard to the small and medium-sized businesses that form the bulk of its accounts, CDW relies on a sophisticated distribution network that includes direct marketing, retail showrooms, outside sales teams, and an online store. In the fall of 2001, it completed a major expansion of its distribution center to manage increasing growth. Operations & Fulfillment spoke with Doug Eckrote, CDW’s vice president of purchasing and operations, about the new facility.

What processes contribute to efficiency in the expanded DC?

Our automation is the key to our productivity and efficiency. There’s a lot of automation that you can put in, but before we do it, we actually weigh how much labor savings we’re going to get through each process and then decide whether it makes sense based on the payback. You definitely could go to other warehouses and see other types of automation that aren’t here, but we get it down to how many seconds each process is going to save us on an order, what type of additional customer service is needed, whether there’s going to be a different type of packaging material — that’s what we look at when we make decisions to automate.

You have many distribution channels. How do you keep them integrated?

We offer lots of options for our customers. Our telemarketing department takes inbound calls and makes outbound calls to customers to build relationships. Our wholly owned subsidiary, CDW-G, has feet on the street serving federal and local governments and education. But from a distribution standpoint, it really doesn’t matter which avenue the customer places the order in. We process the order in the same manner.

Are your information systems off the shelf or proprietary?

All our systems, including distribution and sales, are written in-house. We’re big on building relationships on the sales side, so that even if our customers place an order on the Web, they still have a dedicated account manager who follows up with a phone call. Our sales reps have all account information available so that they can pull up information on a customer and see everything they’ve done with him.

The advantage of developing systems in-house is that you can turn quickly. If we wanted to make a change from the standpoint of automation or service, we have the people who wrote the program right here, and they can tweak the program to make slight enhancements. A number of slight enhancements can equal a big enhancement. It’s just a time saver.

Have you beefed up security following last year’s terrorist attacks?

We were already heavy on systems security, and as far as personal security goes, we have made some enhancements, such as in the mailroom, and that’s about it.

Does the facility ship both palletized and piece-pick orders?

We divide our products into two categories. One would be ready-ship, such as monitors, printers, and things that can go in the box that they came in from the manufacturer. Then we have our pick-pack operation. We have a separate area for each, but we can mix them also. So, for instance, if we have a customer who wants to buy 100 monitors, rather than send that whole thing down a conveyor system, we would pull down skids of products, and we have contracts set up with LTL carriers to do that type of shipment.

How do you control bottlenecks?

Through automation, we’re able to get everything done in a single shift set-up. It’s a company philosophy that applies not just to shipping but to receiving, returns, and every other department of the operation. They just don’t go home until everything for that day has been processed. It keeps you from getting bottlenecks. Bottlenecks happen when you don’t finish the job the day before. Eventually it catches up with you, and you end up not hours behind but days behind. We don’t run into that at all. We process everything the same day, every day. We start receiving at 4 a.m. and run live until 8 p.m. to get the last items in to turn around for orders that sales wrote that day. We start running orders at 8 a.m. and continue until 9 p.m. If an order is placed by 8 p.m., if we have the item in stock it will ship that same day.

Have you had difficulty finding permanent or seasonal labor?

We have experienced no problems — when you make the Fortune 100 list of good companies to work for, it makes it easier to find people to work for you. We don’t keep staffing levels any different for peak or off-peak seasons. We run lean all year and stay pretty steady with our headcount.

How do you train and motivate employees?

We do a lot of mentoring in the distribution center. Trainees get not only a basic overview of the company but also hands-on experience alongside someone who’s been there for a long time, plus help from supervisors and managers. They receive training in using the equipment and technology.

We also offer benefits like on-site day care, and a fitness center that’s a hundred yards across the parking lot from here. We’re big on motivating with food as well. We have bagels and doughnuts every Tuesday and Thursday for everybody. The first Wednesday of every month, we bring in Krispy Kreme doughnuts, and we have ice cream in the summer months one day a week. We also do some unique things in the warehouse. In shipping, anybody who’s on our second shift — which starts at one o’clock in the afternoon and goes until we’re done, which is typically ten or eleven o’clock at night — gets free dinner every night in our full-service cafeteria. That’s included in their package. Everybody in that shift gets differential pay as well.

Any other incentives?

We empower people to look for ideas for improvement. A lot of the automation ideas and simple process changes come from the people on the line. They have communication groups and suggestion boxes, and they get $100 if we adopt their idea. People find it easier to implement a change if it comes from someone actually doing the job than from someone on the outside telling them what to do. It makes for good teamwork and a creative environment.

Vital Stats

CDW Computer Centers Inc.

Headquarters and DC: Vernon Hills, IL

Other locations: Buffalo Grove, Chicago, Metawa (IL); Lansdowne, VA

Sales: $3.84 billion in FY 2000

Total employees: 2,700 plus

Contact info: Phone: (847) 465-6000; fax: (847) 465-3444; URL: www.cdw.com

Distribution Center

Size: 450,000 square feet

SKUs: 15,500; items handled range in weight from two ounces to 400 pounds

Shipments: 15,200 orders and 24,000 cases daily

Number of warehouse employees: 405

Orders picked/hour: 1,600 on average

Pick locations: 14 pick modules, each three stories high; processing done on each floor

Packing stations: Six stations; boxes packed with an inflatable product, with CDW logo, toll-free number, and URL added to each packing pillow

Picking method: Orders printed and processed in batches; batch allocations run from 8 a.m. to 9 p.m.; new picks run every half hour; all orders processed by end of day

Material handling equipment: Automated conveyor system, freight system, and sorter; pallet racks, flow racks, small shelves, and a secured chip cage; carousels, tilt-tray sorters

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