Digging for DC Dirt

Apr 01, 2007 9:30 PM  By

It’s probably easier for a fulfillment executive to answer the question “What are you not concerned about?” than to detail his or her primary concerns. After all, distribution center managers have so many issues to deal with: staffing, technology, vendor relationships, intracompany relationships… So Multichannel Merchant rounded up six DC executives to find out what’s on their minds now. Here’s what they had to say.

JIM SPAHN is vice president of distribution for Jacksonville, FL-based Interline Brands, a distributor of maintenance, repair, and operations (MRO) supplies whose brands include Barnett, Hardware Express, Maintenance USA, Sexauer, U.S. Lock, and Wilmar.

What has been your biggest operations concern of the past few years?

First, how to continuously increase productivity while maintaining or reducing operational expenses. Second, neutralizing increasing fuel expenses in an industry like ours that does not charge customers freight expenses.

Many companies are charged with reducing costs without reducing service levels. Has that been the case with you?

We continuously seek ways to reduce costs while maintaining or improving customer service levels. We have implemented initiatives such as expanding our truck delivery routes and cross-dock utilization to save on third-party expenses, more-effective moving equipment in the distribution centers to increase pick speed with fewer people, process-flow reorganization in key centers to eliminate bottlenecks, and RF [radio-frequency] scanning to increase the speed of inbound receipt, which increases fill rate.

Have you made changes to your facility?

Yes — we moved into some new buildings recently. An updated facility does improve productivity, primarily from the implementation of best internal practices for overall layout and process flow.

Will you be investing in technology improvements for your warehouse in the near future?

Our investments will be in moving equipment that will help associates move throughout the facilities consistently during the day.

Have you implemented a lot of automation?

No, ours is still a very manual process due to the high number of SKUs and the very small pick quantities.

MIKE FANTONE is warehouse manager at Creative Irish Gifts, a cataloger of Irish-themed merchandise based in Streetsboro, OH.

What has been your biggest operations concern of the past few years?

Our biggest concern has been finding people with the right skills for the jobs we have available. Our business is very seasonal, and we are busy from late October until the middle of December. We are always looking for people who may only be looking for the extra money for Christmas, but we also find people who are interested in working beyond December.

Many companies are charged with reducing costs without reducing service levels. Has that been the case with you?

As a company we are always looking for ways to improve our bottom line without compromising service levels. To help achieve that goal, we have been shipping with FedEx SmartPost [since September 2005]. It helps reduce costs but adds a day or two to transit times. We have also reorganized our warehouse picking, packing, and shipping areas to provide a smoother flow. We added flow racks and changed the flow of our picking area by making it a loop instead of a maze.

Do you work with the merchandising or marketing department to make sure products will fit in your boxes and be shipped without getting damaged?

When we are picking the merchandise for upcoming catalogs, we do not always receive the items in the cartons they will actually arrive to the warehouse in. We have a good idea of how fragile the items will be, but we really don’t get advance notice. We have a good relationship with our carton supplier, and they are responsive to our needs when we have special requirements for “off size” cartons.

TONY DEELY is fulfillment director of Tipton, PA-based New Pig Corp., a manufacturer/marketer of industrial clean-up supplies.

What has been your biggest operations concern of the past few years?

Identifying and developing opportunities to reduce or control costs while sustaining or improving service, specifically in two areas: 1) finding ways to use technology to streamline or simplify operations to reduce growth in people costs while the business grows and preparing the product offering for sale becomes more complicated, and 2) finding new and innovative ways to manage and control transportation costs.

Have you made changes to your facility?

We built a new warehouse in 2003 as part of our recovery from a fire…and yes, it has helped us operate better. [A fire destroyed New Pig's main warehouse and call center on Halloween 2003.]

Will you be investing in technology improvements for your warehouse in the near future?

Yes, continued use of technology like wireless computers and scanners.

Have you implemented a lot of automation?

Yes, new warehouse management software, new shipping software, and we’re currently getting ready to implement a small-scale slap-and-ship RFID application.

DANIEL KNIGHT is director for fulfillment quality assurance for the Roanoke, VA, distribution center of Home Shopping Network (HSN). HSN is part of IAC/InterActiveCorp, whose other properties include multititle mailer Cornerstone Brands.

What has been your biggest operations concern of the past few years?

Managing the large number of new product lines that are coming to HSN. It can be challenging integrating these new vendors into the HSN business culture. As with most companies, HSN has specific requirements for product quality and vendor compliance. These requirements can sometimes prove challenging for new vendors, especially when they are smaller start-up operations.

In 2006, HSN launched two initiatives designed to facilitate the on-boarding process for our partners. First, we completely redesigned and reformatted our supply chain requirements manual and made it available to all vendors via our b-to-b Website. This provides all partners with 24/7 access to our most current policies and expectations. The second initiative was to launch our new-partner orientation program. With this program, new partners spend two days on our campus in St. Petersburg, FL, and meet directly with representatives from every aspect of our organization — logistics, merchandising, accounting, quality assurance, broadcasting, fulfillment, etc.

Many companies say they’re charged with reducing costs without reducing service levels. Has that been the case with you?

Constantly reducing CPU [cost per unit] while continuously improving service levels should always be the goal of management. Of course, this is easier said than done. At HSN we’ve achieved success in this area by investing in our infrastructure and our employees. We’ve had an aggressive drive over the past few years to minimize our turnover and improve the overall quality of our workforce. But our real focus has been an absolute refusal to compromise on service metrics.

Have you implemented a lot of automation?

HSN implemented several new automated processes in 2006. For example, we launched a stand-alone WMS [warehouse management system] that we use exclusively for maintaining our 30,000-SKU master sample inventory. We also invested in significant upgrades to some of our existing automation. For instance, we were able to increase productivity by upgrading our automated carton erectors and tilt-tray sorters. And we’re currently prototyping a next-generation auto-bagger.

Do you use or are you looking into RF or wireless technology?

HSN was forward-thinking by implementing a robust radio-frequency WMS when the technology first began to emerge. Since then we’ve continuously upgraded the system to keep pace as the technology evolves. And these days, RF technology isn’t just for the big players. Competition within the field has increased performance and dropped prices to the point that even small companies, start-up firms, and many home-based businesses can afford an entry-level system that still offers robust functionality.

Do you work with the merchandising or marketing department to make sure that products will fit in your boxes and be shipped without getting damaged?

Yes. Several years ago HSN’s quality assurance [QA] department integrated this practice into our [standard operating procedures] for product evaluation and approval. In the past, damages were the number-one cause of customer concern. Now QA works directly with merchandising and the vendor on the front end to establish the appropriate “pack recipe” for every item. This includes establishing the best box size and designating the appropriate void fill. Upon approval, the pack recipe is transmitted to our WMS. When the goods arrive at our distribution centers, fulfillment verifies that they conform to the prespecified pack recipe. If they do not, fulfillment partners with QA to develop an acceptable solution. In some cases, this may result in the product being reworked or overboxed, usually at the vendor’s expense. Since launching in 2003, this process had reduced our damage rate by 93%.

LOU GORGA is director of operations at Lawrence, PA-based Black Box Network Services, a provider of networking products and services.

What has been your biggest operations concern of past few years?

Our service-level objectives demand that 95% of the time a stock product is ordered we have inventory on the shelf, and 100% of that time we ship the product the same day. We consistently meet this objective from the DC operations side.

This objective challenges every phase of our 24/7 operation. Inbound receipts must be scheduled and acknowledged to our WMS with put-aways occurring the same day, and everything must be coordinated with our picking, packaging, and shipping processes. Technology advancements mean we have many new product offerings, which have increased SKU counts significantly. This has tested our DC storage space requirements and location rule sets, forcing a dynamic view of how product movement occurs throughout our DC, and sometimes we’ve had to change our process to address space management.

How do you handle back-end integration across channels and locations?

All customer orders and fulfillment is driven from our IBM mainframe system with application software designed and programmed by inhouse personnel. All electronic orders, whether they’re from the Internet or EDI, interface with the mainframe system. The integration of these systems represents years of software customization that supports our business process model, and every Black Box office on the planet has access to these systems. The system is available more than 23 hours per day, with a short window for daily system backups.

Have you made changes to your facility?

In 1999, because of strong customer demand for new products, we added a 135,000-sq.-ft., state-of-the-art distribution center that greatly expanded our warehousing footprint. The ROI for these capital improvements was strongly supported by our CEO.

Will you be investing in technology improvements for your warehouse in the near future?

We are always looking for ways to improve customer satisfaction and to enhance productivity. Fortunately our building is relatively new, and we planned and built many infrastructure-based improvements into the building during construction. Our DC management team keeps current with technology offerings and brings forward only those opportunities that can support a strong ROI.

Have you implemented a lot of automation?

IT has been the foundation of our ability to service customers. We have ongoing system upgrades and report generation.

Additionally, Black Box is ISO 9001:2000 certified with our quality management system. One of the ISO elements for compliance demands the ability to demonstrate ongoing continuous improvement. We define a number of objectives for improvement, and once they’re complete we add another objective. We have been doing this for years.

Currently we’re implementing a new Web-based shipping system. It will be linked to our order entry system and be able to give customers electronic notification of shipping status and tracking information. This enhancement will improve the productivity of our customer service department and shipping department. It will eliminate many steps that were done manually in the past. This new system will also require less time to update with current carrier rates, it will generate custom shipping forms, and it will produce all forms necessary to meet carriers’ requirements. With all these enhancements, any processing errors should be eliminated.

LORI KEERPS is shipping and logistics manager/purchasing of Marietta, OH-based Rossi Pasta, a manufacturer/marketer of gourmet pasta.

What has been your biggest operations concern of the past few years?

Increased sales each year have caused the need for larger human and physical capacity. Our staff consists of 15 permanent employees. Last year we hired 35 seasonal employees. This number inflates each year with sales growth. The location of our new sales, manufacturing, packaging, and fulfillment center is one building within a complex of many buildings. At our peak time, the owner of the complex offers to rent us additional spaces. This year we rented an additional 1,250 sq. ft. that we used for assembly and finished goods. The fulfillment center alone this past season used 5,450 sq. ft.

How do you handle back-end integration across channels and locations?

Our software integrates the Web processing through fulfillment. Up until now we have chosen not to integrate our retail channel. We didn’t have the technologies needed to integrate the locations, approximately six miles apart from one another. However, due to an available system upgrade we will begin to work on integrating.

Many companies are charged with reducing costs without reducing service levels. Has that been the case with you?

We are moving to a more fully integrated and automated sales order and inventory control system this year. All departments will be operating on the same system, allowing everyone to access all shared information and files, increasing efficiencies and decreasing discrepancies. This will greatly improve the communication flow as well. Before hiring for the season, we set management productivity goals to see what labor hours will be needed. Having these goals in place allows close monitoring to see if the workflow is efficient and what productivity changes may or may not need to be made.