In addition to its 970,000-sq.-ft. distribution center, the Cornerstone facility includes a 350-seat call center and a 65,000-sq.-ft. retail store
By identifying vendor compliance as a corporate priority, Cornerstone achieved a 70% compliance rate in less than a year
Take six separate brands: Frontgate, Ballard Designs, Garnet Hill, The Territory Ahead, TravelSmith, and Smith+Noble. Stir in a range of products from nail clippers and silk dresses to armoires and 700-lb. gourmet grills. To make the concoction more interesting, move each company’s fulfillment operation, established in locations from California to New England, into one site managed by direct-to-customer retailer Cornerstone Brands, based in West Chester, OH, near Cincinnati.
About four years ago, when Cornerstone executives began planning to build a consolidated fulfillment center integrated with the company’s Ohio headquarters, they conceived of the new facility as a hub that would provide efficient fulfillment for each brand. Cornerstone Consolidated Services Group (CCSG), the operations arm of Cornerstone Brands, was formed in August 1997 to implement the plans. CEO John O’Steen led the project team from its inception, and retail and consumer products consulting firm Kurt Salmon Associates (KSA) was chosen to assist in building the new facility, whose design had to be simple enough to handle growing volume, but flexible enough to handle Cornerstone’s growth strategy.
The concept and design of the new facility represented major changes that affected every component of Cornerstone’s fulfillment organization. Construction was completed in August 1999. Just two months before the 1999 Christmas holiday season, CCSG integrated four of its separate companies (Frontgate, Ballard Designs, TravelSmith, and Whispering Pines, which has since been sold and replaced by two more companies, Garnet Hill and the Territory Ahead) into the 970,000-sq.-ft. distribution center. In addition to the DC, the facility includes a 350-seat call center, a 65,000-sq.-ft. retail store, and corporate headquarters. Besides handling a wide product assortment, CCSG promises customers that all orders of in-stock merchandise will be shipped within 24 hours.
When Cornerstone Brands began the task of planning the centralization of distribution operations for five of its partner brands, it was clear that the biggest hurdles were the actual scale of the project, handling the diversity of the businesses, and meeting tight deadlines while managing existing operations.
Not only did each affiliate company need to move into the new DC physically, but the order management system for each company (the different systems included MACs, Mozart, and Sigma Micro) needed to be converted, interfaced, and integrated into the new facility’s Manhattan Associates PkMS warehouse management system (WMS). Although the construction deadline was less than 15 months from ground-breaking to full integration, most of the partner companies were over capacity when the project got under way, and had to lease temporary warehouse space until the new fulfillment center was completed.
CCSG established a project management team and a comprehensive plan to carry distribution operations through the next five years. KSA helped guide the project, allowing CCSG management to focus on existing business while remaining intimately involved with the building scheme.
The project team developed a plan for all the tasks to be accomplished, the timing of each phase of the project, the resources needed, and the goals to be accomplished. The project was broken down and organized into manageable phases, with a manager assigned to and accountable for each phase. Detailed task lists were reviewed and discussed at weekly project meetings.
Although each member company of CCSG is wholly or partially owned by Cornerstone Brands, each operated its own successful distribution center prior to the consolidation. The new distribution center has a single director, one manager for inbound processes, and another manager for outbound procedures. In this respect, the CCSG facility is designed and operated like a third-party fulfillment center.
All inventory is separated by brand both in reserve storage and in the active pick area. The PkMS warehouse management system recognizes the company to which each order should be assigned and prints a packing slip accordingly. The workforce is divided into dedicated pickers for each company, but workers are cross-trained so that they can work in different areas as demand changes. This is because each brand has retained its own packaging, packing methods, return policies, packing slips, service levels, quality standards, unique package insert stuffers, and way of managing special orders. The total of about 40,000 SKUs for all of the partner companies is stored together, but because the items are profiled and clearly identified, they can be picked efficiently to fill orders for each brand.
An operations council comprised of a vice president of operations from each member company determined processes and operating standards for the new facility. According to CCSG vice president of facilities Mark Dawes, “We knew that we could plan for everything except what we call ‘tribal knowledge,’ highly specialized product knowledge that resides only in certain associates’ heads.” To incorporate as much of that tribal knowledge as possible into the new facility, vice president of distribution Kent Martin organized teams from the individual member-company operations to work at CCSG during the start-up.
Cornerstone evaluated several ideas for achieving significant labor savings from automated equipment. The receiving process was one of the first functions to be assessed. To realize the benefits of an automated receiving system, vendors would need to send shipments to the new facility with bar-coded labels and advance shipment notifications (ASNs), and in standard carton sizes. None of Cornerstone’s vendors was complying with all of these specifications.
Automated receiving remains a pipe dream for many companies because getting vendors to comply with labeling and electronic data interchange (EDI) requirements is seen as impossible. Many times this assumption springs from the belief that the vendors are too small or that the company isn’t big enough to enforce compliance. By identifying vendor compliance as a corporate priority, Cornerstone achieved a 70% compliance rate in less than a year, according to Dawes. The automated receiving system reduced receiving costs by 30%, as well as providing greater inventory accuracy and control of merchandise.
Another priority was profiling all of the products 30,000 SKUs before peak season in 1999. Actual move-ins occurred during the summer and early fall. Lack of experience in using the WMS, faulty coordination with partner companies and vendors, new employees handling unfamiliar product lines, new technology, and the recently developed vendor compliance program put heavy stress on receiving operations.
“Intensive training in basic operations and leveraging information from the WMS, combined with a lot of troubleshooting and just plain hard work, got us through this period,” Martin says.
Teams from CCSG and member companies profiled the move-in items. Most profiling efforts were completed at a member-company facility prior to the move. The difficulties of filling in the many thousands of entries required by the WMS item master for the approximately 30,000 move-in SKUs included:
- establishing consistent definitions for the item master fields across the teams;
- weighing and measuring each SKU;
- determining how many SKUs would fit in specified slot sizes for pick carts;
- calculating the “squeeze” factor of apparel, critical for cartonization;
- identifying which items were ship-alones (units shipped singly to customers because of their size), conveyable/non-conveyable, and high-value, and which required merchandise preparation;
- assigning a location based on a product’s sell-through velocity to minimize picking travel time; and
- assigning the right-sized location (pallet, carton flow, double case, single case, high rack) to balance the need for replenishment.
Fold in gently
With the equipment in place, information systems integrated, and company move-ins complete, it was time to start hiring and shipping. CCSG had to ramp up its outbound operations and hire workers less than four months before shipment volume was expected to quadruple during the holiday season.
The company completed a thorough wage study to determine its competitiveness in the local market. “The study revealed that we needed to increase wage rates, so we revised our wage scales,” says Martin. “Competitive wages allowed us to penetrate the labor market quickly.” Although many Cornerstone workers resigned after the 20-mile move from Lebanon, OH (where the old Cornerstone facility was located), to West Chester, that same move brought CCSG access to a significant new labor pool. But the loss of veteran employees from the Lebanon facility made retaining every new worker critical. “The many ‘extras’ enhanced lighting, improved air flow, full-service cafeteria we designed in the facility allowed us to retain [a high percentage of] the new associates we hired,” says Dawes.
To prepare for the upcoming surge in business, CCSG invested heavily in training distribution center workers for top performance. Management reviewed current processes for each operation with the workers, using the employees’ ideas to tweak procedures. Productivity in each area was tracked closely to measure performance improvements, provide feedback to employees, identify areas that would need management attention, and measure progress toward productivity goals.
The new WMS, processes, conveyor systems, and people, and the introduction of radio frequency (RF) technology, created great training challenges for both new and existing employees. KSA provided a staffing model that included learning curves and estimated productivity and that helped determine the number of people needed for new processes.
Phased move-ins of member companies allowed for more gradual worker ramp-ups, but there were still many new employees to train at one time. “Normal hiring procedures for the peak season utilized callbacks to regular seasonal associates and the use of part-timers for either first or second shift,” Martin says. “Being new in the area left us pretty dry in both of those areas, and we were forced to rely on more temporary labor than normal.” A high-energy training program, implementation of productivity tracking measures, and additional supervision were critical to achieving the level of productivity needed to maintain service standards during this time.
Certainly one of the most important factors in coping with the facility’s start-up glitches was focusing on throughput. “We found that batch thinking resulted only in lumps of product moving from one area to the next, with the result being a full-fledged bottleneck,” Martin admits. “We began to realize that work had to flow evenly throughout the facility and that clear handoffs were needed between departments.”
Staff balancing was one of the major training efforts directed at management. KSA conducted several conference-room training sessions to illustrate the importance of balanced work flow and the adverse effects of batch processing. Problem-solving efforts were then directed at the issues causing the bottlenecks, and this procedure increased throughput dramatically.
Some of CCSG’s training focused on productivity improvement using KSA’s P.U.M.P. (pace × utilization × methods = productivity) assessment. Additional training focused on topics such as management of change. “We found these types of sessions to be useful in getting people to voice their concerns about the move and the changes that would take place in the new facility,” Martin says.
After that first holiday season, CCSG shifted its focus from ramping up volume in the facility to increasing worker productivity and accuracy. CCSG’s investment in its employees took the form of KSA’s comprehensive, performance-based Base Plus® productivity/incentive program, affectionately known throughout the CCSG facility as STAR (safety, teamwork, achievement, and recognition). The program has become a focal point for performance, accuracy, and safety improvement at CCSG.
Base Plus has had an impact in other ways as well. It has:
- extended facility processing capacity by 40%;
- reduced labor costs by 30% or more;
- deferred additional capital expenditures on every asset linked to employee head count; and
- increased employee retention, motivation, and morale.
Employees working in the Base Plus program benchmark their own performance daily and are rewarded for extra efforts. Giving workers this responsibility enables managers and supervisors to spend more of their time on schedule management, training, and recognition programs rather than on handling emergencies. In less than two years, the program has helped create a performance-driven work environment that surpasses design productivity levels.
Designing and constructing a new facility as complex as the CCSG distribution center usually revolve around executing the project in a timely and cost-effective way. Most companies invest millions of dollars in new technology and equipment and expect the big payoffs to come solely from the investments.
By contrast, Cornerstone took the position that people would be the key to success. That philosophy has worked well. During the first peak season of operation, the new distribution center shipped 49,000 units in one day. Today, Cornerstone is beating the initial estimates for direct labor cost, a testament to the success of the project’s planning, design, and execution.
Dan Stonaker is a manager at Kurt Salmon Associates in Atlanta. He specializes in direct marketing and e-commerce services, developing logistics strategy, implementing fulfillment centers, and improving DC performance. He can be contacted by e-mail at firstname.lastname@example.org.
CCSG VITAL STATS
Shipments: 150,000 items a day
Pallet locations: 20,000
Case locations: 325,000
Display SKUs: 100,000+
|Size||Sq. Ft.||Clear Ht.|
Inbound receiving sorter
Outbound shipping sorter
Motor freight processing operation
Automated returns delivery system
65-ft. high-bay reserve storage and cranes
Call center on low-bay mezzanine
Emergency exit tunnels in low-bay
|Architectural and engineering design||KZF Design, Inc., Cincinnati|
|Conveyor and sortation equipment||Rapistan Systems, Grand Rapids, MI|
|Crown lift trucks||OKI Systems, Cincinnati|
|Facility construction||Schumacher Dugan Construction, Inc., West Chester, OH|
|High-bay cranes||The Raymond Corporation, Greene, NY|
|High-bay rack||Frazier Industrial Co., Long Valley, NJ|
|Lighting||LSI Industries, Inc., Cincinnati|
|Project management, facility design, systems selection and integration, and implementation and start-up||Kurt Salmon Associates, Atlanta|
|RF technology||Symbol Technologies, Holtsville, NY|
|WMS provider||Manhattan Associates, Atlanta|