Distribution centers and warehouses hold promise for retailers and wholesalers interested in squeezing inefficiencies out of the flow of goods. But operators report that the tools to achieve this goal depend on leading edge technologies.
Numerous technology solutions have been introduced recently, some useful, but others promising more than they could deliver. Now the next wave is rolling in and the key issue is how systems will be integrated and put to work in a fashion that brings sound contributions to the bottom line. In the information area, the Internet has proven to be the largest contributor to technological advancement.
"Automated ordering does hold some promise," said Dave Jonckowski, vice president of operations, Associated Food Stores, Salt Lake City. "Internet-based communication gives us the advantage of real-time inventory management and helps us as wholesalers with our stores' orders," he said.
"Facility managers are in the process of replacing their warehouse management systems, moving to real-time vs. batch management systems," said Ken Walker, principal, LSA, an Atlanta-based consultancy. "A lot of the work was deferred by Y2K issues, and now it is being discovered that it is imperative to complete."
At the core of this urgency are new values retailers and wholesalers are layering onto buyers in the wake of Efficient Consumer Response and Collaborative Planning Forecasting and Replenishment initiatives. "What has been developed is a dysfunctional reward system," Walker said. "Pity the poor buyers who find themselves in an out-of-stock situation. However, the penalty is disproportionate for those who find themselves in a storage situation."
Today's progressive supply chain management requires complete integration of systems from the moment of order to the final shipment -- including procurement, order management, warehouse management, as well as transportation solutions, according to industry experts. The future is built around applications that offer flexible, real-time integration with other systems and solutions that are well-positioned to move rapidly into the e-commerce arena.
Technology tools streamlining warehouse operations fall into two areas: information and materials handling. The information segment has made great strides over the past five to seven years. Materials handling -- including conveyers, picking systems and lift trucks -- are just now being recognized as inefficiency squashers.
Retailers and wholesalers hope to maintain the pace of the e-commerce world with the help of updated hardware and software systems.
"Enhancing real-time architecture to leverage the potential of e-commerce by designing real-time interfaces to existing and future applications will bring a host of new services to our industry," said a source knowledgeable about supermarket industry logistics. "Traditionally, warehouse management systems needed only to integrate with internal applications. The e-commerce world is rapidly changing this four-walls-only paradigm. Today, there is a need for integration across a matrix of external trading partner systems that will enable industry initiatives such as Collaborative Planning, Forecasting and Replenishment to reach their full potential," he said.
"The barriers between companies continue to fall, allowing companies to look into each other's systems to allow for total inventory management across the supply chain," said Bob Silverman, president, Gross & Associates, Woodbridge, N.J., a materials handling and logistics consultancy firm. "This inventory management would reduce inefficiencies not just at each individual company, but across the entire chain." He predicts that as companies become more comfortable with firewalls and security technologies the cross communications will only improve.
Integrating technologies so that benefits and costs can be captured is paramount, both at the retail or wholesale warehouse level and throughout the supply chain.
"You can't take full advantage of technology without integration," Silverman said. "By taking full advantage of an integrated system, retailers and wholesalers can eliminate double-entry costs and have real-time access to information. To best control warehouse operations, operators have to use and leverage the total capabilities of technology," he said.
Jonckowski noted, "As an industry, we have to refine our warehouse systems now. They are not on real-time. When there is an emergency situation, such as a will-call or an add-on, it is like there is a wrench thrown into the system. It definitely needs refinements."
The future is all about e-commerce, said the logistics source, "and the key requirement to successfully integrate e-commerce is the real-time visibility of inventory and business processes across the supply chain. We hear from many food organizations that their warehouse management systems do not offer real-time functionality and fall critically short in the ability to see minute-to-minute product movement."
As warehouse owners look to the future in building the facility of their dreams, experts predict that there will be shifts in space configurations.
"The ratio of operational space and storage space will shift," Silverman said. He makes this prediction in light of the number of companies striving to reduce inventories on a day-in and day-out basis, preferring cross-docking to holding inventory in the racks. "Operational space will increase as cross-docking becomes a means of driving handling costs down. Warehouse space will be more about moving cross-dock and sortation and less about storage."
Associated Food Stores is currently in the process of building a new 900,000-square-foot distribution center. The wholesaler has looked long and hard at methods of streamlining operations and adding enhancements to drive out costs.
"Everything will finally be under one roof," Jonckowski said. "We will have grocery and perishable areas with climate controls and a new pressurized banana-ripening room. Docks will be refrigerated for cross-docking of goods."
The wholesaler currently operates four separate warehouse facilities. One warehouse is for grocery and produce; another facility, the frozens warehouse, is located across the street, and a third facility, for meat and deli, is a mile away. The general merchandise warehouse is 60 miles away. Consolidation is expected to give the wholesaler operational efficiencies.
"The new facility means that we will eliminate double handling," Jonckowski said. "Looking at building a fantasy distribution facility has given us the opportunity to achieve integration integrity."
Associated Food Stores' new facility has also been designed to allow the wholesaler flexibility as systems and technologies shift. While being set up as a wide-aisle facility, there is the ability to convert to a narrow-aisle format in the future.
"There have been so many technology enhancements in the past two to three years, you have to be able to project what may happen down the road," Jonckowski said. "It has been most interesting to see what technologies fit into our operation as we plan to build our new facility. It is interesting to see how far technology has come and what the potential gains are. It is fun to get out of the box and not face constraints."
Having the luxury of building a distribution center from the ground up gives operators the ability to consider technology tools that can not only reduce the cost of sorting and selecting, but also step up accuracy.
"We are looking at radio frequency selection and voice-activated systems," Jonckowski said. "These systems will not only help us move product more quickly to our members, they will help tremendously with miss-picks." Associated Food Stores currently relies on a paper-tagging system for picking orders. "We also looked at robotics, but it's too early for us to make a commitment." It is expected that the wholesaler will glean a 25% reduction in labor costs with the new distribution center.
Other operators report that they are arranging what they can do currently in the materials handling arena, but until cases and palletization are standardized, robotic systems remain a few years out. However, it is reported that new warehouses being built are being designed with some style of automated sortation system. Radio frequency and pick-to-light systems are being cited as those holding the most promise for greater efficiency. Faster fork-lift moves and reduced error rates are just two benefits these systems have.
Within the four walls of a distribution center, operators are experimenting with voice-activated technology in the selection process, noted LSA's Walker. "This system is a good fit with sorting systems and is of particular use in freezer areas where labels peel and scanners are hard to operate with cumbersome gloves," he said.
At Associated Food Stores' new facility, construction costs are being reduced following a careful examination of sprinkler systems. The wholesaler has selected a deluge-type system where pipes are run along the ceiling rather than within each rack. Jonckowski expects installation costs of this necessary fixture to be drastically reduced.
As for the dream warehouse of the future, industry experts predict that today's trends will continue: Facilities will be built taller, with better floors and with a heightened investment in conveyers and sortation systems. Sophisticated warehouse management systems, radio frequency technology and heightened communication systems will all play a part in designing future facilities.
"Everything is about velocity and turns and less about storage capacity," Silverman said. "It's about throughput capacity and order-cycle times, not inventory storage."