Guest Column | August 28, 2000

Setting a distribution center up for fast throughput

Setting a distribution center up for fast throughput










By Maida Napolitano

Contents
Introduction
First, establish goals and expectations
Define operations and operating equipment
Design the facility for fast flow
Develop effective information systems and communication
Justifying the fast-throughput operation
Conclusion

Introduction
E-commerce has really powered the logistics industry, pushing it to the next frontier. It has, for instance, raised the standard on how fast a company is expected to ship its products to customers. Customers now have little tolerance for orders arriving a week later. They want superior, consistent service – and deliveries within 24 hours.

In response, companies are scrambling, anxious to find that magical solution that would accelerate their product through the supply chain and gain that all-important competitive edge.

Well, look no farther. Most of the technology for putting logistics and physical distribution on warp speed exists, and it relies on the following essential practices:

  • Effective use of information technology.
  • Employment of efficient logistics strategies, such as crossdocking and quick response.
  • Need to design for minimum handling at distribution centers.
  • Use of automation in information processing and product movement.
  • More accurate anticipation of customer needs and demand.
  • Flexible and timely supplier and manufacturing response.
  • Seamless exchange and integration of information, and physical product among all supply-chain participants.

But there is a catch: Determining the appropriate mix of technology, strategy and cost can be elusive.
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First, establish goals and expectations
How fast is fast?

In today's e-commerce environment, nervous investors ideally want product in their customers' hands in 24 hours. A 72-hour turnaround is considered archaic. So, the minimum expectation is that an order received by 2 p.m. must be picked and shipped from the distribution center (DC) in a few hours, so that the customer can receive it the next day.

Most of the technology for putting logistics and physical distribution on warp speed exists.

But not everyone has a system in place to sustain such a rapid fulfillment cycle. Realistic goals and expectations must first be established that are commensurate with your business.

Here are some questions to ask yourself:

  • What are your business objectives?
  • What unique characteristics does your business possess?
  • What product nature drives customer demand?
  • What are the needs of your customers?

Only by assessing your business goals and customer needs can throughput goals be determined.

Goals for accuracy should also be established in close conjunction with throughput expectations. High customer approval from speeding an order through the supply chain will backfire when an unhappy customer receives the wrong order. Checks must be in place to ensure that all aspects of customer demand are met accurately. Only then will sales increase and business flourish.
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Define operations and operating equipment
Once goals are established, defining the appropriate operation that will meet these goals is the next step. Employing the latest advances in information-technology and material-handling equipment contributes to accelerated throughput.

Faster receiving and shipping, more efficient picking. Where inventory is required to meet unpredictable surges in demand, a company must determine the fastest methods for receiving and processing, and then shipping this inventory.

Receiving and putaway. Advanced shipping notices (ASNs) and use of bar-coded license plates on incoming merchandise will complete the receiving function in a fraction of the time required by laborious paper-based operations. With a couple of scans of the barcodes on cartons and pallets, a DC worker can verify against the ASN that the correct quantity of the correct item is received. Radio-frequency (RF) technology allows the system to direct putaway of items to the nearest appropriate location — whether in storage, forward-pick area or directly to shipping, if immediately allocated to an open order. The combination of barcodes and RF technology in putaway and picking also facilitates real-time verification so that the correct quantity of the correct item is stored or picked from the correct location, which improves inventory accuracy.

Picking. The picking process should be designed for speed and efficiency. Where possible, batch-pick multiple orders to reduce picking time dramatically. Batch picking is particularly useful when there are many items in inventory, but the same few items are in multiple orders. Instead of traveling to one pick location 20 times for 20 different orders, a picker travels to the pick location one time for all 20 orders. Paperless, light-directed picking systems have been known to triple throughput of previously paper-based systems.

Determining the appropriate mix of technology, strategy and cost can be elusive.

In one pick-to-light application (See Figure 1, below), pickers first scan a bar-coded tote so that the system can recognize the order. The system then downloads the quantities to be picked to the LED or LCD panels on each pick location. The picker picks the item and presses a button to verify that the pick was made. This method not only speeds up the picking process, but also reduces error rates due to wrong location picks.

For even faster throughputs, use the appropriate level of automation. Some high-speed facilities —Avon, for example — use automated-picking devices, such as A-Frames (See Figure 2, below) to pick small to medium cosmetics and health-care items at a rate of about four seconds per order. These devices allow orders to be processed quickly and accurately. Each stockkeeping unit has its own pick lane, which has a trigger mechanism that releases the correct quantity of pieces or case per line required in an order. The items released drop to a conveyor, where they are transported to a waiting tote for broken-case items, or to a palletizer for full-case items.

Sortation, consolidation and shipping. Sortation, consolidation and shipping functions benefit from high-speed conveyors, overhead scanners, bar-code technology and RF to transport and direct completed orders to the proper outbound docks with little or no human intervention.

Proper placement of barcodes on cartons and pallets avoids unnecessary delays in identifying the item and its proper destination.

Transportation. All the technology in the world is useless if the product is sitting in a staging area waiting for a truck to pick it up. Fast throughput depends on reliable carriers to transport merchandise. Electronic data interchange (EDI) can be used to schedule pickups and deliveries. An EDI message is then sent back if the shipment was picked up and dropped off on time, or if it is delayed. Keeping an accurate database of product sizes, dimensions and weights is also a must for efficient load planning and transportation routing.

Crossdocking. This is another tested technique for speeding product through the supply chain. It is the process of receiving product in a facility, occasionally marrying it with other products going to the same destination, then shipping it at the earliest opportunity, without it going into long-term storage. Product is handled only once, with substantial savings in inventory. For a crossdock operation to succeed, you need advance knowledge of inbound product, you need to know its destination and you need to have a system for routing the product to the proper outbound vehicle in place.

Some warehouse management system (WMS) software can allocate inbound merchandise to open orders while product is in transit. Product is simply crossdocked as soon as it is received at the DC.

Bypassing the DC. An even faster flow may involve bypassing the distribution center entirely and shipping the product directly from the vendor to the customer. Also known as drop-ship or direct-store delivery, this method of accelerating product is common in many retail settings for perishable goods such as bread and milk, though it may ultimately increase shipping costs. A variation of drop shipping, known as merge-in-transit, is used to consolidate an order shipped from multiple origins on the fly, so that individual pieces arrive simultaneously at the customer destination without first being consolidated at a DC.

In establishing and sustaining a fast-throughput operation, ask yourself:
  • What are your business objectives?
  • What unique characteristics does your business possess?
  • What product nature drives customer demand?
  • What are the needs of your customers?

Frequently, different products and customers require different distribution strategies. There may not be one method for all products. The key to meeting these varying demands is in determining the appropriate technologies for the appropriate products and businesses.
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Design the facility for fast flow
Designing the facility for fast flow starts with the basics. Products in high demand should be situated close to the docks, while slow-movers should kept in the back of the facility. Since most activity in a fast-flow environment is confined to the docks, 60- to 70-foot dock depths are rapidly becoming the norm.

Some businesses may opt to build multiple satellite facilities, one of which will handle only fast throughput items. This allows a company to match the best technology in a facility for each distribution application.
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Develop effective information systems and communication
The operations and equipment described above are useless without an effective information system that allows for high product visibility and a seamless, preferably paperless, exchange of real-time, accurate information among trading partners.

Within the distribution center, the WMS should accommodate and direct fast-throughput operations and the associated operating equipment. It should manage inventory and be able to direct any crossdocking opportunities in real time. It should be flexible enough to recognize more than one product flow.

Frequently, different products and customers require different distribution strategies. There may not be one method for all products. The key to meeting these varying demands is in determining the appropriate technologies for the appropriate products and businesses.

Beyond the warehouse, information systems should have the ability to communicate in real time the necessary data – such as inventories, costs, delivery times, forecasts – required to parallel the fast physical flow of product, and support warehousing and transportation systems, manufacturing-planning systems, and order-processing systems.
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Justifying the fast-throughput operation
Finally, before any system can be implemented, a thorough economic analysis will be necessary to determine the best operational alternative for your business. Since the resulting increased sales from a fast-flow environment is often difficult to determine, it is best to look at the reduction in bottom-line costs of labor and to justify any capital required to set up a fast-throughput operation.
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Conclusion
The need for speed is here to stay. Faster computers, real-time communication and instantaneous data transfers are fueling a population that expects products to be at their doorstep within hours of asking for it. And only companies able to respond to this increased cycle of demand will survive.

Maida Napolitano is a senior industrial engineer at Gross & Associates, Woodbridge, New Jersey, where she manages projects in areas such as distribution center design, operations improvement and simulation modeling. She has authored a number of books on warehousing-related issues, such as Making the Move to Cross Docking and Using Modeling to Solve Warehousing Problems (both published by the Warehousing Education and Research Council) and The Time, Space and Cost Guide to Better Warehouse Design (published by Distribution Center Management). Maida can be reached at MNapolitano@GrossAssociates.com.

Edited by Michael Lear-Olimpi, Managing Editor, Logistics Online

Gross & Associates is a Logistics Online content partner.
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