MHM Innovator of the Month:Look Out for No. 1

No.1 CEO Rex Falkenrath applied key material handling principles in a unique way to tune up his company's logistics processes.

No. 1 International's customers include some of the major names in retail auto parts supply, including Auto Zone, Pep Boys, Advanced Auto and NAPA. These retailers have a variety of service demands, but all want quick response.

The challenge

No. 1 handles 15,000 different SKUs. Every time an order comes for a kit, it requires a new variation of assembling those SKUs. Managing the logistics involved in fulfilling orders for these kits in a timely manner is challenging enough for a big auto parts supplier, but if you're a small business like No. 1, it pays to be innovative.

Typically, orders for such kits would go to a call center which explodes out a bill of material, and the order is entered manually. Cycle time to process a kit this way can take more than four hours. That's a problem when most customers place their orders at 5:00 p.m. Eastern Standard Time and request next-day fulfillment.

Rex Falkenrath, CEO of No.1 International, says the solution to such a problem is lean distribution. For him, that's a combination of proprietary software, reduced cycle times, efficient warehouse layout, and an enlightened company culture.

"Say you have a Chevrolet 350 engine that we know needs a variety of parts like pistons, bearings and cams," Falkenrath explains. "Because wear takes place inside the motor, the sizing of those items changes with every order. So there are millions of possible component combinations, and that's why every single order is custom. That gives us an advantage over larger competitors because large corporations have a hard time understanding that every order needs a custom bill of materials."

How was No. 1 able to achieve this capability?

The Innovation

Falkenrath worked with his people to determine the necessary software requirements, then met with various contractors to decide who would write the codes that would create those custom bills of material. They then worked with SBC Solutions, Northbrook, Illinois, to write the proprietary software for kitting and doing custom bills of material on the fly.

"That software functions as our WMS," Falkenrath says. "We told our vendors that we had to have 95 percent of our custom bills of material created and the orders out the door and delivered to the stores on the same day. That meant they'd have to pre-build inventories as finished goods and use our packaging with our bar codes and part numbers affixed. Each night we get orders in to them early enough so they can get them out their door. Then every morning at 8 the FedEx truck comes in with any items we're missing and by the second day we're hitting better than 99 percent order fill rate."

Other requirements were visibility and damage reduction. Falkenrath worked with FedEx to give customers visibility to the merchandise from the time the EDI order comes in, all the way through No. 1's supply chain — until it's delivered to the store the next morning.

Damage reduction would require a combination of more efficient material handling and packaging. Automated picking seemed to be the best option, but Falkenrath soon learned that wasn't feasible because of the variety of picks required.

They decided to continue pulling off the shelves manually but now place items into cartons on Hytrol roller conveyors so no one would have to pick up or carry an engine overhaul kit throughout its pick tour. The most popular parts are slotted in the center of the warehouse, near shipping, while the less requested parts are located farther out, resulting in a circular flow pattern.

Once completed kits reach shipping, they slide down gravity rollers, go through a computerized manifest system, then move to an accumulation conveyor belt. They are then conveyed to automated case sealing equipment. From there the kits are sorted to the appropriate shipping line for FedEx, UPS or LTL shipment. The drivers are the first ones to handle the completed kits. The reduction in handling and the improvement in packaging are credited with reducing damage dramatically.

"FedEx has its own packaging laboratory and they came in and did a lot of analysis to help us develop packaging," Falkenrath adds.

The Results

"We don't have damage any more," Falkenrath says. "Not only does the packaging protect our product, but it was also designed to be used with the automated carton sealing equipment. We worked with 3M on random carton sealing automation because we have boxes that are as small as 4 inches tall up to a couple feet tall. As a kit is going down the line, the same equipment seals the top and bottom of both large and small cartons without us having to do it manually and stopping the process. 3M also developed an adhesive tape that has a lot of elasticity so if it falls off the back of a truck on the freeway the tape won't fail. That's been a tremendous benefit. We've had damage as high as 3 percent before that packaging and taping and random carton sealing came on line."

What about fill rate?

"We're hitting 99.94 percent," Falkenrath answers. "To do that, we took 70 percent of our labor content out."

Falkenrath estimates it would take 100 people to do the work currently done by 20. But the people in the DC are used for their brains as well as their brawn.

"We had a number of people from IT, warehousing and procurement that met on a weekly basis every Wednesday at 7:30 a.m. to make sure we were still on the same page on how we were going to take waste out of our system," he says. "Lean material handling was a cultural change."

That means less time wasted by the information systems, as well. Now, from the time an EDI order reaches No. 1's mainframe, it takes about two and a half minutes to process it through the distribution center and get it to the computerized manifest — and then have the tracking information on that order entered into the system.

Lean is also about less wasted material. No. 1 improved its dunnage by recycling corrugated.

"A lot of product that comes in arrives in master cases," Falkenrath explains. "Those are run through a machine from Strapack that turns them into dunnage. We don't have to buy it any more."

Cosmetics are also important to No. 1, and because its packaging is black, dust can show up like dandruff on a black turtleneck. This resulted in another Falkenrath innovation.

"We created a light brush that sweeps the corrugated after it comes through the converter, then attached a powerful vacuum to get the rest of the dust," he concludes. "When you take our product out of the final carton it's dust-free and looks great. It also keeps the dust out of our DC."

What's next? Radio frequency identification (RFID). Falkenrath's team has already done the mainframe programming and is ready to comply as its major customers start asking them to add RFID to the engine kit order fulfillment process. MHM

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