Big Lots Keeps Up With Closeouts

This retailer staffs material handling innovators to move bargains before they're bygones.

In the early 1990s, closeout retailing was a novelty, even to its practitioners. Big Lots, one of the leaders in this space, staked it out as a niche whose future its felt was clear. Material handling would require storage, and lots of it — high and dense. This inventory would be housed in a single distribution center in Columbus, Ohio, that would serve its 600 U.S. stores. Inventory would turn one and a half times in a year.

Times have changed.

The challenge

Today, the key to closeout retailing is adaptability, as Todd Noethen learned. As Big Lots' vice president of distribution support services and a 20-year company veteran, Noethen says he's given up on long-range planning.

"The motivation we had 10 years ago with our Columbus facility is a lot different from what it is today," he explains. "Today, you're planning a year out and you're hoping that you're guessing accurately. The economics of retailing are changing rapidly now."

So is the variety of products Big Lots carries. In the early '90s, very-narrow-aisle storage, wire-guided turret trucks and tilt-tray sortation were put to work in its Columbus facility. But as time passed and Big Lots started carrying items like food, sporting goods, hardware, auto products and glassware, it knew it would need sortation that was more forgiving.

"When we opened our Montgomery, Alabama, facility in 1998, we selected a Buschman shoe sorter system," explains Hal Wilson, Big Lots senior vice president of distribution and transportation services. "That improved the percent of product that we could convey, versus the more costly non-conveyable processing."

Because Big Lots couldn't put fragile items such as glassware on the tilt tray conveyor system, it used a tuggerand-cart system to move non-conveyables through the manual picking system in Columbus. This hampered productivity.

With the addition of the Montgomery facility and two others in Tremont, Pennsylvania, and Durant, Oklahoma, Big Lots is not only better able to serve a growing network of stores in the U.S., but it is also learning valuable material handling lessons along the way. These lessons are paying off in more innovative supply chain management solutions. Rather than take a cookie-cutter approach to material handling, Big Lots is tailoring systems to the needs of those regions. What they've learned along the way will help them improve the Columbus site. But proposing such changes could be risky from a career standpoint in some corporate environments, says Noethen.

"The Columbus DC is attached to our corporate office, so we have a lot of visibility here," he continues. "We sold a lot of plans to our senior management team in 1994, saying this was the right decision for Columbus. To tell them that we wanted to change the decisions we made back then, that could have threatened our credibility."

The main challenge was to achieve in Columbus the efficiencies of its newer greenfield DCs. To begin with, the 52-year-old Columbus building was originally designed as a jet-engine production plant. That made it an odd shape for a distribution center, and resulted in long travel distances between storage and shipping. The complex pallet flows also made warehouse management difficult.

"We use a WMS from SSA Global [formerly EXE Technologies] and we had to jump through hoops to develop the system so it could monitor the flow of pallets into and out of the pickup and delivery [P&D] stations and the storage racks," Wilson explains.

The innovation
"In Tremont, we selected an FKI sortation system, while in Durant we selected Intelligrated," Wilson continues. "In Durant, Intelligrated set us up with a sliding shoe slat-type sorter with a 13 to 1 saw tooth merge. It's only been operating several months but we're real pleased with it. There's a similar sorter in Tremont, but we are using a 5 to 1 combiner that feeds a sliding shoe tubetype sorter. The saw tooth merge concept in Durant and higher sortation speeds helped us increase the sort rate to a sustained 235 cases per minute."

Although these projects weren't intended to be mirror images of each other, there were technologies that performed so well in one that they were applied in the other. For example, in Durant the team installed photo-eye accumulation. Instead of using a mechanical sensor roller on the conveyors, it uses photo-eyes. Based on the success to-date in Durant, and after establishing a less-than-year ROI, Big Lots is retrofitting all its conveyors in the Montgomery DC with photo-eyes. This change will reduce line pressure and decrease carton jams and side-by-sides prior to the merge.

The Durant DC was a $70 million project that went online in April 2004 — only three years after the opening of Big Lots' Tremont facility. Durant was designed to meet the demand of 350 stores, which will continue to open over the next several years. Much of this growth is expected in the southwestern United States. With both sites developed from scratch, the company was not constrained by the kind of architectural limitations or existing equipment issues the retailer faces in Columbus. On the plus side where Columbus is concerned, many of the lessons learned from the successes of Durant and Tremont will be incorporated into a $30-million renovation of the Columbus DC. These innovations include:

  • More energy-efficient lighting;
  • A change from very-narrow aisles and wire-guided man-up turret trucks to narrow aisles and rider reach trucks;
  • Reconfigured pallet heights to support greater off-season storage capacity;
  • Upped sortation rates and capacity;
  • New and more efficient full-case pick modules.

The results
The conversion from turret trucks to all-purpose narrow-aisle reach trucks wouldn't have been possible in the early days of the Columbus facility, according to Wilson, because they couldn't find rider reaches that could store and retrieve product at 35 foot heights. Today such trucks are supplied by Raymond and Crown . "We gain the flexibility and throughput time of dealing directly with rider reach drivers instead of having a dock truck take a load to a P&D station and the turret truck putting it away, then taking it out and staging it somewhere for someone else to pick up."

The Columbus renovation is scheduled for completion by August 2005. Due to the facility's configurationrelated constraints, Wilson isn't sure the Columbus pallet putaway and replenishment department will ever process as many as 16 pallets per hour, but he does know that it will beat its old rate of six or seven. In the meantime, with the help of the Durant facility picking up some of the slack, Big Lots DCs will continue to ship at a rate of 165 million cases per year.

In conclusion, innovation at Big Lots means finding ways to be flexible in the face of change. Says Todd Noethen: "We're always looking for better ways to do things. We encourage everyone on the team to participate. That culture allows us to be more responsive to changes in business."

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