European Retailer Expands DC, Adds AS/RS

March 1, 2005
A dynamic picking system improves speed and accuracy.

A dynamic picking system improves speed and accuracy.

HEMA, a Dutch retailer, had a problem. It needed a faster, more accurate method for replenishing its 320 stores in the Netherlands, Belgium and Germany. The solution was to build a $45 million plus expansion to its existing facility in Utrecht (Netherlands). HEMA chose Witron (Arlington Heights, Ill. and Venray, Netherlands) to design the new facility and be the project's general contractor.

HEMA is a business unit of Royal Vendex KBB, one of Europe's larger retailers. Its sales grew 8.3 percent in 2004, and it recorded $5.5 billion in sales last year.

There were several reasons why HEMA chose to expand its existing distribution center, explains Theo Heemskerk, HEMA's director of Logistics. It costs $200 per meter to build in Holland, and there is a lack of available land in a location convenient to its stores. Utrecht is centrally located to all of HEMA's Dutch, German and Belgium stores. The city is a public transportation hub and a large education center with a population of nearly 300,000 of which 50,000 are students. This offers a bettereducated, larger labor pool, something that is hard to find outside of large cities, he adds.

The centerpiece of HEMA's new DC is Witron's Dynamic Picking System (DPS). It distributes orders for any of the company's 13,000 nonfood products within 24 hours of receiving the order. "We invested in this system to save labor, increase picking accuracy and shelf availability and reduce labor in stores," Heemskerk explains.

The dynamic picking system is housed in a new 97 x 53 x 16-meter facility, and has storage space for approximately 120,000 totes. Within it, the DPS divides 13,000 fashion and consumer goods products into 48 sorting groups. The system can process 220,000 line orders per day. This translates into almost 390,000 units, which are delivered to the stores in 24,000 totes. The distribution center replenishes its stores two, three or four times a week, depending on the size of the store. HEMA also produces its baked pastry products in-house and transports the baked goods to the stores. A logistics services provider warehouses and transports the remaining food products.

HEMA makes a distinction between push and pull products. The push flow consists of seasonal and promotional items. Because the stores order these goods farther in advance, this flow is easy to plan. The pull flow is driven by the cash registers in the stores. After a sale has been registered, a calculation is performed on the basis of a maximum and minimum stock level to determine whether the shelves need to be replenished. Each store has an order calendar, which automatically sends the order lines to the distribution center. Depending on their size, stores place orders two, three or four times a week. Apart from the products on the shelves, the stores do not need to keep any items in stock, at the store location. This saves HEMA an enormous amount in warehousing costs.

Goods arrive at the HEMA distribution center on pallets or in sea containers and are taken to storage as pallet loads. The facility handles 530,000 pallets annually. The warehouse control system (WCS) calculates the inventory needed for the DPS, on the basis of history, order lines received and a projection for the next few days. HEMA repacks 60 pallets per hour into totes at 32 ergonomic workstations equipped with 16 pallet lifts. The totes travel about 100 yards by conveyor to the DPS, which automatically puts them into storage. The DPS integrates storage, replenishment and order picking. SKUs are stored above 70 pick locations. On average, five days' inventory is stored in the DPS. HEMA has 13,000 SKUs; the DPS can hold 300,000 SKUs.

Every night, the WCS optimizes the pick front of the DPS racks for the next day's orders. In practical terms, this means the items that are due for many picks are positioned close to the order pickers' workstations. Similarly, articles requiring fewer picks are placed farther away. Pick-to-light technology increases accuracy and speed. When the order picker has confirmed that all the picks have been made, the bin is automatically transported away.

Because several store orders are gathered from 70 pick zones simultaneously, an order consolidation buffer zone was built in the DPS building. Here, the bins are sorted, then moved to the dispatch area where they are labeled, stacked and placed on dollies based on the layout of each type of store. The dolly load is stabilized with a strap.

HEMA distributes pushed goods in batches. Roll containers store articles previously sorted into sorting groups and display-week promotions. A roll-on roll-off system is used to transport the containers from the warehouse to the dispatch hall. Here the push containers are matched to the pull containers of a particular store's order. The system allows 48 roll containers to be loaded onto, or unloaded from, a trailer in only a few minutes.

Not only did the new facility and DPS system improve HEMA's ordering process, it changed the company's culture. Fortunately, Heemskerk says, "We were five months ahead of our scheduled start date. We needed and used this time to train people and help them use the system better. From the start of last year, we were able to meet our return on investment."

The new DC is large enough for the company to expand. "We will open another 40 to 45 stores in the coming three years," Heemskerk says. "In the end, we will be able to have between 400 to 450 stores."