Retailers throughout the world are realizing profit potential by going beyond their main channel of distribution. However, they must overcome the challenge of merging new with established fulfillment channels. If they can do so using a single inventory process, all the better. The challenges of doing so include the needs to improve speed, accuracy and scalability.
In the case of retailer Sur La Table—which operates 76 stores throughout the U.S., as well as selling via catalog and the Internet—its new supply chain execution system yielded accuracy improvement to 99.53%. That accompanied a 20% increase in space utilization, $5,000 reductions in monthly energy costs and $2,000 monthly savings in lift equipment rental fees.
Labor savings amounted to 18% with the new system. Given Sur La Table’s warehouse headcount of 155 non-peak employees and 300 peak employees, calculated efficiency gains after system implementation range between 34 and 66 full-time equivalents (FTEs).
The need for improvement
Founded in Seattle, Wash. in 1995, Sur La Table positions itself as “providing the inspiration, tools and techniques for those who wish to enhance their lives through creative cooking and artful entertaining.” Sur La Table’s comprehensive selection of products includes tools from around the world to prepare any cuisine, as well as dishes, linens and glasses.
“We run all the distribution from a single warehouse in Brownsburg, Ind.,” says Tom Rafferty, the distribution center manager for Sur La Table. “We not only supply our brick and mortar stores out of this site, but we also handle the direct-to-customer e-commerce and catalog fulfillment.”
Up until mid-2008, this undertaking was easier said than done. Part of their challenge lies in supporting extremes in order size, numbering in the hundreds of items for any of the firm’s stores, to only a few or even one item for its catalog or e-commerce businesses.
“The old system dated back to the late 1980s, early ’90s, and ran on an AS400-based system that lacked RF or handheld technology,” recalls Rafferty. “We were picking orders off of paper pick sheets. None of the inventory transactions like put-away and replenishment were in real time. When we shipped to an individual store, all we knew was that we had ‘X’ amount of units on so many pallets. We didn’t have any information that was specific to the pallet, let alone to the carton.”
Concerned about improving productivity and efficiency as the company grew, Rafferty and his team started aggressively seeking a modern warehouse management system (WMS) in 2007.
The WMS Search
Rafferty’s team looked at a top tier system, a couple of mid tier systems, and some Tier 3 systems before choosing Intek’s Warehouse Librarian, which was said to have the total cost of ownership of a mid-range system with the functionality of bigger systems.
“One of the draws for us was that buying this WMS was like buying Excel,” says Rafferty. “You purchase it off-the-shelf and you could use it right away without any heavy modification.”
This WMS package combines PC-based supply chain execution with a warehouse control system. Sur La Table went “live” with it during the last week of July 2008.
“We went off our old system on Friday, and on Monday we were operating the new one,” Rafferty recalls. “By the end of that first week we had done all of the normal business that was slated for that week. We didn’t have to phase it in, and training went smoothly.”
Operating on a network of Windows-based PCs, the new system was integrated with 75 Symbol (now Motorola) RF handheld scanners and five, internally-designed mobile carts—essentially a PC on wheels.
With the integration of the new system, Sur La Table no longer had to run two parallel inventories.
“Merging our inventories was huge in terms of productivity gains,” Rafferty says. “We used to have to transfer goods back and forth. Now, since we’re picking both ‘live’ from the same slot we can make inventory immediately available to both the retail store and the direct customer channels. In conjunction with our host system, we can reserve product for the direct customer, so that we don’t completely deplete it while fulfilling retail demand. As a result, we’ve gotten about an 18% improvement on a cost-per-unit basis.”
Gains from merging the two inventories also extended to space utilization.
“One of the biggest improvements came from the way we utilize slots,” Rafferty notes. “We were 20% busier through the peak period in 2009, and we did this with the same footprint as the year before we got the new system. It’s hard to put a number on how it’s helped us capacity-wise, but you could argue that we gained 20% in capacity because of the more efficient utilization of our slots.”
Rafferty also credited better accuracy.
“The product that we thought was in the building, was not only in the building, but in the right location,” Rafferty continues. “That improved from 98.39% to 99.53%, which may not sound like much, but in terms of inventory accuracy, that’s pretty significant.”
“In addition, picking with RF gave us better user accountability,” Rafferty adds. “We are also able to track perishable products by expiration date now. We couldn’t do that with the old system.”
Hard Dollar Savings
“We rent our warehouse lift equipment, and this year we could rent fewer lifts to get through the peak period,” Rafferty says. “Over a six-month period of time we saved $12,000 in forklift rental costs.
“Before, we typically would run three shifts, 24 hours a day, five days a week, all year long,” Rafferty continues. “But now, during non-peak periods, the building is only open for 12 hours a day, five days a week. By not having to light and heat the building as much, our utility costs dropped by about $60,000 this year.”
Easier access to information also accounted for much of the gains.
“In the past, we would write queries on the AS400 system, but now we use Crystal Reports to get info out of the WMS,” Rafferty says. “It’s more user-friendly in terms of being able to pull several different files together from not only the warehouse system, but also our host system.”
Good for Stores
“In terms of the way we service the stores, they get much better information now,” Rafferty continues. “Each pallet has its own barcode ID, and each carton on that pallet has a barcode ID that links it to the pallet, and since each store gets a manifest with every shipment, they know exactly what they’re getting on each pallet.”
Modular in nature, the new system can help Sur La Table continue to expand in the new decade.
“In a nutshell, the new system allowed us benefit by joining two inventories into one,” Rafferty concludes. “As the business grows, we can add more RF units and more users to what we’ve already got.”
Ed Sullivan is a Hermosa Beach, CA-based writer. He has researched and written about high technology, healthcare, finance, and real estate for more than 25 years. For more information on Intek Integration Technologies, visit www.intek.com.