Inventory Management Flows to CDW's Bottom Line

Oct. 1, 2002
Efficient storage, scanning and sortation help this technology provider meet growing customer demand on a single shift.

The second quarter of 2002 was a sales record setter for CDW Computer Centers, based in Vernon Hills, Illinois. How could that be, considering the bear market and news reports that everybody’s putting investments in high-tech on hold for the near term? CDW’s CEO, John A. Edwardson, says he knows the secret.

“Our strong performance results from the fundamental belief that you must take care of each customer as if that person were your only customer. This philosophy, as well as our high-ly efficient business model, makes CDW the best way for businesses, government and educational institutions to buy technology.”

Efficient material handling is at the heart of that business model. Using just-in-time inventory practices and automatic sortation in a 450,000-square-foot distribution complex allows:

• 97 percent of credit-approved, in-stock orders to ship the same day (translation: 15,000 orders shipped daily);

• More than 1,000 systems to be customized to customer specs with brand-name hardware and software each day;

• 25 annualized inventory turns;

• Faster, more accurate delivery to customers.

CDW’s customers have come to expect quick turnarounds on their orders because they know product will be in stock and in one place. But that makes inventory management an even more challenging proposition than some of the more sophisticated supply chain strategies CDW’s competitors have relied on to merge inventory while in transit.

“We manage inventory by turns, not necessarily by dollar value,” explains Doug Eckrote, senior vice president of purchasing and operations for CDW. It’s a matter of having people and controls in place to make sure you’re watching your aging inventory and stocking levels. You put automation in to keep your costs down while improving customer service. When customers need product quickly, they’ll look to those who can turn it quickly and do it cost efficiently. We’ll get an order at 8 p.m. and still get it out the same day.”

That includes custom configurations. There are three tech areas dedicated to special builds. Doing 1,000 of these a day requires getting the necessary products to the configuration area where a technician can do the work, then getting the newly configured product out to shipping as quickly as possible. Programs, drives and other parts are selected in pick pack, then sent to a tech area. They’re all separate picks, but they’re counted as one order that ends up in a single box out the door. The monitor is picked and packed separately but it goes into the same truck.

Material handling evolution

Since its founding in 1984, CDW’s product mix has changed from ready-to-ship computer equipment to order configurations involving pick-pack strategies. The company has 363,000 active commercial customers. Its goal is to get a bigger piece of the small to medium business and also to supply the enterprise-size customers with peripheral and system needs. These customers want speed of delivery and responsiveness to their special requirements.

“Thirteen years ago we had one shelving module, probably 15 feet to 20 feet long and a foot deep, dedicated to every single pick-pack item we carried,” Eckrote recalls. “Now pick pack takes up 200,000 feet of our distribution center’s total 450,000 square feet.”

Today, five storage modules, three stories tall, hold CDW’s pick-pack items. Nine modules hold full case items. All were supplied by United Steel Products (USP), Stroudsburg, Pennsylvania.

“We started the project with CDW’s system integrator, Matco Distributors, in July 1997,” explains Nelson J. Cantillo, vice president of sales at USP. “Those pick modules represent 20,000 pallet positions of selective pallet flow rack and pushback rack. CDW was looking for mass customization capabilities so they could fulfill orders in a certain period of time per their catalog.”

“That takes a different type of material handling,” Eckrote adds. “With pick pack, conveyors must be different; you’re handling lighter boxes, you’re using photo eye accumulation of smaller box orders. And now sorters match orders to shipping lines.”

With all this growth and change, CDW’s distribution operations are still accomplished on one shift. It’s shipping 30,000 boxes a day in eight hours with the same number of workers it had a year or two ago when it was shipping 20 percent to 30 percent less. That’s 170 people.A new tilt tray sorter helps distribute products where they need to be for these workers to handle them less frequently and more efficiently. In CDW’s first go at automatic sortation, it relied on a sliding shoe sorter. The downside of that was it had a single point of induction. This created a bottleneck.

Keep in mind, material handling at CDW evolved. Five years ago, everything was done within a single warehouse’s 100,000 square feet of space. Today, that’s called Warehouse One, and it accommodates pick pack alone. Warehouse Two was eventually added, with 100,000 square feet dedicated to handling pick-pack overstock and receiving. CDW’s most recent addition, Warehouse Three, is 250,000 square feet and dedicated to ready-ship storage and shipping.

With the latest expansion, the CDW distribution center has four points of induction — and the ability to add an induct point anywhere. That’s important, considering the variety of case sizes it handles.

“We can have a one-pound or an 80-pound box traveling down the conveyor, plus we were able to build a lot of accumulation into the sorter,” Eckrote explains. “The tilt tray sorter is mounted up in the air, with spurs coming down, each one feeding into a truck. You can put a pretty fancy powered spiral coming down those chutes, but we went with more of a slide. It’s fast and was very inexpensive to do.”

Eckrote says CDW could have survived with its previous shipping sorter, but orders were starting to challenge its capacity and overtime would be required to meet customer demand.

“The shoe sorter was designed to handle only 28,000 cases a day, and CDW was cranking out 32,000 on peak days,” adds Ken Mater, Matco Distributors, Milwaukee. Mater, the principal engineer on this project, refined and debugged the shoe sorter, but product was still backing up into the pick modules.

“Workers were running around like mad because CDW’s philosophy is, ‘Everybody stays until every order is out the door,’” Mater explains. Still, CDW didn’t want to rush the new sorter project — at first.

“We wanted to bring the new warehouse up to speed slowly, while letting the other one continue to run,” Eckrote recalls. “We told our carriers we would have two shipping operations going on at the same time. We felt that in six months the new sorter would be running and all the bugs would be out. Then over time we would shut the other sorter off and have everything under one warehouse. Instead we ended up doing it all in three weeks. We left the old sorter there in case an emergency came up, but in four months after the new site was operational we dismantled the other shipping sorter and added storage.”

Now, says Mater, the tilt tray system is purring. So much so that when he went into the new facility shortly after installation, he was worried that CDW’s business had fallen off.

“Before Warehouse Three was added, I would make it a point to get out of there before two in the afternoon,” Mater says. “That’s when it became a madhouse, and people were literally running around to get things done. Now they’re doing more than before and there’s a calm in the building. You feel the efficiency. It’s handling 20 percent more than what it was originally designed for.”

Flow at CDW

CDW receives the bulk of its shipments about 4 a.m. and is typically finished receiving by 3 p.m. About 80,000 pieces arrive within this timeframe. These are a mix of pick pack and ready-to-ship items. Rather than receiving the products at one of its warehouses and transporting them by conveyor or lift truck to the other, CDW’s transportation partners separate items on the truck so warehouse personnel at one building can unload only the pick pack. Then the truck moves to the other dock where ready-ship items are unloaded. “That adds material handling efficiency,” Eckrote adds.

Pick-pack items are fed into a receive-to-tote process. Each tote has a bar code on one side. Once loaded with incoming items, the tote is placed on a take-away conveyor, which then diverts the products to the appropriate stocking locations. The conveyor alleviates the need for manual product transfer, either carried or by cart.

Regular orders are printed in batches every 45 minutes. Picking from these orders, workers go to the bin locations and apply a bar coded shipping label. The packing list is tucked under the shipping label, eliminating the need to open the case and insert it. The worker scans the UPC code, then the order number. This validates that he has the correct ready ship item and assigns it a serial number. This number is later RF-scanned as the item leaves the dock.

The carriers (with the exception of UPS ground and FedEx ground) scan packages at the dock for tracking purposes as they load their truck.

Next: paperless picking

The next generation of this system, scheduled to go online as this issue of MHM goes to press, combines pick-to-light and a scan tunnel. Paper-based picking will be eliminated. When batches run, the picking module will light up like a Christmas tree, indicating the correct items and quantities to select. From there items will be conveyed to a scan tunnel, which will capture the UPC codes and serial numbers as the packages travel through. It will also apply the packing list with the serial number printed on it. Packages will then go to a second print/apply station where the shipping label is attached. From there they’ll go to the shipping sorter.

“There will be no human scanning; it will all be done by the scan tunnel,” Eckrote says. “The key benefits will be accuracy and timeliness. Our manufacturers send shipments with a ton of bar codes on them, sometimes eight or nine different ones. Our people have to search each box for the right bar codes to scan, and that takes time. The scan tunnel finds the right one by the time a package makes its way through it. On a pick-pack item this can save at least 30 seconds per order. That’s a man-hour savings of $600,000-$700,000 a year.”

Eckrote acknowledges that the varying number and size of bar codes was a challenge for Accu-Sort to accommodate.

“They never had to read the size bar codes we asked them to read at the speed we required,” he adds.

Tunnel scanners are typically used for verification, rarely for processing orders. For this application, CDW’s homegrown warehouse management system (WMS) features a filtering program designed to help the scanner spot the appropriate bar code. As a case goes through the tunnel at 200 feet per minute, nine cameras read every side of it except for the bottom. These images are transferred to a CD and the bar code information is sent back to the host computer, which filters out all but the one code it’s looking for. All this happens within two-tenths of a second. Then the host sends back information on that carton. This triggers the print and apply, attaching the order to the label.

Cases that can’t be read are diverted off the line.

Once the scan tunnel is up and running, Eckrote plans to make use of the additional capacity being made available with a new induction line coming from Warehouse One. Full capacity will be 46,000 cases in an 8-hour day. He intends to use the same 170 people and still achieve 99.9 percent accuracy.

“If you think of the capacity we could accomplish by going to multiple shifts, it would be unbelievable,” he muses.

In the ready-ship warehouse, backordered items will be crossdocked as they come off the truck. They won’t spend more than an hour in the building. Workers in receiving will place a shipping label on the package and it will be conveyed to the tilt tray sorter, which will divert it to a “jackpot feed” and into shipping. The sorter will read the bar code one last time to determine the carrier, then the product will be diverted to the appropriate line at the shipping dock.

If business continues to grow at its present rate, Eckrote says CDW will eventually add more distribution facilities.

“You can have only so much warehouse under one roof,” he concludes. “But that’s a ways out because we still have double the capacity we need.” MHM

Material Handling Suppliers

Accu-Sort: RF scanners, tunnel scanners

Crown: lift trucks

FKI: (Mathews conveyors in warehouses 1 and 2, Alvey Accu-Glide conveyors in warehouse 3)

LexmarK: packing list printers

Mantissa: controls, warehouse 3, tilt tray sorter

Matco: general contractor

Rapistan: pop-up wheel diverters in pick-pack warehouse

Symbol: cordless handheld scanners

USP: racking

Wildeck: mezzanines

Zebra: label printers

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