As one of Europe’s largest music retailers, Cologne’s Music Store GmbH (www.musicstore.com) has established a reputation among professional and hobby musicians beyond Germany’s borders, especially in online retail. A huge range of more than 60,000 items, combined with premium shipping service, increased logistics requirements. Short-term solutions were found using temporary storage, but these would not allow the company to continue its growth.
The situation was complicated: a single retail shop in the city of Cologne, where parts of the administration were situated, supported by one central warehouse with a call-center and the remaining administration—in addition to five peripheral warehouses. The result is that Music Store needed a consolidated site, where all the different business areas could be grouped under one roof.
More than 70 percent of the annual turnover of over 100 million Euros (approximately US$141 million) is generated through mail order business and e-commerce. Up to 6,000 packages are shipped daily to customers throughout Europe. To stay competitive, Music Store guarantees attractive prices, high inventory availability and fast order delivery. The synchronization between the internal ERP system and the shop enables Music Store to update goods availability and price changes immediately.
The majority of goods are shipped the same day the order is received, and depending on the destination, arrive at the customer’s home 24 to 48 hours later. Seasonal peaks around Christmas and the mailing of new Music Store catalogs each spring and autumn created challenges for the logistics system.
The sizes of the orders vary significantly. Due to free shipping within Germany (starting with a minimum of 25 Euros, or approximately $35), many orders consist of only one or two items.
Customers in other European countries benefit from flat rate shipping costs by ordering more items at the same time.
Music Store’s rate of returned items is only 8 percent, which is considerably lower than the average online business. This is due to the precision of the musicians, who select their goods specifically.
However, this issue made it important for Music Store to prepare preventive measures such as the control of instruments before shipping.
First Logistics, Then the Building
Due to the growth of the business, the shortage in logistics capacity and the expansion of e-commerce, Music Store analyzed its actual requirements in 2008. It contacted the consulting firm Pierau Planung from Hamburg to help analyze the logistic processes and the required technological solutions.
The type of automation technologies recommended led the way for the size and choice of building. It would not only be a warehouse in a functional building, but a retail shop that would be a destination setting for customers in Cologne.
Following this, a site near the city center of Cologne, yet easily connected to the city motorway, was selected, and approval granted for the 78 ft. high-bay warehouse. The site would have been too expensive for a distribution center, but the closeness of the Kölner Zoobrücke (Cologne Zoo Bridge), with 120,000 cars crossing daily, gave the site benefits from advertising effectiveness.
With support by Pierau Planung, Music Store prepared the tender documents and invited a couple of suppliers to present their offers. It was decided that all parts of the facility would be tendered separately: the steel work, the high-bay warehouse, the mini-load warehouse, the picking tower and the material flow controls.
Material Handling Flow
Music Store offered the complete electro-mechanics subsection portion of the project, including maintenance and customer support, to TGW (www.tgw-group.com). Only the steel work and the material flow controls were contracted out separately, which made the coordination between the several parties easier. Besides, the PLC (programmable logic control) was adapted by TGW in a way that there was an ideal interface for material flow controls.
Each day, a couple hundred pallets with new goods enter the logistics center. The goods are mostly produced in the Far East and thus supplied in 40-foot containers. Bigger items are received in Euro pallets and either transported directly to the high-bay warehouse for storage via conveyors, or to one of the six re-pack workstations. At these workstations single original cartons are taken off the pallets, identified per scan and transported to the conveying system.
High-Bay and Mini-Load
In the 24 meter pallet high-bay rack almost 14,000 pallets with double-deep storage structure can be stored. Each of the six stacker cranes is equipped with one single-deep and one double-deep load handling device, to increase the throughput rate.
“An important detail of the solution for Music Store was that pallets should be able to be overloaded by four inches, as the products did not fit the standard Euro pallets with 48 x 70 in. surface,” explains Gernot Kratky, TGW project manager.
Retrieved pallets are manually split into single cartons and the products are provided for picking in the flow rack.
The products that have been separated in the goods-in area are transported into the automated mini-load warehouse, where about 15,000 totes and cartons of various sizes are stored. Two TGW Stratus stacker cranes with two Twister load handling devices each supply the 33 ft. high double-deep shelving rack.
This storage area works as replenishment storage for the mini-load picking and for picking full cartons out of this storage block for conveying to the shipping area. For high value items, such as high quality guitars that can cost 10,000 to 20,000 Euros, Music Store asked for a special P&D (pick-up and delivery) station where packages up to 47 inches long can be brought into the automated carton warehouse.
The mini-load picking takes place at pick-by-light workstations, which are supplied by six TGW Commissioner automatic storage systems. After picking, the source totes are restored into the storage area. Employees receive their picking orders on pick-by-light-displays. Goods are picked from storage totes into order cartons, which come from the central order start and at this point have already passed the manual flow racks. These order cartons range from 10 inches to 52 inches long.
All picked cartons are transported from the picking area on the upper floor via conveyor back to ground floor packing and shipping.
“Not only goods for shipping are picked here,” mentions Kratky. “Customer collections are managed with the same system. However, these are not sent through the regular three pack lines, but directly via a separate conveyor line to the retail store at the other end of the building.”
If there is an order in the store, it will be prioritized automatically by the ERP system as soon as the customer pays for it.
For the shipping process cartons are packed at one of the three pack lines and closed before the shipping label is applied. Next, the goods reach the loading ramp, where the packages are transported via telescoping conveyor and loaded onto the waiting trailers.
Goods are also shipped via freight forwarding companies, including bulky items such as digital pianos or trusses up to four meters.
Few Mistakes, High Speed
Music Store invested about 7 million Euros ($9.3 million) into the new logistics center and expects the omission of internal rearrangement will add to the return on investment.
This centralized approach has reduced the number of touches on the goods, and guarantees immediate availability. Moreover, the new system increased the speed of shipping and minimized the error rate.
The new installation is expected to work without problems for the next three years, assuming Music Store grows continuously at the current rate. Beyond that, additional expansion areas have been prepared.
Before this new logistics center, Music Store had to limit the product range handled in the old central storage setup. Now new segments can be added to cover all relevant areas. For Music Store that means not only availability of top sellers but also of “exotic” products that might spend three to four months in storage before being bought.