A cyclist, or skier, or any athlete that relies on his or her equipment for a competitive edge knows that you are only as good as your gear. In the highly competitive retail industry, Sport Chalet relies on its distribution center—its receiving and picking processes in particular—to get new products onto its shelves quicker than everyone else.
With 40 stores mostly located in California, and recent additions in Nevada and Arizona, the company will report around $350 million in sales at the end of its fiscal year in March. Sales have been growing around 10% per year, and management has announced plans to open four to eight more stores in the next 12 months.
To support such growth, in 2002 Sport Chalet consolidated several facilities into a new 325,000-sq.-ft. distribution center in Ontario, Calif. (about halfway between Los Angeles and San Bernardino). The facility currently employs 110 permanent employs and up to 60 temps. A little over a year after the move the company upgraded its warehouse management system and picking processes so that product could be picked and shipped to the stores by department, ready to be placed on the shelf or rack.
"We used to send all footwear— men's, women's and kid's—all together on a pallet. It was a big hassle at the store level because a lot of it would go to the back room," recalls Steve Belardi, v.p. of logistics. "They were touching every carton. It was crazy."
Now, when containers or cartons arrive at the store, they are labeled for a specific department and they can be taken directly to the sales floor and unloaded. To deliver goods this way, Sport Chalet managers worked with enVista Corp., a Los Angeles-based consulting firm, to design a new material flow. The project began by laying out the warehouse more similar to the stores, with small items and large items separated into 13 different departments, or pick zones, such as men's shoes, women's clothes, water sports and general merchandise. Next, the team changed the order-fulfillment process to pick orders for six stores at one time.
Continuous batch picking
Over two shifts, six days per week, order pickers move through the distribution center aisles with specially designed carts that have locations for six containers (corrugated, pop-up boxes that are returned from the stores). Order pickers follow the product location and quantity directions displayed on their RF guns as they follow a pick path through a zone.
The system does not use dimensional data to allocate products to the containers. When a box is full, the operator simply places it onto a conveyor at the end of the aisle that will carry it to shipping. Then they open a new box and scan it and the cart location into the system, allowing them to continue to pick product in that department for the same store, or another store. This keeps the maximum number of picking destination containers on the cart at all times as the order picker travels down an aisle. Following this process, which has been dubbed "continuous batch picking," employees pick and ship 30 million units per year.
"We're very efficient at picking because we're not wasting much motion. Once we go through the pick path, we're basically picking everything that's needed for those six stores," says Belardi. "In the old world we had to do six walks up and down the aisle."
At the beginning of this picking process, the Warehouse Advantage software from HighJump Software (Eden Prairie, Minn.) prioritizes orders for the stores being picked that day based on truck departure times. The software's business process object structure breaks down the process into the discrete steps necessary to pick an order, which can then be configured by the user to match the company's business needs. This capability allowed Sport Chalet to customize the software so that it could pick orders for multiple stores by department, release the cartons from the cart when they were full and introduce a new box, and easily change the process as needs changed.
For example, Belardi reports that when the company first went live with the system in May 2003, it required people to scan both the shelf location and the individual UPC on the price ticket. Coming from a manual environment where they were making a lot of errors, managers wanted to use the system to make sure the order picker was in the right location, and that he or she was scanning the right items. They improved performance to a point where they were 100% accurate, and decided it was redundant to scan both the location and the item.
Sport Chalet also modified the business process logic to help improve inventory accuracy. When someone picks the last item from a location, the system asks him or her to verify that the location is indeed empty, which registers as a cycle count.
The receiving dock
On the receiving end, when Sport Chalet receives a pallet, employees put a label on it that signifies what purchase order is associated with it, the number of cartons, when it was unloaded and by whom. The pallet then moves directly to several detailed receiving areas. They process apparel in one area and conveyable goods in another, and nonconveyable items—treadmills and kayaks—off to the side of the receiving dock.
In the receiving areas employees inspect the goods and perform various value-added tasks. They count the product, examine the quality, verify that it's the right item, add price tickets and anti-theft devices if the vendor hasn't already done so, and insert hangers. Using the software to automate the data collection part of the process improved Sport Chalet's vendor compliance efforts. Now, if a ticket lists an old price, or there's another issue, they can track it.
"That helps us get to the bottom of these problems and help them help us in the future," says Belardi. He reports that 40% of incoming items do not go into storage at all.
"When we are doing that detailed receiving process, if that item is needed by any one of our 40 stores at that moment, instead of us putting it away and picking it the next day, we're going to crossdock it then and there," he says.
After adding price tags and completing other valueadded activities, employees will split up an order of incoming garments from Nike, for example, moving the required number into a "put-to-store" area where they will be shipped out to the retail stores later that same day. The remainder moves to a reserve or forward pick location. As the company improves its merchandising efforts—how it allocates various product types to the stores—Belardi expects the percentage of product that doesn't go into storage to increase significantly.
This flow-through process contributed to Sport Chalet's 13-month return on its investment in the new WMS, Belardi reports. A study of the picking process by the consulting firm that helped with the project documented a 12% to 13% improvement in picking efficiency, which reduced labor costs. And that was only in the DC.
"We didn't factor in the labor savings at the stores, which was huge," says Belardi.
Pushing his cart down the aisle, a Sport Chalet DC employee follows instructions on an RF gun to pick goods for six stores.