By Ed Sullivan
The implementation of a properly configured supply chain execution (SCE) system can provide accuracy in all phases of operation, resulting in significant cost savings and major opportunities for business growth. Inaccuracies in the distribution center (DC) can dramatically impact costs, profits and business expansion opportunities. Unless your supply chain execution system provides at least 99% accuracy in all operational metrics, you may incur the wrath, or loss, of customers.
On the surface, inventory and operational inaccuracies directly impact internal costs, such as labor and warehouse space utilization.
However, inaccuracies can have a much broader effect, triggering significant pain points that affect a company’s ability to compete. Errors can result in supply chain disruptions, deficient customer service and the inability to address SKU proliferation, retail compliance and escalating transportation costs.
All this adds up to a simple but pervasive reality: Unless your SCE system is extremely accurate, it is almost certainly impeding your ability to grow.
Conversely, a suitable system configured to meet supply chain and internal operational requirements can enable manufacturing and distribution organizations to improve productivity and efficiencies within their distribution systems, thereby greasing the skids for business growth.
“To put it in perspective, our sales grew from $60 million not long ago to $151 million in 2007,” says Tom Murphy, director of operations at restaurant supply and design firm, Bargreen-Ellingson. “In essence, our system has helped us achieve that growth with the same number of people but with a lot more accuracy.”
Efficient Growth
Founded in 1960 and based in Tacoma, Wash., Bargreen-Ellingson is a large foodservice supply and design company that operates 16 branch locations in the northwestern U.S. and Hawaii. The firm attributes much of its success to its strong customer-directed focus, which includes not only a comprehensive range of products, but also unique design services and showrooms with kitchens where chefs of hospitality and healthcare customers can test-drive equipment.
In February 2001, Bargreen- Ellingson moved into a 100,000-square foot DC in Tacoma to accommodate its exponential growth. To maximize slotting and other efficiencies, Murphy’s team decided to investigate supply chain software.
“When we first looked at systems, we had a few difficulties getting what we needed in terms of configuration and implementation,” Murphy says. “We eventually brought in Intek Integration Technologies Inc., based in Snoqualmie, Wash., as our provider. Its product, Warehouse Librarian, is a very powerful and accurate system.”
Murphy says power and accuracy has translated to significant savings in warehouse space utilization plus improved labor efficiencies as well as other internal benefits. He describes the solution as a business- and revenue-enhancing system that is facilitating 20%-plus annual growth.
“It is actually hard for us to audit an actual ROI on labor cost reductions because we have been growing so fast,” he explains. “But Intek’s system, because it provides warehouse control as well as distribution management, has allowed us to incorporate automation and grow more efficiently because our DC workforce is so much more efficient. In terms of space utilization, we’ve been able to grow dramatically without moving to a bigger building.”
Murphy says the Bargreen-Ellingson distribution system enjoys a 99.3% accuracy rate in inventory, order fulfillment and order picking. And, the operation is continually improving.
Space Utilization
Bill DeWitt, distribution manager at Boyd Coffee Co., oversees the manufacturing and distribution of coffee and other food products throughout the Pacific Northwest. Boyd Coffee offers coffee and food line items from its DC east of Portland, Ore.
“Our distribution accuracy really picked up in the early 1990s, when we implemented the Warehouse Librarian system,” DeWitt says. “At that time, we were faced with a multimillion-dollar warehouse expansion to gain the storage space we needed to run our DC efficiently. However, with this system’s advanced slot management capabilities, we were able to postpone the warehouse expansion for several years.”
DeWitt says his firm measures accuracy based on shipments going out and errors being reported back and recorded according to sales routes.
“We have numerous routes that receive shipments weekly,” he says. The route salesperson is responsible for that freight and checks everything in. The salesperson is charged for the shipment on his inventory, and it has to balance. We balance the coffee items every week and the other food product items every six weeks.”
DeWitt says Boyd Coffee currently has a 99.8% accuracy rate on shipments based on reported errors. He adds that the solution has enabled the DC to add both space utilization and labor efficiencies, saving on internal costs. In the 1990s, the company had some issues tracking inventory due to warehouse congestion, but now, the system keeps track of everything.
“Today, it is much easier for us to know where everything is located,” DeWitt says. “I can run a report in less than 15 seconds and tell you where every pallet of a certain code is in the warehouse. If it is a location report, it will give me the received ID and the location of any SKU. And, now that we have additional space to accommodate our growth, efficiency has grown.”
SKU Control
As the need to control internal DC costs—labor and space—increases, so do other market trends that create both internal and external challenges. Many DCs are confronted with SKU proliferation, for example.
“Today, we have 7,000 to 8,000 SKUs in our DC,” Murphy says. “Each of our 16 branches gets at least two transfers a week. The system enables us to consolidate a number of SKUs onto pallets. And, with our system, we have found that our speed and accuracy are fantastic. We might send a 300-line-item transfer to our branch in Boise. In the past, that would have taken us six hours to pull, whereas today, it takes three hours. So, it’s now much faster and more accurate.”
Adding carousel picking automation to the Bargreen-Ellingson distribution system also made that level of efficiency possible, Murphy says, adding that it was easy to integrate into Warehouse Librarian.
“We identified SKUs that had relatively high velocity, which helped to determine which SKUs would go up into the carousel picking pod. Now, where one employee in the warehouse is pulling 60 or 70 lines an hour, a person in the carousel system is pulling 200 lines an hour because the product comes to them. And, the same efficiency improvements apply, whether the carousel system is in put-away mode or picking mode,” claims Murphy.
In addition to inventory and picking accuracy, space utilization and fulfillment speed, most manufacturing and distribution companies find that SCE implementation is a major factor in their business growth. Because of the design of the system software, appropriate configuration is achieved through a series of software switches that add functionality and range as required.
“Basically, we use it as a controller of the inventory, and we maintain high integrity of the inventory system,” DeWitt explains. “And, we rely on it to send that information up to the host system, which is the controller of the actual inventory. If you don’t maintain the checks and balances, then the system can get away from you.”
DeWitt says Intek made an effort to learn about the intricacies of his business. “They took the time to understand our industry,” he says, “what we call the pots-andpans business.”
Ed Sullivan is a technical writer based in Hermosa Beach, Calif.
