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February 2003

technologyreview

Faster, higher, stronger ... that’s what DC execs are demanding of their warehousing systems. Once they get a taste, they always want just a little bit more.

TODAY’S RELENTLESS PURSUIT OF SPEED IS BY NO means limited to the push for Pentium-powered PCs, turbocharged sports cars or lightning fast Internet connections. Talk to any vendor involved in developing systems for managing warehouse operations, and you’ll quickly learn that even the humblest distribution center is now demanding double-time throughput (as well as a whole lot of extras).

One company that is looking for some serious velocity in its distribution operations is Saks Inc., parent company of Saks Fifth Avenue and other high-end retail stores. A couple of years ago, the corporation, which has doubled in size every year for 10 years, was facing huge integration issues following a spate of acquisitions. In hopes of bringing some order to its operations, Saks Inc., which handles logistics, finance and IT for the operating companies in its group, decided to close five of its eight existing distribution centers and build a new $25 million state-of-the-art flow-through distribution center in Steele, Ala.

Directing the action in the 180,000-square-foot center, which opened two years ago, is a warehouse management system (WMS) from Catalyst International. Thanks to that system’s robust capabilities, merchandise can now be processed directly through the DC to the appropriate shipping dock with little human intervention. Merchandise is received on the first floor of the facility through 20 shipping doors. The cartons are unloaded onto conveyors and immediately are scanned for correct vendor identification. Correctly identified material moves up the conveyors to the second floor, where cartons are sorted, scanned, marked and processed to shipping by a completely automated operation. The goods are then directed to 126 shipping doors, marked for delivery to a specific department store.

The new DC can move a single carton through in just under four minutes,with shipping accuracy of 99.9 percent. In fact, since installing its robust WMS from Catalyst, Saks has nearly tripled throughput, from 15,000 boxes per shift to today’s rate of 43,000 while operating with fewer people than it did when 15,000 boxes per shift was the norm. “Now that’s leveraging technology,” says Peggy Winstead, director of systems planning for Saks. “We tripled our throughput, which is a huge gain. It’s very, very fast. Logistics is all about speed. This just zooms.”

When the plans were being drawn up, Saks Inc. envisioned a facility where no merchandise would be put away or stored. And at this point, the company is well on its way to achieving that goal. Today, 94 percent of product is crossdocked —a level the company hopes to bump up to100 percent in the near future.

The right stuff?
To keep goods flowing through its DC at a turbo pace, Saks has pushed all value-added services—including tagging, labeling and quality functions—back to the vendors. But that doesn’t mean the company has handed off all responsibility for quality assurance. To make sure that the cartons it sends to the stores contain the right stuff, Saks audits a portion of them with the assistance of its WMS.

“Vendor quality management is a very important add-on to your basic WMS,” says Winstead. “In order to operate a 94-percent cross-dock facility, we have spent years partnering with our vendors to get them into full compliance with our floor-ready merchandise standards. We have a responsibility to our corporation to audit a statistically valid portion of cross-docked cartons, to assure that vendors remain in compliance. We also owe it to our vendor partners to provide feedback to recognize their successful efforts or alert them to any new concern.”

Cartons are randomly selected for auditing purposes. Once a carton receives an audit tag, Saks’ material handling system diverts it to an audit station. The carton is opened and, using the WMS system and RF devices, workers audit the contents to verify that the merchandise in the carton matches the UPC data. Records are then sent to the company’s vendor quality management system. The end result is that Saks is able to give monthly report cards to its vendors, letting them know how well—or how poorly—they are performing.

In its quest for ever-faster performance and higher throughput, Saks has already figured out its next move. The company plans to roll out its WMS platform later this year at distribution centers in Green Bay, Wis.; Ankeny, Iowa; and Aberdeen, Md. The company is also pushing forward toward its goal of 100-percent cross docking, says Winstead, “but to do that we need to reach out to the next frontier.” In this case, the next frontier is XML (extensible markup language). “You’re always going to have some small vendors that can’t get to EDI,” she says, “so we are looking toward XML as the next step.”

Business Casual
Another company with a need for speed in its distribution operations is the Casual Male Retail Group Inc., the retail brand operator of well-known stores like Casual Male Big & Tall, Levi’s Outlet by Designs and Dockers Outlet by Designs. CMRG is hoping that a robust system from Manhattan Associates will streamline distribution processes at its 600,000-square-foot DC in Canton, Mass. The facility, which will be up and running later this year, will eventually fulfill orders for more than 600 retail store locations that are now served by two separate DCs.

“We had some challenges,” admits Adams. “Basically the employees need to be somewhat computer literate, since they are now working with a computer as opposed to paper and pencil. Not every employee started up smoothly. It took some workers months to make it work for them, while others were up in two or three days.”

When it comes to the new system, CMRG has great expectations: It hopes to save between $20 million and $25 million by synchronizing distribution processes, improving its ability to cross-dock and manage inventory in real time through RF-based transactions. In addition,CMRG expects the move to a fully automated,state-of-the-art supply chain execution solution to help the company reduce labor costs in the DC by nearly 70 percent.

John R. Johnson, contributing editor, is a Boston-based freelance writer specializing in supply chain journalism and marketing communications services. He can be reached at jjohnson@dcvelocity.com

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