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Automated Foodservice Distribution Centers - An Affordable Solution Has Arrived!

Automated Foodservice Distribution Centers - An Affordable Solution Has Arrived

Background Information

Foodservice distribution centers universally face the common challenge of SKU proliferation.  The pressure to add more SKUs is particularly acute in this industry because sales representatives want to win over customer accounts by offering private label, customer-specific and/or unique SKU offerings that the competition does not supply.  The logic is simple - win market share by having the broadest product line offering.  Unfortunately, the vast majority of new items that the sales force seeks to add to the distribution network are slow moving SKUs that are sporadically ordered perhaps by only one or a few customers at best.  The business challenge is that these slow moving items are by far and away the most expensive SKUs to handle from a distribution perspective and they drive operating expenses up at an accelerated rate.

The good news for the foodservice industry is that there is an exciting new semi-automated material handling solution that has been developed and as importantly - successfully deployed in a number of foodservice distribution centers.  What makes this automation solution all the more appealing is that it can be deployed within an existing distribution center.  The economical justification for this automation for Dry grocery and Frozen Food is definitely within the reach of North American foodservice companies that have facilities shipping decent volumes (e.g. $US 300 Million sales/year or more) .  This article explains how this semi-automation solution works and why it is an important breakthrough for the foodservice industry.

Why Do Slow Moving SKUs Cost More to Distribute?

Why do slow moving SKUs increase distribution operating expenses at an accelerated rate?  There are a number of reasons for this phenomenon:

  • These SKUs are purchased in smaller quantities thus the economies of scale are more costly to the distributor.  Rather than purchasing full pallet quantities that are the most economic entity to supply for the food manufacturer, the distributor orders case or layer quantities to minimize inventory assets. 
  • In turn, the food manufacturer picks these slow moving items in case quantities which is more expensive than picking layers or pallets.  On the receiving end, these cases need to be sorted out onto separate pallets which incurs an additional handling cost for the foodservice distributor due to the “lumping” process.
  • Often, slow moving products are stored on small pallets (32” x 40”) rather than large pallets (40” x 48”) to enable more SKU variety to be stored within the racking system.  These small pallets are then typically stored in a PIR system (Planned Inventory Retrieval).  PIR systems are usually configured as very narrow aisle (i.e. 5’-0” wide) rack and aisle layouts whereby SKUs are randomly stored and picked throughout all vertical levels within the racking system.
  • Operators perform putaway with the use of a wire-guided order selector truck such that the operator is elevated up to all vertical levels to perform putaway.  Worst case, the product is manually hand stacked into the storage locations which incurs expensive labor costs to perform.  Alternatively, product is stored onto pallets that are stored by a rotating fork turret truck.  In either scenario, the aisle is essentially limited to one vehicle at a time which constrains the ability for multiple operators to access product in the aisle concurrently.
  • When orders are released for picking, orders within the PIR zone are typically batch picked such that the operator picks multiple orders in one travel path within the aisle as though all of the orders are aggregated into a single “parent order”.  At the completion of picking the “parent order”, the product is sorted into individual “child orders” which involves a labor penalty for rehandling of cases.  To minimize this labor penalty, companies often have the product sorted to a portable shelving cage that is elevated with the operator on the order selector truck.  As such, orders are already sorted onto different shelf levels when the operator emerges from picking in the PIR system which minimizes rehandling effort,
  • The operator who picks from the conventional section of the warehouse must go over the area where the PIR portion of the order had been staged to find the cases that were picked from PIR zone so that these cases can be top loaded onto the portion of the order picked from the conventional zone.  Again, there is a rehandling penalty associated with this effort.
  • Slow moving SKUs are typically stored in a PIR environment within the Dry Grocery and Frozen Food rooms of the distribution center because the SKU variety exceeds the number of pick facings that are available at ground level.  The distribution center would need to be sized to be significantly larger is these items were to be slotted into pick slots at ground-level.
  • Thus each case that is handled within the PIR system is manually handled at receiving, at putaway, at picking and again when the case is merged to the portion of the order coming from the conventional section of the warehouse.
  • A good rule of thumb is that a case being selected from vertical PIR locations that are not accessible at ground level will cost 2.5 - 3X more than cases that are selected from ground-level pick locations. Said another way, if a SKU costs $0.30 for labor cost to pick from a conventional ground level pick location then it will cost costs $0.75 - $0.90 to pick within a PIR system.
  • This is why each incremental slow moving SKU that is added to a distribution center has a significantly higher labor cost associated to it.  Sales people may have a difficult time understanding this principal but distribution people understand this all too well.

How the Semi-Automation Concept Works

The slow moving SKUs stored in PIR environments are the primary target population of this semi-automation concept, regardless of whether or not they are picked as split case or full case items. 

Here is how the concept works:

  • SKUs that are designated as slow movers are stored within a racking module that is supported by a high-speed mini-load automated storage and retrieval machine.  All product that is stored in this module must first be placed onto standard 21” x 36” flat trays so that the automated system can work with a standardized material handling entity.
  • At receiving, SKUs that are stored within the module are brought to a receiving station where an operator manually transfers cases to trays via a rollerball table.  Each SKU has a specific number of cases that can be placed onto a tray as instructed by the EMS (Equipment Management System).  The EMS is a subsystem that controls the ASRS mini-load crane and the inventory stored within the rack module.  The EMS is a subsystem that is interfaced to the warehouse management system (WMS) that is used to run the warehouse.  Receipts are entered once into the EMS so that the EMS can update the WMS.  The WMS views all locations within the automation racking module as being a single storage location since the inventory in this module is essentially controlled by the EMS.
  • Empty trays are automatically conveyed to the receiving operator via a simple U-shaped conveyor setup.  The EMS instructs the operator on the number of cases to place on the tray and the configuration of the product placement.  For some SKUs that have shorter case heights, product may be stacked 2 levels high on the tray.  Upon completion, the operator releases the tray to a short powered takeaway conveyor and then continues to stack incoming cases onto the next tray.
    • Note that if the SKU is shipped in less than full case quantities then the cases are opened and the case contents are deposited into a tote-like container that snaps into the tray like a lego brick.
  • The powered conveyor transfers each tray to a temporary staging location at the front of the module which serves as the induction point for the ASRS.  The mini-load ASRS has a dual extraction mechanism that enables the machine to pull 2 trays at a time from the induction location so that the trays can be transferred to a “buffer” storage location.  The trays are then inserted into a buffer rack location (i.e. the same extraction device now reverses direction to insert trays into rack storage locations).
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Product Induction Station - Photo Courtesy of HK Systems
  • The rack module is essentially a back to back regular rack that is separated by a very narrow aisle to provide for the mini-load crane.  The width of the module is roughly 10’-10” which compares to roughly between 8’-0” to 8’-10” for a regular back to back rack.
  • Approximately the first 14 rack bays closest to the receiving induction station serve as a buffer zone to store newly received trays of merchandise.  The reason to have a buffer area is simply to keep the mini-load from putting away trays within the full length of the rack module.  By keeping the mini-load within a short horizontal distance from the receiving induction point, the mini-load can keep pace with the receiver who is busy creating the incoming trays. 
Freezer Module Enables Operator to Work on the Dock - Image Courtesy of HK Systems
  • The first 4 levels at ground level are designated as ground-level dynamic pick slots and all remaining vertical locations from level 5 upwards are designated as reserve locations.  The mini-load automatically transfers product from reserve locations to ground-level pick slots every day so that the SKUs that are needed for the day’s outbound orders are always positioned in dynamic pick slots at ground level prior to the start of the picking shift.
    • For example, let us say that the racks are 99” c/c width such that each level can store 4  trays (21” wide) across the beam.  Since 4 levels are accessible at ground level, the order selector has access to 16 pick facings within the span of an 8’ wide rack.
    • Because there are no wood pallets within the module (i.e. all product is stored on flat trays), product that is stored on the 4th level is not that difficult to access.  To facilitate the operator’s access to the product, a 9” step-up high concrete curb can be deployed around the perimeter of the rack module.  The curb is dual-purpose since it protects the racking module from damage from mobile equipment and it allows the operator to step up to access pick level 4.
    • Depending on the clear stacking height of the building, for every 4 levels of pick slots at ground level, there may be 20+ levels of reserve storage to hold inventory above the pick locations.  The ASRS mini-load is constantly shuffling product from reserve to pick and vice versa to organize the pick line in advance of the evening picking shift.  This approach works well in any distribution environment where it is predictable that 1 out of every 5+ slow moving SKUs will ever be needed on a daily basis.  In the majority of foodservice distribution operations,, this ratio is as predictable as clock work.
Dynamic Pick Facings at Ground Level - Photo Courtesy of HK Systems
  • Throughout the day, as sales orders arrive, information is interfaced from the WMS to the EMS to indicate which SKUs are needed for the day’s pick shift.  Throughout the day, the mini-load transfers 2 trays at a time from reserve locations to ground-level pick locations.  At the time of order cutoff through to the start of the pick shift, the mini-load performs the last of the tray letdowns to the pick slots.  By the time the pick shift begins, the pick line has been set up so that all items that need to be picked over the next 8 hours are slotted at ground level.  SKUs that are not needed for the forthcoming pick shift are not needed at ground level and can therefore be stored in vertical reserve locations.
  • Each time the mini-load drops a tray to a pick slot, an inventory record is transmitted from the EMS to the WMS to let the WMS know the item/quantity that has been placed into the dynamic pick location.  This way, the WMS can instruct the order pickers to go to assigned pick locations to select cases no differently than any other zone in the warehouse.
HK Miniload ASRS - Photo Courtesy of HK Systems
HK Miniload ASRS Dual Tray Handler - Photo Courtesy of HK Systems
  • At the end of the picking shift, the WMS updates the EMS to provide information on how many cases were selected from the pick locations to enable the EMS to reestablish its inventory quantities by item / location.
  • During the picking operation, the mini-load continues to work by transferring trays of inventory from the buffer storage locations to the overhead reserve storage locations to free up the buffer.  This way the buffer zone is emptied for the next day’s incoming receipts.
  • If ever the mini-load goes down, all is not lost.  Conventional man-up order selector trucks can be used to access inventory no differently than in a traditional operating environment where vertical picking is the norm.  This means that however small the risk of an automation failure, the distributor can still ship orders which is good news because foodservice distributors cannot afford to miss a beat.
  • Incoming returns are not a problem.  If a SKU is to be returned to stock, then the receiving operator simply asks the EMS to retrieve a tray of the same SKU that can hold the incoming returned cases(s) and the appropriate tray is brought forward to the operator as requested, otherwise a new tray is inducted with the returned merchandise.
  • If you’re worried about the speed and performance of miniload cranes then think again.  The Dematic RapidStore ML-10 miniload can travel 6 meters/second horizontally and 3 meters/second vertically; with an acceleration of 4m/s2 horizontally and 3 m/s2 vertically.  Put another way, these cranes will blow dry your hair when they pass by!

The suppliers that have pioneered this automated approach are HK Systems and Dematic (ed. note: Dematic acquired HK Systems in 2010).  Sysco is the main foodservice distributor that has rolled out this automation approach to multiple facilities and Ben E. Keith is the latest company to invest in Dematic’s RapidStore ML-10 miniload technology at their Houston, TX distribution center.  Again, it is not that often that automation can be quickly cost justified but in this case we are talking in the 2 - 4 years time period which is exciting. 

In conclusion, if you work in any business where a high variety of SKUs needs to be picked and an order selector truck is being used to access vertical pick locations, your company should take a closer look at this innovative automation approach which enables highly efficient storage and picking of split case and full case slow moving SKUs.

Marc Wulfraat is the President of MWPVL International Inc.  He can be reached at +(1) (514) 482-3572 Extension 100 or by clicking hereMWPVL International provides warehouse design consulting services to foodservice distribution companies. Our services include: distribution network strategy; distribution center design; material handling and automation design;  supply chain technology consulting; product sourcing; 3PL Outsourcing; and purchasing; transportation consulting; and operational assessments.

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MWPVL International Inc. is a full-service global Supply Chain, Logistics and Distribution Consulting firm.  Our consulting services include Supply Chain Network Strategy, Product Sourcing Strategy, 3PL Outsourcing Strategy, Purchasing and Inventory Management, Distribution Center Design, Material Handling Systems, Supply Chain Technology Advisory Services (WMS, TMS, LMS, YMS, OMS, DMS, Purchasing, Forecasting, Slotting), Lean Distribution, Lean Manufacturing,Transportation Management, Distribution Operations Assessments, Warehouse Operations Consulting and much more.

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