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).