video Archives - Abco Automation

Omni-Channel Distribution Part 1: How to be a Hero

Transcript for Omni-Channel Distribution.

Hi I am Cory Flemings and welcome back to whiteboard insights. All the market today is a buzz with this new term omni-channel distribution or multi-channel distribution. I know for me it is embarrassing when people start talking about something and I don’t know what they are talking about.

So I wanted to talk very briefly what is omni-channel distribution , or multichannel distribution and why does it matter and how can you be a hero in your company if you figure out how to deal with this.

So what is it? Basically it is this; I am a company and I have a product line that I send out wholesale orders let’s say to Wal-Mart or Macy’s, I am a clothing manufacturer for example. And I send product out to Wal-Mart or Macy’s distribution centers and I have to send it out to my own retail stores I have stores out there in the marketplace and I have to distribute to them as well. And all because Al Gore invented the Internet we have direct market customer s or e-com, where I have a facility set up specifically to deal with this.

Now how did we get into this mess? Mostly this one box that is important, back in the day when the Internet was first invented somebody came up with the idea. Hey we can sell stuff on the Internet the problem with that though was that everyone was concerned about whether it was safe or not to use your credit card on the Internet now .

Nobody really has concerns about using the credit card on the Internet, in fact this box, the direct market, or e-com box has really started to grow in size to the equal to or even eclipse the box for retail and by box I mean a different distribution center.

When we was first started with direct market campaign a lot of companies took a wait and see attitude they stood back and said well what not sure if this will work so lets make up a little box over here give it a little bit inventory and will sell things out of this facility.

As time has gone business become huge so now we have cost for a wholesale distribution center or operation with cost for retail and a direct market.

What are those costs? Well let’s do the math. Let’s say our average product cost around five dollars apiece and we sell say 250,000 pieces a day and you have to carry 30 days pieces of inventory on hand.

This works out to be about $37.5 million just in inventory carrying costs that is to say I have inventory here in retail and I have it in this facility and it has to be the same inventory. I have duplicated inventory In both buildings which are worth about $37.5 million a month.

Add to this cost the cost of real estate, that I have to either lease or buy, I have my power costs, I have my labor costs at taxes and fees so every time I add another distribution center box I incur all these costs.

So one of the ways you can be a hero in your company is to find out how can I take two of these boxes or even all three and smash them together into one building so that I’m using one set of inventory for wholesale, retail and e-com, all at the same time if you can figure out how to do that you’ll be a hero, in your company.

And you can potentially save your company as much as $37.5 million a month that’s a lot of money. The next part of the series part two we are going to talk about are the issues involved with doing that you have to deal with or consider in order to combine these operations into one.

But quite frankly if you don’t want to watch the second part of this video you can just call us at 858 206-2015 and we will give you the answer. Thanks for much for watching

Filed Under: video Tagged With: multi-channel distribution, omni-channel distribution, video

Why Order Lines Don’t Matter in Distribution Center Design

by Travis Baker

Hi I am Cory Flemings from abco automation and welcome back to Whiteboard Insights. Today I want to tell you a story about a discussion I had recently about cubic velocity.

It goes kind of like this. Back in the history of man we created the distribution center design and before there were computers we basically had static locations and somebody walked through a warehouse and getting stuff off the shelves. And that is how we got to this world of distribution center design. Many of us are still thinking in those days when we talk about the Pareto curve. We all know and love the Pareto curve, it’s on our logo, and we love the Pareto curve.

It tells us a lot about the way an operation works. We all know that 20% of SKUs to 80% of the business but we usually measure things in order lines and the reason we have historic play or traditionally talked about order lines is because it has to do with how many times we go and visit a pick location during the day. It was born in the world where all the SKUs have static pick faces. Then it really matters about order lines. If I have one product that does 100 order lines a day and that means we have to go to that pick face 100 times.

But now things are different now we work with computers and automated technologies and so forth the world has changed and the world has changed and this one remarkable way we are no longer concerned with order lines per day we are concerned with cubic velocity. What is cubic velocity?

Well as you can see from my board cubic velocity is the number of pieces you sell a day of a particular SKU times its piece cubed. So if I have a lamp, as an example, a lamp might come in a box this tall and this big but I sell 25 lamps a day you can understand the cubic velocity of this product might be a pallet load a day. I am moving up a pallet load of this product everyday

On the other hand if I talk about pencils, straight pens or chopsticks or things that are small and thin I can put 2000 of those things in a tub and if I’m moving 2000 lines a day I can manage that much the volume with one tub of that product. And so the difference in cubic velocity is immense.

So the person and I were having this conversation they said, “I don’t understand why you’re putting lamps in a pallet flow line that doesn’t make sense”.

I said, “That’s because you’re still thinking in terms of lines, it only does 25 lines a day, but you are moving a pallet load of stuff through your warehouse every day when you sell these lamps. Over here you’re right to have these small items, these trinkets, that you move a lot more lines but you only move one tub of day.”

So for distribution center design in an automated system I am concerned with how much stuff you have to move around a system, even in a manual system that is completely manual think about how much cube you have to move through your building every day. Some products you have to vote the entire pallet, other products you don’t.

In fact think of your carton flow racks today and how much how many of them have backstock on the backside of the flow rack and I will bet you the reason is you haven’t thought of cubic velocity you are thinking of lines that product moves a certain number of lines a day but the cubic velocity drips out the back of the flow rack sits on the floor.

I encourage you to think about cubic velocity in your distribution center design and if you would like us to give you a hand we would be happy to help you out go to www.abcoautomation.US and connect with us we would be happy to give you a hand.

Sound Interesting? Contact us today and let’s see how we can work together to make your distribution center great.

Filed Under: distribution center design, Pareto Principle, Space, Throughput, video

How Supply Chain Optimization Can Help You Beat Your Competition

by Travis Baker

Hi I am Cory Flemings from abco automation. I want to welcome you back to whiteboard insights. Today we’re going to talk about the supply chain optimization and why it matters. I heard a story one time about a Vice President of Distribution for a very well-known health and beauty aid manufacturer who gave this talk about when he took over as VP. He asked what is the cash to cash cycle line for a particular brand of shampoo?

What is the time from the point where we spend money on boxes bottles or whatever you need for the shampoo and the manufacturing process to the time you get the money back from Wal-Mart (their end customer). Guess how long that process was?

Really, write it down and make a commitment you might be surprised at the answer. Well despite the fact that I’m not Vanna White, here is the answer. 47 weeks, 47 weeks of time. From the time that they bought bottles of goop, and paint and to the time they got their money back from Wal-Mart.

Now the next question he asked was this of those 47 weeks how much time do you really take to add the value process?

That is to make the product. Surprise again. 90 minutes. So out of the 47 weeks of time they only spent 90 minutes actually producing the product, and the final question how much of the corporate attention was on the 90 minutes?

You got it 90%. What does this mean? This means, what the significance of those things, if you can reduce the time that you have to spend on the cash cycle by 50% you get your money and your profit twice as fast as you used to and that matters cause now you can take that money and you can pass it on to the customer and get market share by having a lower cost product or you can put your money in your pocket and make more money and apply to marketing and beat your competition. That what in either case supply chain optimization is critical to companies who both do the same thing and make basically the same product you can see one company or the other is going to win on the basis of the supply channel alone.

So if you’re not lying awake at night worrying about your supply chain maybe you should.

Filed Under: Supply Chain Optomization, video

The Distribution Center as a Competitive Advantage: Gilt Groupe

by Travis Baker

The Distribution Center as a Competitive Advantage: Gilt Groupe

Read the transcript of “The Distribution Center as a Competitive Advantage: Gilt Groupe”.

So what we have is an engine for production. We can get everything stored properly here and it makes order picking efficient and very cost-effective.

Gilt Groupe is a private sale, flash sales company founded back in 2007. We buy luxury items and sell them on a first-come first-served basis, so it creates a competitive shopping environment. The real challenge is the supply chain and logistics strategy on how we continue to scale that business and create a customer service environment that continues to stay best in the industry, so that customers are getting their product on time and in great condition.

We chose to work with abco automation, because instead of them coming in and saying, “what you should do is..” they asked us a lot of questions about our business model instead of just trying to sell us something. Which is really, really important and selling us what we needed instead of what they wanted to sell us. That was the really big difference between abco automation and some of the other players that were out their looking to get our business.

Jack Lehr: When we are called in to look at a distribution center or supply chain we just don’t starting throwing ideas at the customer. We want to find out as much as we can about their current operation, their business model; we want to get a good look at the data from their operation. Without a good grasp on the data I am not sure how you can design a solution that works for the client.

We do the Math that’s abco’s mantra.

Let’s take a tour of the distribution center and show you how all this works together to give Gilt Groupe the throughput and accuracy that they need to guarantee their exceptional customer service.

Gilt is primarily an apparel company so they have a very large receiving area. Associates place all non-GOH garments, flatpack, home goods, jewelry and shoes on gravity lines so an entire order is accumulated. Once a shipment is accumulated they verify it versus the P.O. and ensure that it is presentable for sale.

Then an associate transports it via a cart to a second set of lines, the sort area. This is where all the products are sorted into like, sellable units, placed in totes on the conveyor going to put-away. Every tote has a barcode and an ID so every SKU is active in the system down to the each level.

Part of ensuring great customer service is inventory accuracy. If you say you have something available for sale, you must be positive; and this system allows that certainty.

When the associate scans the item directly into the W.M.S. in receiving, the systems makes real-time decisions about where to send the product. It can go to one of six areas in the distribution center.

Bulk hold.

The Product-to-person area,

The GOH area,

The Pick Module,

Shoe storage,

Jewelry,

The path the product takes depends on how fast the item will be sold. One of the main benefits of this DC is that all the items are not treated the same. The system handles items differently based on product volume-etric characteristics. We know that not every item will move through the distribution center at the same rate. So we designed storage and picking to address the Pareto curve of individual items.

This is the bulk hold area and it performs two functions. It allows Gilt’s buyers the ability to buy large quantities of items that are not ready to be sold immediately. In addition, while Gilt is known primarily for apparel they also sell home goods and larger items that are not conveyable that can be stored and picked here.

Fast-moving items that will sell immediately go to the product-to-person system. Associates remove product from the totes and place it on one of the mobile shelves. While some items can go directly on the shelves other SKUs are placed in the smaller shelf bins if there is danger that they might fall while the robot is in motion.

There are approximately 50,000 storage locations in this area. Product-to-person is important in the Gilt distribution center because it eliminates the need for pickers to continually go to the same area to pick a fast-moving product. The product-to-person area enables Gilt to achieve an enviable amount of picks-per-minute and to support the fast-moving e-commerce business model.

The pick model is the medium to slow moving product storage area and has three levels.

Gilt stores its garment-on-hanger items on the first floor of the pick module. The G.O.H. area can accommodate approximately 50,000 pieces of product for Gilt.

The second and third levels are for “B” movers, the products that don’t move as fast as the ones in the product-to-person picking area. In addition this is where Gilt can store any remnant items from previous flash sales.

In front of the product-to-person area is the shoe storage area for the distribution center. Shoes are a very specific business for Gilt so we built a very specific storage and picking area for shoes. The shoe boxes fit perfectly in the storage area minimizing the space needed.

Gilt recently transitioned its jewelry business from their Brooklyn distribution center to Kentucky. Jewelry requires higher levels of accuracy and security and we adapted that to the Gilt process. By designing a secured area to receive, stock, pick and pack jewelry the DC handles the distribution of fine clothing alongside the distribution of fine jewelry.

When picking starts, the order tote can start in any area. This greatly increases efficiency, because a typical order only contains one or two different products. In addition if an item is not needed from a particular part of the DC the order tote bypasses that area.

The path for the order totes goes from the jewelry area, to shoes and then onto the product-to-person area. Then it continues to the GOH area on the first floor of the pick module, then to one of the upper-level picking areas, where there are 24 pick-zones.

After the order is picked it goes to the shipping area.

One area that we looked at very closely was the packing portion of it, as well as the manifesting. We decided to go a different way and the way that abco built this, is we separated the process.

Packing is a customer service function. And that’s where we ensure the order that our customer receives meets or exceeds their expectations.

It then goes over to another area unsealed, the Manifesting area which deals with the physical logistics of shipping. We weight it, we put the label on it, but we also have additional quality function there which allows the person shipping it out to verify that the correct contents are in the box. This leads to exceptional customer service.

The way this building was designed we can bring a multitude of merchandise in here at any given time and be able to scale it in the way we need to do it.

So what we have here is an engine for production we get everything stored properly here and it makes order picking efficient and very cost-effective.

This is the distribution system that abco automation designed and built for Gilt Groupe, so that even with their explosive growth they still maintain their high level of customer service and accuracy.

Filed Under: distribution center design, Gilte Groupe, Math, Pareto Principle, video Tagged With: Gilte Groupe

Surprising Cost Difference between Automated Distribution Centers & Conventional

by Travis Baker

Transcript for: Surprising Cost Difference between Automated Distribution Centers & Conventional

Hi, I’m Cory Flemings from abco automation. Hey I want talk to you today about a story about concrete or about conventional buildings versus automated distribution centers. In a recent event in my life we were working with a client that wanted to build a conventional freezer. We said no you should consider automation. And she said OK, the CFO, we will consider automation, but it is really just a throwaway option.

I said, “Throwaway option? That’s not true!”

She said sure it is, “Automation is so expensive.”

That’s something that we in the automation field hear all the time.

I said well you are a CFO, pull out your calculator and let’s run some numbers. So she pulled out a calculator and we went to work.

I said the conventional facility for the operation that you want to do will be 500,000 ft.² and if you take 500,000 ft.² and multiply that by $120 a square foot what does that come out to?

She said that’s “$60 million”. I said that’s correct.

I said I am looking at an automated distribution center or automated storage and retrieval facility that is 117,000 ft.². Yes, a hundred and 117,000 ft.², compared to 500,000 ft.² but I said tell you what let’s add on another hundred thousand square feet for docks, workspace and so forth and we will give you a building that is 220,000 ft.².And if you multiply that by $120 a square foot. What do you get?

And she said, “Oh gosh my calculator must be wrong.” I said no, it’s not, wrong it is only $26.4 million.

She said, “That cannot be!”, I said yes that is true in the difference between these two is substantial.

But that’s not the end of this picture. If you have to go buy the land for this process then you have to spend even more money. A let me show you why.

When you build a building on a piece of property depending upon local codes and ordinances you cannot consume with your operation more than 50% of the land. So if you take 25% of the land and then add to it your concrete turnarounds, your waste-water basins, your easements and your parking lots all of those other pieces of the property shouldn’t add up to more than 40%. Because in the future you might want 10%, between 40 and 50% to build a new maintenance building or whatever. You don’t want to land lock yourself on day one.

So you only use 25% of the land you buy for your distribution center. So if you want to put in a building that is 500,000 ft.² you need to actually buy 46 acres of property to support that operation. And if land is $100,000 an acre that is $4.6 million more.

Over here for 220,000 ft.² I need 20 acres to support that operation. And 20 acres again at $100,000 a square acre is another $2 million.

So look at the substantial difference now between when you build a green field building a conventional building versus an automated distribution center.

You are looking at a difference of $64.6 million here and over here $28.4 million and I have a $36.6 million difference between these two. And that’s $36 million you can spend on automation to get a building that cost as much as a conventional building that is not racked, that doesn’t have rolling stock that doesn’t have a WMS, that doesn’t have an RF network with guns and so forth.

You are talking about a lot of automation and material handling equipment that you can invest in before you even turn the key and turn on it on, let alone the labor savings once it begins to run. So when people tell you automation is too expensive and you are going to build a green field distribution centers remember this tale of two distribution centers and how much difference this can make.

We have a white paper about this subject “Why You Should Go Up” I recommend you download it and it can be found here.

Filed Under: Return on Investment ROI, Space, video

Why Smart Distribution Center Design Doesn’t Use a Single-Technology Solution

by Travis Baker

Hi I am Cory Flemings from abco automation. Do you have a single technology distribution center? Do you basically pick all your SKUs the same way? If that’s the case you may be missing some huge opportunities for efficiency and I would like to show you why.

In the 19th century there was an Italian guy named Vilfredo Pareto. And he is responsible for the Pareto Curve or the Pareto Principle. We know it today as the 80/20 rule, as we have applied it to business.

The 80/20 rule basically states that 20% of your SKU base does 80% of your volume. That’s right 80% of your volume is done by 20% of your SKU’s. And conversely 80% of your SKU’s do only 20% of your volume.

So what does that have to do with your distribution center design? Well if you’re picking all of your SKU’s the same way then you are forgetting this principle. You are assuming that every SKU that you add moves the same way as the last one you added. So you have a linear function on this curve. Well, kind of linear.

So as I add from 25 to 50% I am adding from 25 to 50% of my business volume. Whether I measure my business volume in lines, in pieces, in red ramzonics, however you want to metric your business volume it really doesn’t matter. You are assuming in a one technology system that everything gets picked the same. But Pareto says this, Pareto says 20% of my SKU base, does 80% of my business volume. And it looks like this.

You’ll notice that we wear really groovy shirts at abco automation that have the Pareto Curve built right into them. And that’s because we think you can really leverage the difference between this linear relationship in this Pareto curve. This Pareto curve, again, suggest that 20% of your products do 80% of your volume.

Why then would I take those SKU’s the same way that I take these SKU’s down near the end which I will say are my “D” SKUs, if I put letters on them. Or my ‘Dog” SKUs. These SKUs down at the end they might only do 4% of your business volume and with the “C’s” together somewhere between 10 to 15% of my whole business volume. Yet they are going to represent 50% of your SKU base.

And if you are a distribution center operations person you’re slapping your forehead saying “Why do we even bother carrying these things will well it doesn’t matter what products you carry, you will always have this Pareto effect.

So why’d you pick them all the same way?

These products that are down here at the end can have some technology applied to them these two things here in products that I call products-to-person technologies. They might be carousel systems or shuttles but they are technologies or vehicles that bring products to the picker. Instead of the picker going out and passing 80% of the SKUs in the warehouse to find the one that they need. These products or technologies bring them to the selector instead. (A distribution center design can realize) a huge benefit in the efficiency of picking these orders here.

Over here on the other end you have 20% of your products that are doing 80% of your volume. Why would you move these products around? These products need to be stationary or stay in one area and they can be picked. Often times the problem you are dealing with here is how is do you replenish them fast enough.

In both cases automation can be used to help select these and select these, differently. Do you have, as I asked earlier, a single technology warehouse? Well then you can see now there are some huge differences in efficiency that we can apply to help make your distribution center design more efficient.

Give us a call at abco automation 803-517-7537 we can help do the analysis and carve your Pareto curve up with the proper technologies. Because we do the math.

Filed Under: distribution center design, Pareto Principle, video Tagged With: 80-20 Rule

Maximize Your Distribution Center Efficiency with S.A.L.T.

by Cory Flemings

Distribution Center Efficiency

Hi, I am Cory Flemings from abco automation. Have you ever considered automating your warehouse? Have you ever thought about what would be required to justify putting in automated systems inside your distribution center?

I would like to point out the acronym, S.A.L.T., as a way to hang your thoughts together and think about what the issues might be as you consider automating your warehouse.

The first letter up here for S. A. L. T. stands for Space. Now space seems rather obvious doesn’t it? In warehouse operations we are always worried about having enough space. But the problem is once you realize that the walls are closing in and that the rivets on the walls are starting to pop it’s too late.

Because it takes anywhere from 9 to 18 months to build more space. To plan it, to get city permission, to get the approvals, to actually pour the concrete. And even in automated systems if you’re going to consider putting things up in the air with automatic storage and retrieval systems as an example. The data analysis the design, the engineering work is taking somewhere between 9 and 18 months to put those systems in.

So as you start to see your walls close in, give yourself about two years of planning time. Otherwise you’ll find yourself behind the eight ball.

Another place to consider for savings and return on investment for automation is Accuracy. This is one of my favorites.

I went through a warehouse one time and said, “Hey, how is your accuracy?”

And they said, “Oh it is really good.”

I said, “Oh really? How good is really good?”

They said, “It’s at 98%”. While not being the brightest bulb in the box I realized that’s only 2%, or 2% of their orders are going out incorrect.

“How many cases do you ship out a day?”

“Oh we ship about 65,000 cases per day.”

So I pulled out my calculator and realized 1300 cases per day were going out incorrectly. And at $40 a box which is an industry average cost of return logistics to get the product, ship it back to the distribution center, check it out, restock, then you are talking $13 million a year if you work 250 days a year.

$13 million.

And if you have a two-year return on investment your shiny new material handling system can cost $26 million and you will breakeven. In two years.

This is a great place to look, this accuracy, for return on investment in a material handling system as you consider automation.

Labor is the third one. Does your warehouse look like an ant farm? I was going through a warehouse in California. And there are people all over the place. It was like the Indianapolis 500 on the aisle with fork truck drivers going by.

And the vice president of distribution pulled me aside and said, “Before you get too involved in the details, I am trying to figure out how I get something from the receiving dock into that pick face, where that man over there is picking, with as few people as I need to have.”

And that’s where automation can come in. Automatic storage and retrieval systems, automatic re-supply systems, AGV’s, there are a lot of different kinds of automation you can use to get by with less labor.

Additionally, as we move distribution centers further and further away from the population centers people are getting harder and harder to find. And if you find yourself in that position automation might be the way to do that.

For example, 50%, according to one grocery retailer, 50% of the people who apply for a warehouse job can pass a background check.

50%.

And that’s for the people who apply for the job. And in the Southeast he said only 25% can pass a background check and drug test. So people, if you’re having trouble finding them you might want to consider automation.

And finally the last bullet down here the T. stands for Throughput. There are wonderful technologies that are coming out these days that can help improve your throughput.

I’m talking to those who might say, “I just can’t get things out fast enough. No matter how much I try or how many people I throw at my distribution operation I can’t get things through the distribution center fast enough”.

Well, a couple of ideas. Automation, like A-frames. A-frames can do for small stackable products. Let’s spell this correctly, A-frames. They can do anywhere from 1200 to 1800 32 piece orders, an hour. That’s a lot of volume.

Product-to-person systems, P2P, I call them things like shuttle systems, carousels, things like that. These things can do 3x the speed in order lines as pick-to-light or pick-to-voice. That is somewhere between 600 and 1000 order lines per hour. So there are lots of opportunities for you to consider automation in your throughput.

And there is a lot of money available especially in accuracy to help justify the cost of some of these automated systems.

If you have any questions or would like us to take a look at some of your data and do some analysis for you here at abco we would be happy to help you out just give us a call.

Call 803-517-7534 and speak to Amy about scheduling an appointment with abco automation. If you liked our Whiteboard Insights and want to learn more download our supplemental whitepaper here.

Filed Under: Accuracy, Labor, S.A.L.T. Principle, Space, System integration, Throughput, video

Omni-Channel Distribution Part 1: How to be a Hero

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Why Order Lines Don’t Matter in Distribution Center Design

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How Supply Chain Optimization Can Help You Beat Your Competition

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The Distribution Center as a Competitive Advantage: Gilt Groupe

The Distribution Center as a Competitive Advantage: Gilt Groupe

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Surprising Cost Difference between Automated Distribution Centers & Conventional

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Why Smart Distribution Center Design Doesn’t Use a Single-Technology Solution

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Maximize Your Distribution Center Efficiency with S.A.L.T.

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Omni-Channel Distribution Part 1: How to be a Hero

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Why Order Lines Don’t Matter in Distribution Center Design

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How Supply Chain Optimization Can Help You Beat Your Competition

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The Distribution Center as a Competitive Advantage: Gilt Groupe

The Distribution Center as a Competitive Advantage: Gilt Groupe

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Surprising Cost Difference between Automated Distribution Centers & Conventional

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Why Smart Distribution Center Design Doesn’t Use a Single-Technology Solution

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