Case Study – Catalog/Internet Retailer (e-commerce/online auction)
This client was one of the largest catalog/internet retailers of computers, peripherals, and software in the country. Having experienced unparalleled growth over five years preceding the commencement of the project, the company had expanded to four facilities, which totaled approximately 250,000 square feet and employed more than 500 people. The client’s upper management team forecasted continued and rapid growth patterns, which would require the company to more than double existing throughput capacity. Given the velocity of growth that had occurred in recent history, the facilities were ill equipped in terms of material handling infrastructure and supporting information systems to meet the increased demands. In order to meet their targeted service levels, large employee populations filled the gap at great expense. The client guarantees nation-wide next day delivery via overnight courier service on orders taken by fax, phone, EDI, or internet, on any order taken by 10:00 p.m., therefore order cycle time was a paramount consideration.
The scope of the project included the consolidation of all warehousing/distribution operations to one airport based building in order to facilitate required overnight service level. The new facility needed to support a peak demand of approximately 40,000 orders per day in the design year. In addition to receiving, inspection, put-away, storage, replenishment, picking, packing, and shipping operations, a complex, high volume returns design was also to be engineered. Our charter included the analysis of existing operations, quantification of space requirements, development of an optimized layout, balancing of materials flows/product placement, and applying mechanization/automation to yield reduced operating costs, increased productivity, and enhanced control. Furthermore, we were to assist in the development of specifications for an appropriate Warehouse Management System (WMS), which would incorporate bar-code technology, radio frequency data transmission.
Observation and analysis of existing physical operations occurred in conjunction with the collection of raw data (which included millions of historical sales transactions as well as inventory “snapshots” over the preceding two years). Concurrently, design forecast criteria was developed and applied to the results of the refined data analysis. Projected SKU inventory profiles, SKU movement and order profiles were developed upon which the design process would be founded. Inventory/movement appropriate handling/storage equipment alternatives were applied against the data results and a series of alternatives were developed. Each of the possible design schemes incorporated various levels of automation/mechanization and the associated costs vs. labor savings or customer service enhancement was quantified. Information systems (WMS) support requirements were defined.
The recommended processes and associates layouts (approximately 220,000 square feet) included: The implementation of a fully functional WMS system including, radio-frequency data transmission, and high speed bar code scanning capabilities; ergonomically designed receiving stations equipped with vacuum dunnage removal system; automatic carton erection machines supporting a “pick-to-shipper” operation; three-level pick module incorporating pallet flow, carton flow, and static storage pick to belt operations; high speed conveyance including pick zone route sorting and outbound fluid loading of trucks with extendable boom conveyors; segregated processing of orders containing high value/low cube SKUs (computer memory chips etc.) in a secure environment using restricted access vertical carousels; a combination of single selective rack and push-back rack storage arranged in a narrow aisle configuration; a returns operation utilizing a mini-load automatic storage/retrieval (AS/RS) system to buffer “return to vendor” receipts; and supporting product flow for “build-to-order” (BTO) and custom configured computer orders.
The proposed procedures and design for material handling infrastructure fully supported the client’s marketing, customer service, productivity, and operating cost requirements. A 280% increase in throughput capacity was achieved in 89% of the space with 73% of the employee population. System enhancements allowed significantly reduced inventory levels without adversely affecting customer service levels.