ST. PETERSBURG, Fla. -- A test of a "warehouse of the future" concept by C&S Wholesale Grocers with a single retail customer has increased throughput and cut costs at a C&S warehouse, according to the president of a company that supplies C&S.
Ronald J. Wright, president of ES3, Keane, N.H., a third-party logistics company spun off from C&S, Brattleboro, Vt., and now a supplier to C&S, said that at the downsized test warehouse throughput doubled and costs were lowered more than 30% compared with a conventional warehouse, in a test conducted over the past year.
Wright made these comments as part of a presentation at the Grocery Manufacturers of America's 2003 IS/LD Conference, held in early April at The Renaissance Vinoy here. He explained that in contrast to current food warehouses, which stock between 10,000 and 12,000 items, a "warehouse of the future" would have a "much smaller footprint" containing only 2,500 mostly fast-moving items.
Large gains in efficiency, Wright said, could be made by "unbundling slow and fast movers and handling each in the most efficient manner." By outsourcing 80% of inventory from a warehouse, variable costs could be reduced by up to 30%, he said.
In the C&S example, one of C&S's retailer customers, whom Wright declined to name, agreed to take fast movers from the test warehouse and slow movers from another C&S warehouse, including store-ready pallets, cross docked directly to the stores, he said. The test warehouse "is shipping about 70% of the volume to this particular retailer with 2,500 items," he noted.
C&S "wanted to truly test the concept of warehouse of the future," Wright said. C&S separately confirmed Wright's description of the test to SN.
Wright spent a large part of his presentation explaining why a warehouse of the future is important to the food distribution industry and also how his company, ES3, which itself is pioneering the concept of consolidated manufacturer shipments, plans to support such warehouses as an outsourcing partner with retailers as one of its supply chain services. "The current supply chain forces us to buy product we just don't need," he said. "What's needed is a supply chain that lets us buy what we need when we need it."
Retailers, said Wright, want smaller shipments, increased delivery frequency, more tier (case) picks, more customized pallets, and lower warehousing and inventory costs. But truckload deliveries -- what Wright described as the current "unit of commerce between manufacturers and retailers" -- make those goals hard to achieve, causing "the average lead time from demand creation through fulfillment to be one week."
Full truckload order requirements also prevent buyers from ordering slow-moving items during the week after a promotion, when fewer products are being delivered, Wright said. As a result, "slow movers are not stocked until fast movers are needed," leading to out-of-stocks, he noted.
Wright said that ES3's consolidation warehouse in York, Pa., which stores products from multiple manufacturers, aims to "shift the economic order quantity from a truck to a pallet to a case." Using case picks, ES3 plans to create store-ready pallets of slow-moving items, cross docked to a warehouse or to a store, and it would no longer be necessary to combine slow and fast movers in shipments, he said. That is the concept that C&S tested in its warehouse of the future and secondary warehouse, with the latter handling the slow-moving items.
Outsourced case picking via companies like ES3 would facilitate smaller order quantities and more variety at stores, Wright said. "Imagine an item that only sells in high-income areas or ethnic areas," he said. "Today, you have to slot that item in the warehouse or go to a specialty distributor, which is very expensive."
Geoffrey Davis, executive vice president, ES3, told SN that ES3 expected to support outsourcing of slow-movers and case-picking for retailers in the future. "It will require more SKUs in the York facility," he said.
ES3 currently stores products for about 10 manufacturers, including Campbell Soup, ConAgra and Georgia Pacific, at its York facility, Davis said.
Wright and Davis said that ES3's Web-based technology platform helps it deliver consolidated orders within 24 hours to retailers in the Northeast and Mid-Atlantic. ES3 is in the process of completing installation of a transportation management system from Elogex, Charlotte, N.C., which has been integrated with a yard management application from WhereNet, Santa Clara, Calif.
The Web-enabled Elogex system allows ES3 to handle appointments, scheduling, tendering, billing and proof-of-delivery reporting. The system also enables ES3 to communicate more easily with customers and carriers, while providing real-time appointment visibility, said Davis.
Davis said that the WhereNet application helps ES3 track trailers in its yard and the products those trailers are carrying, as well as identify empty trailers.