AUTOMATING THE HEAVY LIFTING 2004-11-01 (1)

MICHAEL GARRY

In 2004, food distributors still rely mainly on human beings -- using forklifts, pallet jacks and good, old muscle power -- to move product around warehouses. That may be starting to change, however.

Take, for example, the 1.3-million-square-foot distribution center opened this year in Freetown, Mass., by Stop & Shop, Quincy, Mass. It is being described as one of the largest automated materials-handling DCs in the world, and a radical departure from both traditional and automated food distribution facilities.

The Stop & Shop depot features an Automated Storage and Retrieval System (AS/RS) that uses 77 rotating-fork cranes to perform the putaway and replenishment functions for the facility's 64,000 pallets, in lieu of traditional forklifts, according to HK Systems, Milwaukee, supplier of the system. (Stop & Shop declined to comment for this article.)

Though this type of automation has existed since the 1950s and is employed at many food manufacturing and third-party logistics facilities, Stop & Shop's DC represents a minority position in the world of U.S. supermarket warehouses, said observers. Rising wage rates for warehouse workers, however, may be forcing food retailers and wholesalers to take another look at warehouse automation for storage and retrieval. Already, chains like Publix, Wegmans and Safeway are using AS/RS systems similar to Stop & Shop's, while H.E. Butt Grocery, Kroger and Wal-Mart are deploying other AS/RS systems.

One factor allowing distributors to consider DC automation is that the price point of the AS/RS systems has dropped from around $750,000 down to as low as $200,000, according to Marc Wulfraat, senior partner, Kom International, Montreal, a supply chain consultancy that worked with Stop & Shop on the selection of the automation for the Freetown facility.

The systems are capable of moving about 35 to 40 pallets per hour, much more than was possible a decade ago, added Wulfraat, who spoke at a session on DC automation at the Productivity Convention & Exposition, held Oct. 17 to 19 at the Wyndham Anatole Hotel in Dallas.

For a major DC encompassing all product lines, Stop & Shop's may be the most ambitious recent example of automation. The DC, which delivers to all of Stop & Shop's 350 stores in the Northeast, consists of a 500,000-square-foot perishables building and a 620,000-square-foot dry-goods warehouse.

Stop & Shop's AS/RS incorporates HK's Equipment Management System (EMS) and works in concert with the DC's Warehouse Management System (WMS), said HK Systems. Once a pallet is brought to the AS/RS' machinery at each storage lane, the WMS alerts the EMS of the pallet, which is moved into a storage location. The system also replenishes floor-level pick slots, removes empty pallets, and retrieves full pallets for delivery to stores.

In a departure from the norm, Stop & Shop's new DC employs its AS/RS system in a "single-deep" selection environment, meaning the pick slots are just one pallet wide, said Wulfraat. These systems have typically been used at a minimum in "double-deep" environments with pick slots that are two pallets wide.

A single-deep picking configuration makes sense for food retailers, contended Wulfraat, because many products sold in supermarkets don't move fast enough to justify being warehoused in double-deep slots. Moreover, he said, a single-deep arrangement prepares a retailer for the development of order-selection robotics -- under way in Europe -- which could materialize in five to seven years. "When we hit that, we won't need people for order selection," observed Wulfraat. "Then [single-deep configuration] will make sense."

However, the single-deep scenario raises safety issues for order pickers, who still manually pick items off pallets in pick slots onto pallet jacks, albeit guided by voice technology. Reaching for items in the back of the pallet puts their hands near AS/RS machines moving along the adjoining aisle. "Man and machine work very close together," noted Wulfraat.

To protect workers, AS/RS machines are equipped with multiple movement sensors that stop the machines on a dime in the presence of any obstruction. In addition, the automation can reduce the number of injuries associated with forklift operations.

Still, employees have had to make many adjustments in working at the new DC, said George Bishop, senior vice president, LxLi, Toronto, which collaborated with Stop & Shop on developing new engineered labor standards for the facility.

Bishop noted that the system in the Freetown DC waits until all products have been picked before removing an empty pallet and replenishing the slot; conventional warehouses bring a new pallet before an existing pallet is depleted. "This is a radical departure from what they're used to," Bishop said. "It shouldn't be taken lightly."

Show Me the ROI

According to Wulfraat, the major justification for deploying AS/RS automation in a DC is the reduction of labor costs. "A CEO looking for a business case wants to understand the labor story," he said. Stop & Shop, facing high wage rates in a unionized operation, is no exception, he added.

Based on a study he conducted for an unmade food retailer doing $4 billion in annual sales and operating about 220 stores, Wulfraat concluded that AS/RS automation is most suited for distributors located in markets where forklift labor costs approach $30 per hour (including benefits), which he described as a "conservative figure." For a double-deep layout, the wage rate required goes up to about $35 per hour.

The retailer in the study did not meet the wage threshold, causing it to build a new DC in the traditional, non-automated style, Wulfraat said. Wage rates for Stop & Shop in Massachusetts are thought to exceed $30 per hour, according to sources.

The business case improves with greater shipping volumes, and it is more appropriate for DCs with chronic labor shortages, high land or building costs, or "extreme" working conditions like a freezer facility, said Wulfraat. Labor and land conditions in Europe favor its utilization there, he noted.

In addition, Wulfraat said, AS/RS offers such advantages as inventory and damage control, accuracy and constant operation.

On the other hand, there are such risks as machine downtime and less flexibility. The systems also have a low tolerance for discrepancies such as faulty pallets or product overhang, in addition to the significant initial investment.

Handling Slow Movers

Another AS/RS, used principally for slow-moving items stored in totes, is being implemented this year in the United States by Kroger, Cincinnati, in a facility in the Southeast and by CVS, Woonsocket, R.I., in Ennis, Texas. CVS plans to also install it in a DC in Vero Beach, Fla.

This AS/RS, called the Dynamic Picking System, from Witron, Arlington Heights, Ill., has been used widely in Europe by such retailers as Delhaize (SN, May 17, 2004), Sainsbury's and Migros, among others. Delhaize's DPS facility for slow movers handles such items as nonfoods, health and beauty care, cigarettes, spices and perfumes.

The essence of the DPS is that, rather than all slow-moving items being treated equally, very slow-moving items are stored above the picking area and brought down into picking stations by cranes only as needed in what is called dynamic picking. More commonly picked items are already available at pick slots (static picking). This saves space, and reduces the time and walking required of selectors, said Witron.

Kevin Smith, CVS' senior vice president, supply chain and logistics, has noted that the automated facilities require less space and offer lower labor cost, improved picking accuracy, and damage reduction.

Kroger completed the first phase in the deployment of a DPS for piece-pick operations in September, retrofitting an existing DC in the Southeast. The installation thus far encompasses 16 stacker cranes, 70 picking workstations, and 175,000 tote locations, according to Witron.

Kroger has declined to identify the exact location of the DC, but SN has learned it is Peyton's Southeast, a Kroger-owned facility in Cleveland, Tenn., which handles slow-turning pharmaceuticals, health and beauty care, and other merchandise.

Some of the benefits expected from the Kroger installation include a reduction in footprint and direct-labor requirements, up to a 75% reduction in pick path, and more store-friendly shipping, according to Witron.

Better Picking for Smokes

For Associated Wholesalers Inc., Robesonia, Pa., one of the more cumbersome tasks in the distribution operation was selecting and packing cigarettes, and stamping packs with state taxation marks.

So a few years ago, the company decided that a mechanized cigarette selection and stamping system could do a better job. It has, cutting inventory costs by a "couple of million dollars a week," said Robert A. Rippley, executive vice president, logistics, AWI.

The system, Smoke Pick, from Power Pick International, Lincoln, Neb., was installed at AWI's 225,000-square-foot GM/HBC distribution center in York, Pa. All products selected at York are sent to AWI's main DC in Robesonia, 50 miles to the northeast, and cross docked with grocery and perishable goods for shipment to the cooperative's 1,000 stores, including supermarkets and convenience stores.

Smoke Pick is "a batch-pick selection system," said Rippley, who has brought new supply chain applications like Smoke Pick to the cooperative since arriving five years ago. (See "For AWI, Time Is Money," SN, Oct. 18, 2004.) "If you have orders for 40 stores, it picks [batches of each brand] for all 40 stores at one time, by size. It works well."

After the cigarettes are batch-picked, individual packs run through a stamping machine. They then move to a packing station where a "pack to light" system tells workers "what's coming and how many to put in each box," said Rippley. Once boxes are full, they go to a checker who puts a label on the box that tells what's in it, and identifies the store and route. Boxes are then shrink-wrapped, combined with totes containing other products, and sent to Robesonia. AWI uses a sortation system that sorts all products by store and shipment.

Rippley is especially pleased about the feature that stamps the inside wrapping of cigarette packs. In the past, only packs of cigarettes sold in Pennsylvania, about 65% of the total, were pre-stamped. Packs sold in AWI's other market areas -- the six states contiguous to Pennsylvania -- had to be separately stamped after selection, a cumbersome procedure. "Now we use one inventory for all states," he said. "All are selected first and stamped later."