PEAPOD WEIGHS SCALING UP FULFILLMENT CENTER

PATRICK SCIACCA

NEW HYDE PARK, N.Y. -- Peapod's first dedicated fulfillment center here has been operating since Dec. 7, 1998, but the Internet grocery company is already considering scaling up operations.

"This unit is growing so rapidly," said Carl Alguire, senior vice president of operations for Peapod, Skokie, Ill., at a Jan. 28 open house held at the facility. The fulfillment center is a 15,000-square-foot "mezzanine" operation that sits above its retailing partner, Edwards Super Food Stores, which is operated by the Carlisle, Pa.-based Giant Food Stores division of Ahold USA, Atlanta. The facility resembles a conventional grocery store with an added staging area for orders.

Currently, the facility can handle about 90 orders per day, said Mike Pappas, operations zone manager for Peapod. He added that, on a typical day, the Internet grocer delivers about 65 orders.

If Peapod's growth on Long Island continues at its present rate, the company could outgrow the New Hyde Park facility within a year, said John Walden, chief operating officer for Peapod.

Peapod attributes its fast growth in this market at least in part to technology that has dramatically increased the operation's efficiency.

Peapod warehouse employees, referred to as shoppers, use handheld personal organizer devices to receive and "shop" their orders, which are picked from the fulfillment center's shelves. Thomas Parkinson, Peapod's co-founder, executive vice president and chief technology officer, developed the software for the handheld units.

Shoppers take the handheld unit and register their identification number into it. The unit is then hooked up to a port that hangs down from the ceiling in the warehouse. Once the handheld unit is connected, the order to be picked is downloaded into it.

The shopper then follows an electronic list. Once an item is picked from the shelf, the shopper cross-references it with its bar code and registers the item as picked. The handheld unit then provides the shopper with the next move.

When the picking is complete, the shopper attaches the handheld personal organizer device to the port and double checks the order, then attaches the device to a machine that prints out a receipt.

The shoppers place the orders in paper shopping bags, using plastic bags for produce. The bags sit inside delivery containers called totes, which can hold two shopping bags. The totes sit on carts, which the shoppers use in the warehouse during the picking process. "The totes can also be lined with foam to store frozen and refrigerated items," Walden said. He told SN that by using the foam to separate the sections of the tote and then placing dry-ice pucks in the frozens section, items such as ice cream can be kept frozen for up to 48 hours even in temperatures of 104 degrees Fahrenheit. Adjacent sections that need refrigeration are kept cold, but not frozen, from the residual cold of the ice pucks.

Walden said the coolant technology has been developed to give Peapod the flexibility to make "unattended deliveries."

Other technology helping to streamline Peapod's Internet grocery shopping operation is a routing system that provides the drivers with their daily delivery schedules. However, all of Peapod's Long Island trucks are currently routed from the company's Chicago facility. Alguire told SN that until the New York operation grows a little more and a larger facility is available, the trucks will be routed from Chicago. In addition to the routing system and new picking technology, Peapod has arranged a new supply agreement with its Long Island retailing partner.

Since the warehouse is run on a just-in-time delivery schedule, Edwards provides Peapod with a replenishment manager for the fulfillment center. Alguire said that for ordering purposes, the fulfillment center is isolated and treated by Edwards as a separate store. The replenishment manager is the only non-Peapod employee in the warehouse. However, in case of an out-of-stock situation, Peapod can go downstairs to the retailer's shelves and make a pick, but out-of-stocks are not a common occurrence at the warehouse.

"There is a two-case stock minimum [in the warehouse]," said Ed Sheedy, director of micromarketing at Giant Food Stores.

Another piece of the logistics puzzle that has helped reduce pick time and mispicks at the warehouse is the arrangement of product on the warehouse shelves. Product is arranged by category rather than by brand names, Alguire told SN. The product separation has reduced the number of mispicks as well as increasing order-picking speed.

Walden said it takes about 20 minutes to pick an order from the fulfillment center, about half the time it would take to pick the same order from a store's shelves.

According to Parkinson, the fulfillment center has been scientifically mapped out to make for the most efficient use of the space and personnel.