New DC and New Technology Mean Fewer Touches

MICHAEL GARRY

Nobody has ever accused food wholesalers of operating a “touchy-feely” business, yet natural and organic food wholesaler Nature's Best is obsessed with “touches.”

In this case, of course, each touch represents a distinct time when an employee handles a case of product going through the distribution center, from receiving to delivery. In its old distribution center, which consisted of multiple buildings, the average number of touches for a given case was about 18. In the 410,000-square-foot DC opened in April 2008 in Chino, Calif., that average has dropped to five.

The drop in touches is a big deal for Nature's Best as it strives to remain competitive in the ever-expanding natural and organic food business. ”When you reduce touches, you also reduce machine costs, labor costs and processing costs,” said Brian McCarthy, senior vice president of operations for Nature's Best. “If you don't reduce touches, you're not going to be around.”

Founded in 1969, Nature's Best, based in Brea, Calif., is the largest privately held distributor of natural and organic grocery products in the U.S., distributing in 11 Western states, as well as Alaska, Hawaii and parts of Asia. Its customers include independent natural food stores and supermarket operators.

Faced with increasing competition and shrinking margins, Nature's Best decided it could gain greater efficiencies — and reduce touches — by consolidating its multi-building distribution center into a single warehouse. At the same time, it invested in new supply chain management technology from Manhattan Associates, Atlanta.

Nature's Best selected three applications from Manhattan Associates' Scope Distribution Management product suite: Warehouse Management, Slotting Optimization and Supply Chain Intelligence.

Four months after the systems went live in early 2009, the wholesaler achieved significant benefits, including a 75% reduction in product handling (touches), which led to a 66% drop in labor costs (warehouse job descriptions were cut from 32 to six) and a savings of more than $100,000 in the cost of running its fleet. In addition, order accuracy doubled, on-time deliveries increased 11%, productivity jumped 114% and inventory accuracy grew by 14%, reducing out-of-stocks by 2%. With these improvements, the ROI for the technology investment “is well under way,” said McCarthy. (Manhattan Associates declined to cite the cost of the systems.)

For its willingness to overhaul its supply chain technology, and for the positive results that followed, SN selected Nature's Best to receive the 2010 Technology Excellence Award in the wholesaler category.

FEW MODIFICATIONS

In selecting new warehouse technology, Nature's Best was seeking systems that would work for “97% of our processes” without any modifications, said McCarthy. It found that in the Manhattan Associates systems, which required only 13 modifications, eight of them pertaining to the design of case labels. The new technology also gave the company a standard supply chain methodology, rather than a methodology replete with exceptions.

At the same time, new technology is flexible. For example, the Warehouse Management system adjusts the number of pallets shipped on each truck — and the cube (volume) taken up by each pallet — to maximize the space used. “In the old days, if it didn't fit we would get another truck,” said McCarthy. “Now, it dynamically adjusts the cube per pallet to preplan the truck. So when we pick it, it fits and goes out as planned. That's been huge for us.”

Slotting optimization has been one of the key drivers of the rise in productivity at Nature's Best, helping the wholesaler to find the best location in the warehouse for 30,000 SKUs, including 21,000 unique items sold in cases and 9,000 of those items that are sold individually. The system “looks at the characteristics of each SKU — fast, slow or seasonal — to make slotting decisions,” said McCarthy. “During Thanksgiving, it tells us to move the stuffing from a small location to a large location so we don't have to replenish the slot as often and the product will be more available.”

Nature's Best spends about 80 hours per week doing 300 to 500 slotting moves to optimize SKU characteristics.

The biggest caveat for implementing the systems cited by McCarthy is the need for extensive training. Nature's Best documented 4,011 hours of training — the actual amount may have been double that, he said — for 125 employees prior to opening the new DC. “The execution was relatively seamless, but the learning curve was massive,” he said. But once the DC opened, “we were able to get up to speed quickly.”