We help you make better decisions on a wide range of supply chain infrastructure issues. The following mini-case studies provide some answers to questions you may be asking yourself right now.
Facilities are the critical nodes of your supply chain network, where distribution and manufacturing happen. Poor design and wasted space reduce your productivity and limit performance, resulting in costly operating penalties.
We help you invest in the right supply chain infrastructure through:
Facility Sizing & Site Design
We start by conducting a hard analysis of your current operations, assessing the gaps and developing comprehensive forecasts. We then translate that into a layout that defines what you need to build well before going to bid.
The Situation – A liquor distributor had been operating from the same distribution centre since the early 1980s. Decades later, their business model had changed dramatically and with it the SKU base grew from 2,500 to 17,000. Shipping volumes had also grown year-over-year with no end in sight. To manage this growth, the distributor began with a single outside storage facility, but this soon became three outside facilities feeding the original, main DC. Operating costs were out of control and the complexity of coordinating inventory in four locations had become a major service risk that left customers unhappy during peak shipping seasons. The distributor knew it was time for a new distribution centre and turned to LIDD for the solution.
Issues & Decisions – When you embark on the design of a new distribution centre, you must begin by understanding your needs. Those needs come from modeling your requirements in great detail and projecting those requirements into the future. Those requirements must be expressed in terms of throughput, variety and storage.
Most distributors have a wide variety of materials handling system options that can be reasonably applied to provide their needs – from conventional designs to mechanized or fully automated systems. Each approach can meet the design requirements with different capital and operating cost outcomes, as well as different risks and human resource considerations. Site availability and configuration can also play an important role in defining the right solution.
Finally, many distributors under-appreciate the critical links between IT capability and facility design. This creates a bias towards a particular design solution.
The Results – Our design for the new distribution center came after a careful look at all reasonable technologies, including fully automated “lights-out” systems. Our recommendations came with one surprise for the client: retain use of the original, main distribution centre to house slow-moving product and cross-dock that product for consolidation with fast-moving product that the distributor would stock in the new distribution centre. We recommended the re-purposing of the original distribution centre in recognition of the fact that while the facility had value as an operation, it would be difficult to dispose of the asset. Therefore, its greatest benefit would be to reduce the capital needed to build the new facility.
We help you optimize your existing materials handling systems to maximize efficiency, productivity and space utilization.
The Situation – A specialty foods company with wholesale accounts, its own retail stores and a thriving direct-to-consumer business had five more years on the lease of its distribution center. The facility was at capacity but the company wondered if there was anything that could be done to increase its capacity and avoid moving some of their business into outside storage.
Issues & Decisions – There are three dimensions to distribution centre capacity, each with their own symptoms and solutions:
- Throughput capacity – measure of the inbound and outbound volume that a building can handle
- Pick Line capacity – the number of SKUs that can be faced on the pick line
- Storage capacity – the amount of inventory that the building can hold
To solve a capacity issue, the first thing is to determine the kind of capacity problem – understanding that more than one kind of limitation can often be at play. Once we diagnose the problem, we can then prescribe the right medicine.
The solutions depend on a number of factors, including profiling:
- Operations – inbound/outbound activity, inventory turns and SKU variety
- HR structure – shifts of operation, workload balancing within a shift, day and week, labor by function
- Materials handling systems – racking, mobile and fixed conveyance, pick line
- Profile of the facility – size, shape and clear stacking height, building condition, location of obstructions, master site conditions and use
The Results – We developed a re-engineered materials handling system that increased storage capacity by 15% and re-set the pick line, which substantially reduced congestion in the direct-to-consumer fulfillment area. In addition to physical renovations to the materials handling system, we helped them increase inventory turns and revamped dock scheduling to flatten volumes across the working day.
The Situation – A grocery wholesaler distributing specialty foods from a 350,000 sq.ft. DC knew their picking productivity was below what it should be. They knew they had a long pick line and with an ever-growing SKU base, they were not maintaining their slotting.
Issues & Decisions – Slotting is the fundamental organizing principle of the distribution center with important impacts on:
- Most direct labor functions in the DC, particularly picking, replenishment and putaway
- Throughput capacity in conventional, mechanized and automated facilities
- Error rates – LIDD’s analyses have shown that improper slotting can measurably increase the error rates in the warehouse
- Damage and product stability in outbound transportation
- Customer service and labor at the customer site
Few distributors do a good job of maintaining their slotting and the proliferation of new SKUs puts additional pressure on the pick line. In a typical distribution center, 50% of all items are in the wrong slot type and the labor penalty can be 20% or higher.
Re-engineering the pick line is not an annual undertaking: it needs to be set with flexibility in mind and then maintained regularly.
The Results – We re-engineered the pick line, introducing a new handling system for slow-moving SKUs that created sufficient capacity to provide fast-moving SKUs with larger slot types. This eliminated 20% of replenishment tasks in the process. We also re-sequenced the pick line to eliminate the need to “re-stack” outbound pallets due to poor product sequencing. We developed an implementation plan that saw the entire facility re-slotted over a period of six months without affecting on-going operations. Post-implementation, direct labor productivity increased 15%. After spending years scoring in the middle of a benchmark of its peers, this distribution centre became the most productive facility in the group.
With a scope and mandate larger than the traditional role of a general contractor, we serve as a Project Commissioner to manage the construction & delivery of a fully operational building.
The Situation – A large, government-run liquor distributor required a new physical distribution center and improved supply chain technology and systems to accommodate growing demands and adapt to significant changes in the retail landscape. LIDD was selected to manage every aspect of the 3.5 year project to design and build the agency’s new distribution facility.
Issues & Decisions – If not expertly managed, any last minute decision in the building process could have introduced serious operational limitations and cost overruns. At a minimum, poor choices can result in delays and frustration. It was critical that they invested their capital wisely if they hoped to meet budget and timeline objectives. That meant doing it right the first time.
The Results – We managed the construction phase to ensure that objectives, standards and milestones were met before equipping the facility, training employees and overseeing a smooth transition into the new facility. Part of the project commissioner’s job is to coordinate all the players, representing the owner’s interests at all times.
“It was a long journey but the rewards are worth it,” said the client’s project manager. “We completed the project on time and within budget. It is a state-of-the-art operation running at full capacity as well as a very pleasant work environment for our employees. One of LIDD’s intangible assets is that they excel at communicating, interacting and engaging across all levels of an organization from upper management to the warehouse floor.”
Supply Chain Strategy
Without stepping back to look at your entire supply chain, it’s easy to let it slip out of control, leak money and handicap your market position.
Multi-Site Network Strategy
The ultimate goal in optimizing your distribution network is to find the least-cost solution that also meets your company’s service level goals.
The Situation – A foodservice distributor with 3 distribution centres acquires a smaller distributor with 2 distribution centres in the same geographic market. It hires LIDD to help develop a long-term network capacity plan that integrates both operations and provides the necessary infrastructure to sustain growth and improve service levels.
Issues & Decisions – The ultimate goal in optimizing a distribution network is to find the least-cost solution that meets a company’s service level goals. “Least-cost” = the total cost of distribution – capital and operating costs – in transportation, warehousing and carrying inventory.
Some of the questions you may ask when undertaking these studies:
- Are our customers served by the right distribution centre or should we re-balance our service regions?
- Should we re-engineer and/or expand existing facilities? If so, when and how?
- Should any facilities be re-located and/or consolidated?
- Do any facilities change their role in my supply chain?
- Can I make fleet improvements by introducing outbound cross-docking or inbound consolidation programs?
The Results – A 10 year capacity program was developed after studying a series of available alternatives. These included: consolidating facilities, relocating to new, greenfield distribution centres, shifting service areas to better balance the network and expanding/re-purposing existing facilities. We developed an implementation plan that, as leases expired, would reduce the total number of distribution centres from five to three.
The Situation – A home furnishings manufacturer develops a new product line with an entirely different supply chain from its core business. This new product line has domestically-sourced raw materials and transportation costs require it to manufacture as close to its markets as possible. With strong demand from retailers across the United States, the company needed our help planning the roll-out of production facilities for their new product line.
Issues & Decisions – Manufacturing facilities require capital to build; they have fixed and variable operating costs. Their location must take into account inbound and outbound freight expenses, economic service levels and other factors such as workforce cost and availability. There are also government incentive programs that influence these decisions.
The more facilities you build, the closer those facilities get to your markets, which lowers total outbound costs. However, the capital investment and fixed operating costs of those facilities mitigate those savings. The lowest-cost solution, within acceptable service levels, is the one that manages a balance between competing cost drivers.
The Results – A master plan was developed based on a projected market that called for four manufacturing sites across the United States. Over a five year period, the company implemented all four facilities as the new product line found shelf space with a growing number of retailers. We also provide freight monitoring reports to ensure that their tactical routing decisions remain consistent with their strategic plan.
Omni-Channel & e-commerce Strategy
We have helped companies of all stages and backgrounds build profitable, high-quality B2C operations. Typical clients include:
- Wholesalers transitioning into direct-to-consumer fulfillment
- Pure-play e-commerce companies with large operations
- Start-ups and early stage e-commerce companies with 1–2 years of operations experience
The Situation – A consumer products manufacturer has 100+ years of experience distributing to the top retailers in the nation. Increasingly, many of their clients have been asking them to take on direct-to-consumer fulfillment for orders placed on the retailers’ websites. In addition, the company had a series of niche products they wanted to market and sell directly to consumers. In the early days, they had set up their own DTC fulfillment operation but as volumes grew, they realized they needed expert advice to help get the operation under control and costs in line with their expectations. They called LIDD.
Issues & Decisions – Direct-to-consumer fulfillment has distinct differences from traditional wholesale (or business-to-business distribution). Three features of direct to consumer fulfillment deserve highlighting:
- The typical order has very few lines relative to B2B distribution
- In the case of this consumer packaged goods manufacturer, where retailers placed orders that had 30 – 50 lines, 90% of direct to consumer orders had a single line
- This means that in a traditional picker-to-goods picking operation, most of the picker travel occurs between orders and not between order lines
- Direct to consumer shipping patterns have different peaks both within the week (e.g., Mondays can be peak shipping days) and over the year (between Thanksgiving and Christmas, many operations see volumes quadruple)
- Direct to consumer fulfillment has an intense packaging component that will consume a significant portion of direct labor costs and will be a constant focus of continuous improvement
For mature companies entering the direct to consumer field, one significant issue becomes the lack of IT functionality to support this unique animal. Order processing and warehouse management are set up for B2B distribution and adapting the existing technologies to the new direct to consumer environment can lead to painful inefficiencies.
The Results – We developed a simple, scalable direct to consumer fulfillment operation. We defined a series of WMS and order processing technology enhancements that would need to be in place to continue to support the rapid growth of this business. We also provided an activity-based costing model to help the company’s sales team develop sustainable pricing for this service as they negotiate with their retail partners.
Transportation Resource Analysis
We can help you solve a wide range of transportation problems, from detailed routing of multi-stop delivery trucks to developing carrier routing guides for line haul shipments.
The Situation – With an aging fleet, high fuel prices and driver shortages all contributing to a need to find transportation efficiencies, a foodservice and convenience store distributor turned to us to help uncover opportunities.
Issues & Decisions – With 30% of a driver’s time spent making the delivery at a customer’s location, we identified pallet building and truck loading processes that would reduce the amount of time taken to assemble each order in the back of the truck.
The Results – Reducing the time required to deliver an order not only increased the number of deliveries each driver could make in a shift, but also improved the customer experience by reducing the time needed to receive a delivery.
Information Technology Services
Information technology is the foundation of supply chain planning, execution and reporting functions.
Integration & Optimization of Systems
An application park is the portfolio of business software used to run your business. You should have a very clear idea of which software applications support which business functions to ensure a clean, manageable application park.
The Situation – A fast-growing grocery retailer had reached the point where it had to make IT investments to automate business processes, get better control of inventory and enhance their reporting. Convinced it needed a WMS to improve its warehousing and distribution functions, it turned to LIDD for guidance.
Issues & Decisions – This client had many common challenges that arise from a confused application park. An application park is the portfolio of business software used to run the business. Ideally, you should have a very clear idea of what software applications should support what business functions – resulting in a clean, manageable application park. However, most application parks are a mess of software with overlapping functionality and canyon-sized gaps. This problem occurs when you do not fully understand what problems different kinds of software solve.
The Results – We mapped out this grocery-chain’s application park and identified their functional deficiencies. It became apparent to the executive team that while there were glaring weaknesses in their warehouse operations, eliminating those weaknesses would not fundamentally address their most pressing business challenges. Those challenges required a new ERP system, which no longer addressed the complexity that sustained growth had created.
Selection of WMS, MES, TMS & ERP Software
The software you choose needs to have the right functionality but the solution provider and the quality of the implementation team are equally important to the success of the system.
The Situation – One of the largest convenience store chains in the United States was building a central commissary to prepare various on-the-go meal solutions for their stores. They needed software to plan and execute their food production operations. They turned to us for help in defining their needs and selecting a solution in the marketplace.
Issues & Decisions – Food production is a complex endeavour that requires highly disciplined planning and execution in order to deliver fresh, safe food to customers. Some of the key business issues to resolve include:
- Production planning and raw materials procurement
- Traceability & lot tracking
- Recipe management (assembly, such as making pizzas, and disassembly, such as butchering meat)
- Yield management & product costing
- Work order execution, raw materials consumption and finished goods creation
- HACCAP and other food safety compliance programs
There is a wide variety of software solutions for food processors – from behemoths like SAP to one-man software companies serving a miniscule niche. The solution you choose needs to have the right functionality but the solution provider itself is equally important. The implementation of the software will be as critical to your success as the software itself so the strength and quality of the implementation team matters. Choosing a software provider is about picking a long-term partner for your business. This partnership matters.
The Results – Our client selected a solution that was unknown to them when the process began. Under our guidance, they followed a rigorous selection process that helped them land on not only a solution that would do the job but a partner that would be there for the long-haul. The implementation team met their deadlines – not without a few late nights – and the launch was a success.
After a successful implementation, we are ready to provide additional tech support and assist you with any additional infrastructure projects related to your supply chain. Our team of experts are highly trained in the technologies we support and are committed to helping you win by adapting to a new world that includes a shift towards on-demand fulfillment and personalized service.
Industrial Real Estate
Our LIDD Real Estate practice is dedicated exclusively to the needs of tenants. We align your leasing and facility needs with warehouse performance & IT optimization.
Lease Renewal & Restructuring
- Lease review
- Market scan
- Evaluation of alternatives
- Strategic negotiations
Site Selection & Acquisition
- Needs analysis
- Lease vs. purchase
- Transaction management
- Building design and implementation
- Portfolio management and review
- Facility disposition
- Sale and leaseback