ARC CASE STUDY
MARCH, 2005
Mastering Flow Through
By Steve Banker
Keywords
Warehouse Management, Logistics, Flow Through, Crossdocking, Conveying & Sorting
Summary
Manufacturers, distributors, and retailers talk a lot about Flow Through
but few practice it. Flow Through (also known as Crossdocking) involves
flowing goods directly from receiving to shipping without the laborwasting steps of putting the goods away and later
Flow Through processes in a DC can
greatly decrease labor handling costs,
reduce cycle times, and increase the
picking them. SAKS Inc. is one company that has
mastered this advanced logistics process.
chances that the goods customers want
are on retail shelves. The key to Flow
Through is that information must flow in
advance of merchandise.
Analysis
SAKS Inc. sells merchandise such as apparel,
shoes, accessories, and jewelry with brand names
like SAKS Fifth Avenue, Off Fifth, Younkers, and Parisian. The company
has over 350 stores and six distribution centers (DCs), as well as customers
that order directly over the Internet.
The Base Process
At SAKS, merchandise is delivered not on pallets, but as cartons. Ninetysix percent of cartons flow through the facility to shipping without being
put away. This percentage could be even higher, but SAKS has learned it
makes sense to retain a small amount of inventory at a central DC in order
to replenish stores quickly with hot-selling items instead of managing
cross-store shipments or having to use a reverse logistics process.
The key to Flow Through is that information must flow in advance of merchandise. That information takes the form of Electronic Data Interchange
(EDI) and portal-based Advanced Ship Notices (ASNs) from their suppliers
and 214 electronic manifests from their carriers. Over 90 percent of ship-
THOUGHT LEADERS FOR MANUFACTURING & SUPPLY CHAIN
ARC Insights, Page 2
ments are preceded by ASNs. SAKS, like other leading retailers, does levy
charge backs if suppliers do not send UCC 128 ASNs, do not properly label
cartons, short SAKS, or if trucks do not arrive on time. To practice Flow
Through, supplier reliability is critical. SAKS success in this area is based
on years of working with suppliers to improve their performance.
For
suppliers that cannot afford EDI, SAKS provides an Internet-based application that allows even the smallest suppliers to generate ASNs, UCC labels,
and the necessary packing slips.
A vistor to SAKS’ highly-automated, 180,000 square foot distribution center
in Steele, Alabama would see mainly 55-ft trailers being unloaded across 16
receiving docks. Based on the barcode label and its preexisting association
with an ASN, most cartons flow from inside the trailer via conveyors to the
appropriate receiving line. A single inbound trailer might contain goods
destined for 100 different stores and so the cartons are typically routed to
about 80 outbound trailers (some trucks deliver to more than one store).
While it is critical that inbound trailers be moved as quickly as possible
from the dock, trailers on the outbound docks may take as long as a day to
Suppliers
Product/Service
Siemens Logistics
& Assembly
System Integration,
Conveying & Sorting
System, Controls, &
WCS
Catalyst Intl.
WMS, YMS, Supplier
Quality, and Supplier
Link. The key
software partner.
ARCLOGIX
TMS
IBM Global
Services
Supplier selection
SAKS Technology Partners for Steele,
Alabama Distribution Center
be fully loaded as they incrementally receive cartons from different inbound trucks.
In some cases, when a trailer is filled but delivery is
not scheduled until later in the week, a trailer will
be pulled away from the dock and placed in the
yard for a brief period of time. The trailer, in effect,
becomes a miniature warehouse. The constraint is
the store; if the store lacks the labor to get the merchandise to the floor, there is no sense delivering
the goods.
SAKS does require vendors to send
shipments in a “floor ready” format (on hangers,
and then boxed) to help reduce labor at the store
level.
On the shipping dock, workers “tunnel load” the trucks. They group cartons for one store on one side of the truck, for example, and goods for
another store on the opposite side. Or if goods are being delivered to the
same store, products from one selling zone (e.g. men’s apparel) would be
grouped separately from women’s apparel. While building the load, a tunnel down the center of the truck is created by not filling that area with
cartons.
©2005 • ARC • 3 Allied Drive • Dedham, MA 02026 USA • 781-471-1000 • ARCweb.com
ARC Insights, Page 3
Conveying & Sorting System Automates the Process
This base process flow is automated through the use of a conveyor system
integrated with a high rate sorting system. Telescopic conveyors that extend into the trucks are used at receiving. Different types of receiving
equipment are used. This is because the trucks that are arriving
have a variety of factors attached
to the shipment that affects how
fast they can be unloaded.
Goods move up a conveyor to a
mezzanine level where they are
merged onto a sliding shoe sorter
operating at 540 feet per minute.
The cartons then move on to an
in-bound
sorter
station
that
routes packages either to value
added processing stations located
High Speed Sliding Shoe Sorter
directory below this station or on
to shipping. A vision system cap-
tures an image of every bar code, reads the bar code, measures the length of
the package, and determines how many packages should go on a particular
value added processing divert lane.
Next to this station is a PC loaded with system monitoring software. The
software shows the conveyor system layout. If a particular module is not
performing correctly, that module’s icon turns red on the computer screen.
It is an Internet enabled system, so corporate headquarters in Jackson Mississippi can also view the system status simultaneously.
Next cartons headed for the shipping docks are sprayed with the store
number and department by inkjet sprayers. This information is used by
truck loaders to correctly load trailers that will contain goods moving to
more than one store.
Cartons are then sent to the shipping sorter. This
sorter diverts cartons to the appropriate shipping lines. Packages move
down from the mezzanine level to the shipping docks on gravity controlled
conveyors designed to extend into trucks to speed truck loading. The conveyor system is designed to re-circulate cartons on the shipping side if
workers are not able to keep up with the amount of cartons flowing to them
and thus prevent the overhead conveyor from becoming blocked. A light
©2005 • ARC • 3 Allied Drive • Dedham, MA 02026 USA • 781-471-1000 • ARCweb.com
ARC Insights, Page 4
adjacent to a particular gravity fed conveyor comes on if the conveyor is
fully loaded with cartons. This allows a manager to reposition workers and
eliminate the bottleneck.
The speed with which cartons move through the facility is impressive. If
cartons are not diverted to value added processing, they move through the
facility in eight minutes.
Process Extensions
Not all cartons flow through the facility in the manner described above.
SAKS has a sophisticated inbound auditing process. Audited cartons are
diverted to an audit area. For some suppliers, 40 percent of inbound cartons are audited. If there is no ASN associated with a shipment, SAKS will
scan each piece of merchandise. For suppliers with excellent reliability, few
if any inbound goods need to be audited. The audit logic is contained in an
add-on module to the WMS solution that was built with detailed input
from SAKS.
Certain products require Value Added Services (VAS) and they are also
diverted to a special area. VAS tasks include price ticketing, putting security devices on expensive goods, and shipping some apparel on hangers.
At the Steele distribution center, diverted product is processed and then reintroduced onto the conveyor system.
SAKS is completely wireless RF enabled—no tethers anywhere – and this
fits their philosophy of cross training workers to perform multiple tasks.
SAKS uses the analogy of SWAT teams. RF devices also mean that any
worker can move to any area based on the need of the moment.
Flow Through’s Advantages
Flow Through’s greatest advantage is labor savings. At the Steele facility,
the combination of common systems, material handling equipment, and
Flow Through processes allows 45,000 cartons per shift to be processed. In
the past, a facility with the same square footage could process 15,000 cartons per shift at best.
The labor cost per carton has since dropped
dramatically. The cost of handling a carton is $0.14 when it arrives as part
of an ASN shipment, but $1.40 for cartons shipped without ASNs . The initial projection was that the payback period would be three years.
Subsequent analysis showed the project actually had a payback of 18
months.
©2005 • ARC • 3 Allied Drive • Dedham, MA 02026 USA • 781-471-1000 • ARCweb.com
ARC Insights, Page 5
Labor savings are partially the result of better capacity planning and
smoother labor utilization. Flow Through, as practiced by SAKS, resembles
Theory of Constraint processes used in manufacturing operations. A human planner can enable a steady flow of work by visually monitoring
activity and scheduling the unloading process to maintain a steady beat of
activity. If the VAS area is busy, for example, a trailer can be unloaded that
has a high percentage of ASNs, which means less work for the VAS processors. The planner indicates which trailer moves to which inbound dock by
making a selection in the Yard Management System (YMS). The YMS’s
alerting capabilities aid labor productivity. If an inbound dock is open for
more than five minutes, a manager is alerted on a pager. Similarly, if a
truck will arrive late to a yard, managers are alerted. Prior to the implementation of the YMS, turn time was 10 to 12 minutes. The YMS solution
reduced it to 7 minutes or less.
Flow Through also took two days out of the SAKS supply chain, while increasing their ability to flex deliveries to the stores. They can ship as often
as warranted based on volume. For their larger stores, in peak season, this
means twice daily. The service standard, even for VAS merchandise, is to
receive goods and ship them out within a four hour window. Finally, Flow
Through has increased store replenishment accuracy. Each time they have
increased the percentage of goods moving via Flow Through, replenishment accuracy has also increased.
The Journey to Flow
SAKS began the journey to Flow Through in 1997 when they began creating
a future state vision of where they wanted to go. At that time, they had
doubled in size through various mergers over a 10-year period and they
were left with different systems at their DCs. They wanted to have common applications across their distribution network, rationalize the network
to reduce transportation costs, and slowly move to state-of-the-art facilities.
SAKS hired IBM Global Services to help with the selection process. By the
end of 1999, they had made their supplier selections. Catalyst International
was their primary fulfillment software supplier and Siemens Logistics and
Assembly (formerly Rapistan) was the system integrator on the material
handling side as well as the supplier of conveyor systems, high speed sortation systems, and the material handling control system.
©2005 • ARC • 3 Allied Drive • Dedham, MA 02026 USA • 781-471-1000 • ARCweb.com
ARC Insights, Page 6
One of the most interesting decisions SAKS made after Siemens was selected, was to allow Siemens to design the material handling system first
and then to design the building as a shell that wrapped around the automation. On the outbound side, Siemens came up with a unique design where
conveyors heading to dock doors criss-cross back and forth instead of having a central conveyor line off which packages are diverted to shipping
doors.
The folks at SAKS refer to this section of the building as the “Ca-
thedral.” As someone that has toured this facility, I agree the name is apt.
While this design did lead to longer conveyor systems, it allowed the building to be much narrower and saved a significant amount of money in the
construction of the building.
Recommendations
•
ASNs are used far too rarely. They offer strong advantages in preplanning DC operations. These advantages are magnified when combined
with Flow Through processes.
•
Recognize that the value of Flow Through is greatly increased by procurement programs that emphasize more frequent, smaller buys that
better reflect consumer demand. If retailers do not have “open to buy”
programs in place, they will not gain the full advantages of Flow
Through.
•
Consider designing the automation first and wrapping the building
around the material handling layout. The project manager from Siemens who worked on this project reports that in a lengthy career, no
other company has approached an automation project in the same way.
The results achieved here suggest that this is a best practice that other
companies would do well to emulate.
For further information or to provide feedback on this Case Study, please contact
the author at [email protected].
©2005 • ARC • 3 Allied Drive • Dedham, MA 02026 USA • 781-471-1000 • ARCweb.com