What's Your Enterprise Missing?

For the forklift driver, today was not much different than any of the hundreds of days that preceded it during his employment at Dal-Tile's Sunnyvale, TX, distribution center (DC). The frenetic pace that accompanied the unloading of a pallet of tile from the back of a trailer was par for the course. Checking his onboard monitor for a putaway location, the driver sped to the predefined location only to find that the shelves were full - not an uncommon dilemma. Out of the corner of his eye, the driver spied an opening just 20 yards from where he was sitting. First, he scanned the bar code label on the full-shelf location to record the putaway. Then, he headed to the opening and slid in the pallet. Problem solved...that is, until another driver needs to pick the pallet, and it is inefficiently located in the wrong part of the warehouse. Small warehouse operators will probably shrug their shoulders at this putaway/pick problem. For billion-dollar Dal-Tile, which operates four regional DCs in the United States, the problem struck to the very heart of what the 8,000-employee company should do best - distribution. Serving three main sales channels (company-owned sales and service centers [SSCs], independent distributors, home centers) means that more than 80% of the company's tile products must move through DCs to eventually be sold. "Distribution is not a small piece of what we do at Dal-Tile," comments John Turner, Jr., vice president, distribution and customer service at Dal-Tile. "It became increasingly more risky to continue to run our DCs with the old WMS (warehouse management system) we had in place."

Legacy WMS, Same Old Story
Watching forklift drivers struggle to put away shipments and pick orders made Dal-Tile's warehouse managers queasy as productivity gains slowed and managing overtime became more difficult. For the most part, their hands were tied. The DCs were running an old WMS from Logisticon (Santa Clara, CA) that lacked many of the features of modern WMS packages. The WMS, which is integrated with the company's legacy order processing system, had been customized over the years to accommodate many needs that are unique to Dal-Tile, such as handling 18,000 SKUs (stock keeping units) and different shade combinations within the same SKU.

What the WMS offered in customization, however, it lacked in real-time information. Dal-Tile had little data on the flow of products throughout their DCs, and this made laying out a warehouse particularly challenging. Poor putaway practices led to inefficiencies in the picking process. The lack of space optimization tools led Dal-Tile to plan for a warehouse expansion that seemed necessary but couldn't be validated. And, making improvements became somewhat self-defeating. "With the old system, we may have taken three months just to gather data for an improvement project and six months to implement it. And often, the requirements for the project changed, and we wouldn't even know it," recalls Turner. "Marketing would add three or four new SKUs into the mix without warning, and those SKUs started acting differently. We would invest all these hours into new racking and new material handling techniques, and the new SKUs would make our work obsolete."

Thinking Outside Out-Of-The-Box
Entering 2001, the main logistics project at Dal-Tile was clear - implement a new WMS at its DCs. There were many WMS alternatives available, but the company was quick to settle on Dispatcher-WMS from LIS (Charlotte, NC). Beyond product functionality, a couple of other factors weighed in that decision. First, LIS was very familiar with Dal-Tile's business and the tile industry, as LIS had been supporting the now-defunct Logisticon installations at Dal-Tile. "LIS knows what we are all about. It would have been a real challenge to bring another vendor up to speed in terms of our requirements," explains Dan Cooke, vice president, information technology at Dal-Tile. Second, all of Dal-Tile's current RF (radio frequency) handheld terminals from LXE could be used with Dispatcher-WMS.

While LIS knew Dal-Tile's business, it was immediately clear that this was not going to be an out-of-the-box implementation. LIS worked with Dal-Tile to rewrite numerous WMS processes to better suit the tile manufacturer's needs. One significant customization included in the system is for a "job pack" process which will be used in Dal-Tile's DCs in the future. An order placed by an SSC, for instance, might contain 10 separate customer orders. Instead of having each customer's order spread across multiple pallets, Dal-Tile requires each customer order to be contained on one pallet. "The SSCs are part of our company, and this new process will create downstream efficiency. We will pack orders in the manner that the SSCs want to receive them. In turn, the SSCs will spend less time and money in receiving the orders before the products get to the eventual end users, and this job pack feature will allow us to do it, " adds Turner.

Dal-Tile also used the WMS implementation as an opportunity to upgrade the interface between its new warehouse package and the company's legacy systems. The old WMS communicated with the IBM mainframe-based legacy system via protocol converters. Data from the WMS was converted to an SNA (systems network architecture) protocol, which was developed by IBM for its mainframe environment. "The protocol converter allows our mainframe to use the SNA protocol to communicate with the old WMS and hardware devices on the floor," states Cooke. "With the new WMS, we upgraded to a standard IP (Internet protocol) scheme."

More Intelligence Means More Savings
After six months of software requirements gathering, development, and testing, Dal-Tile went live with Dispatcher-WMS in its four DCs over the span of five months. While it's too early for Dal-Tile to have specific metrics on productivity associated with the new WMS, the company is handling record volume while achieving its headcount plan and overtime objectives. Suffice it to say that its forklift drivers are no longer looking for open spaces to stock shelves. The new WMS allows the company to evaluate product flow and demand in each DC on a daily basis. This ability, for example, let Dal-Tile configure its Sunnyvale DC differently than its DC in Eldersburg, MD. Because tile popularity varies greatly depending on geography, tile that is easily accessible in the Sunnyvale DC might be stored in the back of the Eldersburg DC.

The new WMS also led Dal-Tile to initiate a next-day ship project where orders taken by 5:00 p.m. each day begin shipping that night and the next morning. Every order is handled in this manner, whether the customer requests it or not. If a customer needs the order in two weeks, the DC will not be notified of the order until the day before it should be shipped. "Moving to next-day ship gives us about a 70% reduction in cycle time within distribution," adds Turner. "Ultimately, we want to get an order to the DC and have it shipped in five minutes. That was never going to happen with the old WMS we had in place."

And, the hunt for new warehouse space...well, that capital decision has been put on hold. Now that internal improvement project timelines have been reduced from six months to a few weeks, Dal-Tile has completed several projects to better optimize space within each DC. Warehouse space is expensive and tile is "not the most valuable of commodities." Additionally, warehouse expansions mean long-term leases that can be prohibitively expensive to break. "We were at a point where we thought we were outgrowing several of our DCs. In reality, we were just not utilizing the cube right," says Turner.

WMS Is Only Part Of The Picture
The implementation of Dispatcher-WMS is one tile in a mosaic of supply chain initiatives at Dal-Tile. On the B2B side, Dal-Tile is working with the NTE (National Transportation Exchange) in an effort to eliminate the manual communication between freight dispatchers and freight providers. This means that a specific load is system-built to predefined parameters, electronically released to the exchange, and accepted by a carrier without human intervention. This one project allows Dal-Tile to handle 15% to 20% more volume with no additional requirements on its end.

A recent drive to automate its customer ordering process through EDI (electronic data interchange) and Web-based services has also resulted in cost savings in customer service. Over the past three years, this automation has reduced headcount by 40% while call center volume increased 30%.

Anecdotally, Dal-Tile knows it is one of the best in its industry at leveraging supply chain technologies. The company points to the vendors that arrive on-site only to shake their heads and walk away after seeing the company is already using advanced tools and techniques. Quantitatively, the company receives high marks from 3PL (third-party logistic) providers who routinely benchmark Dal-Tile's processes against their own and their clients'.

"I don't see how you can grow your volume in a price-competitive and profit-competitive environment and not reduce your costs while you grow," comments Turner. "This is a fact: somewhere in logistics in this company, we are changing something every day."