Magazine Article | November 1, 2003

Rise Above Warehouse Inefficiency

Source: Field Technologies Magazine

By integrating WMS and automated storage and retrieval systems, $1.2 billion Minolta Corp. USA's National Parts Warehouse increased order shipments by more than 23% and reduced overtime costs by 47%.

Integrated Solutions, November 2003

You may not know Alan Battiato, national manager of distribution and warehousing for Minolta Corp. USA. However, you probably have more in common with him than you realize. Like you, he knows his company's success depends on more than just making quality products. It has to get its products to dealers faster and cheaper than its competitors. And, its competitors aren't just the Xeroxes and Canons of the world; they are also the third party parts manufacturers that make replacement parts resembling Minolta's 60,000 SKUs (stock keeping units).

It's Battiato's accomplishments at Minolta Corp. USA's National Parts Warehouse (Minolta NPW) that may set him apart. Consider Minolta NPW's shipping history, for example. One of the ways the company measures its distribution output is by the number of line items shipped. If a dealer orders three different items, for instance, the order counts as three line items - regardless of the quantity of each item ordered. In 1996, Minolta NPW shipped 420,000 line items. Last year it shipped nearly 609,000 line items. Proof that Minolta NPW has been doing things right under Battiato's guidance is that it has been able to accommodate this growth with fewer overtime hours worked, faster order turnaround, and more accurate deliveries. And, did I mention it's cut down its dealers' shipping costs, too? Obviously, to have such improvement, Minolta NPW must not have been in such a favorable position in the first place. Battiato readily admits this.

WMS Sees Opportunity For Optimization
Unlike a lot of warehouse success stories, Minolta NPW is not a story about how a company replaced a legacy system with a modern, Web-enabled enterprise solution. Initially, this company had no WMS (warehouse management system) in place - only simple spreadsheets for inputting a few fields of data. "We used to print out 1,000-page green bar reports, which warehouse workers would use to identify SKU names and locations," says Battiato. "We installed horizontal carousels [i.e. automated picking machines] in an attempt to reduce our picking times - but we still had an average pick time of 2 minutes." Part of the problem was that each of the 22 carousels required an operator to manually program each order into the machine. Using this system, carousels could pick only one order at a time, which restricted their efficiency. Another inefficient practice Minolta NPW recognized was that it didn't have the ability to combine orders. A dealer may have several field service workers who might place two to five separate orders on the same day. With anywhere from 600 to 900 orders a day, it was impossible to find and consolidate orders manually. This translated to extra costs, which were passed on to customers.

WMS Boosts Carousel Performance Eightfold
Despite running a paper-based warehouse, Minolta NPW still had a respectable track record with its customers. The company shipped 66% of all non-emergency orders within two days and had an order accuracy of 94%. Without ceasing its manual processes, however, it would be able to maintain only status quo, which in a competitive market is never good enough.

Minolta NPW's initial attempt to automate its warehouse yielded disappointing results. "The first WMS we found that could be integrated with our carousels had basic functionality that did little more than send messages to rotate the carousels and place the right product in front of the warehouse personnel," recalls Battiato. "At that time there were few WMS vendors that had products which integrated with carousels and other kinds of automated storage and retrieval systems." After further research, the company found WMS vendor Intek Integration Technologies. Intek's Warehouse Librarian was installed at the Blauvelt distribution center over a 3-month period. Since the company previously had no legacy solution, the majority of the WMS implementation centered on creating a database from scratch. (See vendor sidebar for further details, page 42).

After the implementation, which included 7 weeks of employee training, Minolta NPW experienced several improvements in its distribution practices. By integrating its WMS with its 22 carousels, the carousels could be programmed to pick multiple orders simultaneously. "The carousels pick up to eight orders at the same time," says Battiato. "And, one operator can run up to three carousels at a time." The carousels handle about 30% of Minolta NPW's SKUs. For some of the other SKUs, pick-to-light and RF (radio frequency)-based scanning technologies were introduced and integrated with the WMS. "For our faster-moving, consumable products, which are picked in bulk quantities, we use a pick-to-light flow rack," says Battiato. "For slower-moving, floor-stacked products we use wireless handheld scanners for receiving, picking, and putaway." The new solution enabled Minolta NPW to accommodate increases in orders while simultaneously reducing overtime costs by $8,000 per month. During the same period, the company improved its order fulfillment accuracy from 94% to 99.5% and shortened the overall order turnaround. "We used to ship 66% of all non-emergency orders within two days and the rest would take as many as four days," recalls Battiato. "Now, nearly 100% of our orders - including back orders - are shipped within two days."

Not only are orders getting turned around more quickly at Minolta NPW, the company and its customers are seeing other benefits as well. Using a feature of its WMS called a combo module, orders from the same dealer placed within a day apart can be consolidated. Not only does this save Minolta NPW on labor, carton, and packing peanut costs, but customers save on shipping costs as well. "Our customers have experienced a reduction in their overall shipping costs," says Battiato. Minolta NPW received a full payback on its technology investment within two years. Further benefits are being realized with 67% of Minolta NPW's dealers placing orders via the Web (called Minolta Partner Link Web site). This eliminates data entry and provides dealers with services such as advanced shipping notices and total visibility to their orders. This is just one more way Minolta NPW is making sure the 330,000 Minolta copiers its dealers presently service aren't going to be replaced with one of its competitor's models anytime soon. While no one can predict for certain what the future holds, just about any distribution center manager hopes to have more than a few things in common with Battiato.