t's tough to turn a profit in an industry where the average item sells being misdirected, and customers were getting the wrong orders. The I for a buck or two. It's a high-volume, low-margin game, prone to any number of market variables. To skim gains off already-slim returns, a streamlined logistics process is essential. So is a willingness to change. Encore Sales Ltd distributes low-end general merchandise across Canada and the US from its headquarters in Concord, Ontario (just north of Toronto). Its clients are dollar stores and discount merchants, and its products span the gamut from hardware and health products to stationery and seasonal goods. It's a dandy time to be in discount. Bolstered by a dollar store renais- sance and favourable import conditions, Encore has experienced tremen- dous growth in recent years. The unforeseen downside of success, however, was the overloading of the company's warehouse and shipping processes. About three years ago, the company decided to clean things up. With help from a trusted consultancy and a savvy vendor, it completely revamped its sortation process to cut lead times, errors and costs. The history Irving Bloomberg founded Encore more than 42 years ago. His brother Howard soon joined him, and the two built a business distributing general merchandise to domestic retailers. The company has expanded significantly in the past two decades. With a surge in dollar store popularity came heightened demand for Encore's products. In 1986, the company moved into a new 150,000sqf facility on North Rivermede Road, which remains its headquarters today. In the late 1990s, the company overhauled its entire orderpicking process and implemented a full WMS-provided by Scancodeto better meet its new demands (MM&D covered this in our August 2001 issue). As growth continued, so too did space demands. The company adjusted by adding an 180,000sqf seasonal goods facility a few kilome- tres away on Jane Street six years ago; two years later, it built another a building of the same size for receiving and storage near Keele Street, also nearby. All three facilities are within a five-minute drive of each other. The problem Even with the extra space, by 2003 the Rivermede facility had become cramped and awkward. Most freight was still handled manually. Space was tight. Employees were getting in each other's way. Inventory was staging process was rife with unnecessary steps: up to four people would handle a finished order before it left the door. All these factors jacked up costs and sent lead times through the roof: even the quickest order took three days to get out, and some took as long as two weeks. Irving's son, David Bloomberg knew it was time for a change. "There were lots of costs and delays," he says. "It was simple math. But where, exactly, should the company start? To answer this question, he called upon a longtime associate. RSM Richter Consulting had assisted Encore with its orderpicking and WMS upgrade a few years earlier. It made sense for the partnership to continue. The consultants Richter principal Barry Levine and senior manager Eric Matusiak took on the tasks of assessing the problem, prescribing a solution and mapping out a plan for Encore. To start, the two immersed themselves in the operation in order to understand its inefficiencies. "We did a fair amount of analysis on flows and on workloads in each of the areas," Levine explains. The idea was to try and ascertain where costs were being incurred, what kind of volumes were going through each of the work centres in the DC, and really to understand the problem." "They did a whole time study," Bloomberg says. They were here for two weeks with stopwatches, timing to get data." After analyzing Encore's inventory, product flow and volumes going through consolidation, Levine and Matusiak had their answers. There was too much product in the building, and it was being sorted inefficiently. The pair drafted a report detailing the task at hand. Levine explains: Our mandate was to identify space that could be freed up by moving product to the new building, to recommend ways to reduce product handling and labour costs throughout the process, to develop improved processes for consolidating picking cartons into orders and to provide an overall plan that incorporates all these recommendations in the available space." The process RSM Richter's recommendations necessitated a complete realignment of the Rivermede space. The site would now be used solely for picking, 1704 MI MAJESTA 29 28 Cartons line up to be palletized in one of Encore's 32 lanes MITAR packing and shipping. Extensive equipment would be introduced, forcing the company to eliminate all unnecessary racking, trucks and staff from the facility. Overstock inventory to fill orders would be shuttled in from the Keele Street warehouse, picked directly to carton, barcoded, labelled, and sent into a conveyor-based automated, central sortation system. Levine and Matusiak considered using an accumulator with manual sortationa low-cost but labour-intensive solution. Ultimately they decided on an automated sub-sorter that automatically reads each barcode and sorts items appropriately, diverting them to one of 32 lanes for shipping. It requires far less human contact, but substantial capital investment in technology and equipment. "Instead of having people make the decision as it came out of picking, we would have it automated," Levine explains. "We would use barcode technology to read each carton and divert it down a lane, and then we would have an operator basically float along several lanes to offload those cartons onto pallets." The vendor With a decision made, Levine and Matusiak turned to Mainway Handling of Burlington, Ontario. Engineering manager Andrew Sharp an instrumental advisor throughout Encore's previous upgrade-led the project. Sharp agrees that streamlining the sortation process was the best option for the Rivermede site. "They had reached the maximum growth they could get in that warehouse with the system they had. To add more volume per hour would have meant more bodies, and that would have exacerbated the problem, which was too many people to put things away. "We gave them a system that would take them beyond the capabilities of that building." The changes The transformation was vast, forcing Encore to revamp its entire inventory model. Close to 1,000 pallet positions were removed from the Rivermede site and redeployed to Keele Street in order to make room for the new sortation sys- tem. The space, which once housed six to eight weeks' worth of inventory, was stripped down to two or three weeks' worth-the bare minimum needed to meet order requirements at any given time. This freed up enough space to install an elaborate network of conveyors, all feeding into a new 32-lane staging area. The sortation system itself was largely Sharp's brainchild. It started with a mixed conveyor system, involving both roller and belt propulsion, from Automotion. Scanners (supplied by SICK) were positioned throughout the line, triggered by advanced photo-eye accu- mulation technology. The photo-eyes sense the activity of the cases ahead: if one has stopped, it deactivates the drive behind it to prevent items from crashing into one another. "Some of the boxes weigh two pounds, and some weigh 75 pounds. If they were to crash into one another...they would jackknife and go all over the place," explains Sharp. Now they can sit there without damaging each other." The conveyors keep the cartons upright to ensure accurate scanning. Each case bears two UPC barcodes: one from the vendor, and one from Encore's own WMS. Once scanned, the codes tell the system which lane to divert the item to. The dual-tag approach allows the WMS to double-check product accuracy; if they do not match, the destination lane immediately blocks new orders and a bright red light alerts an employee to remedy the problem. Once the cartons have arrived in their proper lanes, workers stack- load them onto pallets, wrap them and set them aside to be shipped. RSM! Richter Logistics advice to help your business succeed. Operations Improvement business strategy process improvement Technology Implementation. assessment and selection project advisory & implementation Barry Levine Tel: 416.932.6204 blevine@rsmrichter.com Toronto RSM Richter is an independent member firm of RSM International, an affiliation of accounting and professional firms. Calgary Montreal www.rsmrichter.com Non-conveyable itemsabout six percent of the facility's inventory_ are manually scanned into the system. The installation Construction of the new system started in January 2004. A year later, Encore began ramp-up, running approximately 20 percent of the daily volume through the system. By April 2005, the system was at 100 percent. According to Levine, implementation had a few glitches, mainly surrounding the WMS. Encore had been using an older version of Scancode that needed to be upgraded. Aside from such technological speedbumps, implementation was surprisingly painless. Since the inventory rollout and conveyor installation was so gradual, operations at Rivermede were able to continue as throughout the entire process. "We never had one interruption because of all that construction," Bloomberg claims. reduction in staffing. Approximately 40 workers were affected by the change. Some were let go, while others were retrained and rede- ployed to Keele or Jane Street. Order turnaround time is another key benefit. What once took up to two weeks to ship out now leaves in less than two days. Considering the early benefits, Bloomberg has little doubt that the changes represent a sound investment. While the new system was not cheap in the neighbourhood of a million bucks-he says the compa- ny is poised to reach its original 18-month ROI target. "Aside from the obvious cost savings, there's the human error point of view," Bloomberg sums up. "We just don't have as much damage now because not as many people are touching the product. "Our just-in-time ability now is huge. We just couldn't conceive of that before." MM&D The results In just over a year, the new system has boosted Encore's operational efficiency. Most daily orders can now go out in one eight-hour shift, leading to a drastic Encore Sales: The Basics Location: Concord, Ontario Industry: General merchandise for discount and dollar stores Facility: 150,000sqf office, showroom and regular order fulfilment centre; 180,000sqf warehouse for seasonal goods and 180,000sqf centre for receiving and storage in the GTA Staff: Core hourly warehouse staff of 135; fluctuates throughout year Receiving: Most goods shunted in from satellite warehouse Shipping: Ships from 18 doors WMS: Scancode Scanners: SICK, Inc Conveyors: Belt and roller with photo-eye accumulation, provided by Automotion, Inc Lift Trucks: Raymond RSM Richter Barry G. Levine, P.Eng. blevine@rsmrichter.com Tel: 416.932.6204 Barry is a Principal of RSM Richter Consulting. He has 20 years of experience as a consultant working with a variety of manufacturing and distribution organizations. His extensive project experience includes business strategy and planning, feasibilities studies, operational reviews, process improvement, productivity and cost reduction, labour costing, performance measurement, business requirements definition, software selection and project management. Eric J. Matusiak, MBA, P.Eng. ematusiak@rsmrichter.com Tel: 416.932.6265 Eric is a Senior Manager with RSM Richter Consulting. He has over 14 years of experience in consulting and industry. His project experience includes strategic planning, process improvement, operational analysis, economic analysis and organization design. His industry experience includes retail, consumer packaged goods, manufacturing and construction. www.rsmrichter.com