Mastering Flow Through

Flow Through processes in a DC can greatly decrease labour handling costs, reduce cycle times, and increase the chances that the goods customers want are on retail shelves. The key to Flow Through is that information must flow in advance of merchandise.

Manufacturers, distributors, and retailers talk a lot about Flow Through but few practice it. Flow Through involves flowing goods directly from receiving to shipping without the labour-wasting steps of putting the goods away and later picking them. SAKS Inc. is one company that has mastered this advanced logistics process.

SAKS Inc
SAKS Inc. sells merchandise such as apparel, shoes, accessories, and jewellery with brand names like SAKS Fifth Avenue, Off Fifth, Younkers, and Parisian. The company has over 350 stores and six distribution centres (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. Ninety six 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 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 shipments 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 - CatalystCommand Supplier Link - that allows even the smallest suppliers to generate ASNs, UCC labels, and the necessary packing slips.

A visitor to SAKS highly-automated, 180,000 square foot distribution centre in Steele, Alabama would see 55-ft trailers being unloaded across 16 receiving docks. Based on the barcode label and its pre-existing 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 be fully loaded as they incrementally receive cartons from different inbound trucks. 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 conveyor from becoming blocked.

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 labour to get the merchandise to the floor, there is no sense delivering the goods.

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. mens apparel) would be grouped separately from womens apparel. While building the load, a tunnel down the centre of the truck is created by not filling that area with cartons.

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 centre, diverted product is processed and then reintroduced onto the conveyor.

SAKS is completely wireless RF enabledno 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. Wireless RF saves money by eliminating the need for staging space, lines, and workers.

Flow Throughs Advantages
Flow Throughs greatest advantage is labour 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 labour 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 .

Labour savings are partially the result of better capacity planning and smoother labour 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 YMSs alerting capabilities aid labour 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 vendor selections. As their main technology partner they selected Catalyst International for the CatalystCommand suite which includes Warehouse Management, Yard Management, Supplier Link and Supplier Quality. They standardized on ARCLOGIX for Transportation Management, Siemens Logistics and Assembly (formerly Rapistan) for conveyor systems, and Lafayette Engineering as their integrator of material handling systems.

Catalyst International was selected as the primary technology partner in large part because of its willingness to be a true co-development partner, to take the process improvements and build them into their standard code base. SAKS has been very happy with the Catalyst relationship. The new management team comes in for special praise. Over the past several years, they have progressed from implementing the first DC in January of 2001, to implementing the software systems across all distribution centres and bringing up a new state-of-the-art facility with advanced material handling.

SAKS feedback was important in improving the WMS, YMS, the Supplier Link and Supplier Quality products. This feedback and interaction continues today, most interestingly in the area of combining Flow Through with direct-to-consumer shipments.

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.
- Another advanced trend in retail distribution is recognizing that by using special totes and truck loading techniques, labour costs in truck unloading and stocking at the stores can be greatly reduced. Carton loading a truck leads to lower transportation costs but higher labour costs, particularly at the stores. Careful cost and process analysis can help companies find the right balance point between these two techniques.

Suppliers Product/Service
Catalyst Intl. WMS, YMS, Supplier Quality, and Supplier Link. The key technology partner.
ARCLOGIX TMS
IBM Global Services
Vendor selection
Siemens Logistics & Assembly Conveyors and Automation
Lafayette Engineering, Material handling consulting
The audit logic in the CatalystCommand Supplier Quality module statistically analyses the performance of vendors on an ongoing basis. The module lowers or raises the percentage of goods to be audited based on the analysis. The solution has the ability to understand lane performance delivery on this lane by this vendor to this DC is good, but not on this lane. The philosophy is to go deep. If a shipment is to be audited, every carton is inspected.