Sunday 23rd Oct 2016 - Logistics Manager

Fulfilling the direct sell

Amway, a global manufacturing, marketing and sales organisation, is arguably the ideal model for a franchise business, with some three million independent business owners (IBOs) worldwide, including the UK, selling a wide range of goods – predominantly under the brand name Amway – within their own local sales areas. Amway’s principal products fall into three distinct groups – homecare, personal care as well as health and wellness.

All IBOs place their orders at a central point within their own country which are then consolidated and sent electronically to Amway Europe in Germany. Each IBO works on the same sales margin and all sales bonuses are paid only directly to the IBO who placed the order. Movement of money or goods between IBOs is forbidden, thus ensuring that the Amway business model is not pyramidal.

The ordered goods are then delivered directly to the home of the IBO. The biggest world market sector for Amway is China where the sales method is modelled more on the lines of conventional retail stores.

Worldwide manufacturing, research and development and distribution are conducted for Amway by Access Business Group International, a series of global Amway subsidiary companies dedicated to the fast and efficient supply of Amway products but with the ability to offer any surplus capacity to other non-related concerns, where applicable. Amway ensures high availability by very refined methods of sales forecasting. So accurate are these forecasts that even warehouse space allocation and temporary staffing needs are calculated using the same forecasting models.

Driving logistics

For Europe, it was decided in the 1990s to consolidate distribution, initially starting in Western Europe. The Amway business is very dynamic, with the European sector alone growing by more than 20% in the past two years. Following judgement according to various criteria, the Dutch town of Venlo – on the Dutch/German border – was selected as the European distribution hub.

Some 80% of the Amway product range is manufactured in the US, as product quality is a cornerstone of the business. It is shipped from the US by container to Venlo, via Rotterdam.

Venlo was originally the distribution centre for the Netherlands, Belgium and France and an extensive narrow aisle warehouse was already in use for all 24 markets in Europe. An adjacent building was purchased and a new fulfilment centre built. All the planning and selection of the handling systems was undertaken at Amway’s US headquarters, where engineers have gained high levels of expertise in designing such systems and – with worldwide Amway expansion – distribution has become an area of in-house expertise.

The facility at Venlo comprises two distinct parts. Firstly, the original narrow aisle warehouse where all pallets of incoming goods are stored. Goods from here are picked for the 11 markets where fulfilment is conducted away from Venlo, and for the 13 markets where fulfilment is performed at Venlo. All stock at this point is owned by the parent company, which plans every detail – even the pallet locations at Venlo are controlled by Amway’s own warehouse management system (WMS).

The second element at Venlo is the fulfilment facility for the 13 markets. About two years ago, Amway installed a new order fulfilment system in Venlo, with Knapp Logistik Automation selected as the main contractor for the complex order picking system. The Knapp system comprises some 1,455m of intelligent conveyor, including 312 drives and 742 accumulation stops.

Volumetric software calculates which of three standard carton sizes the order will be shipped in. Three fully automatic carton erectors feed the three standard carton sizes – complete with packing lists and invoices – to the picking lines while there is a tote feed station for the e-commerce lines. There are ten manual picking stations where Knapp’s own ‘KiSoft’ pick-by-light technology ensures error-free picking.

One of Knapp’s fully automatic SDA 2000 ‘A-Frame’ order picking machines fulfils the fast-moving lines. Small direct orders, known as ‘e-commerce’ orders, are grouped together and picked into totes. These totes are emptied at a special ‘e-commerce’ station, with each item being scanned. The system automatically shows, by an indicator light, in which position on a special shelving system the item must be placed.

This part of the solution can be likened to ‘put-to-light’ – effectively, pick-by-light in reverse. Each location on the shelving system represents a separate customer order slot, and another operator retrieves all the items for the order from the other side of the shelving unit when a further pick-by-light indicator light on that side notifies that the order is complete.

Software integration

Carton orders are directed as required to the designated picking stations and, in addition, the system can accommodate full cartons that bypass the picking loops in the system, going directly to despatch. Completed orders pass through a quality control station where their weight is checked. If there is any discrepancy between the predicted weight of the order and its actual weight, the carton is diverted into the quality control station for manual checking.

Completed cartons are then filled with environmentally-friendly dunnage pellets made from corn, prior to being sealed and labelled. There are four palletising stations and five despatch ramps, with goods being conveyed directly into the back of waiting delivery vehicles.

Due to labelling standards and local national languages, many identical Amway products stored at Venlo become different SKUs. The labelling is all originally applied at the source manufacturing plant, which for Venlo is about four weeks upstream in the US. Venlo therefore has a small re-labelling facility to cater for changes in local regulations or to counter minor forecasting anomalies.

Shipping is conducted by various express carriers directly to the homes of the IBOs. The handling system is controlled by Knapp’s own KLASS-X software.

Frank Timmers, director of European logistics for Access Business Group International, comments: “Various software interfaces exist between Amway’s own WMS and the Knapp KLASS-X software, which runs the fulfilment operation. Every day between 8,000 and 10,000 orders are seamlessly Electronics