Achieving healthy growth in the highly competitive electrical, HWS (heating water sanitary) and ventilation wholesale sectors is a challenge that requires a creative business strategy, operational efficiency and a supply chain clearly geared to the needs of the customer – electrical and heating contractors.
One company serving the north European market has experienced organic growth of 17 per cent in 2006 and has a target of an annual average organic growth of 6-8 per cent for the period up to 2010. Solar, a Danish wholesaler based in Jutland with credentials stretching back to 1919, has placed the supply chain at the centre of its strategy for growth and has, since 2003, invested over €10 million in automating key warehouse operations.
The core strategic principle that underscores the company’s highly competitive service offering is its commitment to overnight delivery to the customer. ”Our aim is to take orders up to 6pm and deliver before 7am, where the geography allows it”, says Lars Goth, corporate supply chain director for Solar. But fast delivery is not the only consideration, consistently accurate order fulfilment is essential in meeting the expectations of electrical and heating contractors who are committed to hitting their own demanding deadlines. By offering a fast and efficient operation Solar’s customers are able to carry less stock.
Headquartered in Kolding, Jutland, Solar is a € 1.3 billion turnover company that has its origins in the electrical wholesaling sector – purchasing companies in markets across northern Europe, with businesses in: Sweden, Germany, Poland, Denmark, Norway, Finland and the Netherlands – and has recently diversified into Heating Water Sanitary (HWS) and ventilation markets since 2005 with the acquisition of Sanicentra Group in the Netherlands and Alvesta in Sweden. ”We could see a merging of these two sectors and we wanted to offer a one-stop-shop for these technical areas”, explains Goth.
In total the company has ten central warehouses serving 129 branches across Europe. But the business model was developed in Denmark and then replicated across its geographic markets.
Potential for expansion
Solar has 16 branches in Denmark served by a 40,000 sq m central warehouse in Vejen. The site was established in 1985 but has undergone a series of enlargements and updates over the years, and being placed on a site of 230,000 sq m, has plenty of potential for further expansion. Since 1988 distribution has been centralised at Vejen, the idea being to make larger central purchasing decisions. ”We had 10,000 skus in the branches, but when we moved to a central warehouse we went to just 2,500 skus. By adopting a night distribution system we were able to drastically reduce the stock in the branches”, says Goth. Suppliers used to deliver directly to the branches but now with centralised control over purchasing, suppliers deliver to the central warehouse, ”This was good news for suppliers as the number of deliveries was reduced which enabled us to get more competitive setup and conditions”, adds Goth.
The Danish subsidiary, Solar Danmark, uses The Solar Drive-in Catalogue – with its 2500 skus that are common to all branches – to standardise fast moving products across the outlets. These stocks are automatically replenished once a day. ”We scan the branches twice a day, am and pm, and deliver overnight,” explains Finn Kristensen, Solar’s Logistics Manager. Every item sold in the branches is logged on the ERP system.
But over 95 per cent of goods shipped from the central warehouse go direct to the customer. ”In our ERP system we have 120,000 skus of which 50,000 are held in the central warehouse”, says Kristensen. ”Non stocked items are purchased and coordinated centrally and handled together with the stocked items”.
Apart from Solar’s network of branches, the company has in Denmark, since 1987, offered a service of taking telphone orders and since 1998 direct orders can be placed via its website. This side of the business is booming and now accounts for over 55 per cent of the company’s trade. ”When our branches close at 4pm customers can still order up to 6pm on the web for a 7am next-day delivery,” says Kristensen.
”We have a very high level of delivering the right item at the right time to the right spot”, maintains Goth. And for fast moving items a next day delivery rate of 99 per cent is achieved. Considering fast moving items account for 80 per cent of the throughput, that is a reasonable achievement.
High service offering
Efficiency within the Vejen warehouse is vital to achieving the high service offering of Solar. ”We are doing a lot of work to optimise all our handling operations, using vendor managed inventory with suppliers and scaling up automation,” says Kristensen. A particular focus has been the small goods area, which is responsible for 70 per cent of the daily picks and it was here that the company recently invested in a new, highly sophisticated, automated picking system installed by automated systems company, Univeyor. The capacity of the resulting system is 25,000 picked order lines within a five hour window (3pm to 8pm) – a target achieved by changing from a ”man to goods” to a ”goods to man” operation.
”We have the same number of staff, but have improved productivity by 50 per cent with much less errors,” emphasises Goth, jokingly adding, ”women can do the picking with no errors now, which means men only make a few mistakes.”
At the heart of the operation lies a ”goods to man” picking system comprising three interlinked processes geared to the volume and size of goods handled. For ”slow movers” a fully automated Univeyor mini-load crane system, set over four aisles, retrieves totes for delivery to four picking stations; faster moving items are allocated to a flow-rack area equipped with pick-to-light technology; and ”small items” are designated to 12 automated Logimat paternoster storage cabinets. Pick-to-light is used extensively across all the areas and totes are moved between picking zones by conveyor under the full control of the warehouse management system.
Larger bulk goods are stored in the high bay store, which is a conventional racked operation consisting of 19 aisles, up to seven levels high, and serviced by a mixed fleet of seven Yale and BT order picking trucks. Most of the goods from this area go direct to the dispatch area.
Incoming goods destined for the ”small items” picking area are broken down into plastic totes, used on the internal system. Dividers allow a tote to be split into eight slots, but in most instances only four slots are used. Twelve input stations are employed to input totes into the automated ”small items” picking operation, and it is here that information relating to the tote’s content are uploaded onto the system.
In the mini-load area four fully automated double deep cranes retrieve goods from the 32,000 tote storage capacity system, operating over four aisles 75m long and 6m high. Totes are routed to four picking stations where the picking operative is surrounded by ten totes to pick to. Totes from the mini-load arrive in front of the picker and the operative picks from the tote in accordance to on-screen instructions, placing the item to a tote as indicated schematically. Pick-to-light technology is also used here to indicate the tote to pick to. When items have been picked from a tote, the next tote moves forward and so forth, until the order totes are complete and so ready for packing and dispatch, or are ready for the next picking zone. The pick-to-light panel in front of the order tote indicates when an order is ready to move on. The tote is then pushed onto a take-away conveyor and taken to its next destination automatically and as instructed by the Unicontrol warehouse management computer system.
Partially completed orders arriving at the flow-rack area arrive in front of a picker. Each picking station along the four picking lines is six metres (20 stations in total). A pick-to-light system indicates the number of items to pick from a location (on-screen instructions are also given) and a flashing light indicates when a job is done. A button is pressed by the picking operative and the tote is pushed back to a take-away conveyor. This area is designed for faster moving items, with bulk positions behind the picker being allocated to the fastest moving items. Replenishment of the flow racks is managed by the Unicontrol system.
In the vertical lift area which is used for small items that are medium fast movers, 12 vertical lifts offering a total of 30,000 locations are deployed – one operative normally taking care of three machines. These machines are integrated into the automated picking system by the conveyor system. Totes arrive, as designated by the Unicontrol system, and items are picked to totes as indicated on screen and highlighted by pick-to-light technology. The shelves of the carousels automatically rotate to present the picker with the required tote and is highlighted in sequence to picking instructions. Completed orders are pushed to a take-away conveyor. If the weight or quantity for an order is too large, then the system will automatically allocate two totes or more.
All completed orders are eventually routed to the packaging area, where there are 12 packaging stations. All totes entering the packing zone are weight checked for verification of the order before moving to a packing station.
The packing operative takes items from a tote, confirms and packs into cardboard cartons (four sizes), plastic bags or Jiffy bags. The carton or bag is labelled, delivery note dropped in and the package sealed and placed onto a take-away conveyor where it is routed to the despatch area.
In the despatch area an Interoll cross-belt sorter system, integrated by Univeyor, sorts the packages and cartons across 27 spurs as determined by the Unicontrol system. All items are bar-code scanned before loading into a vehicle.
Some 72 routes are serviced every night with an average of 30 drops per route. The driver often has to let himself into restricted areas such as building sites – de-activating burglar alarms in some instances – and scans packages to drop points for proof of delivery.
Solar has successfully adapted to the needs of the market and has made service the cornerstone of its business strategy, investing in the very latest automated materials handling technology to fulfil its demanding overnight service offering. The company has now taken this model and refined it further in a green-field project in Halmstad, Sweden.
Lars Goth, Corporate Supply Chain Director, Solar
We had 10,000 skus in the branches, but when we moved to a central warehouse we went to just 2,500 skus. Using a night distribution system we drastically reduced the stock in the branches.
Finn Kristensen, Logistics Manager, Solar
When our branches close at 4pm customers can still order up to 6pm on the web for a 7am next-day delivery.