Stamping out inefficiency (2)

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About 90% of Hagemeyer’s trade is for next-day delivery.Beaumont explains: “We needed to implement a new enterprise management system, and we chose Movex. We created a national distribution centre at Runcorn which is a 330,000sq ft automated, high-bay facility with a Univeyor conveyor system.”

He says the plan is for that facility to be the NDC for all Hagemeyer’s businesses. The 8,370sq m (90,000sq ft) Warrington RDC is now the national return centre while the 25,110sq m (270,000sq ft) Dagenham facility is undergoing a change of use – it will become a “superhub” for the South-east for all of the business rather than being dedicated DC.

Newey & Eyre is being rolled out onto the hagemeyer’s Runcorn NDC.

The 30,690sq m centre is an automated, high-bay facility.

It features a Univeyor conveyor system.

The Movex enterprise management system is from Intentia.

SSI Schaefer supplied the racking

The material handling equipment is Jungheinrich.

The sorter is from Interroll Axmann.most of the hubs are the bigger branches, and creating regional distribution hubs. Beaumont explains: “We trunk out overnight from the Runcorn NDC – TNT Logistics is our trunking partner – which gives us the flexibility to have an efficient transport network for orders that we need to do ourselves. And there are certain circumstances and certain products that we can’s send third-party or with a parcels carrier – fluorescent lights, for instance, are very fragile and we do these up to 6m long.”

Hagemeyer has recently won a multimillion pound, two-year contract to supply the electricals for Heathrow Airport’s Terminal 5 and will handle the distribution in-house. “It’s a big one [contract]for us. The volume of the product going to a big site like that dictates that we should do it ourselves. Also, we’ve got some strong commercial service criteria that we have to match.”

Hagemeyer has contracts with a variety of organisations, including county councils and educational authorities, covering product that can be moved by third-party carriers and parcels companies. “As well as developing our own network which is much more efficient to service all Hagemeyer UK customers we then take out the easy work and we’ve contracted that out to UPS. Our aim is for about 35% of our volume to go via parcels and we’ve recently reached an agreement with UPS for that work,” says Beaumont.

TNT is also helping Hagemeyer to improve visibility concerning track and trace technology and proof of delivery (PoD). Hagemeyer has operated a PoD system in certain areas of the country and intends to roll that out throughout the UK by Christmas.

Reduced inventory

And Beaumont says Hagemeyer had been managing the stock records in every single branch for replenishment, and a key benefit from the new logistics model is that it can now move towards taking that stock out. Branches had been working on lead times of six, eight or ten weeks for product from suppliers to come in. “With the NDC, everything becomes a 24-hour lead time. Branches now only stock product for same-day or over-the-counter sales.

“A customer going to his local branch will still get the same service with an expanded range. The only difference they actually see is that when the vehicle turns up it’s got a Hagemeyer-branded employee in it. Customers still get a local service but they get it in a much more efficient way from the back end. From the front end people still see themselves as WF customers or Newey & Eyre customers, and that it important to us as the brand identities are pretty strong.”

With the integration changes that Hagemeyer has already put in place, the company reduced its inventory by about £10M last year and Beaumont says “the target this year is another £13M, which will bring us down to a total group inventory of between £70M and £75M”.

The £23M coming out of the inventory is a result of the integration and visibility that Hagemeyer now has, says Beaumont. “Two years ago, for example, our product availability at a branch was the direct result of how good the person was at managing that branch and product was. On average, we were working between 88% and 92% availability. Our Newey & Eyre line availability currently is 97.5% out of the NDC, and across the range it is most probably up 5 or 6 percentage points. And that kind of availability drives sales anyway because we have less records to manage and less people managing records. So if you keep stock back at the NDC, you keep stock down at the branches.”

Equally by profiling stock movement, Hagemeyer now knows what product lines are trading profitably for the business, and what is not. Under the old system, each branch managed about 7,000 product lines which they decided to stock. They now have got 35,000 lines available next-day from the Runcorn NDC.

The changes that Hagemeyer has made to its supply chain is already paying off in terms of improved efficiency, reduced inventory and the resulting cost savings but Beaumont says it targeted 28 projects to work on this year, “which is a big task”.

Some of the things that the company is looking at currently include factory gate pricing with a lot of its suppliers. Beaumont says: “That’s not in an aggressive way, but in a partnership way and with a shared benefit. We have a national transport network and we’re passing a lot of our suppliers everyday, and we had no supply chain integration with them, we just bought the product. Some of the things that the retailers are very good at in this industry we are probably about four or five years behind what they are doing.”

He says the first initiative being worked on is integrating collections and sharing benefits for both parties, which has been well received by Hagemeyer’s biggest suppliers. The company has 250 key suppliers, of which 10% have signed up.

Hagemeyer is also working with the suppliers to assess how much the NDC has saved in their supply chain ? previously they were picking for 300 branches and shipping to 300 branches.

Future challenges

Beaumont says a lot of the company’s electrical product is sourced and manufactured in the Far East. It has started an initiative with Exel Consolidation Services in China, and it has three key customers which were buying ex-factory in China. “Because we’re a high SKU business our highest cost in the distribution centre is identifying when it will receive potentially a full pallet with approximately 600 products. We’re trying to take that complexity out by putting our systems in the Far East with Exel, and doing the sortation and getting all of that work done in there so that when we receive in the UK it’s a much easier process. It’s also cheaper for us to buy there.”

Hagemeyer has a supplier matrix which has about seven or eight key things on which it wants each of them to “come to the party with”, including backhauling and pinpoint deliveries as well as looking at order multiples and reducing inventory in the NDC where it knows it can rely on supply within a certain amount of time.

The company is also looking at how often its orders and what quantities it orders that match both the suppliers’ picking amounts and its storage quantities.

Beaumont says the plan next year is to move to cross-dock some orders of the slower moving products over to suppliers that are close by. “One of our big suppliers, for example, is only nine miles up the road so we’re saying ‘do we really need six weeks stock of your product when you’re there?’ as we could get an EDI file to them at 5pm in the evening and they can get it to us by 8am.”

Also, once WF has moved on to “the front end” Hagemeyer will benefit from putting more scale into the network. “The network’s built to have scale and we are at 20% of its capability now and by the end of this year maybe we’ll be up to 50-60%, and when WF comes on it will give us those economies of scale to drive down the amount of product in the system and improve the service,” says Beaumont. nhub network now and Beaumont expects Parker later this year and WF in 2005.

Next year will also see Hagemeyer relocating from the existing facility at Dagenham to a new purpose-built 11,160sq m centre four miles away.

According to Beaumont, there are clear synergies from driving stock out by having a national distribution centre, and “driving cost down by single stocking for all of our products”. Hagemeyer has had to integrate its systems in order to achieve that.

Prior to these changes and the way the brands operated, Hagemeyer had no integration, no visibility and no comfort zone. “We had a very inefficient way of servicing our customers. You’d go on a branch visit to Scotland and see van with Newey & Eyre Birmingham driving past you,” says Beaumont.

Flexible network

Having a single stocking point was the reason for creating the national distribution centre. All the brands are moved into the single stocking point at Runcorn. At the moment it has 35-36,000 and by the end of 2004 it will have 55,000 products available, and by the end of 2005 that will rise to 100,000 products. Beaumont comments: “That’s key for us because no-one in our market place has centralised distribution in the same way. We are the only company in the UK that would offer that sort of range and product on a next-day basis.”

One of Hagemeyer’s branches can have 1,500 SKUs, if it is a very small site, that can be bought over the counter while a very large branch could have 7,000-8,000 and that continues within the business today. About 90% of Hagemeyer’s business is next-day trade.

Beaumont acknowledges that Hagemeyer’s competitors would say they are more flexible because they have branch networks, they have vehicles at every branch and they will drive 100 miles to get product to them. However, he stresses that Hagemeyer can maintain flexibility with a NDC having developed a service offering a range of products guaranteed next-day delivered by 2pm.

He adds: “We can profile what customers want to buy on a same-day basis. From our history, we know what our emergency surges are. We’ve profiled those same-day lines and we have created a hub network – 13 hubs and some outbases – that covers the whole of the UK.

“That gives use two things. It gives us the flexibility to say to our customers ‘we can give you the same same-day service that any of our competitors can give you’. On top of that, those hubs are as big as any of our competitors’ branches so locally we retain the choice and flexibility of service.”

Customers that order before 10am will receive delivery before 2pm and if they order before 2pm then delivery will be before the end of the business day.

This, says Beaumont, gives Hagemeyer a single logistics backbone that is much more efficient than the way we used to service our customers.

To help improve visibility and ascertain where the demand is when delivering to customers, Hagemeyer is moving its van fleet away from the individual branches, although Part of pharmaceuticals and consumer health group Novartis, CIBA Vision specialises in the research, development and manufacture of optical and ophthalmic products, namely contact lenses and lens care products – Focus and Freshlook are its two main brands of lenses. In Germany, CIBA Vision has two manufacturing facilities at Grosswallstadt, near Frankfurt, and Grossostheim.

Grosswallstadt is also the home of CIBA Vision’s European logistics centre – Eurologistics – from where it ships thousands of contact lens and lens care product orders to customers in Europe within 24 hours. The centre serves more than 50,000 specialised opticians, ophthalmologists and clinics in 15 European countries, delivering more than 17,000 orders on an average day. Supplies are received from the two German manufacturing facilities as well as CIBA Vision’s production plants in Atlanta in the US and Batam Island in Indonesia.

The Eurologistics centre operates two systems for compiling orders – the majority are compiled entirely automatically while the remainder are picked by hand. Automation at the centre has mainly been supplied by Interroll Axmann.

Orders are received from larger countries every five minutes while those from smaller countries arrive every 15 minutes. As a result, the centre operates a flexible working time of 33 hours. If more orders are received in a day than is the norm, the staff of 180 will continue working to fulfil those orders.

overcoming space constraintsThe Belt Curve+ is the latest offering from Interroll Axmann Automation where a conveyor line needs to change direction in a tight space. Interroll says that a key feature of the new belt curve is a positive head-drive which guarantees reliable transport at a maximum speed of 2.5m per second.

The overall height from the upper track to the frame has been minimised from the previous 250mm to 160mm making the Belt Curve+ ideal for complex conveyor layouts or time-sensitive applications such as airport baggage handling or parcels hubs. The belt also has smaller diameter (40mm) end rollers to give reliable transport of the smallest goods. The rollers are also cylindrical in design rather than conical.

The drive with its positive connection between the driving toothed wheel and the interlocking teeth enables it to overcome traditional space constraints. The belt drive offers additional stability, delivering better operational safety and reduced maintenance costs.

The belt is kept on kept on track by spring-loaded castors fitted inside the upper section of the outer radius side frame.

Apart from the spring steel profile which integrates the belt drive and enables high loading of up to 250kg total weight on the curve, another significant improvement is the sealing of the gap between the lateral guide and the belt.

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