Beyond the margins

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Charged with the task of improving the company’s competitive position, Patrick Cescau, Unilever’s chief executive, is concentrating on increasing margins by focusing on productivity to boost Unilever’s European Business.

A significant example of just how productivity has been improved upon in the UK supply chain can be seen at the recently opened National Distribution Centre for Unilever UK Foods at Cannock, Staffordshire. The site – which stores and distributes all of Unilever’s ambient food brands, including PG Tips, Pot Noodle, Knorr, Hellmann’s, Colmans, Marmite, Bovril, Chicken Tonight, Bertolli and Peperami – utilizes sophisticated automation technology to deliver productivity gains.

According to Unilever, the cost-per-palletmoved comparison between automation and manual operation of the site favours automation by between five and seven per cent – when considering the anticipated volume levels over the length of the contract. An attractive saving when over 758,000 pallets per annum are expected to be dispatched from Cannock, with more to follow.

The key strategic reasons for undertaking such an ambitious project revolve around Unilever’s aim for service improvement. Since Unilever’s acquisition of Bestfoods in 2001, the business had operated two parallel order streams to all retail customers. The project’s objective was to allow these streams to be merged, so customers could place a single order across the entire ambient range. The site also provides a facility that will be able to meet future customer service requirements by being able to grow and develop with the business. The pallet storage area can be expanded from its current 72,000 pallet locations to 110,000 as business volumes increase.

High degree of automation
The 40,000 sq m facility uses a high degree of automation with 12 automated storage and retrieval cranes, automated cross-docking, 24 automated marshalling lanes, paperless picking via radio data terminals and twinpallet loading and unloading to give a capacity of 164 pallets per hour in and 265 pallets per hour out. In total some 100,000 orders a year are handled at this impressive facility, offering a 24 hour or less order lead time capability.

DHL Exel Supply Chain designed, project managed the construction, and now operates the state-of-the-art site. Manned by over 200 local DHL employees, the site uses the very latest technology to store, pick, repack and despatch goods to stock around 2,000 stores nationwide. DHL led the design and selection process, working with its preferred suppliers and consulting closely with Unilver on the design approval over the 20 month build programme. Dematic supplied the automated materials handling systems. Interestingly, the facility is owned by a large UK finance institution with DHL sharing in some aspects of risk associated with the investment.

For anyone familiar with the rather delicate recent history of warehouse automation in the UK, the decision to invest in a major project of this nature could be considered bold. So, were the management nervous aboutinvesting in automated warehousing  technology in the light of Sainsbury’s experiences?

According to Richard Jones, company distribution manager, Unilever UK Foods, ‘There is always risk in starting up a site of the size and complexity of Cannock, but one of the reasons that Unilever chose DHL was their record at our sites at Coles Hill (Frozen Food) and Doncaster (Personal Care) which gave great confidence.’ DHL Exel Supply Chain’s md for consumer products, Dan McNutt, concurs, ‘The automation in use at the site is well proven and similar in nature to that used at two other Unilever facilities in the UK over the last seven years with great success.’

Overall, automation appears to have been selected due to its long term cost advantages, speed of response, and advantages in terms of quality both for accuracy as well as a reduction in the level of damage to goods. ‘It also provides a platform that enables data to be captured at more detailed levels which in turn provides an information advantage in running the business. A manual operation was considered but couldn’t compete with the cost, quality, and speed of response for the automated solution,’ commented McNutt.

Product is sourced from manufacturing locations the UK and Europe, and is delivered to customer locations, which for the major retail customers tend to be their RDC networks – this is done directly from Cannock. For smaller customers distribution is via a network of regional consolidators who receive orders from Cannock, and build loads with volume from other clients and deliver on Unilever’s behalf.

Critical functions
The main functions of the facility are to manage UK factory clearance, receive and store finished goods from the manufacturing facilities, manage stock reconciliation between the site WMS and Client Host systems, receive and process orders (combination of full pallets and picking), marshall and load orders, deliver to Trade Customers (direct and via out-bases), receive and process returns and undertake contract packing/repacking operations.

A particularly important activity is the copacking operation. As John Pattullo, chief operating officer, DHL Exel Supply Chain, EMEA, emphasised at the opening of the NDC, ‘…Our co-packing facility, operated by DHL, also means that we can prepare specialist store promotions of particular products. This is key to remaining ahead of the game in an increasingly complex and competitive consumer food market.’

Industry estimates suggest that in the UK alone, the co-packing market is worth around e1.2 billion each year. Food manufacturers are increasingly turning to logistics providers to outsource packaging activities.

For this purpose a 2,601 sq m mezzanine floor has been incorporated into the design at Cannock. This is a flexible space, which will be used for repacking product to produce specific variants for individual customers, and to produce promotional packs. Merchandising units can also be assembled in this area, such as packing product onto wheeled dollies, which can be positioned in store.

This facility has been designed to enable stock stored in the high bay to be released directly to the co-packing area, thus reducing lead times and generating greater flexibility for Unilever in terms of fast response to customer orders/promotions.

Moving through the Cannock operation from the Goods In area – vehicles can be side and rear unloaded, with side unloading being more efficient. Pallets are taken to an automated conveyor system where they travel to an input station to be scanned and quality checked before being conveyed to the high bay store for placement in the racking by automated stacker cranes. Twelve automated storage and retrieval cranes operate in the 72,000 pallet location high bay store, raising goods to the full height of the 31m facility. With the Despatch/Replenishment operation, stock is retrieved from the high bay store by the Dematic cranes and is routed via the conveyor system to the designated despatch lanes or to the picking area (for orders requiring less than full pallet quantities).

Once pallets arrive at the picking area they are put into storage or pick faces by man operated trucks. Order picking is undertaken by operators under instruction from the warehouse management system using radio data terminals and picking trucks. Completed pick pallets are put onto an automated conveyor system, which transports the pallets to the designated despatch lanes ready for loading by lift truck onto the appropriate lorry.

All activities are managed by the Warehouse Management System (WMS) on a ‘gate-to-gate’ basis.

Delivering the highest levels of customer service is quite clearly a priority for Unilever, and the Cannock site is regarded as a key part of the strategy. ‘Order accuracy and timeliness, stock availability, order lead times and product quality are the drivers for service, and the site is focussed on delivering world class service in all these areas,’ states Jones.

McNutt adds, ‘Competitive advantage is delivered through long term cost advantages, speed of response, and advantages in terms of quality both for stock accuracy as well as a reduction in the level of damage. The stateof- the-art WMS and IT systems facilitate the achievement of best-in-class service levels.’

‘We are extremely pleased with the start up of the site,’ says Jones. ‘The cost and service objectives established for the period have been met. Our priority at the moment is to consolidate the excellent start up. The site has expansion capability, so it can grow with the business.’

‘The facility has met all planned volume and activity levels at the high standards and service levels committed to,’ confirms DHL’s McNutt. ‘The facility operated in excess of its year one goods-in activity levels during the volume ramp-up phase and the design incorporates the ability to meet increased future throughput by adding additional cranes in the high bay, in two phases.

‘Storage can also be increased through a two phase approach, firstly from 72,000 pallets to 90,000 pallets and then up to 110,000 pallets. Phase two would require the construction of an additional chamber to the side of the high bay.’

‘As FMCG companies come under increasing pressure to satisfy the growing demands of our customers, management of the supporting supply chain has assumed new significance. Our logistics partner DHL Exel Supply Chain has designed the state-ofthe- art NDC at Cannock to meet Unilever’s needs both now and in the future – ensuring that we have the flexibility to respond to rapidly changing market places in a timely manner,’ concludes Richard Jones.

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