In this strange high-tech world that we live in, where a ‘Furby’ – the ‘must have’ children’s toy of a couple of Christmases ago – has more computing power than the lunar landing module used on the Apollo 11 mission, we have developed high expectations of the electronics industry and are, perhaps now, a little desensitised as to the high risk dynamics of this futuristic sector. We have grown used to the exponential rise of processing speeds and the storage capacity of microchips, yet we expect their size to decrease, along with their price.
There is a sense that new ground is being broken every day, that boundaries are being pushed back and that technology is moving in leaps and bounds. That sense of excitement and of looking at new ways of doing things extends too to the supply chain.
A prime example of this forward thinking iconoclastic logic can be found in the new European Advanced Logistics Centre for electronics distributor, Eurodis Electron, located in the small border town of Haaksbergen in The Netherlands. Here, Lex de Wijn, general manager ALC of Eurodis Electron, has torn-up the general template used by rival firms in the sector and has set about building a highly automated facility designed with flexibility and capacity for future growth very much in mind. After spending nearly two years in planning and visiting sites throughout the world he has created a ‘goods-toman’ system that decouples storing and picking activities, freeing the picking staff to become more productive.
Working closely with prime contractor on the distribution centre, Viastore Systems, and with ERP vendors, Strategix, on redesigning sales order processing in the group, de Wijn has successfully transformed Eurodis Electron’s supply chain. Inventory holdings have been reduced by two thirds, availability has improved significantly, obsolescence has diminished and the error rate is now just 0.1 per cent of the old operation.
De Wijn admits, ‘What we were very good at was making things very complex, so we decided to make things very simple. We believe we can gain market share by doing things simply, but well. Essentially, we want to be best in class in service quality.’
Eurodis Electron operates in a demanding and difficult market supplying components to contract manufacturers, as well makers of washing machines, mobile phones and circuit boards – in total some 50,000 customers across Europe (although, as with most businesses they concentrate on the top 20 per cent). Surprisingly, the company does not look towards the PC market for its custom as components for this market are ‘such low margin items’.
Broadly speaking, says de Wijn, the electronics components market breaks down into: computing 25 per cent, telecoms 25 per cent and other industrial applications 50 per cent. And it is in the latter two areas where Eurodis Electron concentrates its activities. ‘It’s here where the margins are higher and where the company can best add value, as with over half the products we sell we have been involved in the design of the component,’ he points out.
The company offers 500,000 different products, holding 50,000 of those product lines in stock. The vast majority of items being shipped are tiny and number a staggering 15 million components a day, on average.
‘A single component can be used in so many different applications. A typical order can be worth $500 and may consist of five components or in other instances 5000 components. The value of components vary widely too and can be worth anything from less than a cent up to $5000,’ explains de Wijn.
An eclectic network
As a result of aquisitions over the years Eurodis – which is headquartered in Surrey in the UK – had an eclectic network of eight warehouses serving the European market, each national operation acting as an autonomous unit with its own IT and distribution facilities. Five years ago a Strategix ERP system was deployed to unify IT across the enterprise. The second step was to integrate purchasing and to franchise it across a number of offices. De Wijn points to an example, ‘we do all the purchasing for Philips products for the whole group from here.’
By replacing the network of eight warehouses with a central distribution facility for the whole of Europe stock availability improved significantly, whilst reducing stock holdings and stock obsolescence. ‘Our productivity is now about 150 per cent higher than before,’ he says. ‘The decision to centralise inventory was taken three or four years ago. A major point being that we wanted to reduce our risks for insurance purposes – in fact,’ he laughs, ‘if we hadn’t built this facility we wouldn’t have been insured any more.’
Inventory value on site is $95m, which might account for their preoccupation with security and insurance issues. ‘We expected the facility to hold a lot more when we planned it, but as everyone knows, the market has been very tough. It is only 50 per cent full with the facilities we have in place, but without any problem we would be able to triple our turnover by expanding within the building.’
There are huge upturns and down turns in this sector. Highlighting this volatility, de Wijn explains: ‘Two years ago, in 2000, we experienced 43 per cent growth for the company but, then we went down by 20 per cent the following year’.
‘In this industry it’s not the amount of components we sell but the prices change so much. It swings between over capacity and high demand – at the moment demand and capacity are starting to come into line again.’
Operating in such a market demands great flexibility and a steady nerve. The total investment for the project was $30m with $10m being spent on the 14,000 sq m building and $20m on the materials handling equipment and IT systems. ‘We planned to get a return on investment in three to four years, but due to the lower volumes today we expect the ROI to be longer – but things can change very quickly,’ says de Wijn. ‘We expect the market to move ahead once again at an average annual growth rate of 15-20 per cent.’
The facility itself is based around a fully automated tote system, consisting a 16 aisle mini-load storage silo delivering goods-to-man via an intelligent conveyor system. But the heart of the operation, and perhaps, one of the cleverest aspects of the concept is the use of fifteen vertical sequencers to serve the 30 pick/pack stations. Here the system demonstrates its inherent flexibility – the computer controlled allocation of orders to pick/pack stations can be altered according to needs using the sequencers to balance demand against resources and enabling stations to be opened or closed as required or as staff changes. This is important as the distribution centre is run on a rolling shift basis.
Picked and packed orders are conveyed to the despatch area where they are labelled and sorted for delivery. Although a small volume of orders require products stored in a relatively small bulk pallet area (all racking throughout was supplied by Schaefer), over 95 per cent of goods passing through the system are processed by the automated tote system.
From start to finish
Running through the system. Goods arrive through four loading bays and are checked against despatch note before being loaded onto trolleys and moved to one of eight check-in desks. Here a member of staff clears the goods against the purchase order (using the Strategix system), generates a note giving the batch and product details and places it with the consignment. The trolleys are then pushed forward a short distance to one of eight input stations.
At an input station a standard tote (700 x 400 x 320mm) has its bar code scanned. The Viadat warehouse management system, developed and supplied by Viastore Systems, associates the tote with the scanned incoming batch code and the item is placed into the tote along with a label sheet printed out at the input station.
As batch sizes vary greatly, totes can be divided in half or into quarters using metal dividers, and are selected accordingly by the operative at the input station from one of the three roller conveyor buffer lines at the station. Once a tote is ready it is introduced to the intelligent conveyor system – supplied by Vanderlande Industries as subcontractor of Viastore. At this point the product is available for picking and may proceed directly to the picking area, be stored in a 200 location mini-load rack located between the input stations and the picking area (for fast replenishment), or may be transported to the main mini-load storage silo. It is quite possible for items to pass through the system to despatch in just over half an hour, indeed, 30 per cent of throughput is in effect cross-docked in this fashion.
Five per cent of goods are ‘exceptional items’ and are moved to a zone picking area directly. Or if the goods are palletised, a forklift truck driver is instructed by radio data terminal to place it in a designated rack position.
Interestingly, waste fibreboard cartons are conveyed away to a crusher on a separate belt conveyor running next to the input station. When the skip is full it phones the waste contractor automatically! This was an innovation that caught the attention of Wijn on his travels.
Moving back to the automated system, totes are transported to the nine metre high Viastore mini-load silo by the conveyor system and are directed onto a loop travelling over two levels – totes being diverted to their designated aisle ready for pickup by the dedicated mini-load crane. Each of the 16 aisles of racking can hold 6500 totes and each crane can move 100 totes in and 100 out in an hour – operating in an X direction at 4m per second and accelerating at an impressive 3m per sec sq. De Wijn admits this is an enormous over capacity but he believes, ‘the people have to be the bottle neck and not the installation.’
Totes leaving the mini-load silo are called off in accordance to picking instructions generated by the Viadat warehouse management system. These totes are transported to one of the 15 vertical sequencing towers (a mini-load crane with 20 tote locations on either side).
Each sequencer provides two order pickers with a continuous flow of work and when a picker finishes for the day the system redirects orders from the sequencer to another – this offers tremendous flexibility.
By bringing goods-to-man the picker is very productive and as they are responsible for picking and packing of the order, quality issues are easily addressed and traced to the individual so that they are able to improve their performance.
At the picking station tote boxes bringing the items are automatically tilted towards the picker. The picker scans the label in the tote, scans the label for the carton, picks the required item and quantity, as instructed by computer screen, and Oks the order. A dispatch note is printed and placed with the goods in the cardboard carton along with an airbag for cushioning the components. This is another novelty of the operation as Eurodis worked with Sealed Air on developing a new system that automatically inflates the air bag once the carton is sealed at the despatch area. The bag is inflated through the introduction of a needle which punctures the side of the carton.
Off to despatch
Cartons leaving the picking and packing area move away by conveyor and are taken to despatch. Some may be directed to a ‘shelf picked item’ area where further items are added to the order and 10 per cent of all goods go via a quality control area.
Finally, the cartons move onto the final leg of their journey through the distribution centre by passing through the automated carton sealer and Sealed Air bag inflation device. They are then scanned prior to moving onto a weight station where the dimensions of a carton are measured and an address label printed and applied to the carton. Once again, this is another first – as Eurodis has a strategic supplier relationship with Deutsche Post (the first customer to use all their services in a combined package) specific address labelling software was developed with Deutsche Post to work with their systems and to facilitate a smooth flow of goods through their operations.
From leaving the labeller cartons move onto a Vanderlande Industries ‘Distrisorter’ where they are sorted onto 30 lanes of roller conveyor in accordance to despatch instructions given by the Viadat warehouse management system. Finally, cartons are scanned to write off the inventory and loaded into cages ready for despatch that day, or if picked for advanced orders, placed in cages ready for the following day.
All cut off times are after 4.30pm, with the majority it is after 5.30pm. Many can still place orders up to 5.30pm for next day delivery – the last pick-up being 8pm.
On the IT front Strategix has been working with Eurodis to introduce the Strategix logistics solution to support centralised purchasing, which since the beginning of 2003 is now almost entirely based in a single Eurodis company. In addition this system has been integrated with the warehouse management system, Viadat, in both directions in real-time, ensuring immediate availability of information in both systems and with seamless operation.
Essential to the smooth running of the whole transition was the planning phase which lasted 18 months. This exhaustive process explored the possibilities of eight separate degrees of automation. The path chosen was for the most highly automated option. Implementation took just 13 months and came in on time, to within two per cent of budget.
Eurodis is quite clearly, and deservedly, proud of its new logistics centre, as a statement by Martin George, VP operations at the company indicates: ‘The Advanced Logistics Centre is a clear signal to the market of Eurodis’s business ambition and our passion for customer service and quality. The Centre is the corner stone of our operations strategy and gives us a huge step function improvement in capability.’
Now fully operational since July 2002 Eurodis Electron’s European Advanced Logistics Centre demonstrates the extent to which flexibility can be planned and built into an automated facility – breaking new ground in operational efficiency and paving the way for further growth of the company.
Lex de Wijn would do well in putting this newly transformed supply chain forward for The European Supply Chain Excellence Awards 2003. It could well be a winner.