Turning Inventory Into Profits

In years past, the status of inventory levels was usually known only at the beginning of the first shift-and only if there had been a batch update the previous night. "The only time companies really knew the accuracy of their inventory levels was first thing in the morning," says Dan Trew, vice president, product strategy, Catalyst International Inc., Milwaukee, and Wisc.

But advancements in wireless technologies have given companies the ability to capture inventory information in real time.

At Owings Mills, Md.-based Sweetheart Cup Co., operators use hand-held scanners as they navigate through distribution centers larger than 1 million square feet and then monitor that data on more than 3,000 stock-keeping units (SKUs) of disposal cups, plates, plastic cutlery through terminals mounted on the forklifts they drive.

Since the data is updated in real time, there is virtually no chance that operators will arrive at a warehouse location and not find the needed inventory. "What we show as being in inventory is actually in inventory," says Charles Blevins, director of operations systems management.

Similarly, $5.3 billion Dollar General Corp., Goodlettsville, Tenn., with more than 5,700 retail stores in 27 Southeast and Midwest states, has transformed pencil-and-paper collection for the approximately 3,500 products each store stocks into a paperless, integrated approach that tracks each pallet, each carton and each individual piece of merchandise at each stop on its journey.

There are other advantages and efficiencies that companies can realize from using wireless technologies in its distribution centers and warehouses:

• It can eliminate mandatory cycle counts since inventory is updated in real time when inventory enters and leaves the warehouse.
• It can eliminate waste and redundancy in tasks, allowing companies to reassign personnel to more value-added responsibilities.
• Wireless can improve a company's distribution system and allow for efficient growth capacity for expansion

"I know companies that have paid off their [wireless] systems in one inventory count," says Michael Leone, regional systems consultant, Intermec Technologies Corp. "Wireless can make inventory tracking an error-free process."

But don't expect to just purchase a wireless technology solution and have it automatically work. You must address questions integral to your business for it to succeed and know what problem you want that technology to solve. The challenge for Dollar General was that its distribution system had been stretched beyond its capacity a few years ago. So company executives wanted to move to a new technological level that would permit more efficient capacity growth Indeed, that was its strategic motivation. Dollar General's strategy is that no retail store be more than 200 to 250 miles from a distribution center. So with plans to open around 600 stores each year, that created the need to increase the number of distribution centers and automate them to reduce handling and distribution costs.

Sweetheart Cup's business motivation was to reduce the amount of time spent on finding and picking from inventory of the low-margin, cost-competitive, single-use disposable products it makes for the food and beverage service industries. "The time wasted on finding and picking products was enormous. We needed to make efficiency of the utmost importance," says Blevins.

Before Sweetheart switched to an enterprise resource planning (ERP) system and wireless warehouse management system in the mid-1990s, explains Blevins, forklift operators would have to print out an order pick list, which could be as high as 80 items, and each item could be in one of five locations. Operators routed themselves through the warehouse. And, as is typical with most batch and paper-based systems, an operator many times would get to a location where the system indicated inventory was supposed to be only to find that someone else picked that inventory.

Today, each product is scanned into the system as it enters a Sweetheart warehouse, making it immediately available for shipment-and the receipt that comes with the product can also act as the outbound order form.

"Instead of being directed to put the product in the warehouse, we can directly put it on an outbound truck," asserts Blevins. "We want to get our inventory out to the customers as fast as possible. That's less money in the warehouse and more revenue being generated for the company."

In the new system, operators are routed through the warehouse by the warehouse management system, which reserves for them the quantities of inventory they need. The wireless approach also allows real-time collection of inventory, inventory location, inventory picking, and shipping and receiving data. That instant knowledge of status of inventory has created a cost-effective system that helps Sweetheart get product to the customers faster.

The shipping window has been reduced from two days to one day. Cycle times have been reduced, shipping accuracy has improved and the company has faster access to its data.

All that has made for a better relationship with customers, says Blevins. "We don't miss an opportunity to make a shipment. We can get products out to our customers quicker. That's good for business." Similarly, Dollar General is able to process approximately 200,000 cartons per day in its seven fully automated distribution centers.

The paperless aspect of Dollar General's system begins before any product even enters a distribution center. Purchased orders are generated at the company's Goodlettsville, Tenn., headquarters and downloaded into the warehouse management system, which generates bar-coded license plates. Trucks are unloaded and cartons are scanned to check their dimensions before they are moved to pallets, each of which receives a license plate.

At that point, everything goes wireless and paperless, and each pallet, carton or piece is tracked via its scanning code at each stop on its journey. The warehouse management system and mobile computers direct the forklift operators where to deposit each carton. As the operator scans the pallet or carton with a mobile computer, inventory is automatically updated. Up to 400 simultaneous wireless sessions can run on the system at a given time.

To prepare outbound shipments to stores, orders are downloaded daily from the host computer in Goodlettsville. Items are picked the day the order is received and are handled on a batch basis. That enables Dollar General to put together pallets on a geographic basis to make the delivery process more efficient. The warehouse

management system verifies that the inventory is in the warehouse, correlates the inventory or attaches the inventory to the order. At the same time, it produces the work orders to replenish items picked for delivery, and generates labels for the outbound cartons. Reports can be generated on virtually any aspect of an operation at any time. The flexibility of an integrated wireless system can allow a company to manage resources to handle the occasional peaks and valleys associated with warehouse inventory.

The net effect for Dollar General? Improved accuracy, efficiency and productivity. It's also enabled the retail store chain to better manage both the use of its equipment as well as its people, and given them a tool to measure performance.

Or, as Vertex Interactive's Scipioni adds. "If a company isn't doing it’s shipping and receiving in wireless, it's missing the point. That company isn't getting the accuracy it can have. The warehouse won't run as efficiently as it could."

Dollar General's wireless warehouse system Dollar General's solution includes an IBM Corp. computer, a Catalyst International Inc. warehouse management system and an Intermec Technologies Corp. wireless network backbone and hand-held wireless computers with integrated scanning.

The company's seven distribution centers have fully integrated and automated warehouse and ship sorting systems that handle every step of the process, including inventory (receiving, putaway and order processing), order selection, allocation, picking and loading/shipping functions.

All Dollar General distribution centers use IBM RS-6000 servers as the host computer and utilize the AIX operating system. The Catalyst warehouse management system software supplies modules for resource and inventory management, order selection, automatic picking, inventory allocation and loading and shipping.

An Intermec 900MHz spread spectrum system hosted on the RS-6000 supports more than 50 model 6710 and model 2100 remote transceivers and access points. A mix of more than 200 Intermec mobile computers, including models RT 6400, RT 5900 and RT 1700, are used for wireless scanning, collecting and transmitting data to the host. The RT 1700 models have tethered scanners, are in powered cradles on forklifts, and are used for pick-and-run and putaway.