Welcome to the final portion of our three-part series, Moving from Manual to Automated Fulfillment. In the first portion, we discussed considerations for adopting automation vs. expanding manual operations, how to arrive at “real” costs in the comparison of the two and some suggestions on how to structure the project. Part II addresses how to determine the feasibility of tackling these kinds of projects internally, what level of planning and resource commitment is required from the client side, how long it may take and the pieces involved in switching over to automation. In Part III, we will finish with a project-specific discussion with our client, Paul Loebbaka, the Managing Director of Fulfillment for Alta Resources.
DEARTH: Paul, let’s start by giving some background on Alta Resources — who are they?
LOEBBAKA: Alta Resources provides a range of outsourced services including relationship sales, one-to-one marketing, consumer direct-order marketing, consumer care, business intelligence, IT services and fulfillment for a variety of customers across diverse industries. Our origins are in the customer relationship and service end of the business, which then naturally grew to include fulfillment as a means of providing additional service offerings to our clients.
DEARTH: What drove the automation adoption decision in your case?
LOEBBAKA: Various automation solutions had been considered over the years. However, none were adopted due to the nature of the business at the time. When one of our key clients began to experience 60% club membership growth, our manual pick and pack processes soon required us to flex in 20 additional temps on top of the 20 already augmenting our permanent staff. We just could not keep up with demand otherwise, but it was painfully clear that this was not profitable and unsustainable for future growth. Continuing to add headcount was simply not the answer.
DEARTH: So the automation adoption decision was easy at that point then?
LOEBBAKA: Well, the issue itself was certainly clear. As with all significant capital and process investments, however, we had to develop the financial models for ROI and select the most appropriate automation solution and then prove our case for automation to senior management. The key was to understand that this was a viable, growing aspect of the business and that to ensure continued success with our current clients — let alone grow the base — we had to invest in solutions that could help us become less manually constrained and get product out the door more quickly and efficiently.
DEARTH: I’m sure that you set some specific project goals — how did you define and measure success and how did your results compare?
LOEBBAKA: Yes, we did set specific goals that we intended to achieve with this project. First, we wanted to ensure that we never exceeded a two-day service level for any regular shipment from the point of order receipt through pushing the package out the door. We have been roughly 85% successful in meeting or exceeding this goal. So, pretty good but we can continue to improve.
Additionally, we intended that our fulfillment cycle for completion of monthly featured product would be no more than seven days. We have been 100% successful in meeting this target.
Last, but certainly not least, we needed to improve the profitability of the fulfillment center. Although I can’t divulge specific numbers, this initiative has improved profitability over 400% from purely manual fulfillment operations.
DEARTH: Fantastic! Have you been able to identify any additional benefits?
LOEBBAKA: We sure have! First, we now have an avenue to scale with our current — and future — clients, regardless of their growth plans. We have solutions in place where they can easily grow with us based on need. We are also now better able to maintain consistent staffing and currently require half the amount of staff previously needed to complete daily workloads. On a related note, it had previously taken around 70 resources to ship 40,000 packages during featured product cycles -— it now requires only 18. This has permitted us to focus on our core team members and minimize augmentation via temporary staffing, which also reduces productivity loss and costs related to constant training.
Another unanticipated benefit was the ability to leverage the application software delivered with the automation solution in other areas of our operation, such as our hand-pack stations that were still needed for non-conveyable types of product. This allowed us to have a common packaging and host system interface platform that could then be used for all packages shipped rather than just a subset. Clearly the cost savings from additional development and maintenance was a very nice added bonus!
Finally, we now have an electronic means of confirming shipment and manifesting completion which gives us additional accuracy — and security — gains over purely manual packaging and hand-entry validation.
DEARTH: Do you have future enhancement or expansion ideas queued up?
LOEBBAKA: I don’t want to give too much away, but we are looking at a couple of near-term additions. For example, capturing actual shipment weight after packaging via in-motion scale is something in which we are very interested.
DEARTH: How long did the project take?
LOEBBAKA: All told, we were roughly one year from beginning to end, but that included a fairly lengthy pilot period in which we were experimenting with different types of consumable packaging material based on end-customer desire as well as overall package presentation. At the end of the day, we still had to keep product moving out the door while this was in progress.
DEARTH: Was this done in-house, or did you leverage external resources?
LOEBBAKA: It was a combination. We initiated and led the overall project and performed software modifications required on our host systems. Due to both resource constraints and material and specific expertise needs not immediately available in-house, we teamed with external vendors for different aspects of the solution. Xpedx was the distributor of the overall solution and Ivex supplied materials. System Packaging built and delivered the automated packaging machinery and its controls. TranSystems|ESYNC partnered with System Packaging to build out the application and integration software that provided the integration between the packaging equipment and our host systems, as well as the user interface and utilities necessary for our pickers and packers. This was the application that was then leveraged for the hand-pack stations.
DEARTH: Looking back, was there anything you would have done differently — any final advice for the readers?
LOEBBAKA: Do your homework and plan well. Although it sounds obvious, the first step is to ensure that you have a clear understanding of the business needs and solution goals. Know your environment and the resource pool and skill sets available internally so that you can understand what you need to get externally. Design and plan well, then execute against the plan. Test aggressively. Above all else, let common sense prevail!
Dennis Dearth is Director of Technical Services for TranSystems | ESYNC, a supply chain strategy, design and implementation services company. For more information, contact Dennis at dldearth@transystems.com, call 419-842-2210 or visit www.esync.com.