Two years ago, Associated Food Stores (AFS)—a major player in the wholesale grocery business in the western intermountain states—was using 127 people to track assets across its 600-plus-acre distribution center and warehouse in Salt Lake City.
“The process was so dynamic,” recalled Tim Van de Merwe, AFS internal logistics manager, “that by the time the information was entered [into our yard system], it was obsolete.” With data accuracy running between 60 and 70 percent, Van de Merwe added, “We might as well have gone back to pad and pencil. We were using fancy technology but not realizing any benefit.”
When the operation was moved to Farr West, UT, Van de Merwe decided it was a good time to look for a more flexible, dynamic yard system to manage assets across the new one-square-mile distribution center.
Ousting the old, unforgiving technology
According to Van de Merwe, the old Dallas system (now EXE Technologies) was very rigid and unforgiving. It also wasn’t very user-friendly.
“There was a real angst among users,” said Van de Merwe, “whether it be a clerk or a guy on a forklift, to use the technology.” Most of the anxiety was due to the precision required for data entry. There was a full page of information, with multiple fields, that had to be completed on every truck. If just one character or one space were off, the entire field would be rendered useless.
“The misentries and delays were submarining our operation,” explained Van de Merwe. “In an industry as dynamic as ours, data is worthless if it isn’t 100-percent accurate.”
So AFS went looking for new technology and, when it came to evaluating vendors, AFS was nearly as unbending in its demands as the old yard system it was looking to replace.
First, AFS told every prospective vendor that it wouldn’t pay a single dime until the technology was up and running. Van de Merwe said AFS expected the chosen vendor to meet a tight, fixed budget and had no intention of paying out the project in stages.
“This project was a risk for us,” he said, “so I wrote into the contract that payment would be upon delivery.”
Second, competing vendors had to prove—in advance—that they could actually deliver what they promised. AFS set up a minienvironment (a 100 x 100-yard area) and asked vendors to come in and set up their wares.
“We wanted them to demonstrate that their proposed solution was going to work,” said Van de Merwe.
It was the third criterion that actually scared much of the competition out of the ring. AFS insisted on a six- to nine-month ROI, guaranteed.
“We knew this technology would be obsolete before it was even installed,” said Van de Merwe. “And in retrospect, we were right. The stuff I’m using now, even though it’s only a year and a half old, has been supplanted by better, more ruggedized hardware. AFS didn’t want to be paying off this technology over the next four or five years. We wanted an ROI in six to nine months so we’d be freed up at the end of the year to reinvest.”
By the end of the grueling evaluation, AFS had eliminated RandTec and EXE.Dallas, leaving only OMI International in the running. “Even though OMI’s MDS (Mobile Distribution System) had some bells and whistles that were different from our old Dallas system, we didn’t see any real benefits to changing until OMI mentioned that they could link their technology to tags (wireless radio transmitters) that could automate data entry,” explained Van de Merwe.
Accurate, automated data capture
OMI proposed integrating its yard management system with a real-time locating system from Santa Clara, CA-based WhereNet Corp. The WhereNet system is composed of a local infrastructure of antennas, location processors, and WhereTags—wireless radio-frequency transmitters—that would be permanently mounted on AFS-owned trailers, tractors, and dollies, as well as temporarily tagged on third-party fleet as they enter the AFS distribution center. The system works in tandem with wireless LANs and bar code data-capture products to provide AFS personnel with up-to-the-second business information from a single integrated tracking system.
The solution provides AFS real-time location and telemetry information on each of the several hundred trailers and associated equipment the company employs. It enables AFS to pinpoint the location of yard resources within 10 feet of accuracy.
The constant visibility of assets and inventory eliminates manual yard searches for inventory, speeds fleet turnaround, and protects the quality of refrigerated groceries by moving them quickly to the proper storage areas.
The advanced tracking and location capabilities of the WhereNet technology proved a major breakthrough for AFS.
“WhereNet allows us to track, locate, and monitor transportation assets and the contents of every load of lettuce, Popsicles, and chicken in real time, all the time,” said Van de Merwe. “It’s a real competitive advantage because it helps us better utilize our equipment, which drives down our operating expenses.”
For the nearly 600 grocers AFS serves throughout an eight-state region, there’s an added advantage: Member stores receive on-time service so food arrives fresher than ever before, he explained.
Bridging the data divide
Locating and tracking mobile assets has always been a challenge for the grocery industry. By the time information gets uploaded into a database, the assets have already moved, so the data is obsolete.
WhereNet bridges the data divide by transmitting tracking and location information in real time.
“With WhereTags, we get a line of information transmitted about every four minutes that identifies every asset and tells us its location in the yard,” explained Van de Merwe. “We could program the tags to transmit even more frequently if we chose to. But even at four-minute intervals, the 100-percent accuracy of the data we’re capturing has enabled us to turn equipment from every two or three days to every two or three hours.”
Van de Merwe added that, while data accuracy is certainly the backbone of the operation, it’s how that information integrates with OMI’s yard management system that allows the productivity gains AFS has received. These productivity gains are compounded by the efficiencies AFS is achieving through a comprehensive warehouse management system, and routing and scheduling applications.
ROI expectations met
Using the WhereNet system, AFS realized a complete ROI in six months on its $1 billion operation, and continues to exceed its business goals. With 100-percent accurate data feeding its yard management systems, AFS has improved efficiency to an impressive level. For example, AFS has:
- Reduced data entry employees from 125 to 2.5. (Those employees are now responsible for more value-added labor.)
- Realized fuel savings of more than $500,000 a year.
- Saved more than $100,000 a year in food spoilage by preventing trucks from having to idle in the yard on hot summer days.
- Reduced monthly leased trailer expenses from $45,000 to zero.
- Reduced the number AFS-owned trailers from 252 to 167.
- Reduced the number of $80,000 tractors from 92 to 62.
- Reduced weekly deliveries from 1445 to 950.
- Reduced the total number of routes from 503 to 320.
- Reduced drivers from 123 to 83, saving between $40,000 and $50,000 a year on each salary.
- Reduced the “drop time” of trailers at the distribution center from six to eight hours to 15 minutes.
Lessons learned along the way
While WhereNet has exceeded expectations, getting the technology up and running proved more challenging than anticipated. According to Van de Merwe, AFS learned some hard lessons along the way.
The first obstacle was mapping out the topology of the distribution center yard to create an accurate CAD drawing of the facility to determine where to set up the array of antennas. It was important to have enough lines of sight to cover the entire area. Armed with a little measuring wheel, AFS employees measured every inch of the yard by hand.
“We spent weeks and weeks and weeks trying to configure the X-Y coordinates for every square inch of the yard,” said Van de Merwe, “only to discover that even a minor margin of error was going to cause major problems.” Nowadays, WhereNet just flies over a site with a small plane, shoots the map, and it’s done.
The second obstacle was the hardwiring. AFS set up 19 antennas every 400 to 500 feet. Trenching the 12-inch thick concrete tarmac to lay over five miles of cable from one of the facilities was a massive undertaking.
“We were able to piggyback some of the antenna cabling with the conduit used for electricity,” explained Van de Merwe, “ but we had to be creative in figuring out how to get the cabling in without exceeding the original budget.” Installing the hardwire and setting up the antennas cost around $25,000. But today’s WhereNet antennas are wireless.
The third obstacle was the interface. Getting the hardware and software systems to sync was crucial. But WhereNet was spread out between Santa Clara and Tennessee, and OMI was stuck in the middle. Everyone tried to work out the problems long distance, without success.
“There’s a lot that can be done in an implementation by remote,” noted Van de Merwe, “but interface is not one of the them.” After a lengthy struggle, AFS got developers from WhereNet and OMI to collaborate and write the necessary code.
“I would describe the process and the results we were looking for and this whiz kid from OMI would write the code as I would dictate,” recalled Van de Merwe. “We spent a week together writing the interface that way before we were able to realize the full benefit of the technology.”
Typically, WhereNet’s technology is easily deployed. An average installation is up and running within 90 days. Due to the extraordinary challenges of interfacing the technology with OMI’s yard system, the process at AFS took nearly a year.
Optimizing the supply chain
Despite the lengthy implementation process, Van de Merwe cites significant cost savings in three key areas: asset usage, yard throughput, and spoilage and shrinkage:
- Improving asset usage: With WhereNet, AFS always knows the exact location of its yard equipment. The company no longer underutilizes existing equipment. As a result, AFS doesn’t need to lease additional trailers, tractors, and dollies to process daily shipments. AFS employees are more productive, since they no longer waste hours on lengthy manual searches for yard resources. With real-time visibility of all trailers, AFS runs an aggressive “drop and hook” program, compressing the turn time for independent drivers from several hours to minutes. The overall result is fewer capital equipment purchases and better utilization of labor.
- Increasing yard throughput: With WhereNet, AFS automates gate check-in and departure for all its fleet trucks. A WherePort device located at each gate causes the WhereTag mounted on each truck or trailer to send a special “blink” when entering the WherePort range. The real-time system displays the docks that are available to complete a quick transfer of goods from the inbound truck to the outbound AFS grocery shipment. “At the start of every day,” said Van de Merwe, “we would have 10, 15, 20 trucks stacked up out the gate, down the street, all the way to the freeway exit. And then once they got into the yard, there was congestion as well. It was very slow moving and very difficult.” Now with the WherePort sensor at the gate, the AFS fleet comes through automatically with no bottlenecks and no stoppage. The quicker turnaround helps AFS earn lucrative incentives from manufacturers for meeting time-sensitive goals for processing their goods.
- Reducing spoilage: Initially, AFS equipped a few trailers with sensors to enable WhereNet to transmit status information about refrigerated trucks in the AFS yard. This status information included the respective temperatures of the frozen foods and produce compartments, the fuel levels of the refrigeration unit, and whether the trailer’s door is open or closed at a dock. The system will send an alert if the trailer compartment temperatures exceed specifications or if the doors are open when they should be closed. The goal was to use automated monitoring to help AFS reduce the risk of daily spoilage. But the sensors weren’t in place long. “We quickly realized that the sensors were an unnecessary expense,” explained Van de Merwe. “Because of the heightened visibility provided by WhereNet, we move our trailers so quickly through the distribution center that food doesn’t stay sitting on site in trailers long enough to have a chance to spoil.”
Locating a growth opportunity
The distribution benefits are piling up, and the new technology has also boosted the company’s overall business strategies.
“The efficiencies we’ve realized at our new distribution center have actually exceeded our expectations,” said Paul Jones, general manager of Associated Foods’ Farr West Facility. “This stems in part from 100-percent accurate data capture generated by the WhereNet system. By improving processes, reallocating labor, and better utilizing our fleet, we’ve opened the door to take on greater volume while improving customer service for our growing customer base.”
This greater efficiency is particularly timely since AFS recently picked up another $110 million in new business and by April 2003 will experience another significant bump in business in Idaho through consolidation of the division.