Revamped DCs' next goal: full automation

Home Channel News, Feb 21, 2000

Co-op wants to get to the point where stores don't have to check the inventory they receive

It took TruServ more than two years to consolidate the inventory in the warehouses that had been operated by Cotter & Co. and ServiStar/Coast to Coast. The post-merger buying group had to shut down warehouses, reconfigure delivery routes, and reduce its sku count from 150,000 to around 63,000 before the two companies combined. Jobs were eliminated, vendors lost business, and dealer-members had to readjust their ordering and receiving procedures.

The task was nerve-wracking and more than a few times put tremendous strain on the co-op, its members and its suppliers. "The merger was much larger than anyone could have imagined," said James Burnett, the owner of Mid-South True Value in Vicksburg, Miss., who sits on the co-op's board of directors. "It was a surprise to everyone how it was to convert three brands and to find out that the warehouse space that was sufficient for three companies individually wasn't sufficient for three companies combined, and wasn't economical, either."

This difficult chapter in TruServ's short history is supposed to be over this month, when TruServ stops shipping out of its Westfield, Mass., distribution center. Westfield is the last of seven RDCs closed by TruServ since the fall of 1997. With its downsizing out of the way, the nation's largest buying group faces an equally daunting task: automating all of its remaining distribution centers.

TruServ now ships out of 17 DCs, ranging in size from a 343,000-square-foot facility in Henderson, N.C., to its newest DC, a 822,000-square-foot warehouse in Hagerstown, Md: The co-op expanded three DCs last year, and built Hagerstown from the ground up. TruServ also designed the warehouse in Butler, Pa., which holds early seasonal buys and serves as its Internet fulfillment site.

TruServ has installed bar code scanners in six of its RDCs so far. Workers at the remaining 10 RDCs still use adhesive-backed pick labels to pack and ship merchandise. TruServ plans to introduce its automated distribution system to all its warehouses, which is supposed to reduce labor hours by 10 percent to 15 percent "We'll convert a couple [of DCs] a year until they're all done," said John Semkus, senior vp-distribution for TruServ. "It's a [good] strategic direction but also a major financial commitment."

With the installation of inventory management software supplied by E3, and the application of the Unity Retail System that can make sense of the point-of-sale data coming out of the dealers' still-disparate store systems, TruServ's warehouses are finally getting control of their products, how they are being distributed and -- perhaps most important -- what's actually selling.

Semkus described his job to NHCN in simple terms: "I put everything away," he said. But Semkus is also responsible for the outbound products heading to retailers' stores. TruServ members are not reticent with their feedback, according to Semkus: they've told him they want more predictable delivery times and more accurate order filling.

"We were turned upside down for two years," said Semkus, referring to the wholesale changes in TruServ's distribution operations. Now that things have settled down, Semkus wants to boost the DCs' accuracy rates from 99 percent to 99.25 percent (or better) out of the non-automated RDCs. Warehouses with scanners should have at least a 99.65 percent accuracy average, Semkus said. "About half of them are already there' he noted.

Most of TruServ's dealers still double-check every item they receive, a laborious chore than takes time away from selling the products. With improved accuracy, Semkus hopes to convert TruServ's members to a "blind" receiving process. Shipping more merchandise on whole pallets, a process that speeds the loading and unloading of delivery trucks will require TruServ to install hydraulic lift gates on its trailers. Many retailers on the receiving end lack docks or forklifts, Semkus noted. "We only do it where it makes sense," he explained.

For the purpose of consolidating orders during shipping, TruServ is testing the use of a large collapsible container that can hold an amalgam of smaller boxes. In another trial, TruServ's delivery trucks are backhauling products from suppliers' plants to the DCs. "Rather than bring them back empty, we want to pick up merchandise and bring them back full," said Semkus. That way, TruServ can control the flow of inbound freight and save money on transportation costs.

Semkus is one of TruServ's two distribution overlords: the other is Bill Godwin, vp-inventory management. Godwin oversaw the co-op's switch to a real-time replenishment system that allows quicker responses to members needs. Working with TruServ's merchandising department, Godwin helped to launch a new vendor compliance program -- a kind of monthly "report card" that is already showing results (see story, page 44).

             A slimmed-down, more efficient warehouse network
       TruServ's regional distribution centers, as of February 2000
RDC                     Square Members
Location               footage  served
Hagerstown, Md. [1]    822,000     999
Corsicana, Texas [2]   773,000     854
Harvard, Ill.          750,000     485
Manchester, N.H. [3]   710,000     839
Jonesboro, Ga. [4]     631,000     946
Fogelsville, Pa.       540,000     762
Brookings, S.D.        518,000     593
Springfield, Ore.      504,000     590
Butler, Pa.            470,000      **
Kansas City, Mo.       438,000     317
Indianapolis           420,000     392
Westlake, Ohio         405,000     630
Mankato, Minn.         377,000     397
Kingman, Ariz.         372,000     297
Woodland, Calif.       359,000     321
Denver                 355,000     281
Henderson, N.C.        343,000     347
                     8,787,000   9,050
(1.)Hagerstown opened in 1999.
(2.)Corsicana total includes 341,000-square-foot addition last year.
(3.)Manchester total includes 185,000-square-foot addition last year.
(4.)Jonesboro total includes 265,000-square-foot addition last year.
Source:TruServ, NHCN chart