warehouse – The OM Blog by Heizer, Render, & Munson

Guest Post: Walgreens Updates Its Supply Chain Distribution Network in Response to Changing Consumer Behavior

Dr. Misty Blessley is Associate Professor of Supply Chain Management at Temple University.

Consumer behavior is shifting from shopping in retail stores to ordering online. In response, Walgreens says it is going “all-in on the idea that its stores will do double duty as both retail outlets and hubs for home delivery.” Walgreens is able to leverage retail outlets for home deliveries because the pharmacy store chain expects that store fulfillment for its non-pharmaceutical products is more efficient than managing separate distribution networks for e-commerce and in-store sales.

In lieu of e-commerce warehouses, Walgreens’ employees will pick and pack items for same-day delivery, through third-party apps such as DoorDash and Uber Eats. (Walgreens finds that 78% of Americans live within five miles of one of its stores). It has not completely abandoned its 16 distribution centers that restock their stores and its hub stores that operate as small distribution centers, which provide two to four-day delivery via FedEx. However, when placing an order, customers are encouraged to choose store fulfillment for the same shipping cost of $5.99, or free for orders over $35.00. The benefit to the customer is 50 minutes on average delivery, as opposed to waiting for 2-to-4 days.

Walgreens will have its store employees pick and pack items for same-day delivery through third-party apps such as DoorDash and Uber Technologies’ Eats

Walgreens has not stopped short of considering what network would be best for prescription fulfillment, but this class of products must operate under a separate logistics network because of the added complexity of handling pharmaceuticals. While online prescription orders are filled through the pharmacy chain’s 11 highly automated fulfillment centers, the company also offers same-day prescription delivery through DoorDash and Uber Eats, for medications that are ready to be picked up by the customer.

Classroom discussion questions:
1. Refer to Chapter 11’s discussion of Distribution Management in your Heizer/Render/Munson text. What does Walgreens expect the change will be to response time because of moving from warehouse to store fulfillment? What about the change in delivery cost?
2. Why is it important for firms like Walgreens to constantly review their distribution networks to appeal to shifts in consumer behavior?

OM in the News: Walmart’s Warehouse of the Future

Leland Geiger transitioned from unloading trucks manually to using an autonomous forklift

Walmart is in the process of automating or partially automating many of its hundred-plus U.S. warehouses in the coming years. The shift means Walmart can use fewer people to process more goods and make stocking shelves at stores more efficient. To keep their jobs, many of the company’s tens of thousands of warehouse workers need to retrain for new roles. Some will leave. Warehouses will also need to hire people with new skills, such as technicians.

Large companies such as Walmart and Amazon that rely on massive warehousing networks have worked for years to automate more of their supply chains to increase the volume of packages they can process and reduce labor costs, writes The Wall Street Journal (July 29, 2023). Because of Walmart’s scale, its plan to make automation standard in more of its supply chain is likely to affect how smaller competitors invest in their own facilities and what a U.S. warehouse job becomes.

“What this technology does for us is increases capacity, increases the accuracy of our loads, increases the speed of the supply chain and lowers cost,” said the VP of supply chain for Walmart. It is “also completely reshaping the way that our associates work within the distribution center.”

In Walmart’s Central Florida warehouse, as sections of robotic arms and screens are gradually installed across the more than 1–million–square-foot facility, some of its 900 workers say they are skeptical about transitioning to new roles that require different skills. Transferring from unloading trucks manually to what Walmart calls an “automated cell operator” is easier physically but harder mentally.

Skepticism and fear of layoffs among workers are common when a warehouse first transitions to automation. Many workers are excited about a new challenge, but others leave. Employers automate, in part, to cut labor costs, so losing some workers during the process helps avoid the need for layoffs. At warehouses, managers are emphasizing that the new roles require less manual labor and offer more mental stimulation and potential longevity. Some of the jobs offer a pathway to higher-paying automation roles such as systems operators.

Classroom discussion questions:

What are the advantages of an automated warehouse such as the one in Florida?
Disadvantages?

OM in the News: Saks Pairs Robots with Workers

Staff and collaborative robots, or cobots, work together in this Saks warehouse

Seven months after launching its stand-alone e-commerce unit, Saks Fifth Avenue has started shipping online orders from a high-tech Pennsylvania warehouse, deploying dozens of autonomous robots programmed to help workers find Giambattista Valli gowns and Christian Louboutin pumps.

With its robots and new facility, both operated by GXO Logistics, Saks is aiming to keep up with skyrocketing online sales, reports The Wall Street Journal (Oct. 28, 2021). Like many other retailers, Saks has been flooded by stay-at-home shoppers since Covid.

“Advances in robotics, coupled with AI and machine learning capabilities, have created exciting possibilities in automated warehouse design,” said GXO’s CIO. Many of these advances enable fulfillment-center operators to boost efficiency and speed up deliveries, he said. “Technology is enabling greater precision in inventory management. Pairing workers with robots is a winning combination.”

Robots being used by Saks—known as cobots, because they collaborate with human workers—stand 4 feet tall and move about the warehouse on wheels. They are equipped with large computer screens, which are used to display images of items that workers need to gather for an order. The robots rapidly cross-reference incoming orders with a map of product locations in the warehouse and quickly guide workers to the items. From there, workers pick up the items and route them to the appropriate delivery bay.

The system helps move goods through the fulfillment process twice as fast as manual processes alone. That kind of speed will be crucial for online retailers, like Saks, as they gird for what is expected to be a busy holiday shopping season.

The move to the new high-tech facility is part of a broader plan to boost the retailer’s use of advanced digital technology to support an aggressive growth strategy. “We are focused on elevating the entire experience,” said Saks’ VP, “from how customers discover our offering, to how they engage with us, to how the product arrives at their home.”

Over the past 2 years the e-commerce unit’s sales increased 82%. Even as vaccines make it safer to return to physical stores, many customers are sticking to online shopping habits picked up during pandemic lockdowns.

Classroom discussion questions:

How does this warehouse differ from that of an Amazon center? (Hint: see the Global Company Profile for Ch. 12 in your Heizer/Render/Munson text)
Describe the technology used at this Saks facility.

OM in the News: With New Self-Driving Robots, A Revolution in Material Handling

A swarm of robots will soon be overtaking John Deere’s Wisconsin plant, reports New Equipment Digest (March, 2016). A fleet of new-generation AGVs will begin zipping through the lanes of the company’s assembly line, hauling parts and materials across the plant in an efficient, automated buzz. On the face of it, there is nothing too exciting about this news. Automated Guided Vehicles have been scurrying around plants in one form or another for decades already.

But John Deere’s fleet will mark the latest deployment of Clearpath Robotics’ OTTO 1500—a fully self-driving, autonomous robotic vehicle. The machines are capable of transporting up to 3,000 lb of goods through congested plant and warehouse environments without the need for drivers, supervision, or guidance infrastructure.

That last detail is what makes this technology exciting. Traditional AGVs require a lot of work and a lot of free space to run safely and efficiently. In the past, this has meant tying them to magnetic strips or grids of barcodes crisscrossing human-free transport lanes. OTTO taps into the same sensor-driven, high-computing backbone of Google’s self-driving car to safely and efficiently transport supplies along the same plant and warehouse paths populated by workers and equipment.

OTTO is basically off the track–similar to the difference between subway systems and taxis in a busy city. There is a time and a place for a subway system. But when speed and efficiency are needed, there is also a time and a place for taxi cabs. To make that jump, Clearpath had to tap into the full arsenal of today’s technological tools.

Classroom discussion questions:

How do these AGVs differ from Amazon’s Kiva robots?
What are the advantages of using robots in manufacturing?

OM in the News and Video Tip: Rise of the Robots

“The exponential growth in the power of silicon chips, digital sensors and high-bandwidth communications improves robots just as it improves all sorts of other products,” writes The Economist’s special report (March 29-April 4, 2014). Three other factors are also at play.

One is that robotics R&D is getting easier. New shared standards make good ideas easily portable from one robot platform to another. A robot like Rethink Robotics’s Baxter, with two arms and easy, intuitive programming interface, would have been barely conceivable 10 years ago. Now you can buy one for $25,000. A second factor is investment. (The biggest robot news of 2013 was that Google bought eight promising robot startups.) The third factor is imagination. In the past few years, clever companies have seen ways to make robots work as grips on film sets and panel installers at solar-power plants. Aerial robots—drones– let farmers tend their crops in new ways, give viewers and broadcasters new perspectives on events, monitor traffic and fires, look for infrastructure in need of repair, and more.

While society may benefit greatly, robots’ growing competence may make some human labor redundant. Aetheon’s Tugs, for instance, which take hospital carts where they are needed, are ready to take over much of the work that porters do today. Kiva’s warehouse robots make it possible for Amazon to send out more parcels with fewer workers. Click here to watch a great 3 minute video on Amazon’s robots. Driverless cars could displace millions of people employed behind the wheel today.

The advent of robots that are cheap and safe enough to be used outside big factories is one reason for a resurgence of interest in robotics over the past few years. Foxconn, a Taiwanese company that manufactures and assembles electronics, is aiming to robotize much of its operation with hundreds of thousands of its own relatively cheap Foxbots. Car companies use the lion’s share of industrial robots; they account for over 50% of robot installations in the U.S.

Classroom discussion questions:
1. Why are robots proliferating?

2. Why did Amazon buy Kiva Systems?

OM in the News: The Last 60 Minutes of On-line Holiday Shopping

Time is money. And in the fierce holiday-season battle between online and offline sales, a single hour can be worth millions of dollars, says The Wall Street Journal (Dec.19,2012).

GSI Commerce, a division of e-Bay that handles online shipping for 70 brands including Godiva, Aéropostale, and Estée Lauder, has been counting workers’ steps and even tweaking the way it prints labels with a single goal: Push back the cutoff time for Christmas delivery by 60 minutes. This year, GSI’s customers let shoppers order as late as 11 p.m. on Dec. 22 and still get their orders by Christmas Eve. That’s 8 more hours than shoppers get on Amazon.com, and an hour later than GSI’s deadline last year. “It’s beyond critical,” says the COO of one on-line retailer. “Having a few hours over a competitor could be a seven-figure event.”

As soon as last Christmas ended, GSI’s OM execs began huddling with customers and UPS to figure out how to speed up the time it takes for an order to be processed. GSI spent more than $25 million to improve its operations and speed since then. One of the OM changes: saving steps for employees–who can walk nine miles a day–by putting the most popular goods closest to the people who pick them. This cut employees’ walking time by 60%.

The company then placed 7,000 big box storage containers closer to the front of the warehouse. To figure out what to put in the boxes, GSI’s OM team tracked order patterns and worked with retailers to know what is being promoted heavily. Those calculations were rerun every hour.

To further cut down walking time, GSI moved smaller storage boxes on their shelves closer together. Fire insurers required the warehouses to maintain a few inches of space between the boxes so that water from overhead sprinklers can drain down between them. Across miles of shelves, those gaps add up. So GSI decided to drill holes into the boxes, proving that could accomplish the same firefighting goal as the spaces.

Discussion questions:

1. Why was it important for GSI to improve its warehousing operations?

2. How did GSI decide what processes to change?

OM in the News: That’s One Gigantic Shoe Warehouse

One of the largest warehouses in the US is about to open its doors in a new 1.82-million-sq. ft. building near the Port of Los Angeles. Skechers USA, Inc., the nation’s no.2 footware company chose the area because, in the world of international trade, Southern California remains the hub of choice. The Los Angeles Times (July 1, 2011) points out that the LA/Long Beach Port is the highest rated cargo movement region in the US in terms of container counts, rail connections, and infrastructure. Skechers needs the space to handle all the containers of shoes made in China by its contract manufacturers (the firm keeps 300 staff there just to stay on top of the contractors).

How big is the new $1/4 billion distribution center? First, it takes 1/2 minute to drive from one end to another at 60 mph. It’s 2,900 feet long and 700 feet wide, enough to hold 40 football fields. It’s the size of 17 Wal-Marts. There are 270 truck bays. But more importantly, it will replace 6 smaller warehouses. In the old system, workers had to handle shoes 3 times as they moved from building to building, adding costs, including the wages of truck drivers. “Now”, says the COO, “no one will have to touch it to do the same amount of work”. Instead of “7,000 pairs of shoes an hour, with the new warehouse, we’re expecting to be able to move 18,000-20,000 pairs of shoes every hour”. In effect, the move allows Skechers to get out of the trucking business.

At the LEEDS-certified warehouse, conveyor belts which are programmed and pressure sensitive will move the shoes and prevent product pile up, which happens with traditional belts. Storage racks are operated by robots that pick up the boxes and bring them to the desired locations.

Discussion questions:

1. What are the advantages and disadvantages of such a massive distribution center?

2. Why is proximity to West Coast ports become important to logistics?

OM in the News: The Rise of the (Orange) Warehouse Robot

If you remember back a decade ago, the e-grocery firm Webvan outfitted warehouses with 4.5 mile long mazes of conveyor belts and carousels meant to sort, box, and deliver groceries. The idea and company was a bust, going belly up in 2001. But its founder, Mick Mountz, decided that what was missing was robots. So in 2003, he founded Kiva Systems to provide warehouses so automated that any e-commerce firm could compete with Amazon. “Now you can get Amazon in a bottle”, says Mountz. “Everyone can have what Amazon has”.

According to this week’s Businessweek (Nov.10,2010),Kiva’s technology provides the backbone of Diapers.com, Zappos.com, and a dozen other retailers. Its squat orange robots scurry around warehouses and bring shelves of clothes, car parts, electronics, or whatever the product, to packing stations. There, humans pack and ship. The cheapest system ($1 million), comes with 30 robots and 2 packing stations. Most systems cost $4-6 million.

Kiva integrates with existing inventory management software and is smart enough to continuously reorganize inventory based on order flow. If there is an uptick for one SKU, the robots place that item closer to workers.

Here is an entertaining 4 minute video of the robots at work.

Discussion questions:

1. Why did Webvan fail?

2. What did Kiva do to change warehouse management?

3. What other kinds of firms could benefit from this approach?