AFS cuts costs with new distribution center, automated yard management

July 1, 2002
In the cost critical world of wholesale grocers, every dime and every labor minute counts. The opportunity to reduce labor costs while improving system

In the cost critical world of wholesale grocers, every dime and every labor minute counts. The opportunity to reduce labor costs while improving system efficiency provides double benefits for a business where nearly all performance categories are measured as a percentage of sales. Reducing logistics costs in a sales-driven business such as a supermarket cooperative moves revenue directly to the bottom line.

In the past two years, Associated Food Stores of Salt Lake City, Utah, has taken two major steps toward this goal. It has begun operations from a new distribution center in Farr West, Utah, about 50 miles north of Salt Lake City, and it has implemented mobile distribution system and real-time locating system software to help control yard inventory and equipment utilization. The mobile distribution system, an internal development, was installed first and followed soon after with the locating system developed by WhereNet Corp of Santa Clara, California. WhereNet has developed locating and process tracking systems for manufacturers and distributors such as Ford, Coca Cola, and American Airlines.

Associated Food Stores is a cooperative distributor owned by more than 700 independent supermarkets in an eight state region centered on Salt Lake City. From the primary distribution center in Farr West and three divisions in Boise, Idaho; Billings, Montana; and Helena, Montana, AFS serves the Intermountain West including all of Idaho, Montana, Nevada, and Utah, along with parts of Colorado, Oregon, Washington, and Wyoming. The company stakes were started by Donald P Lloyd, president of the Utah Retail Grocers Association, and 34 independent retailers who put up $300 each to found the cooperative in 1940. Today, AFS continues to stake its claim to being the only independent wholesale distributor headquartered in the Intermountain West.

Four fleet locations

This huge distribution area is served by a fleet divided among the four locations. Obviously the largest of the four, Farr West is home to 62 tractors — 31 sleepers and 31 daycabs — and 167 trailers. Helena has the second largest fleet with 22 tractors and 66 trailers. The Boise division operates 16 tractors and 48 trailers, and Billings is home to 10 tractors and 23 trailers. In addition, AFS runs seven tractors and 18 trailers in a small convenience store operation. The majority of the trailer fleet, and especially the most recent purchases, are multi-temp systems capable of handling frozen, meat and produce, and dry groceries all in the same load. Two temperature zones are used with groceries loaded in the medium temperature compartment.

In order to match equipment to loads, AFS runs a wide variety of trailers, including 28-ft, 42-ft, 45-ft, and 48-ft reefers. In 2001, the company purchased 31 new multi-temp trailers and split the order between 28-, 42-, and 48-footers. Newer equipment in the fleet is a mix of trailers from Great Dane and Utility. Refrigeration units are primarily from Carrier Transicold.

Multi-temperature trailers are necessary to provide service to retailers spread across such a large area. Standard procedure is to load frozen foods in the front compartment and set the thermostat at -12°F. Dry groceries are then loaded behind the bulkhead separating the frozen compartment from the rest of the trailer. Produce is loaded behind the groceries; the entire compartment is held at 38°F. Meat and deli products are shipped as single temperature loads with the refrigeration units set for 30°F. Trailers with multi-temp refrigeration may run meat and deli loads, but only the host unit is used to cool the van.

Doubles carry heavy loads

Running trailers in combinations — turnpike doubles of two 42-ft trailers or Rocky Mountain doubles with a 48-ft trailer followed by a 28-ft trailer — can produce total gross loads of up to 129,000 lb. Some of those loads must climb 8% grades, so high horsepower is standard in the AFS fleet. The company uses Freightliner and Volvo tractors with Detroit Diesel engines rated at 470 hp. Mack Vision tractors in the Boise division are equipped with Mack engines rated at 460 hp.

Staffing for the fleet requires 82 drivers in Farr West, 22 in Helena, 16 in Boise, 10 in Billings, and seven in the convenience delivery group. Farr West runs an average of 60 loads a day, seven days a week. These loads include store delivery as well as shuttle service to the other divisions. The three divisions handle only store delivery. Many of these are to rural communities where the stores have no docks, and the merchandise must be unloaded by hand or by skate-wheel conveyor.

After operating in Salt Lake City for 50 years, AFS began to outgrow its headquarters distribution center. Every bit of the existing facility was racked to capacity, and it was operating 24 hours a day. In 1994, general merchandise operations were moved to Payson, Utah, in an effort to regain capacity in Salt Lake City. However, by 1997, the board of directors instructed the company to begin looking for a new home warehouse.

Initially, plans called for building a new center on property about three miles from the existing Salt Lake City warehouse. Site selection was complete and the real estate purchase was scheduled. Just before closing, a relatively new warehouse in Farr West was put on sale by its previous owner, the Rite Aid Company. AFS officials determined that the building in Farr West could be adapted to the company's distribution needs with only modest remodeling. In addition, the geographical location was advantageous.

Purchased building saved money

After a year of work on the building, AFS moved in April 29, 2001. In the process, the company saved more than $15 million compared to the cost of building a warehouse from the ground up. The new warehouse has 1.25 million sq ft of storage space including 305,000 sq ft with eight temperature and humidity zones for perishables. At 590 yards, the building is slightly more than one-third of a mile long. It has 149 doors for shipping and receiving, including an 18-door integrated loading area between the dry and perishable sections of the warehouse for loading multi-temp trailers.

The building sits on 65 developed acres, and AFS owns an additional 45 acres that can be utilized for future expansion. The warehouse stocks 30,000 individual items stored on 7 million pounds of steel racking designed and built specifically for AFS. These structural steel racks are warranted for 10 years against any damage, even if caused by abuse.

Peak capacity

At peak capacity, the Farr West distribution center will employ a staff of 500. It receives as many as 600 loads weekly from a mix of more than 1,000 vendors and ships more than 750,000 cases a week. The warehouse crew handles an average of 12,000 cases per hour. Farr West dispatches 325 routes weekly of which 60% are in Rocky Mountain doubles or turnpike doubles for delivery to the other three divisions.

The three satellite divisions are hybrids in the AFS system. They stock inventory for order selections as well as receiving loads picked to order in Farr West for cross-docking to local stores. Although the divisions get some direct delivery, most of their inventory is delivered from Farr West. The primary purpose of the divisions is to cut distribution mileage and speed service to customers, all of whom order electronically directly from Farr West.

The key to productivity at the new distribution center is merging the warehouse, shipping, and transportation functions into a seamless process with all the pieces arriving at the appropriate place in a timely manner. Warehousing cannot function if it does not have a complete inventory to select store orders. Neither shipping nor transportation functions well if orders or fleet equipment is not available when needed. A highly automated mobile distribution system and a real-time location system help reduce the effort required to operate efficiently.

Managing equipment on the distribution center property provides a good example. Prior to implementing the two software systems, AFS utilized at least part of the workday of 126 people, nearly all of whom were actually hired for different tasks. This large body of employees included 100 drivers spending part of every day doing order entry along with providing pre-trip and post-trip inspection information. Four security guards entered data after checking vehicles entering or leaving the property, and two yard managers attempted to keep track of equipment location. In addition, eight warehouse clerks spent time directing equipment moves, and three warehouse supervisors directed the priority of those moves. Three routers were needed to manage the on-yard equipment inventory and maintain status reports on that inventory — whether it was empty, loaded, waiting to unload, or in the shop for scheduled maintenance. Three dispatchers took care of matching drivers to equipment, and three yard hostlers were needed to move equipment from place to place and report those moves.

Efficient labor utilization

The problem with utilizing this huge group of people is that almost none of them were originally hired to manage equipment on the distribution center property. They all had other primary jobs, but were being used for yard management, says Karlyn Mosier, senior logistics coordinator at AFS. With the new yard management hardware and software in place, the part-time labor of 127 people has been reduced to the fulltime work of five people, broken down to about 1½ salvage clerks, 1/2 the daily time of a receiving clerk, and three yard coordinators. “The great part of this is that the 121 other people didn't go away; they went back to doing the jobs they were hired to do,” she says.

Integration of warehouse management systems, the mobile distribution system, the real-time location system, and the company's Roadnet routing system make this labor reduction possible. Particularly vital is the real-time location system (RTLS) that uses a small low-power radio transmitter on every tractor, trailer, and converter dolly in the fleet. These RTLS tags transmit a signal every four minutes for reception by a matrix of receivers in specific locations on the distribution center property. This fixed antenna grid provides an accurate location for every transmitting tag, based on the time differential between signal receipt at the various antennae known as locating access points. This information is utilized to post data to the mobile distribution system.

The WhereNet RTLS differs from other yard inventory systems such as radio frequency identification tags or barcodes in that tractors or trailers do not have to pass a tag reader or barcode scanner to be detected. With those systems, the user knows where a piece of equipment is only when it passes a detector. The WhereNet system is active, transmitting at preset intervals so that location is available simply by clicking the Refresh button on a computer screen.

Real-time location and status

The two systems give the yard coordinators a real-time look at equipment inventory and location. With the click of a computer mouse, yard coordinators can identify every piece of equipment on the yard and verify its status. A blue dot on the computer screen indicates a trailer, a red dot signifies a converter dolly, and a green dot is the symbol for a tractor. The alternative to using RTLS and the mobile distribution system is walking the lot to verify equipment location and status, Mosier says.

The problem with taking a physical inventory of the lot is that status can change by the time a coordinator finishes a tour of the yard. “Without RTLS, we might as well take a folding chair and an umbrella to ward off the sun and sit in the yard watching trailers,” she says. “The automated system is the only way to maintain a 100% accurate yard inventory and status report. We no longer have to worry about losing a trailer, such as when a 48-ft van gets mistakenly parked in the 42-ft ready line. If we can find equipment, we can use it effectively, which allows us to operate with a smaller fleet.”

In fact, AFS does operate with a smaller fleet at certain times of year. In off-peak seasons, extra trailers are eliminated from the daily rotation and removed from the general maintenance schedule. Those trailers are still maintained, but are not inspected on the same schedule as trailers in active service. This allows AFS to perform efficiently at a lower total fleet cost.

The big payback from the new systems comes from labor reduction and accuracy, Mosier says. With only five people, AFS can manage assets with 100% location accuracy and 100% status accuracy. The result is improved quality of service to AFS members and lower product loss. “We know where things are, so we don't face the problem of looking for an empty trailer while a load of frozen food sits on the dock and we look for a suitable trailer,” she says.

About the Author

Gary Macklin

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