R etailers always seem to be fighting through notoriously tight operating margins, so any competitive advantage that accrues to the bottom line is welcome.
Saks Direct, the high-flying e-commerce division of Saks and companion of the high-end Saks Fifth Avenue retail stores, is certain it has found a nice fulfillment advantage over some of its rivals for consumers’ online shopping dollars.
The humdrum world of order fulfillment and product distribution hardly matches the luxurious and legendary Saks brand. But an ambitious decision two years ago to revamp the company’s fulfillment processes allowed Saks Direct to meet equally ambitious 2011 holiday shopping season delivery opportunities.
Casting aside its fixed warehouse automation systems for moving product, Saks took a capital-intensive leap of faith and began implementing a mobile-robotic approach to picking and packing for Saks Direct at its 500,000-sq.-ft. distribution center in Aberdeen, Md. Michael Rodgers, executive vice president and CIO for Saks, says the new fulfillment system allowed Saks Direct to promise Christmas Eve delivery for customers ordering as late as the day before.It seemed to make a difference: Saks Direct reported a 21 percent increase in fourth quarter sales from the same period in 2010.
“That’s a competitive advantage. I don’t know how many of our competitors were able to do that and how many weren’t. I just know that we were, and we didn’t break a sweat doing it.”
Breaking a sweat in the Aberdeen DC isn’t for humans anymore. With the Kiva Mobile-robotic Fulfillment System, hundreds of “robots” do the grunt work, automatically moving products of different shapes and sizes on mobile, modular shelving units across the DC floor. The robotic-drive shelving units are guided to workstations where associates await — a process Kiva markets as “Goods-to-Man Order Picking.”
Peter Blair, Kiva senior director of marketing, says the system reduces cycle time through efficiencies of scale as associates can pick, pack and ship orders more quickly without having to move around the warehouse floor to locate products.
“Say Mrs. Smith orders a pair of shoes, a dress and some earrings. In most cases, you have two options. Either one person goes out with the cart and walks miles around the warehouse … [or you] take three people and send one over to get the dress, one over to get the shoes and one over to get the earrings.”
The heart of the Kiva Systems' mobile-robotic fulfillment are the bright orange mobile robotic units which move inventory shelves from their warehouse floor locations to the worker stations where a human picker pulls the items ordered. This eliminates warehouse people from having to walk all over the warehouse to pull inventory items off the shelves (Click Image To Enlarge)
Blair explains that efficiencies are created because all the robotic drives do is ferry products to workstations. Associates use hand-held barcode scanners to point to the shelf to verify the product. A light on the shelf activates indicating the location of the item, accommodating product elements like size and color. Once done, the robotic drive moves to the next workstation, leaving another pod ready in the queue to deliver product.
The scanning system leaves little to chance, while enabling associates to pick multiple orders simultaneously and completely. Blair says.
“It’s very nice for the worker because it is very accurate. They don’t have to think too much about what they are doing. It’s very clear.”
Increased space & flexibility
The Kiva system covers inventory control, forward replenishment, picking, packing, shipping sortation, finishing and quality assurance. With shipping sortation, for instance, orders can be picked depending on their destination. If the delivery is going from the East Coast to the West Coast, the order might get picked and packaged earlier in the workday to accommodate air travel schedules.
Rodgers says going to robotic fulfillment from a manual operation was a strategic decision to create leverage from expanding consumer interest in online shopping. Online spending during the 2011 holiday season (November 1 through December 31) reached $35.3 billion, according to digital research firm comScore – a 15 percent increase from 2010.
“This was a big bet Saks made ... during the throes of the recession. We asked, ‘What are some of the big bets we can make that are going to make a difference when we come out of this recession?’”
Rodgers says mobile-robotic fulfillment worked so well for Saks that the company implemented the system at Aberdeen much sooner than anticipated. Saks Direct initially converted four departments to Kiva, completing that phase by September 2010. The company waited to complete the remainder of the conversion so as to not interfere with the impending 2010 holiday shopping season, though executives already were convinced of its benefits, Rodgers says. Saks completed the makeover by June 2011, well ahead of the 30 months planned.
“It is a relatively new technology, bu5t from the day it started to today we haven’t had problem one. The biggest thing was how fast we could get the rest of it converted.”
Rodgers says two other benefits of the robotic system are space and flexibility. As online shopping is expanding rapidly among consumers, so is the need for retailers to keep more inventory in warehouses to satisfy service requirements for shipping and delivery. With dynamic shelving, Saks could create 30 percent more space at Aberdeen.
“It maximizes the issue of shelving [because] it’s a non-human environment. People don’t have to walk up and down aisles, and you can pack items in more closely.”
Rapid product delivery
As it expands its omni-channel marketing efforts, Saks is seeking to grow its distribution footprint – possibly to new facilities. Since the Kiva system is based on a mobile principle. Rogers says.
“I can pick it up and move it to other locations."
Blair says that in today’s e-commerce consumer environment, superior customer service demands super-fast product delivery.
“It used to be that [retailers] could take a week to get you something. That has changed. Everyone now expects that shipping is going to be quick and that it may even be free. Consumers also expect to have value-added services like gift wrapping and all those other things. Expectations have gone way up.”
Rodgers says the benefits from robotic fulfillment have been like a rallying cry for Saks.
“We’ve done things our competition hasn’t done. Everybody feels really happy about it. It is one of the things we hold up as a strategic investment that is paying big dividends for the company, not only from a return on investment standpoint but also from a service standpoint. That’s probably the most important thing in the dot-com arena.”
COMMENTARY: Kiva Systems delivers accuracy, productivity and flexibility across a wide range of products, processes and industries. Kiva distribution operations handle products from aspirin to audio components, books to bath towels, crutches to candles, diapers to dishes, elbow pads to earrings, fan belts to folders, golf balls to ball gowns, hair gel to hand bags…well, you get the picture. If a product is picked as eaches or cases to satisfy orders, a Kiva system will handle it more accurately, productively and cost-effectively than any traditional automation approach.
Kiva automates eCommerce and catalog direct-to-consumer fulfillment, business-to-business order fulfillment, retail store re-stocking operations, industrial MRO and parts distribution, work-in-process parts supply functions, medical and hospital restocking programs and other order processing operations across a diverse spectrum of vertical markets. Kiva Systems has implemented its mobile-robotic order fulfillment system in these markets.
- eCommerce - Kiva is widely recognized as THE solution for eCommerce fulfillment.
For internet retailers the fulfillment center is the store and customer satisfaction is the top priority. Kiva makes it possible to pick eaches and cases as productively as full pallets. Kiva builds accuracy into the solution and enables just-in-time order fulfillment. Light directed picking, put-away and order consolidation combined with barcode scanning and multiple methods for confirming quantity ensure that inventory and orders are 99.9% accurate. Kiva does not require batching and waving of orders so any online order can be processed in as little as 15 minutes from the time a consumer submits an order to when a picked, packed and labeled package is sitting on a delivery truck. Additionally, Internet retailing often involves large assortments and strategies for offering the 'long tail' of goods selection that's impractical in brick-and-mortar stores. This imposes both storage and productivity challenges on eCommerce fulfillment operations tasked with handling high volumes of individually slow-moving goods.
- Retail - The Kiva solution allows retail distribution centers to improve service and lower inventory levels for the enterprise while improving distribution productivity. Kiva makes it possible to pick eaches and cases as productively as full pallets. Kiva delivers just-in-time store replenishment. By integrating store front-end systems with Kiva's back-end order processing system, retailers are capable of selling an item at store level and picking a replacement item in the distribution center within minutes. It is even viable to ship the store replenishment order on the same day.
- Medical Devices & Supplies - The Kiva solution simultaneously delivers speed, accuracy, productivity, and flexibility while meeting the challenges imposed on distribution operations by the inherent quality concerns of the medical supply chain. With Kiva it is possible to pick eaches and cases as productively as full pallets. Kiva builds accuracy into the solution and enables just-in-time order fulfillment. Light-directed picking, put-away and order consolidation, combined with barcode scanning and multiple methods for confirming quantity, ensure that inventory and orders are 99.9% accurate. The Kiva warehouse automation system was designed to meet medical device order fulfillment challenges while delivering operational efficiency and labor savings for distribution center operators.
- Apparel & Footwear - The Kiva solution enables apparel and footwear distribution centers to improve service and lower inventory levels for the enterprise while actually improving distribution productivity. Kiva makes it possible to pick eaches and cases as productively as full pallets. Kiva delivers just-in-time order processing. Kiva customers use the system to store and process single garment picks, cut-case picking, full case picking, garment-on-hanger selection, lay-flat handling, bagged goods, boxed goods and shoes of all size, shape and type. If your company is involved with distributing apparel and footwear products, Kiva has a solution that works for you.
- Health & Beauty - Operations that deal with health and beauty care (HBC) products are excellent candidates for automating with a Kiva solution. Cosmetics, skin care, hair products, vitamins, supplements and similar goods are often picked in each and case quantities to replenish retail stores and salons or to ship directly to consumers. High SKU counts are normal. There are a multitude of packaging configurations to deal with - inner packs, outer packs, cases, clamshells, peg-and-hook-friendly hanging packages, tubes, vials, bottles, and boxes of various shapes and sizes. Additionally, due to formulations and color choices many different products look almost identical which makes it a challenge to pick them accurately. The average warehouse worker would be hard pressed to tell the difference between tubes of red, ruby, scarlet and passion sunset lipstick without some systematic aid in the picking process.
- Other - Kiva automation solutions deliver accuracy, productivity and flexibility across a wide range of products, processes and industries. As opposed to traditional systems where many items are considered "non-conveyable," most items will work with Kiva. Kiva is flexible enough to handle just about any product that a single human can pick alone. Every new customer challenges us to handle at least one item we haven't seen before.
Kiva Systems' major customers include:
- Acumen Brands - ecommerce retailer
- Boston Scientific - medical device manufacturer
- Crate & Barrell - Housewares retailer
- Dansko - Footwear, socks and healthcare apparel manufacturer
- Diapers.com - ecommerce retailer
- Dillard's - Fashion apparel, cosmetics and home furnishings retailer
- Drugstore.com - Drug internet retailer
- Gap - Apparel, footwear and accessories retailer
- Gilt Group - Designer fashions retailer
- Office Depot - Office supplies and equipment retailer
- Saks Fifth Avenue - Apparel, footwear and accessories retailer
- Staples - Office supplies and equipment retailer
- Timberland - Footwear manufacturer and retailer
- Toys R Us - Toys retailer
- Walgreens - Drug retailer
|UPDATE: On March 19, 2012, Amazon.com announced that it has agreed to acquire Kiva Systems for about $775 million in cash. It is considered the latest bid by the online retailer to streamline its growing distribution network.|
Courtesy of an article appearing in the April 2012 issue of Stores Magazine