Coffee Talk

A new attitude is brewing at the Dunkin' Donuts Mid Atlantic Distribution Center in southern New Jersey. While Dunkin' Brands Inc. works to perk up its sleepy coffee and donut brands, the MADC has been quietly transforming itself into a customer service powerhouse, committed to providing its customers-Dunkin' Donuts franchisee owners-with whatever they need to succeed in business.

"Our distribution center is evolving into a total service facility for our franchisees, or 'members,' as we like to call them," says Craig Setter, the company's executive vice president and chief operating officer. "I'm not talking about distribution--that's just a small part of it. It's a very competitive environment out there. Take Starbucks, for example. Those are company-owned stores, so everything is taken care of for them. But our members are entrepreneurs and they're basically on their own."

That's about to change. Setter and his team are planning to offer their members a complete array of services-everything from medical and liability insurance, to paving store parking lots and snow removal assistance, to phone systems-in the near future. "We can negotiate better deals for them based on volume for almost anything they need," says Setter. "We've spent the past five years building a distribution infrastructure and now we're focusing on providing our members the tools and services they need to be successful."

What's fueling these lofty ambitions? A new facility, technological investment and a company-wide commitment to becoming a member-focused organization.

The MADC is one of four cooperative non-profit Dunkin' Donuts distribution centers owned collectively by the franchisees they serve. It distributes product to more than 1,700 Dunkin' Donuts locations in eight states. With the business booming-sales grew 10 percent last year--the company traded up to a bigger, cross-dock facility in Westampton, NJ. The company expects business to increase later this year when it takes over distribution for Baskin Robbins and TOGO's, two other franchise chains owned by Dunkin' Donuts parent company, Allied Domecq PLC, the British wine and spirits marketer.

The new facility, almost triple the size of the company's previous warehouse, will support the growing business. Setter and Warren Engard, director of operations, were involved in the planning of the 305,000-square-foot building. Long and narrow, with 134 dock doors, it's designed to move product in and out fast.

A one-stop shop for the members, the facility carries more than 1,200 SKUs. It stocks all of the ingredients to make the donuts--flour, yeast and glaze--and muffin mix and coffee beans, plus dry goods, paper goods, cleaning supplies, uniforms and foodservice equipment. If a member needs it, the MADC has it.

Thanks to the new layout, inventory turns much more quickly here than it did at the old facility. "We have less than one week of inventory on hand now, as opposed to 1.3 to 1.6 weeks, which represents millions of dollars in annual savings for us," says Setter.

Voice Recogniton: Boosting Productivity, Accuracy

Inventory is also turning faster because, inside the warehouse, voice technology is now the word. Like many foodservice distributors, the MADC was technologically behind the times, relying on manual systems. Before moving into its new location, however, the company began training its order selectors on a voice solution from Voxware Inc., Princeton, NJ.

Engard was impressed with voice technology when he saw it demonstrated six years ago. "I knew it was perfect for us-hands free and eyes free-and it eliminated paper," he says. "We were looking into warehouse management systems (WMS), but I didn't want to use barcodes or scan labels. Our selectors have to move 50-pound bags and I knew that if they used scanners we were going to take a productivity hit."

Back then, voice was still "bleeding edge," says Engard. Plus, voice solutions are typically integrated with a WMS, and at that time, the company didn't feel it was ready for one. Last year, however, the MADC began working with Voxware, which offers its solution, VoiceLogistics, as a stand-alone system. The solution, which consists of a wearable computer and a headset that communicates with a server, can support a variety of warehouse operations, including picking, receiving, putaway, cycle counting, replenishment, cross docking and returns.

The MADC rolled out the voice system in the dry area in its old warehouse, training a handful of selectors for about eight weeks. The initial trial went very well, says Engard.

"We started with VLS-310s and when we moved into the new facility, they upgraded us to 410s," says Engard. "The 410s have a longer battery life and the unit is faster."

Today, most of the order selectors are using VoiceLogistics in all areas of the new facility. The application in use at MADC can support multiple modes of picking. Order selectors can pick discrete orders, or multiple orders, in a single pick trip. In addition, batch picking operations are supported. Selectors can have from one to three pallets at a time, with pallets sectioned off according to separate stops on the delivery route. When a selector arrives at a pick location, he is directed to pick all of the units of the item needed for all of the stops. The voice software directs the selector to put the correct number of items in the appropriate pallet location corresponding to each stop.

The system can also direct workers to batch pick a total quantity that will satisfy many orders and deliver the picked goods to a truck or loading area. This location becomes a "dynamically created pick area." Later, another selector will be directed to this location by VoiceLogistics, and the batch-picked items will be distributed among the orders as loading progresses.

"The picking solution gives us greater picking accuracy, so we were able to deploy our order checkers into other areas of the business," says Engard. "In addition, we were getting higher productivity than in the past, so our cost to move the same amount of goods is less than it was before, which is good because our business growth is so aggressive."

The system has enabled the company to exceed 99.9 percent accuracy, so it could eliminate order-checking positions.

"The accuracy is great," says Setter. "Last week, on the dry side, we had 99.93 percent accuracy on about 285,000 pieces-and that's phenomenal. We've gone from 21 hours of picking down to nine or 10 hours because of VoiceLogistics and the layout of this building."

While the implementation went fairly smoothly, there were a few obstacles to overcome. One stumbling block was RF network coverage in the cooler--it turned out the facility had dead air. "That wasn't a Voxware problem," says Engard. "We had installed the network ourselves, so we had to go and change some of the antennae. Now, it's working perfectly."

Information Technology: Linking The Supply Chain

About the same time the MADC was implementing the voice system, the company began evaluating enterprise resource planning (ERP) solutions, and in the process, heard about Integrated Distribution Solutions (IDS) LLC, a software provider based in Omaha, NE. IDS had an ERP system, IDS Power Enterprise, that could be seamlessly integrated with other systems, and that caught Engard's attention.

"IDS could integrate the back-office side of the business with front-end systems, as well as with warehouse and transportation systems," says Engard. "When IDS demonstrated its products, we knew it was what we were looking for-a single solution that met most of our needs."

Two of the other Dunkin' Donuts distribution centers-the Midwest and Southeast-are also implementing the IDS system. The three will share an IBM eServer iSeries system, located at the MADC facility, with a backup system in Chicago.

"We will all be totally integrated with IDS. Even though we are independent operations, one of our goals is to be able to help each other out in case of an emergency," says Setter. "We're putting together contingency plans so that if a hurricane shuts the Southeast facility down, for example, we would be able to start picking product for them. We're all using the same item numbers and the same processes, so we can take orders from their members and vice versa."

Another benefit from having all three distribution centers linked is that if one is experiencing unexpected growth in a particular market and can't meet demand, one of the other DCs can help out until it gets up to speed.

The IDS system is expected to go live mid-summer. One IDS application the MADC will emply is IDS PowerNet, an Internet-based customer self-service tool. IDS PowerNet will allow the company's members to place orders and track inventory online in real time-and free up its customer's service representatives. "The bulk of our orders are placed by phone, but with IDS, we're going to move the stores into 100 percent online order entry," says Engard. "Instead of just taking orders, they'll actually be able to help our members run their businesses better."

The three Dunkin' Donuts DCs are implementing IDS Power Enterprise, IDS Power Warehouse and the IDS Customer Relationship Management applications. The full software portfolio will allow each of the DCs to manage their full supply chain, enabling them to track orders from suppliers, through the warehouse and out to their members' stores.

"We buy our coffee overseas, on the commodities market, for example, and we will be able to know when the vendor gets it, when it's prepared, when it's shipped and when it's set to arrive here," says Setter. "Then we'll be able to follow it through our WMS and TMS-right up to the point of sale in the shop. This will all be in real time, so any department in any given time will know exactly what's going on."

Distribution: On-Time Deliveries, Expanding Reach

In addition to the new facility and technology, the MADC is improving in other areas-especially in the transportation arena. The company is Ryder System Inc.'s largest leasing customer in the United Statesoperating out of a single facility. Ryder runs an onsite maintenance facility, with a crew of 14 workers.

"Our fleet has grown from 60 trucks to well over 300 pieces of equipment," says Setter. "Highway restrictions in New Jersey and New York have forced us to go from conventional tractor trailers to straight trucks in those areas, and because of the growth in the frozen side of the business, we've gone from refrigerated trailers to multi-temp. About half our trailers are multi-temp and we're working towards 100 percent."

While the larger Dunkin' Donuts stores receive direct shipments from the MADC, the smaller shops are served by commissaries, to which the MADC also delivers . For shops that are outside the MADC's eight-hour driving radius, the company takes advantage of domicile facilities that are operated by Ryder.

"We can load our truck here and haul the product to a Ryder drop yard, drop the trailer and have a driver make the deliveries to the local stores in that market," says Setter. An added benefit of using local drivers, he adds, is that they get to know the members-and inclement weather doesn't delay service.

"Take this recent snowstorm," he says. "We had enough time to get our trucks loaded and into the markets that were going to be hit. We load the trucks in the afternoon and they're out by 5 p.m. They start delivering at eight the next morning, so it gives them more than 12 hours to make a four-orfive-hour run. The snow doesn't stop them."

As Dunkin' Brands expands to the West, Setter hopes to take on additional business. "We hope they let us be part of that expansion as they set up their distribution network. Although we're only operating one shift each day, our warehouse is set up to operate 24 hours a day, so we could certainly handle the increased business, and Ryder could help us facilitate that."

To generate additional revenue, the MADC developed a separate truckload division. "The division allows us to handle close to 80 percent of our own backhauls," says Setter. "We'll take another company's product to a destination, pick our own product up and bring the product back. We control 80 percent to 90 percent of our inbounds ourselves." Another revenue stream is going to come from the facility's freezer. "We have a huge freezer and we want to get into third-party refrigerated warehousing," says Setter. "With the new WMS, we will be able to segregate the space and manage it as a separate inventory."

Right now, the MADC delivers to its members once a week, but will soon double that, according to Setter. "We want to be able to make two deliveries a week to every shop that wants it. That's a monumental task in just setting up the orders here and figuring out the routing. If you're delivering to a shop once a week, you know they're going to take a delivery, but if it's twice a week--and they have a light week-they may not take another delivery.

"That means we're going to have to continuously modify the routes and still hit the time frames that we've established with the other members so that they get their delivery when they're supposed to get it."

It all boils down to customer service. "It's going to take some time to change the mindset of our employees," says Setter. "Like our customer service reps, our drivers will also play a new role. They're just drivers now, but they're going to have to become salesmen."

But with its new facility, technology-and most of all-it's new, customer-focused attitude, the MADC is off to a great start.

Now, That's A Lot Of Joe

When the first Dunkin' Donuts shop opened in Quincy, MA, in 1950, founder Bill Rosenberg couldn't have imagined that, by the turn of the century, thousands of Dunkin' Donuts franchisees would be serving 2.7 million cups of coffee a day.

Today, Dunkin' Donuts is the number one retailer of coffee by-the-cup in America. There are more than 4,400 Dunkin' Donuts locations across 36 states, the majority of which are located in the Mid Atlantic and Northeast. In fact, 80 percent of its sales come from just 35 percent of the United States, but not for much longer.

Dunkin' Donuts is looking to expand to the Midwest and South and has entered four new markets--Cleveland; Charlotte, NC; Tampa, FL; and Cincinnati. The company plans to open up more than 500 stores this year, taking on its two rivals, Starbucks Corp. and Krispy Creme, which have a much tighter stronghold on the West and South.

While both competitors have posted double-digit growth over the past couple of years, Dunkin Donuts has done pretty well itself. Sales increased last year by 10 percent-not too shabby for a 55-year old brand.

That's because Dunkin' Donuts is creating a new recipe for success. First, it expanded its menu beyond doughnuts to include bagels, low-fat muffins and breakfast sandwiches. Next, it launched the Coolatta to compete with Starbuck's Frappuccino, and added flavored coffees at lower price points than its competitors.

Most recently, Dunkin' Donuts has added lattes, cappuccinos and espressos to its mix. Anything its competitors can do, Dunkin' Donuts thinks it can do better-and cheaper.

Voice Significantly Reduces Training Time

So, what's it like to listen to computer commands all day through a headset? We spoke to two order selectors at the Dunkin' Donuts Mid Atlantic Distribution Center to see how they liked the technology.

"Speed is the number one benefit-the technology substantially speeds up the process," says Joe Licciardelli, an order selector who's been with the MADC for a year and a half. "With Voxware, there's no paper whatsoever, so you're not fumbling around with paperwork. The system puts everything in order for you, tells you where to go and how many items to pick. You can ask it anything you want, say to repeat a location, and it will give you the information."

While Licciardelli was excited to learn the system, Phil Howard, a relatively new selector, had doubts about the technology at first. "I started out on paper when I first joined the company and became pretty comfortable with the process. I was skeptical about switching to voice, but the learning curve was short-it only took me one week to get up to speed on VoiceLogistics. Plus, once I was comfortable with it, I was able to do my job much faster."

That's one of the major benefits of the voice technology-it significantly reduces training time. "It used to take up to eight weeks for a new worker to reach our standard performance level, but with VoiceLogistics someone with little or no warehouse experience can move to standard in half the time it used to take," says Warren Engard, director of operations.

Using voice, the MADC had to change the way it trains its selectors. "We used to have a new selector train with an experienced selector, but with the trainer wearing the headset, the trainee couldn't listen in, so we've been trying different ideas to improve the training," says Engard, adding that he's found it easier to transition the newer order selectors to VoiceLogistics than the more experienced workers.

"We've decided to train one week on paper picking and then move them right on to VoiceLogistics, with a minimum exposure to paperwork," he says. "The paperwork gives the seasoned selectors comfort because when they get their order, they can see the entire order in one glance, and with VoiceLogistics, you don't get that.

"Once they start to realize that they don't need all that information, they learn to trust the system and just go."

The solution speaks for itself. "I'm really into technology, so I'm all for anything that will make my day easier and faster," says Licciardelli. "I haven't found any drawbacks--and I would never go back to paper picking."

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