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Warehousing and distribution activities in the food and consumer goods industries have never been more complex. Companies must handle an ever growing number of SKUs and do it in a cost effective way. This places pressure on both manufacturers and retailers to make the most of their distribution center (DC) space. The solution is often found in technologies that can make the most of smaller footprints without requiring the addition of labor.

CVS Pharmacy is among those companies that have sought out technology to maximize its DC operations. A recently opened DC in Ennis, TX, showcases the latest in integrated solutions and allows CVS to operate in half the space of a conventional DC. Using Witron's integrated technology for storage, product retrieval and order picking, the DC is 30 percent more productive than a comparable "manual" facility and is highly cost effective from a time and labor perspective. The equipment includes mini-load or tote automated storage and retrieval cranes, unit load or pallet automated storage and retrieval cranes, precision racking, pick-to-light, conveyor-to-transport totes and pallets, and scissor lifts..

CVS is able to provide customized deliveries to its stores and has sped up product replenishment. The new DC has been so successful, in fact, that the company is currently building a second, similar DC in Florida, scheduled to open sometime in 2006.

Traditionally, the food industry has operated its warehouses and distribution centers with a fairly manual approach. But as with CVS, that's beginning to change. "The food industry is beginning to look at technology a bit more than in the past because the reduction of labor and real estate costs is so important today," says Steve Simonson, a partner at Tompkins Associates, Raleigh, NC. "DCs in the food industry can go up to a million square feet, so companies need to cut costs somehow. They're looking to use automation to do this."

Ed Frazelle, president and CEO of Logistics Resources International, Atlanta, agrees. "The higher the cost of occupancy per square foot, the easier it is to justify automated material handling systems that yield high-density storage," he says. Also, he adds, "The fewer hours worked per year per headcount, the easier it is to justify high levels of material handling automation."

Bill Ostermeyer, vice president, automated sales and consulting at Swisslog, Buchs/Aarau, Switzerland, says that automation is the direction most companies are heading. "There is a transition from mechanization to automation, which means information gathering and optimization layered on top of mechanization in an integrated supply chain logistics system," he says.

Take Five As the industry evolves, more and more automated DCs like the CVS facility are being built. As these DCs become more common, clear automation trends in food distribution are emerging.

Five types of technology stand out as the food industry takes the path of automation. They include voice recognition, AS/RS, dynamic slotting, automation in the cooler/freezer areas, and the emerging trend of RFID. Below we delve into each technology and its impact on food distribution:

Voice recognition: Where Wal-Mart goes, others will generally follow. So the fact that Wal-Mart is among those in the food industry to install voice recognition systems in its DCs "speaks volumes." Consultant Ken Ackerman of Columbus, OH, says that voice technology is "the biggest trend" in automation in the food industry. "The price has come down, and productivity and accuracy go way up," he says.

In addition to Wal-Mart, Kroger and many other retailers already have voice technology in place. On the manufacturing side, Baton Rouge, LA-based Associated Grocers Inc. recently added the technology to its 575,000-square-foot facility. The company was looking for a solution to help it handle greater volumes while also improving customer service. It placed a Vocollect voice-directed solution to select full cases from pallet racks and to pick individual items in the repack area. Since implementing the technology, the company has seen improvements to picking accuracy, optimized labor, productivity and inventory control.

Ackerman says that in addition to the productivity gains that can be achieved from voice directed technology, there's the "cool" factor. "Kids love this technology and that helps with employee retention," he points out.

AS/RS: With the need for large DCs and with the cost of real estate escalating at record rates, food companies are interested in technologies that can cut their costs of occupancy. One way to maximize the use of the footprint is to install high-density storage solutions like automated storage/retrieval systems (AS/RS).

"High-rise AS/RS is gradually becoming popular in the food industry," says Sheldon Green, regional manager at Murata Machinery USA, Charlotte, NC. "AS/RS can offer greater productivity with reduced cycle time, improved quality and reduced cost, enabling improved competitive positions for food industry DCs."

Paul Hermsen, president of Venray, Netherlands-based Inther, says that AS/RS provides a big jump in efficiency. "You get automated replenishment, taking the job away from people and reducing labor costs," he says.

While AS/RS can be costly, running anywhere from $5 million to $8 million depending on the SKU count, the cost is justified in the footprint savings, says Simonson.

Further savings are realized through productivity gains, says Victor Hoerst, manager of business development at Witron Integrated Logistics Corp., based in Ventura Heights, IL. "In the DC, a person can spend 60 percent to 70 percent of his time looking for items," he says. "If you can reduce that, you get a big boost in productivity."

Automation in cooler/freezer space: The frozen food sector of the food industry is growing by leaps and bounds, fueled by increased consumer demand for prepared entrees. "Ten years ago, the freezer area of the grocery store made up only one aisle in the store, or about 5 percent to 10 percent of the floor space," says Robert Lyon, at HK Systems, New Berlin, WI. "Today it encompasses two or three aisles or about 10 percent to 20 percent of floor space. We see this trend continuing over the next several years."

As a result of this trend, productivity in the freezer section of the DC is more important than ever. In recent years, there's been a push to add more automation to this area--a welcome relief to workers who must endure temperatures ranging from -30F to +35F. "This is a harsh environment for personnel with low labor efficiency rates and high labor costs," says Lyon. "We've recently completed projects for HP Hood Dairy, Wells Blue Bunny Ice Cream and several other projects are in the design phase and will begin construction this year."

Ross Halket, business development manager for automated systems at Charlotte, NC-based Schaefer U.S., adds that higher density storage will become a feature in freezer space as well in order to lower energy consumption in the cooler/freezer area.

Dynamic slotting: The number of SKUs on store shelves continues to rise as it does also in the DC. At the same time, however, "everyone wants less inventory," according to Witron's Hoerst. "Retailers have to carry more items, so DCs need more pick faces."

However, most companies don't want to have to add space to their DCs. The solution, says Hoerst, is through technology like dynamic slotting. "If you have 10,000 SKUs, you need that many pick faces," he says. "But if you have equipment that can bring the products to you, you can work with only the SKUs you need for that day, say 3,000 SKUs." This makes it possible to handle more SKUs with less labor and a smaller footprint. Productivity goes up and costs go down.

Dynamic slotting is accomplished through a combination of equipment. Usually this is made up of a mini-load or unit load crane (AS/RS), pick-to-light or pick-to-voice technology, and a robust WMS to bring everything together, says Hoerst.

RFID: "The number one technology exploding in the automated material handling business for food DCs is RFID," says Murata's Green. "The largest retailer in the business drove a stake in the ground in mid-2004 challenging the RFID suppliers to provide product at the right price in the near future. RFID will absolutely revolutionize point-of-sale at the retail level and in food industry DCs."

Green is not alone in his opinion of the impact of RFID. Most in the industry believe its impact will be great, although how soon it will become a day-to-day reality is anyone's guess. "RFID is an emerging trend, but no one has yet defined where the savings will come from," says Tompkin's Simonson. "It will take a while to see where it goes."

Still, the promise of RFID remains high. "The technology enables 100 percent automated inventory at all locations in DCs and retail stores," says Green. "Products will not need to be passed over scanners and shrinkage will become a thing of the past."

The future of food distribution will likely include more automation. "Supply will be initiated by demand, which is only possible with shorter cycle times," says Schaefer's Halket. "That requires automation."

Swisslog's Ostermeyer sees the future of the DC including increasing amounts of automation. "The future will integrate retail store operations with the DC and manufacturing facility, incorporating appropriate automation to minimize product touches from production to the consumer," he says. "The justifiable levels of automation will vary between companies balancing ROI, corporate cultures, financial limitations and ultimately, the need to survive in an extremely competitive marketplace."

For now, the United States remains behind Japan and Europe in automation, but Green sees that all changing. "The trends in technology today will enable U.S. food industry distribution to become first-in-class worldwide," he says. "As the larger DCs implement automation, it paves the way for others to follow."