To cut delivery times and make sure that orders arrive on time, food producer Dairy Crest has centralised its delivery network, overhauling its IT infrastructure and increasing the level of automation in its supply chain.
The hub of the delivery network is an automated warehouse management system at the company's recently-built central depot in Nuneaton, Warwickshire. The previous warehouse in Hemel Hempstead, which had been run by Excel Logistics, was limited in size and its location was less than perfect. "It wasn't a systems problem," says Dairy Crest's business systems director David Batts. "What the company wanted to do was build a new centralised system."
The new warehouse in Nuneaton, which became operational at the end of last February, is bigger and the company has gone to great lengths to make sure it is as efficient as possible.
"The more you can automate things the greater the business benefit," says Batts. Of the Dairy Crest system, he says, "Some call it fully automated but I call it highly automated - nothing is ever fully automated." Workers are still required for the picking process, which is central to the whole operation.
Dairy Crest also decided to terminate its outsourcing contract with Excel and bring control of warehouse management back in-house. Having made that decision, it set a time-scale of just three weeks before going live.
The new warehouse is made up of three main halls. There is a finished goods store, a picking hall and a cheese maturing hall - all of which operate at different temperatures. The cheese maturing facility can hold 35,000 tonnes of cheese for up to 18 months. This allows the company to control not just the quantity of stock but also the quality, as the cheese continues to mature while in storage.
According to Batts, the situation is a vast improvement on previous arrangements, where the cheese was held in three or four different warehouses.
Every factory also had its own warehouse, which would send out orders direct to customers. Now most of Dairy Crest's orders are processed via the central Nuneaton facility, which helps the company to keep track of orders more effectively. This process is more efficient and the deliveries are better organised, resulting in transport savings.
A materials handling engineering system from logistics automation firm DAI controls the automated cranes, the monorail and the conveyor belts that transport the pallets in the warehouse and this is integrated with the company's distribution and finance system, which uses Geac's System21 enterprise software.
The integrated set-up allows the company to have an up-to-date picture of what is going on across the operation. As Batts says, "It's not real-time but it's as near to real-time as we can get it."
He adds that the warehousing operation has been central to the company's success and has helped it achieve a 99.95% delivery accuracy rate. How would Batts describe the system? "The word 'crucial' is the obvious one that springs to mind. Without it the ability to deliver products to our customers would be dramatically curtailed."
But although the warehouse management system is integral to the company's enterprise resource planning (ERP) outlook, Batts is keen to point out that it is not part of a generic ERP system. Rather, "it's tightly interfaced to an ERP system".
Batts believes the company's automated warehouse model would not sit well in a standard ERP system. When Dairy Crest was in the early stages of planning the warehouse management system it calculated that about 70% of the system would be focused on engineering issues, like controlling the monorail and the cranes. This would leave just 30% to drive the customer interface. So it developed an integrated system that was more tailored to its business needs.
But the situation was complicated when the company acquired rival firm Unigate in July 2000. Whereas Dairy Crest had been using the Geac system for its finance and distribution, Unigate had been using SAP software. Faced with the task of choosing between the two, the company chose Geac. As Batts explains, "We chose the one that would give us the quickest business benefit."
Since then Dairy Crest has been busy implementing the system across the whole of its operation. Batts says the process was completed in June and now the company's focus has changed. "For the past 12 months we've been focused on integration but during the next 18 months we will be looking more at business planning."
Dairy Crest expects the changes to save it £25m by 2003. But, for Batts, the major achievement of the project is not the added business benefits or the projected cost savings. "The good thing as far as I am concerned is that it allowed every one of us to focus on a common goal."
How Dairy Crest's warehouse management system works
- All the pallets have a barcode, which is scanned on arrival in the goods inward department of the warehouse to ascertain their weight and size
- Accepted pallets enter the warehouse via an automated conveyor belt
- The warehouse management system selects a location for the pallet
- Pallets are transported via a system of elevators, a monorail and an automated crane to the desired location. Details of these locations are stored in the system
- Orders are processed through the Geac System21. Pallets are then either retrieved automatically or instructions relayed to forklift truck drivers
- The System21 inventory is informed when pallets are dispatched and customers are notified that the delivery is on the way, using electronic data interchange.