A recent site visit, to a 1 million+ square foot grocery distribution center in the Northeast, provided yet another example of how important it is to view your supply chain infrastructure (buildings, equipment and technology) as a single cohesive unit.
The VP of Distribution was giving me the tour and as we worked our way across the dry warehouse, deliberately skipping the freezer, we started down one of the cooler aisles.
Dried Fruit in the Cooler
There, sitting in pick slots, among the usual deli and dairy items, were shelf-stable salad dressings and dried fruit: the kinds of things you’d expect to see in the dry. So why slot them in the cooler?
The VP explained to me that their WMS didn’t allow them to have the same vendor in two different warehouses, so they had to make a decision about what to do with vendors who ship them both dry and chilled products.
“We could create two different vendors for the same supplier," he said. "But that would create the administrative burden of multiple purchase orders, plus it would jeopardize our ability to get truck-load discounting. So, we chose the simpler route, which was to put the dry stuff into our cooler.”
For now, the company can manage the situation because it has ample capacity in the cooler. However, as volumes and SKUs increase – they recently launched a gorgeous new store concept that highlights fresh offerings – these invading grocery items will soon squeeze the cooler.
Hidden Costs of Neglecting Your Technology
Their WMS was leading-edge when they first installed it more than a decade ago, and it still supports robust warehouse functionality today. But after years of neglect, through acquisitions and turbulence, the technology underpinning the WMS failed to evolve. As such, it has created bizarre constraints that force operators to either trick it or live with its failings.
In this case, the failings mean less cooler capacity than the footprint suggests. If nothing else changes, this means the grocery retailer will be paying a premium for cooler expansion when what it really needs is considerably less expensive dry space.
Capital Infrastructure Road Map
That’s a lesson in infrastructure and a big reason why your capital investment decisions should always be guided by the strategies outlined in your company’s 5-7 year infrastructure road map.
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