South American Food Retailer Consolidates 3 Distribution Centers

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Client / Industry

A large South American retail grocery company with over 70 stores and some centralized distribution operations.

Scope of KOM International's Mandate

The client was experiencing high distribution costs and poor store service levels as a result of inventory being held across 3 partial-line distribution centers. KOM International recommended the consolidation of these facilities into a single 21,800 square meter full-line distribution center. KOM International designed and implemented the state-of-the-art facility.

Critical Issues

• High warehouse operations costs
  
  
• High transportation operations costs
  
  
• Product freshness issues
  
  
• Store service levels were below objectives
  

Objectives

• Introduce a new full-line grocery and perishables distribution center to service all 70 stores
  
  
• Reduce logistics costs to improve profitability and net working capital
  
  
• Improve perishables product quality at retail

KOM International's Recommendations

• Multi-temperature loading, shipping and delivery
  
  
• Assured the cold chain for fruits and vegetables throughout the distribution process
  
  
• Shipment of selected orders on pallets to eliminate the use of trolleys
  
  
• Adjusted dock heights to comply with inbound and outbound trucks
  
  
• Flow-through process for 13 degrees Celsius fruits and vegetables
  
  
• Receipt of supplier goods on pallets to reduce the number of required truck doors
  
  
• Slotted the products for increased picking efficiency
  
  
• Restructured process flows in the General Merchandise area
  
  
• Introduced double-deep reach trucks and double pallet jacks to improve labor productivity
  
  
• Conducted order selector training and productivity monitoring

Benefits

• Improved storage capacity using double deep racking and the full building height of the existing distribution center enabling the consolidation of all three facilities into a single distribution center
  
  
• A planned 2,000 square meter facility expansion was canceled resulting in a capital investment avoidance of $1,000,000 U.S.
  
  
• By receiving goods on pallets, a projected purchase of 30 truck doors was canceled resulting in a capital investment avoidance of $500,000 U.S.
  
  
• A manpower saving of $200,000 U.S./year was achieved by using pallets for shipping to the stores rather than using trolleys