For Shanghai Kedi Logistics,
how this efficiency achieved?
 
Index Before HDWMS After HDWMS
Turnover rate 7 days 5 days
Picking efficiency, minutes per day 90 seconds 40 seconds
Delivering time 24 hours 12 hours
Labor cost saved 40 persons 20 persons
Picking accuracy   2/%%
Check efficiency   100% boxes
Transport route   decreased 20%
loading efficiency   increased 15%
dimensional and dynamic putaway Fulfilled
expiration spoilage amount Decreased
FIFO, batch management Fulfilled.
   
  1. Route of Shanghai KeDi Logistics Center
 
¡ó Before 2004, Kedi CVS was served by a 3PL, Brightdairy Logistics in which about 10 thousands square meters was separately for it.
¡ó Jan.1 2004, Kedi CVS established their own logistics division by internal staff to operate logistics business.
¡ó On second half of 2004, Kedi searched another 10 thousands M2 for its new logistics center to get total 20 thousands M2 warehouse. It would serve for more than 1300 CVS stores and extend to 3PL business.
¡ó March 2005, Kedi new logistics center opened
¡ó June 20, 2006, Cold chain of Kedi logistics formally opened which is the index of China CVS DC entering into new era.

  2. IT Way of Kedi Logistics
 
In this case, HEADING cooperated with Kedi from beginning, provided Kedi total consulting and implementation, including critical system HDWMS, process consulting via ARIS, interface to RF, CAPS, implementation and training.

2.1 Characteristics of Kedi logistics
For Kedi logistics has to server for all Kedi CVS stores, highly increasing stores require

2.1.1 Large amount of delivering stores, more than 1300 stores
2.1.2 Extended scope covering 18 cities and area in Shanghai, Jiangsuand Zhejiang province
2.1.3 Big amount of shipment, about 2 million RMB per day
2.1.4 Large quantity of shipment, about 20 thousands boxes per day
2.1.5 High devanning rate to reach 85%
2.1.6 Frequent delivering, at least 1 time per day within 24 hours

2.2 How to Improve Critical KPIs ?
It seems hard to improve some KPIs such as inventory ratio, picking accuracy, picking efficiency, spoilage ratio when they have been achieved a certain level.
2.2.1 Picking Accuracy
Whole check of picking turnover boxes can theoretically improve picking accuracy, but in practice a partial of turnover boxes will be checked for big cost.

2.2.2 Picking Efficiency
We prefer to optimize process and layout in warehouse other than increase labor. We analyze what are little value-added jobs and decrease them.

2.2.3 Stock Spoilage
Stock spoilage including those by expiration can be improved via FIFO. To achieve strict FIFO needs more than manual experience.
Analysis and operation on large amount of existing data before optimization is needed to improve above KPIs.

  3. New Technology, New Methods, New Efficiency Brought in Kedi Logistics
 
New technology
¡ó HDWMS: HEADING Warehouse Management System
¡ó RF handheld, HDWSM provides interface to it.
¡ó CAPS, HDWSM provides application modules and interface to it.

New methods
¡ó Real time delivering for store
¡ó ABC method in warehouse
¡ó FIFO
¡óReengineering and optimization of process
¡ó Dynamic stock putaway and stock take
¡ó Automatic checking
¡ó Automatic loading

New efficiency Achieved
Such as :
¡ó Picking efficiency improved from 90 seconds to 40 seconds for one store
¡ó Delivering time improved form 24 hours to 12 hours
¡ó Labor cost decreased, such as, picking labor saved from 40 persons to 20 persons
¡ó Picking accuracy enhanced to 2/10000
¡ó Check efficiency enhanced to 100% boxes can be checked.
¡ó Transport management efficiency improved such as total route decrease 20% via optimized route suggested by electrical map, cargo loading efficiency increased 15% via automatic loading calculating on volume and capacity.
¡ó Putaway space utilized efficiency increased, such as, dimensional and dynamic putaway was fulfilled to replace old one.
¡ó Receiving accuracy highly increased, expiration spoilage amount decreased; check via barcode, FIFO, batch management are fulfilled.
¡ó Electrical operation on damaged merchandise returning from the stores is fulfilled via scanner.


  4. How a New Logistics is fulfilled?
 
4.1 Picking efficiency enhanced and cost down by ABC method
ABC method is adopted here to distinguish goods. A for high frequency picking, B for normal frequency picking, C for low frequency picking. It can save labor with little added value.
Such as, in average layout picking area, picking person has to use same minutes in walking to pick each item, some of them are little value. When ABC method is fulfilled , we collect A and B in a same area, and C in another area, among C area, more or less frequency items are also distinguished. So, total time in walking, that is total picking time can be saved.
IT system is critical for large amount of data are collected, monitored and analyzed to achieve optimized suggestion. HDWMS can do this and specify better picking slot for different item.

4.2 Picking accuracy improved by CAPS and slot optimization
CAPS and slot optimization are adopted in devanning operation.
CAPS export picking slot code and amount to be picked to picker after receiving data from HDWMS, this can reduce labor mistake. Furthermore, picking tags are brought automatically in HDWMS, pickers work guided by tags to enhance full box picking accuracy.

4.3 Frequent delivering per day even real time
For small space store and highly running, DC of CVS prefer small quantity and frequent deliver. At least one deliver per day is required.
Today, Kedi stores require frequent even real-time deliver according to its sales. These requirement are submitted to HDWMS and CAPS in DC to fulfill via internet.

4.4 Automatic checking to enhance efficiency
When picking finished, HDWMS and CAPS will record information of these items in turnover boxes. Then, these items are checked automatically in HDWMS by weighing equipment to identify only those mistakes which will then be strictly explored by check person via RF.
So, total items can be checked via this way otherwise only 10% will be checked as sample. Comparing to commonly 10% check capacity, we can achieve 100% here.

4.5 Loading efficiency enhanced by automatic loading
HDWMS can suggest how many stores should be delivered by each vehicle by calculating number of turnover boxes, containers picking and number of items for each store comparing to vehicle volume. Suggestion can be amended manually.

4.6 Putaway space utility enhanced by dynamic puraway management
Dynamic stock putaway is adopted here to achieve space utility and efficiency.
When shipping to shelf, by receiving data from RF, HDWMS scan and suggest suitable location rea time according to stock existing and specified policy. When this flow finished, HDWMS fix this corresponding between item and location.

4.7 Receiving efficiency enhanced
Automatic receiving is fulfilled by HDWMS and RF.
In preview receiving, HDWMS automatically export receiving suggestion including pallet receiving dock according to order. After receiving, HDWMS record item, amount, produce date and weight according to data in RF, meanwhile transfer location data to RF real time.
Efficient receiving can be achieved by collaborating of HDWMS and RF.

4.8 Expired spoilage decreased by FIFO
Strict FIFO is fulfilled here to manage produce date and batch by collaborating of HDWMS and RF.
In receiving, RF record detail data of items including produce date and batch and transfer them to RF real time. In supplementary operation, HDWMS automatically pick those first in to keep with FIFO. In daily management, HDWMS alarm those will be expired.

4.9 ARIS to enhance business capability and capacity
ARIS tool is adopted in kedi logistics. Process and flow are reengineered and optimized to improve bottle-neck, labor and other resources via modeling and simulation.

  5. Continue optimization of kedi DC operation
 
5.1 TMS, transportation management system
Vehicle arrangement, tracking fee and velocity, labor valuation are fulfilled in system.
Tracking vehicle fee
Repair, annual auditing, insurance case, mileage record, various fee are recorded in this system. Status of fee and concerned staff can be identified easily.

Alarm management
Alarms such as date to be insurance, date to be maintained, date to be duty will be showed by system.
Labor performance valuation
Performance of hipping staff and drivers will be valued by concerned information recorded in system.
Vehicle arrangement Kanban
Departing time, route, loading dock etc. can be visible by HDWMS

5.2 Cold chain
Before June 2006, cold chain operation was outsourced to 3PL. Today, it is more and more critical for CVS.
DAS CAPS is adopted to fulfill delivering cold chain goods
High quality achieved by advanced technology and methods such as temperature controlling and automatic adjustment.
High efficiency of cold chain. Its DAS can handle more than 300 items almost 200 thousands pieces of goods and 6000 thousands of boxes for more than 1300 stores to achieve first level internationally.
DAS supported by HEADING contribute greatly to kedi cold chain operation.

5.3 Reverse Logistics
It is important for a DC which contains distributing discrepancy, handling, returns from store to DC then to vendor, turnover boxes recycle. They are supported in HDWSM.
Turnover boxes recycle and claim loss
Turnover boxes going with goods to stores should be recycled and transferred back to DC for next use. Some of them maybe claimed loss. HDWMS can support this process.
Distributing discrepancy handling
Under distributing from DC is not matched with receiving in store, store should report to DC by filling discrepancy form. HDWMS can support.

5.4 Multiple level DC architecture
Transferring Logistics business is applied in Kedi with increasing stores in other area such as Zhejiang province which is served by Linping Logistics other than Shanghai DC.
Linping Logistics redeliver goods picked by Shanghai DC to Zhejiang stores. In such status, HDWMS submit data needed by Linping to Shanghai DC, transferring documents are formed in Shanghai DC system then be delivered to Linping DC with goods, Linping DC receive goods according to this transferring documents and redeliver goods to Zhejiang stores.

5.5 Continue enhancement are achieved in normal temperature part
Collecting checking by RF to improve picking accuracy.
Putaway space utility improved by ordering model .
Receiving preview enablement in system to better resources utilizing
Cross dock for rapid receiving and shipping hot sales
Such as drinks in Summer, cross dock location is set both in system and space, assorting picking documents are brought in system. Operator transfer hot sales from cross dock to each store's pooling area according to assorting picking document. Cross dock can save large amount of labor and make high efficiency for hot sales.


  6. Brief Summary
 
There are different characteristics of logistics in different country. For those in Japan, highly automatic mechanization and IT system are adopted to fulfill big volume, for those in Taiwan, partial automatic mechanization and IT system are adopted to fulfill not big volume. For those in China such as Kedi, a few automatic mechanization while largely controlled by IT system are fulfilled. It deeply impressed visitors to Kedi logistics that its excellent ROI controlled by IT system other than advance equipment.

Competition of CVS today is focused on back-end other than front -end once before. DC efficiency can decide last winner. Management such as ABC picking, FIFO, frequent batch VS small amount fulfillment, handles with e-label , RF can be applied in DC. But, it is critical how to applied them to your DC step by step according to your goal and draft.

In this case, HEADING and Kedi created a beacon for DC and warehouse runners.