El Dorado hosts forum on warehouse logistics
By Clint Engel -- Furniture Today, March 17, 2003
Miami Beach, Fla. — El Dorado Furniture will complete later this year a 125,000-square-foot expansion at its Florida distribution center, but Pedro Capo said the Top 100 store now believes it could have put the project off.
That's because it recently completed installation of a new warehouse management system that goes far beyond radio-frequency inventory tracking. The move has improved back-shop productivity and efficiency, creating space that wasn't available just a few months ago.
"We probably could have postponed (the warehouse expansion) another two or three years," said Capo, El Dorado's chief operating officer, speaking to a group of industry retailers here.
His remarks were part of a two-day forum hosted by El Dorado on the topic, "Accelerating Profitability Through Logistics Excellence." The gathering featured the software system and services of Charlotte, N.C.-based Logistics & Internet Systems, or LIS, which has offered warehouse management systems for years but is relatively new to the furniture industry.
LIS's Dispatcher-WMS system, customized for furniture retailers, manages the eight-store El Dorado's 250,000-square-foot warehouse operation, including computer-controlled picking and put-away of merchandise, customer pickups and the handling of damaged or returned merchandise. The latter was described as previously nightmarish and error-prone by El Dorado Vice President and Chief Information Officer Jesus Capo.
The system works in real time and can move incoming furniture straight to delivery staging areas as customer orders come in. It's also capable of "interleaving," where stock pickers pull and put away merchandise on the same aisle runs as up-to-the-minute information is fed to them in mid-task.
El Dorado customers, who used to wait 30 minutes for take-home merchandise, now can pick it up in three to five minutes, Capo said. And the system has facilitated the store's same-day delivery.
Dispatcher-WMS knows which lift operator is closest to the merchandise needed, and it develops put-away patterns so the fastest-moving goods shift to racks closest to delivery doors. The system also measures individual worker productivity by both the number of pieces picked and the size or volume of what's picked.
Jesus Capo called the resulting productivity and customer service improvements "nothing short of spectacular" since El Dorado began a staged installation of the system in October 2001.
Among the problems solved was a plethora of repacked returns, which were piling up on racks. Previously, salespeople controlled allocation of such goods, but they typically didn't want repacked items going out to their customers. Under the new system, the software prioritizes picks so that repacked items are among the first to go, and that's helped reduce repack racks from about 10 in 2001 to under four in 2002.
In addition to getting repacked furniture back out the door, the system stops them from piling up by taking incoming customer returns and cross-docking them to new customer deliveries without merchandise ever hitting the racks again.
El Dorado was part of a consortium of four retailers that investigated LIS and paid for the interface between LIS and a GERS host system. Two others, Steinhafels of New Berlin, Wis., and Slumberland of Little Canada, Minn., have installed Dispatcher-WMS.
Groveport, Ohio-based Sofa Express, part of the original group, is set to install it, and Sleepy's of Bethpage, N.Y., will have it up and running in May.
At the LIS-sponsored conference here, El Dorado brought in executives from these retailers as well as other prospects that use both GERS and Storis retail software systems, hoping to sell them on the technology.
"(LIS) was probably the only company that wanted to invest the time and energy in the furniture industry on the warehouse level," said Pedro Capo. El Dorado stands to benefit from others buying the system because their input will lead to further improvements, he said.
El Dorado paid an estimated $1.2 million to convert to the largely paperless warehouse system, including code-reading guns and other hardware. "I expect within 12 to 18 months (of the November 2002 installation) to get my investment back," Pedro Capo said.
LIS President Jerry Neville estimated his company's system and services would cost a furniture retailer from $300,000 to $550,000 depending on size. With related hardware, the total cost could reach $1 million, he said.
"We have a lot of down time in our warehouse — mostly related to paperwork (holdups) — and I think this would eliminate that," said Kim Fleming-Crouchet, vice president of the five-store Home Furniture in Lafayette, La.,
She said Home has not committed but is seriously considering LIS for a 70,000-square-foot, racked distribution center currently under construction. "If you don't have something like this and you want to grow, it's a challenge," she said.
Conference attendees also heard from Bill Lindler, consultant and president of Atlanta-based United Steel Storage, which has worked on logistics and warehouse projects for many Top 100 furniture stores. He noted Costco's recent standalone furniture store venture — Costco Home in Kirkland, Wash. — makes the wholesale club retailer the most recent big-box company to enter furniture retailing.
"One day, one of them will be successful," Lindler said, and furniture retailers will need all the efficiency at their disposal, including warehouse management systems, in order to win.
"Either you've got to dominate your market or they're going to dominate it," he said. "You can either do this today, or you can wait till it's strategic and you must do it."
While El Dorado has connected its LIS warehouse system to information coming from GERS at the stores, GERS also has a warehouse management system used by 99% of its customers, or more than 200 companies, said Phil Kenney, GERS vice president of marketing.
He said GERS plans to add more functionality to its warehouse system over the next 12 to 15 months.
Among other things, Kenney said GERS is working with Mor Furniture for Less of San Diego to design interleaving capabilities. Worker productivity analysis should be added in about six months, he said.
Ira Bakst, executive vice president and co-founder of Storis Management Systems, said Storis has met with LIS representatives and was impressed with the company's credentials.
"But like any product out there, there has to be a demand from our user base to (develop an interface to LIS software)," he said. Storis is doing a lot of work in the warehouse management arena, Bakst said, but remains open to working with LIS.
