UNFI expects automated DCs to double pick speed

Dive Brief:

United Natural Foods has opened a new distribution center in Riverside, California, and has completed a "major expansion" at a facility in Ridgefield, Washington, UNFI President Chris Testa said on the company's earnings call last week.
"We introduced automation in portions of both of these distribution centers, where we expect to experience 100% increase in throughput as measured by units [picked] per hour, which will yield expense savings in addition to improving our order accuracy and lowering operational credits," Testa said.
The facilities handle a lot of slower-moving and each pick inventory. The company plans on having a network where within a region there will be a fast-moving warehouse, a slower moving warehouse and a general merchandise facility, CEO Steve Spinner said.

Dive Insight:

UNFI announced plans to begin optimizing its distribution center in the Pacific Northwest two years ago. And Spinner said it has also worked on similar efforts in Southern California. The company's whole network consists of 59 distribution centers that handle 1.3 billion cases a year, according to figures from the company last year.

Part of this effort involves distribution center consolidation. The network optimization happening in the Pacific Northwest and Southern California will result in the company going from 10 DCs to six in those two regions, according to statements Testa made in December. The reduction in the number of facilities will help to lower the wholesaler's fixed costs, he said.

"In both the Pacific Northwest and Southwest projects, we are modernizing our facilities by deploying automation, which is already proven to dramatically increase throughput levels, improve our capability to track labor, and lower operating costs," he said last year.

Technology and automation can often be important parts of warehouse consolidation efforts. Spirit AeroSystems was able to consolidate 500,000 square feet of warehouse space into a seven-story, 150,000-square-foot facility called the Global Digital Logistics Center that relies of technology for improving inventory accuracy and increased storage capacity.

Spinner said this week that operating multiple DCs involves redundancy across a number of expenses including inventory, trucks and material handling equipment.

"In a distribution business, the more volume you can flow through a singular DC, the more EBITDA you’re going to create," he said.

In 2019, Spinner noted that the consolidation will result in the company having 250,000 SKUs available on the West Coast across "every single category of product."

"No more than maybe a 100 miles from the customer and we will be the only wholesaler to do that," he said then. "And we'll be able to put it all on one truck. And so when you think about what value that brings to an independent or natural or specialty or supermarket, in that market is pretty spectacular."

As UNFI is working to make its distribution centers more efficient, it is also trying to make them more sustainable, Spinner said last week.

"We've challenged ourselves to reduce food waste by 50% by 2025, achieved zero waste to landfills from DCs by 2030," he said. "Reduce our distribution center energy intensity by 30% by 2030."

Increased automation does also increase the energy demand in warehouses, according to Swisslog, but steps like lowering conveyor speeds and coordinating autonomous movement to avoid simultaneous peaks can help to keep use down.