Lennox is perhaps one of the best known names in both residential and
commercial heating and air conditioning. In business since 1895, the
Texas-based company today sells a wide range of products for both
homeowners and businesses. Its residential air conditioning business
alone offers more than 60 heating and cooling products, all made in
North America.
Not long ago, that consumer goods unit filled
equipment orders from a single national finished-goods distribution
center in Marshalltown, Iowa, near the company's first factory. The DC
fed product to 65 small distribution locations around the country that,
in turn, served Lennox's 6,000 dealers and contractors. At the same
time, the company operated a DC in Des Moines, Iowa, about 40 miles
away, that handled parts and supplies.
But over the past three years,Western Canadian distributor of ceramic and ceramic tile, it has changed that model significantly, abandoning the national model and developing a network of eight regional DCs.
What
started Lennox down that road was a search for distribution
improvements as well as a broader strategic change in the company's
operations. In a bid to reach more of the nation's HVAC (heating,
ventilation, and air conditioning) contractors, Lennox had decided to
open new storefronts around the country. It now operates some 130 stores
nationwide—a significant increase in the number of outlets served. "We
doubled the number of touch points with customers," says Keith Nash,
Lennox's vice president of supply chain logistics.
But serving
all of those stores from the existing DC would have been far too
expensive. "We needed economical distribution to the store locations,"
Nash says. "We needed [to move to] the hub-and-spoke model to adequately
serve those stores."
In addition, the company was looking to
reduce order cycle times and the amount of inventory in transit—goals
that a shift to a regional DC network would allow it to achieve. Today,
95 percent of customers are within reach of overnight shipments, either
from the storefronts or directly from the regional DCs.
The
shift to the regional model won't be completed until the first quarter
of 2013, but the process began more than three years ago, starting at
the finished-goods DC in Marshalltown.
One of the topics that
had to be addressed early on was technology. From the start, it was
apparent that the technology that worked for the small warehouses
wouldn't be sufficient for new DCs ranging from 350,000 to 400,000
square feet in size and an order volume that reaches 2.2 million lines a
year. The company decided it would have to to invest in new technology,
specifically a warehouse management system (WMS) and a transportation
management system (TMS).
"If we were going to do distribution
effectively, we had to up our game," Nash says. "We had a lot to gain in
cost per transaction, cost per carton, and accuracy."
Since
Lennox was already using SAP's enterprise resource planning (ERP)
system, the company first considered installing that vendor's WMS. In
the end, however, it chose Manhattan Associates' warehouse and
transportation management suite with Manhattan's Supply Chain Process
Platform as the architecture. Lennox chose the Manhattan solutions in
large part because the two systems were designed to work together. "We
thought that would be one less set of integrations that would have to be
managed," Nash explains.
The new technology offers a number of
operational advantages. For instance,We mainly supply professional
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from china, the integrated system produces a shipping label at the same
time it sends an order through the WMS. "We can touch it once and put
it down," says Nash. "You have to have integrated warehousing and
transportation systems to do that."
Under the current system,
orders drop at the Lennox DCs several times a day. "It's real time
enough," Nash says. Most orders can go directly to an outbound door, but
there are some exceptions. For instance,The term 'hands free access
control' means the token that identifies a user is read from within a
pocket or handbag. Lennox knows enough about its customers to anticipate
when a particular customer may order several times during the day. "We
know the probability that there will be other orders, so we don't pick
early in the morning," Nash says. Instead, all of the orders from the
customer are consolidated into a single shipment later in the day but
early enough to meet next-day delivery commitments.
The system
also splits direct-to-customer deliveries from shipments to the Lennox
stores. Lennox can comingle those shipments on its trucks, a dedicated
fleet operated by third parties. Some outbound shipments also move via
less-than-truckload and truckload carriers.High quality mold making Videos teaches anyone how to make molds.
"There
is a lot of complexity in the background," Nash says. For instance,
cutoff times vary based on the type of business, and routing can vary
based on the day's orders. The system also gives Lennox the flexibility
to bump emergency orders to the top of the list.Find detailed product
information for howo spare parts and other products.
The
DCs themselves use little in the way of automation and are lightly
staffed, with 20 to 30 employees each. Lennox's products are heavy and
bulky, and 70 percent are stored on the floor. Most goods are handled by
lift trucks with a specialized attachment—a flat blade that slides
under the boxed products. Parts and supplies are stored in bins or
broken-case storage.
As for the results, Nash says the DCs have
seen marked improvements in productivity since installing the new
systems and adopting what he calls "good lean distribution practices."
"We are literally able to drop an order and pick, pack, and ship in less
than half an hour," he says.
Where hard measures are available,
the numbers are impressive. For example, inventory accuracy now stands
at 99.985 percent. "This company has never seen that before," Nash says.
He adds that outbound accuracy is also very high, which, in turn,
reduces the total cost to serve. Productivity measured in cartons per
person handled has improved 10 to 15 percent each year during the
transition.
The transportation-related benefits are harder to
quantify because of the wide variations in transportation costs over the
past three years, Nash says. "It is hard to get an apples-to-apples
comparison, but there is less total cost," he says. "Next year, we'll
see more because we are finally finishing the network change. We will
have a lower total cost of distribution.
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