A Reserved store in one of the shopping malls in Poznań. As every week, new models have gone on sale. Size ranges in individual clothing collections are being replenished on the racks. Each replenishment order, generated based on daily sales history, triggers a logistics chain at the distribution center. Within 24 hours, the goods reach the shelves of stores: Reserved, Cropp, House, Mohito, Esotiq, belonging to LPP SA.
Automation of internal logistics processes as a condition for efficient distribution
The Polish company, which began its operations in the 1990s, today creates one of the largest retail clothing chains for customers of various age groups. People in 12 European markets dress in T-shirts, trousers, shirts, jackets, and underwear designed by the Gdańsk-based company LPP. New stores are constantly joining the 839 existing company outlets. There can be as many as 20 new ones in a single week. They are being established in Poland, where there are the most, but also in the Czech Republic, Slovakia, Romania, Bulgaria, Hungary, and the Baltic states. But the number of fashion enthusiasts for Polish collections is growing with every new store in Russia, Ukraine, and Belarus as well. In 2007, the sales results of all clothing brands promoted by LPP exceeded PLN 1 billion. Supplying the chain of stores according to the rules adopted by the company would be impossible without implementing efficient logistics processes in terms of warehousing, sorting, and product distribution. In 2007, LPP decided to build a Logistics Center that would keep up with the efficiency of the constantly growing retail chain.
Logistics has been in the hands of the manufacturer from the beginning. – “Before the latest logistics center in Pruszcz Gdański was built, we had many smaller locations in the Tri-City area. We had customs warehouses in them, where goods arriving in containers directly from the port were cleared. Even then, we wanted to improve manual sorting, which was a barrier to the speed of order fulfillment. Reference visits to the United States inspired us to automate this process” – recalls Stanisław Dreliszak, Logistics Director at LPP SA.
In one of these warehouses, in 2002, the first sorting plant was built, which allowed for the efficient distribution of clothes for 96 stores. But after 2 years, it turned out to be too small, because the number of stores had doubled, and each subsequent year brought further development of the retail chain. Distribution needs were growing, and the sorting plant was becoming less and less efficient. LPP did not decide to outsource the logistics department to an external operator. – “Despite talks held in the country, it was impossible to find a company that would take on such a task and have the appropriate technical facilities for this purpose. LPP is too large a company, with specific and often unique logistics processes, for anyone on the domestic market to be able to handle it independently overnight. Therefore, who better than people who know the company and its processes could do it better. It remained to develop logistics with internal forces, using previous experience. The decision to invest in a new logistics center took on a strategic character” – says Sebastian Sołtys, Director of the LPP SA Logistics Center.
The potential of an IT provider, implementation experience, and a complete offer are the basis for the success of an IT project in logistics
In the warehouse hall with an area of 30,000 sq m, which belongs to LPP and stands today on a 17-hectare plot near Pruszcz Gdański, all logistics processes have been centralized. Until recently, they were scattered across many locations. The key criterion for designing the facility was the maximum use of automation for internal logistics processes. A consulting firm accompanied the investor in developing the logistics concept. The next step was talks with equipment suppliers. The goal of the negotiations was to select the best devices on the market. Therefore, they did not look for a single supplier and technology from one source. They opted for innovation, at the cost of having to integrate individual sets of equipment. – “In such a case, more time is needed for testing and integrating the devices. However, the scale effect is enormous. In complex processes, the handling of which costs millions of zlotys annually, making an optimization of a few percent, at the cost of integrating the best products, even from several suppliers, pays off anyway” – claims Jacek Kujawa, Vice President of the Management Board of LPP SA.
The IT system managing the new warehouse was a key element of the entire investment. – “Unlike other industries, we introduce a new model to sale every week, whose sales cycle is no longer than 6 weeks, planning so-called allocations. Besides, we collect sales data from all stores every day and in this way replenish them to the intended levels, delivering individual pieces of clothing according to the sizes sold” – says Jacek Kujawa. Replenishment orders for each of the stores are generated automatically in the ERP IT system, which are then transferred to the WMS warehouse management system. This is how each order picking cycle is initiated. From its provider, experience in integrating with automatic devices was expected. And as it turned out, during the presentation, knowledge of one’s own product was also not without significance. – “A huge weakness of the companies participating in the tender was underestimating the complexity of the project that lay ahead of them. They were rather advertising their companies, and that was not what we expected. Many could not point to the development possibilities of the systems” – comments S. Dreliszak. The company that performed best in this IT casting was PSI Produkty i Systemy Informatyczne – the Polish branch of the German software manufacturer PSI AG. Ultimately, it was entrusted with the implementation of the WMS system at the LPP logistics center. What arguments prevailed? Technological potential, number of implementations, and experience. Contrary to the selection of warehouse equipment, for the investor in the IT sphere, the comprehensiveness of the offer available from PSI also mattered. – “We maintained moderation, wanting to buy all the necessary systems from one supplier. And PSI could provide us with the WMS warehouse management system and the MFC (Material Flow Control) application as a layer mediating between device control and the warehouse system” – argues S. Sołtys regarding the choice. Mikołaj Garbarek, Director of Logistics Systems at the Polish branch of PSI, explains that proprietary software allows for the integration of various applications in special cases. – “WMS supervises the logistics process and manages locations in the warehouse, operating at the business logic level, while the handling of internal flows, at the level of conveyors and sorters, is supervised by the MFC layer. Its functions consist of sending messages to the automation system about the types of subsequent tasks” – he adds.
The article comes from the magazine “Logistyka” 4/2010.