Got children in pre-school or elementary school? Then you’re probably buying them new back-to-school lunchboxes and stickers—and their teachers are already stocking up with colorful flash cards and games that will help the kids with everything from telling time to learning their multiplication tables.

Quite a few of those cards and other learning aids come from Greensboro, N.C.-based Carson-Dellosa Publishing Company. And just about now, the company’s new warehouse in North Carolina is a blur of activity as its staff hurries to meet the back-to-school buying cycle, aiming to get all replenishment orders shipped within 72 hours.

It’s the toughest time of year for the company, and it’s only recently that it has been truly manageable. Previously, the publisher had been choking on its own paperwork, coping with an archaic warehouse layout, and struggling almightily to meet rising customer expectations. Delivery schedules were erratic with some orders arriving to the customer days after they were expected. Modern techniques such as cross-docking were not in the realm of reality.

Throughout the year, 90 percent of annual revenue comes in from more than 3,000 dealers across North America, with shipments of as many as 4,000 SKUs flowing out at a fairly steady pace. But business ramps up dramatically after Carson-Dellosa mails its catalog in June, with thousands of small orders pouring in each day from teachers readying their classrooms for the new semester. A new e-commerce site and enhanced Web site has added to the volume and variety of small orders.

Every summer, the company faces the same hectic mix of seasonal orders and multiple delivery channels. However, the difference between today and a few years ago is that now everyone, from forklift operators to shipping clerks, understands exactly why they have to hustle: They know that every order delivered accurately and on time is another reason why Carson-Dellosa should get the order the next time around.

And in a commodity business, that is a very good thing. “This market is extremely mature, and many of the products offered by our competitors look very similar to ours,” explains operations vice president Rich Lugo. “So for us, winning is very much about delivery.”

Putting it another way: Lugo and his team have turned their new facility into a competitive tool, not only using advanced warehouse management systems but also rewriting the book on how the facilities are laid out and how tasks are assigned. In turn, the company has saved millions in inventory reductions and reduced freight costs—and most importantly, improved customer satisfaction.

For much of the 31 years since the company’s founding, excellence in warehousing operations had not always been top-of-mind. The Carson-Dellosa brand—named for the teachers who founded the company in Ohio—was the educational publishing category’s equivalent of Polo or Cadillac, and the brand more or less carried the products through the dealer channels as well as through catalog sales to individual teachers.

But as competition tightened through the 1990s and into the new century, the market’s dynamics began to change. Customers who had once tolerated orders that shipped as much as 10 days late now had new expectations. “We were not one of the preferred suppliers because customers knew it would take a while to get their orders,” says Shannon McConnell, the company’s special projects coordinator and data analyst. No wonder. The company’s 48,000 square foot warehouse in Greensboro, N.C. (where they were located before moving to a larger facility in 2002 and moving again in 2006) ran on paper. Manual packing slips were the order of the day.

“When I came here six years ago, there were stacks of packing slips more than two feet high, spread out on the tables,” recalls Lugo. “The printer would never shut off.” After packing, the slips would be transferred to the customer service department to initiate billing, making order revisions next to impossible.

More troubling from an efficiency standpoint: the warehouse was structured so that items were located by item number, in numerical sequence. With no A-B-C categories prioritized according to what was selling, some of the fastest moving items were at the end of 70-foot aisles. “Employee-walk times to pick products were tremendous,” says Lugo.

At the same time, the packers were crammed into a small space, and the resulting bottleneck meant products were often lost or mixed with the wrong orders. At the start of the decade, the concept of forward visibility of order flow was, well, just a concept at Carson-Dellosa. Proactive planning was a rarity; the warehouse simply reacted to events.

Although the company was far from being in trouble, the senior management team realized that the company had to raise its game. They saw that they had to match Carson-Dellosa’s brand with equally lustrous service to customers.

It was clear to the team that the little warehouse was at its limits. It also became clear that the 127,000 square-foot facilities that the company moved to in 2002—with around 4,000 stocking locations compared to the couple of thousand available at the old facility—would not be able to meet the market’s needs or cope with growth in demand over the long term unless it also benefited from significant process changes.

Step One: Rich Lugo was hired from the apparel industry to embed best-practice supply chain management principles in the company’s operations. Determined to ensure that the warehouse would never be a deterrent to company growth, Lugo knew he had to bring best practices to bear on the facilities—and in doing so, he knew he needed to replace the blizzard of paperwork in order to improve order accuracy, boost asset utilization, and pick up delivery performance.

The logistics overhaul involved a long list of quick fixes as well as long-term process changes. At the top of the list: assuming control of hiring of summer staff. The human-resources department had been hiring the 60 or so temporary workers needed for the surge of back-to-school orders, but it had been taking a couple of weeks to bring them on board, getting summer deliveries off to a rocky start. The fix: Carson-Dellosa partnered with a staffing agency that was able to hire promptly.

To make more long-lasting changes, however, Lugo and his team had to have better data.

So, the team embarked on a program of analyzing its business processes—how it took orders, entered orders, anticipated demand, planned for peak shipping periods, organized warehouse layout, handled picking, and much more.

“The biggest thing for us was analyzing the sales data—ranking the products according to their sales performance,” says Lugo. With input from UPS Supply Chain Solutions and from materials handling specialist Warehouse Design, Inc., Carson-Dellosa quickly reworked its stocking locations according to product movement, significantly reducing travel times for picking large orders. The “flexible warehouse” pilot program soon led to warehouse areas that were prioritized by item demand. It also led to differentiated use of space. Whereas in the old facility, pallet racking heights were at standard 48-inch vertical spaces, the racking could now be adapted to lower heights for the many flat products such as posters and maps, pushing the numbers of stock locations up significantly.

Packing processes also went through a makeover. From eight tables at the original warehouse, the team added another 24, which helped minimize damage to products. Previously, it had not been easy to pack a mixed order without risking damage to a product at some point. The process analysis produced pre-planned product picks whose sequence matched the order in which products could be safely and space-efficiently packed.

The larger warehouse was also planned with logistics efficiencies in mind and designed around bar coding practices—the platform for ditching all that paperwork. In 2004, they began the automation initiative. Using Intermec handhelds and Infor’s warehouse management system (WMS) software, Carson-Dellosa’s warehouse workers could start seeing order volumes before they hit—and quickly get temporary staff up to speed on the new business processes.

Lugo figures the WMS paid for itself inside a year. “I remember five years ago, spending a week climbing in the racks to do an inventory count,” he recalls. “Now inventory accuracy means we don’t wrongly purchase items just because we can’t find it, as we used to do. Accuracy is so good that there’s no need for a big inventory count day.”

In 2005, the operations group also invested in Jada Management Systems’ supply chain planning module which allowed management to monitor the company’s sales history, correlate it to inventory on hand, and get daily bulletins on, for example, where stock-outs might occur. “That was huge,” says Lugo. “Before, a committee reviewed a report that ran to maybe 400 pages. Now you just sign in during the morning and the system advises you of how much inventory you have on hand.” Against a modest investment in the Jada system, Lugo estimates that Carson-Dellosa has saved several million dollars in inventory reductions and reduced freight costs.

At about this time, the investments in data gathering and analysis began to pay off. One example: Carson-Dellosa started using casepack quantities—standard cartons containing similar items—to better serve its many small dealers. “We found that customers would like to order our chartlets in quantities of 12. Previously they’d been packed loose,” says McConnell, who led the research. “That’s really increased our efficiencies in the warehouse.” She recalls earlier situations where pickers would literally count 96 posters for one order—and the customer would have to count out all 96 after receiving them. Now, each case is labeled with the contents, quantity, and UPC code.

For Carson-Dellosa, casepack orders are much faster to pick, pack, and ship, which helps provide for faster turn times on orders for all customers. A non-casepack order comprising thousands of items can take days to process. Now, when the order is mapped to casepack quantities, it can be processed in hours, with less need for temporary employees in the summer.

Lugo and his operations group have also put more emphasis on fast delivery. During the back-to-school season, the company is committed to shipping all replenishment orders within 72 hours. This helps meet the new expectations of the thousands of individual customers—mostly teachers and parents—and it helps lock in the loyalty of the many small dealers. The benefit to Carson-Dellosa: fewer phone calls to the customer service desk inquiring about order status.

To be able to offer those higher service levels, the operations department implemented three key initiatives:

Zoning: The first was the improvement of what is called “zoning” in the pick area. Zoning provides the opportunity to group orders that have items in the same area of the warehouse. That way, one picker can pick several orders at once in a concentrated area. The new facility, with more than two dozen discrete zones—11 more than in the first warehouse—offers the opportunity to break orders apart, allowing multiple people to pick one order. Zoning drastically cuts the processing time to complete an order.

MOGS: The second best-practice initiative is the creation of multi-order groups, or MOGS. MOGS are small orders, under 20 pounds each that are grouped together based on the size and location of the items in the order. The orders are then picked on carts that hold either 12 or 24 orders; a picker picks multiple orders at once rather than just one. On average, a picker can complete 96 orders and a packer can complete nearly 300 orders during an eight-hour shift. This initiative has enabled the warehouse to ship thousands of MOG orders each day and it helps minimize warehouse headcount while remaining on track with the goal of shipping replenishment orders inside 72 hours.

Order consolidation: The third big initiative is the consolidation of orders for several large accounts. By encouraging key accounts to place one large order rather than several small ones within a short time span, orders can go truckload rather than LTL. By shipping complete truckloads, in particular to the West Coast, Carson-Dellosa has been able to realize transportation savings of 20-30 percent. In the past, the customer would place several orders throughout the week and a carrier of the customer’s choice would collect the shipment. Now using Carson-Dellosa’s preferred carriers, Epes Logistics & Estes Express, the truck picks up a week’s worth of the customer’s orders each Friday, and the customer has the delivery by the following Monday at a considerable cost saving.

The next move forward came in December of 2006 when Carson-Dellosa moved into its new 183,000 square foot cross-dock facility in Greensboro. Many of the big improvements that Lugo and his team had put in place at the second warehouse could now be expanded and accelerated. For example, one aisle is now set aside as a “hot section” dedicated to the fastest-selling products.

At the same time, the team has been able to push utilization rates so that the newest facility has up to 7,500 stocking locations—five or six high over approximately 25 aisles. “If we hadn’t done the pilot program at the previous facility, we’d have been closer to 6,000,” explains Lugo. “This warehouse is totally flexible—you can flow-rack or flat-rack. Conveyors take product right into the truck—everybody packs to a conveyor. And we’ve been able to stop the third shift.”

The results of the best-practice initiatives have been impressive. During the first two quarters of fiscal year 2007, Carson-Dellosa’s operations department ran at six percent below budget. The increase in casepack orders helped cut the quantities of boxes purchased by more than 25 percent and reduced the amount of supplies purchased (including tape for the boxes) by over 44 percent of the amounts budgeted.

At the same time, freight costs have been held tight. While the number of skids shipped via truck increased by nearly a third during the first two quarters of 2007, freight costs have increased only a fraction of this amount thanks largely to order consolidation and truckload shipments rather than LTL to key customers.

Incoming freight costs are down too—by nearly 10 percent compared to the same period last year. This is largely due to the use of a just in time inventory (JIT) system which allows the purchasing department to call in inventory as needed and which helps the company to consolidate smaller shipments into full truckloads from key suppliers. While JIT was originally implemented to control inventory levels, it has been highly effective in reining in freight costs—and will continue to do so.

But the long-term benefit comes from increased customer satisfaction—particularly from Carson-Dellosa’s thousands of dealers. Letters arrive from appreciative customers lauding accurate packing slips and fast delivery times. Last year, the company won the National School Supply and Equipment Association’s customer service award. Lugo also credits the new warehouse operations with helping the company maintain market share in a fiercely competitive sector. “The market is so mature that if you don’t have these practices in place, you’ll be the first one to lose share,” he says.

And for the future? Says Lugo: “We’ve developed an infrastructure for growth. Now the company can take on something new immediately.” A case in point: the warehouse is gearing up to ship for another division of Carson-Dellosa that develops educational products for pre-school kids. But sometimes it’s the small signals of success that are the most gratifying. Both McConnell and Lugo cite the time when a customer came by with ice cream for the entire warehouse staff. “You know you’re doing something right when that happens,” says McConnell.