L’Oreal: To automate or not to automate

A month from now, the North American materials handling industry will gather in Atlanta for the Modex supply chain show. Walking the floor, attendees will see the latest developments in materials handling automation, as well as the software and technology tools that promise to transform their operations to compete in a market that grows more demanding every day. Indeed, most large global manufacturers are in the midst of transformation projects: They are automating to meet the increasing demands of their customers and gain a sustainable edge.

Count Erik Rodriguez, director of supply chain for L’Oreal Americas. “The sheer volume of orders has increased, but the lines per order has decreased. Additionally, there’s pressure from our retail customers to reduce our lead times and improve our delivery times because they are running leaner inventories.”

Those customer challenges are happening against the backdrop of increasing competition for labor and a mandate to drive continuous improvements in safety and ergonomics. “In just about every major city where we have distribution centers, there is real competition for labor,” says Rodriguez. Put them together—the need for speed, quality, service and labor shortages—and “automation becomes a way to operate successfully within the context of these competing demands,” says Rodriguez.

In fact, new demands may be changing the rules for justifying automation, at least when it comes to the traditional measure of return on investment, adds Rich Werner, vice president of physical flows for L’Oreal’s consumer products division. “ROI is still important, but the justification for automation is no longer purely ROI,” he says. “It’s also the ability to meet the surges in demand on peak order days, the quality of the pallets going out the door and the improvements in ergonomics and safety that automation can bring to an organization.” To that end, L’Oreal is in the midst of implementing solutions as varied as robotics to automated goods-to-person solutions in its DCs on a global basis.

Here is a look at how and why L’Oreal embraced two different automation technologies. The first is a robotic layer picking solution (Cimcorp, cimcorp.com) in a 680,000-square-foot distribution center just down the road from the Florence, Ky., plant that manufactures hair care products. The second is slotting software (Optricity, optricity.com) that is reducing travel time and optimizing picking processes across some 23 DCs, with plans for more implementations.

Automation enables the business
What does L’Oreal look for when it considers new automation technology? “We look for scalability and the ability to connect with other pieces of automation in the future,” says Rodriguez. What’s more, the automation should in some way enable the business or enable new ways to meet the needs of the market.

The robotic layer picking solution in Walton, Ky., is an example of automation that met both of those criteria, according to Werner and Jonathan Hart, the director of physical flows for the consumer products division and who works in Walton.

Opened in 2009, the nearly 700,000-square-foot facility is located about 10 miles from the primary manufacturing location in North America for shampoos and conditioners. The location was no accident. “When you’re dealing with a product as heavy as shampoo, inbound freight is a big cost driver, and because we’re so close to the plant, our inbound costs are relatively low,” says Werner.

Until last February, it was a conventional full pallet in, full and mixed pallet out facility running three shifts a day. Fast moving SKUs were stored on the floor while slower moving SKUs were stored two pallets to a location in pallet rack. Most orders were for full pallets. However, in recent years, customers began asking for tiered—or mixed—pallets. While tiered pallets represented a small percentage of the business—a typical order might have 22 full pallets and two tiered pallets—the demand was growing.

Building them with manual labor was a challenge. For one, the quality of the loads just wasn’t as good as a full pallet, in part because customers didn’t always order a full tier of an SKU. Another was that all of that case picking to pallet was taking a toll on associates.
“A shampoo case weighs about 12 pounds, which meant that we had employees lifting thousands of pounds during a shift,” says Hart, adding that the facility was challenged when there was a surge in demand, such as providing the support for a new product launch.

L’Oreal approached the problem from two angles. The first was to align the sales strategy with a new fulfillment strategy proposed by the supply chain group. Rather than build mixed SKU pallets randomly, each tier, or layer, would represent one SKU. That would lead to better quality pallets going out the door; moreover, it would lend itself to automation. That meant convincing L’Oreal’s largest customers to order in a new way. That was first a sales challenge.

“We worked to understand how our customers receive pallets in their facilities, and then we would show them the difference in quality between the pallets they were ordering and a tiered pallet,” Werner says. With that piece in place, L’Oreal could find an automation technology to build the pallets and enable this new approach to the market.

Initially, Hart and Werner expected to implement some kind of goods-to-person solution. Then at ProMat in 2013, Hart saw a video of a robotic layer picking solution at one of the supplier booths. In this solution, an overhead gantry robot can pick a full layer of product from hundreds of donor pallets (L’Oreal has 350 pallet positions inside the automated picking area). The system requires very little conveyor space because the shipping pallet is stationary while the robot can move on three axes to pick full layers of product: forward and backward, side to side, and up and down. “What intrigued us the most is that the pallet doesn’t transport through the system during the build process, which minimized the amount of conveyor while providing the throughput rates we need during peaks to support product launches,” says Hart. Along with robotic layer picking, they also decided to implement very narrow aisle pallet storage with turret trucks to make better use of space.

Getting associate buy-in was critical to the project. “Once we knew we were going to automate, the first thing we did was to let the associates know what we were going to do and the reasons why were doing it,” says Werner. “We showed them videos of the system in operation and assured them that it wasn’t going to affect their jobs. We didn’t want them shocked when they saw the system rolling in through the doors.”

L’Oreal then worked to identify key individuals who had the initiative to learn how to operate the machine and take ownership. “We continually see the machine improving from a maturity standpoint because of those key individuals,” says Hart.

There were learning curves. For one, they had to balance work flows in the manual pick operations with the robotic order picker so that full pallets and tiered pallets for an order showed up at the loading dock at the same time. Otherwise, they would tie up valuable dock space. Another was developing a spare parts and preventative maintenance program for the automation. “You don’t want to bring down the system because you don’t have the right sensor in stock,” says Hart. “We were fortunate that we had a few mechanics who had experience with PLCs and automation, but we are still developing our maintenance program.”

Roughly one year after going live, L’Oreal can tick off a number of benefits from automation. From a logistics standpoint, the facility is better at cubing out trailer loads than in the past, is delivering higher quality pallets and is much better positioned to respond to demand in a timely way. Picking that used to be spread across three shifts is now done in just two, leading to labor savings. And, the facility is safer and more ergonomic since associates are no longer picking thousands of pounds per shift.

Robotic layer picking is the first phase of the projects for Walton. Phase two will introduce automatic guided vehicles (AGVs) to replenish the layer picker. “The AGVs on the market today we believe create a safer work environment,” says Rodriguez.

Slotting comes of age
Not all automation projects involve big capital investments in equipment. Beginning in 2012, L’Oreal began to ask what other types of tools it might be able to deploy that can be used in conjunction with mechanization to deliver a multiplier effect. One answer was slotting. L’Oreal was already using a homegrown slotting program with a lot of limitations. “We decided that slotting was something we could deploy easily and would pay for itself in a matter of months in some facilities,” Rodriguez recalls. “We also thought that it could complement what we were doing with labor management. To me, it was a basic tool.”

L’Oreal engaged a consultant from DMLogic to analyze the different suppliers and solutions available in the market from pure play slotting software vendors, from consulting organizations and as a module from one of the best-of-breed warehouse management system (WMS) providers. Once L’Oreal decided that it did not want to be beholden to a consultant or a WMS provider for slotting, the team and their consultant compiled a list of some two dozen attributes to meet its requirements and ran a tender. Eventually, the choice came down to two pure play candidates. The ultimate winner offered a solution that could be implemented relatively easily, but offered the ability to scale and add functionality as L’Oreal gained experience with the tool.

Several areas were targeted for improvements, including:

• a reduction in travel times to reduce order cycle times;
• more efficient use of storage space;
• a reduction in errors;
• more effective storage by weight of the item or movement of a SKU to improve ergonomics;
• more effective storage based on how pallets are formed, such as heaviest items on the bottom;
• co-locating items that are commonly ordered together; and
• the ability to load historical information into a forecasting tool to best slot for the rollout of a new product launch.

  For the first rollout, L’Oreal chose one of its mature facilities that was already using the homegrown slotting tool. If they could show improvements there, the thinking went, then they had something. Within a few months, the lines picked per hour had improved by 12%. “Based on the outcome of the pilot, we have so far implemented slotting in 17 of our 23 DCs in the United States,” Rodriguez says. Slotting has also gone live in Mexico, Chile, Argentina, Brazil, Canada and France, with plans for other facilities in Western Europe, Australia and South Africa.

Now that it is up and running, slotting is delivering a sustainable competitive advantage. Improvements have ranged from reductions of up to 28% in bends and reaches, reductions of up to 21% in travel distances and improvements of from 10% to as much as 30% in lines per hour picked, depending on the maturity of the operation. “If you have the volume to justify the investment, it makes perfect sense,” Rodriguez says. “And, of course, you have to keep thinking about what your business is going to look like in the next three to five years to remain competitive.”

System Suppliers
Software consulting: DMLogic, dmlogicllc.com
Robotic Layer Picking: Cimcorp, cimcorp.com
Rack: Interlake Mecalux, interlakemecalux.com
Lift truck: Yale Materials Handling, yale.com; Crown Equipment, crown.com
Bar code scanning: Zebra Technologies, zebra.com
WMS: SAP, sap.com
Slotting software: Optricity, optricity.com
Stretchwrap: Lantech, lantech.com