Executive Briefings

Dunkin' Donuts' Short Relocation Brings Big Change

A restaurant distribution center proves that the right management can operate an efficient, productive facility in a high-cost area.

Getting up at the crack of dawn each day to make fresh donuts, pastries and coffee is a way of life for the thousands of tireless Dunkin' Donuts franchisees around the country. But that is not all they have to do. These small business owners are responsible for purchasing, transportation, logistics and warehouse operations at the five distribution centers that provide all baking materials, supplies and much of the equipment for the Dunkin' Donuts stores throughout the U.S. The U.K.-based parent company, Allied Domecq, is essentially a marketing company. The franchisees are responsible for just about everything else. In each region of the country, the franchisees own separate distribution companies that are managed by professional logistics managers. For example, the Dunkin' Donuts Mid-Atlantic Distribution Center (MADC) is a franchisee-owned, stand-alone non-profit corporation that services 1,400 restaurants in eight states and the District of Columbia.

These hard-working small-business owners know the value of efficiency and productivity, as well as the importance of the right location. By 2004, the current DC location in the southern-most part of New Jersey had become a problem. MADC had been operating out of the cramped 125,000 square-foot DC for six years, and the growing base of Dunkin' Donuts restaurants in the mid-Atlantic region cried out for expansion. But because of the marginal nature of the current location and resistance to expansion from the local municipality in Swedesboro, N.J., the company looked elsewhere.

"We liked New Jersey, but we needed to be farther north, closer to New York City where the business climate is better for distribution operations," says Warren Engard, director of distribution operations for MADC. "Just as important, we need a facility better suited to our operations with more space, more doors and cross-docking capabilities."

Before deciding on a new location, the company looked at its changing restaurant network. While the New York City area remained the largest single market, more store expansion was planned in Pennsylvania, Baltimore and Washington.

"We had to stay in the middle of these growing markets, so we only moved about 36 miles north to Burlington, N.J.," says Engard. "If we went much farther north, the costs would have become much higher, and we would have had a problem retaining employees."

The company selected a site in a small industrial park in Burlington, N.J., that it shares with a trucking terminal. The site is immediately adjacent to two major highways (the NJ Turnpike and Interstate 295) with easy access to several bridges going into Pennsylvania.

Bigger and Better
The new Burlington facility is a vast improvement over the previous DC in Swedesboro, according to Engard. The old DC was a mere 125,000 square feet with 22 doors. It was so cramped that the pickers and receivers overlapped in time and space. Receiving was done over 16-18 hours, while picking was done for 21 hours day.

"My pickers hated the receivers, the receivers hated the pickers," says Engard. "Everyone was in the aisles at the same time."

The Burlington DC is 300,000 square feet, with 134 doors and a cross-dock layout. The facility is not just larger, but dedicated pick and put-away aisles eliminate congestion. While this arrangement takes up more space, it allows simultaneous picking and receiving 24 hours a day, if need be. Because of the more efficient layout and operations, there is rarely a need for extended hours of picking and receiving.

"We are more capable in eight hours than we were in 21 hours at the old facility," says Engard, adding that all picking is usually done in one eight-hour shift. Receiving from outside carriers starts at 4 a.m. for frozen goods and dry goods receiving begins at 7 a.m. After 1 p.m., only goods carried on the private fleet are received. Since the vast majority of inbound goods come in as backhauls on the private fleet, the volume of afternoon receiving is significant. Workers and aisle space must be available, and the new facility provides all the space needed.

The DC building has the ability to be expanded another 100,000 square feet, but Engard doesn't anticipate the need for such an expansion anytime soon, even with the likely addition of other Allied Domecq restaurants. MADC is being asked to service Baskin Robbins and the Togo sandwich chains since many of the franchisees have combination shops.

"Because of our much greater throughput and ability to handle all orders in one shift, we will have all the space we need for years to come," says Engard.

Private Fleet Efficiency
Another way that MADC tightly manages its DC operations is with intense use of its private fleet that it leases from Ryder Transportation. The fleet consists of 62 road trucks and 110 trailers in its road division. In the route division that serves stores directly, there are 95 tractors, 108 trailers and 12 straight trucks. Most of the 300 employees at the DC are drivers and driver helpers. In fact, only 40 employees are receivers and pickers, so the trucking operation is a critical part of the MADC operations.

"The straight truck fleet is increasing because of growing restrictions on tractor-trailers in New York and other cities," says MADC's transportation manager, Tim Kennedy.

MADC is Ryder's largest U.S. customer in one facility and the truck lessor even operates a three-bay full maintenance and repair facility on MADC's property. Ryder also helps MADC manage its longer haul trucking routes, half of which used to require one or even two overnight layovers. With the help of Ryder, MADC now uses drivers domiciled in the more remote areas. Its home-based drivers shuttle trailers to Ryder facilities in the outlying regions where they are staged for pickup by the domiciled drivers who will do local delivery and backhaul pickups. These local drivers, in turn, drop off backhaul trailers loaded with supplier materials at the Ryder facilities for the home-based drivers to bring back to Burlington.

"Right now, 85 percent of our supplier material is backhaul freight for our trailers," says Kennedy. "The goal is to build this up to 100 percent."

The MADC private fleet also has 48-state for-hire trucking authority that is uses to fill excess backhaul capacity with freight from selected partners, including GE appliances, Pepsi and Juicy Juice.

"Our own logistics staff carefully coordinates the movement of these trailers and the available capacity with our Appian Logistics transportation management system, so the trucks are available when we need them," says Kennedy.

MADC also coordinates front and backhaul moves with its sister DCs operated by other Dunkin' Donuts regions. For example, MADC ships bagels up to the New England DC and brings back dairy products and shortening.

"Although we are separate companies, the DCs work closely together," says Engard, adding that three of the DCs are using the same warehouse management and enterprise resource planning systems from Integrated Distribution Systems (IDC). "The Midwest and Southeast center will be running off our system, and one of them will have a redundant site to deal with any computer crashes or down time."

Voice System Raises Productivity
Another reason for greater productivity at MADC is the Voxware voice-directed picking system that was installed into the new facility when it opened last November. The Voxware system consists of radio frequency transmitters in the ceilings, a server and a network of receivers carried by the pickers. The command system is loaded with the orders and determines the pick sequence. An automated voice system tells workers where to go and how much of the item to pick. The worker confirms the selection and moves on to the next item. The worker can skip if he has trouble finding the item or if the aisle is in use. The command center will remind him to go back at the end of the list.

"We deployed it first to experienced pickers who were used to the paper system," says Engard. "Initially, they were uncomfortable with it and took some time to adjust, but now they wouldn't consider switching back. We have had even faster adoption by our newer employees, who took to it immediately."

For example, a new picker wasn't making the required productivity numbers using the paper system. Engard says he thought he might have to let him go, but then he tried him on the Voxware system.

"In two weeks, the worker had achieved performance better than standard rate," says Engard. "He had been picking about 110 cases an hour and was now picking 210 cases an hour."

VoiceLogistics has been implemented in stages at the MADC. All items in the dry materials area are now picked using Voxware's VoiceLogistics, where order accuracy has reach 99.94 percent with no need for follow-up checking. When it was implemented in the cooler section, it took only two days for productivity and order accuracy to exceed the existing paper system.

"We are looking forward to Voxware's tweaks to the software, so we can do picking in the freezer section according to our procedures," says Engard. "Voxware has been a real homerun for us and has achieved more productivity gains that we ever imagined. At Christmas time, we picked a record 300,000 cases in eight hours."

The system continues to be adapted to MADC's specific needs. For example, one aspect of the paper system that pickers wish VoiceLogistics had is the ability to see the whole order at a glance. Pickers like to see where they are going next in case there are any large quantities of any item on which to build the pallet. Voxware intentionally did not have this feature, but it is now writing changes to give the pickers what they want.

"Voxware has gladly tweaked the product to meet our needs," says Engard.

In the near future, IDS and Voxware will be integrating their applications at MADC, so the combined system will be able to handle receiving, put away, replenishment, cycle counting and even vehicle loading. System-directed loading helps locate the orders in the right area of the trailer, prints out a map of the pallet locations and verifies that all the pallets have been loaded.

New Jersey is so densely covered by distribution facilities that MADC was offered little assistance and no incentives by state or regional economic agencies, even though the facility is creating high-paying jobs and contributing toward the local tax base. This lack of attention was not an issue for MADC.

"We're not here for the incentives," says Engard. "This location is ideally situated for our inbound and outbound transportation. We have retained the vast majority of our old employees, and we are able to hire and train new ones without much difficulty. Other than the fact that this is an expensive part of the world to operate in, what else could we ask for?"

Getting up at the crack of dawn each day to make fresh donuts, pastries and coffee is a way of life for the thousands of tireless Dunkin' Donuts franchisees around the country. But that is not all they have to do. These small business owners are responsible for purchasing, transportation, logistics and warehouse operations at the five distribution centers that provide all baking materials, supplies and much of the equipment for the Dunkin' Donuts stores throughout the U.S. The U.K.-based parent company, Allied Domecq, is essentially a marketing company. The franchisees are responsible for just about everything else. In each region of the country, the franchisees own separate distribution companies that are managed by professional logistics managers. For example, the Dunkin' Donuts Mid-Atlantic Distribution Center (MADC) is a franchisee-owned, stand-alone non-profit corporation that services 1,400 restaurants in eight states and the District of Columbia.

These hard-working small-business owners know the value of efficiency and productivity, as well as the importance of the right location. By 2004, the current DC location in the southern-most part of New Jersey had become a problem. MADC had been operating out of the cramped 125,000 square-foot DC for six years, and the growing base of Dunkin' Donuts restaurants in the mid-Atlantic region cried out for expansion. But because of the marginal nature of the current location and resistance to expansion from the local municipality in Swedesboro, N.J., the company looked elsewhere.

"We liked New Jersey, but we needed to be farther north, closer to New York City where the business climate is better for distribution operations," says Warren Engard, director of distribution operations for MADC. "Just as important, we need a facility better suited to our operations with more space, more doors and cross-docking capabilities."

Before deciding on a new location, the company looked at its changing restaurant network. While the New York City area remained the largest single market, more store expansion was planned in Pennsylvania, Baltimore and Washington.

"We had to stay in the middle of these growing markets, so we only moved about 36 miles north to Burlington, N.J.," says Engard. "If we went much farther north, the costs would have become much higher, and we would have had a problem retaining employees."

The company selected a site in a small industrial park in Burlington, N.J., that it shares with a trucking terminal. The site is immediately adjacent to two major highways (the NJ Turnpike and Interstate 295) with easy access to several bridges going into Pennsylvania.

Bigger and Better
The new Burlington facility is a vast improvement over the previous DC in Swedesboro, according to Engard. The old DC was a mere 125,000 square feet with 22 doors. It was so cramped that the pickers and receivers overlapped in time and space. Receiving was done over 16-18 hours, while picking was done for 21 hours day.

"My pickers hated the receivers, the receivers hated the pickers," says Engard. "Everyone was in the aisles at the same time."

The Burlington DC is 300,000 square feet, with 134 doors and a cross-dock layout. The facility is not just larger, but dedicated pick and put-away aisles eliminate congestion. While this arrangement takes up more space, it allows simultaneous picking and receiving 24 hours a day, if need be. Because of the more efficient layout and operations, there is rarely a need for extended hours of picking and receiving.

"We are more capable in eight hours than we were in 21 hours at the old facility," says Engard, adding that all picking is usually done in one eight-hour shift. Receiving from outside carriers starts at 4 a.m. for frozen goods and dry goods receiving begins at 7 a.m. After 1 p.m., only goods carried on the private fleet are received. Since the vast majority of inbound goods come in as backhauls on the private fleet, the volume of afternoon receiving is significant. Workers and aisle space must be available, and the new facility provides all the space needed.

The DC building has the ability to be expanded another 100,000 square feet, but Engard doesn't anticipate the need for such an expansion anytime soon, even with the likely addition of other Allied Domecq restaurants. MADC is being asked to service Baskin Robbins and the Togo sandwich chains since many of the franchisees have combination shops.

"Because of our much greater throughput and ability to handle all orders in one shift, we will have all the space we need for years to come," says Engard.

Private Fleet Efficiency
Another way that MADC tightly manages its DC operations is with intense use of its private fleet that it leases from Ryder Transportation. The fleet consists of 62 road trucks and 110 trailers in its road division. In the route division that serves stores directly, there are 95 tractors, 108 trailers and 12 straight trucks. Most of the 300 employees at the DC are drivers and driver helpers. In fact, only 40 employees are receivers and pickers, so the trucking operation is a critical part of the MADC operations.

"The straight truck fleet is increasing because of growing restrictions on tractor-trailers in New York and other cities," says MADC's transportation manager, Tim Kennedy.

MADC is Ryder's largest U.S. customer in one facility and the truck lessor even operates a three-bay full maintenance and repair facility on MADC's property. Ryder also helps MADC manage its longer haul trucking routes, half of which used to require one or even two overnight layovers. With the help of Ryder, MADC now uses drivers domiciled in the more remote areas. Its home-based drivers shuttle trailers to Ryder facilities in the outlying regions where they are staged for pickup by the domiciled drivers who will do local delivery and backhaul pickups. These local drivers, in turn, drop off backhaul trailers loaded with supplier materials at the Ryder facilities for the home-based drivers to bring back to Burlington.

"Right now, 85 percent of our supplier material is backhaul freight for our trailers," says Kennedy. "The goal is to build this up to 100 percent."

The MADC private fleet also has 48-state for-hire trucking authority that is uses to fill excess backhaul capacity with freight from selected partners, including GE appliances, Pepsi and Juicy Juice.

"Our own logistics staff carefully coordinates the movement of these trailers and the available capacity with our Appian Logistics transportation management system, so the trucks are available when we need them," says Kennedy.

MADC also coordinates front and backhaul moves with its sister DCs operated by other Dunkin' Donuts regions. For example, MADC ships bagels up to the New England DC and brings back dairy products and shortening.

"Although we are separate companies, the DCs work closely together," says Engard, adding that three of the DCs are using the same warehouse management and enterprise resource planning systems from Integrated Distribution Systems (IDC). "The Midwest and Southeast center will be running off our system, and one of them will have a redundant site to deal with any computer crashes or down time."

Voice System Raises Productivity
Another reason for greater productivity at MADC is the Voxware voice-directed picking system that was installed into the new facility when it opened last November. The Voxware system consists of radio frequency transmitters in the ceilings, a server and a network of receivers carried by the pickers. The command system is loaded with the orders and determines the pick sequence. An automated voice system tells workers where to go and how much of the item to pick. The worker confirms the selection and moves on to the next item. The worker can skip if he has trouble finding the item or if the aisle is in use. The command center will remind him to go back at the end of the list.

"We deployed it first to experienced pickers who were used to the paper system," says Engard. "Initially, they were uncomfortable with it and took some time to adjust, but now they wouldn't consider switching back. We have had even faster adoption by our newer employees, who took to it immediately."

For example, a new picker wasn't making the required productivity numbers using the paper system. Engard says he thought he might have to let him go, but then he tried him on the Voxware system.

"In two weeks, the worker had achieved performance better than standard rate," says Engard. "He had been picking about 110 cases an hour and was now picking 210 cases an hour."

VoiceLogistics has been implemented in stages at the MADC. All items in the dry materials area are now picked using Voxware's VoiceLogistics, where order accuracy has reach 99.94 percent with no need for follow-up checking. When it was implemented in the cooler section, it took only two days for productivity and order accuracy to exceed the existing paper system.

"We are looking forward to Voxware's tweaks to the software, so we can do picking in the freezer section according to our procedures," says Engard. "Voxware has been a real homerun for us and has achieved more productivity gains that we ever imagined. At Christmas time, we picked a record 300,000 cases in eight hours."

The system continues to be adapted to MADC's specific needs. For example, one aspect of the paper system that pickers wish VoiceLogistics had is the ability to see the whole order at a glance. Pickers like to see where they are going next in case there are any large quantities of any item on which to build the pallet. Voxware intentionally did not have this feature, but it is now writing changes to give the pickers what they want.

"Voxware has gladly tweaked the product to meet our needs," says Engard.

In the near future, IDS and Voxware will be integrating their applications at MADC, so the combined system will be able to handle receiving, put away, replenishment, cycle counting and even vehicle loading. System-directed loading helps locate the orders in the right area of the trailer, prints out a map of the pallet locations and verifies that all the pallets have been loaded.

New Jersey is so densely covered by distribution facilities that MADC was offered little assistance and no incentives by state or regional economic agencies, even though the facility is creating high-paying jobs and contributing toward the local tax base. This lack of attention was not an issue for MADC.

"We're not here for the incentives," says Engard. "This location is ideally situated for our inbound and outbound transportation. We have retained the vast majority of our old employees, and we are able to hire and train new ones without much difficulty. Other than the fact that this is an expensive part of the world to operate in, what else could we ask for?"