Mikasa Inc., a fashion leader in china, stemware and other table accessories, realized in 1993 that its distribution network was ill-suited to a changing retail environment. As the Long Beach, Calif.-based company grew sales, particularly through an expanding network of company stores, its traditional retail customers were pushing inventory-holding requirements back up the supply chain, forcing Mikasa and other suppliers to quickly fill frequent, smaller-lot, highly customized orders.

Under these changing conditions, Mikasa's existing distribution centers in Secaucus, N.J., and Carson, Calif., became increasingly congested, creating serious bottlenecks. To support the company's growth and meet the market's quick-response requirements, a centralized, highly automated distribution center was needed - one with high-tech materials-handling capabilities and an advanced warehouse management system.

Both these elements as well as a high-bay, no-lights bulk storage configuration distinguish Mikasa's new East Coast distribution center in Charleston, S.C.

When planning began on the new facility, Mikasa operated out of six different warehouses, four in Carson and two in Secaucus. "The Carson location was facing the same logistical challenge that was being experienced back home in Secaucus: We were having to shuttle our own trucks between all those facilities to consolidate outbound orders," explained Anthony F. Santarelli, Mikasa's Secaucus-based executive vice president of operations.

"We began to see that the inventory fluctuations with our product were outpacing the available space in existing facilities, and the flow of goods was increasing exponentially with that expansion. So the need to add capacity became obvious," added Harry J. Wamboldt, director of operations.

	"We pretty much knew we wanted to be along the East Coast because most of our customers were still East Coast people and a lot of our product comes from Europe." - Anthony F. Santarelli of Mikasa

And there was the challenge presented by then-ongoing changes in the retail sector. "We had an absolute need to increase the service level," said Santarelli. During the early 1990s, he explained, most of the major department stores reorganized and began wanting their trading partners to provide such value-added services as bar-coding and EDI data transmission. "But we had facilities that were really '70s technology and not '90s technology, and it is a quantum leap between those two. So we were faced with two problems: the need for physically being able to store more product, and the ability to turn the product quicker while providing the value-added services."

Also, customers were changing direction in their ordering process, moving away from master-carton bulk orders, said Wamboldt. Instead, they requested shipments packaged by store in less-than-master-carton quantities. This trend became evident during a survey of customers conducted on behalf of Mikasa by SDI Industries, a Van Nuys, Calif., firm that specializes in materials-handling systems design, implementation and general supply-chain management consulting.

"SDI said basically that within five years all of our major customers were going in this direction and we better be ready for it," Wamboldt said. In reality, the time lag turned out to be about two and a half years. "So very quickly, the way we did business changed from 'go take a master carton off the rack and put it on the dock for the trucker' to 'go get that same master carton, open it up, fracture it, pack it into six different cartons, and then put those six cartons on the dock for the trucker.'" A typical master carton might contain 48 boxes of a product, such as dinner plates, with 8 plates to a box, he explained.

Repacking orders for each store was an entirely different step that required a broad building footprint and a tremendous use of manpower, "for which we received the same amount of remuneration from the customer," said Wamboldt. "At the end of the day, we're still selling him 24 pieces - the difference is that they all have to be repackaged."

Since launching its trademark in the 1950s, Mikasa consistently has contracted out manufacturing and concentrated its strength in marketing and design. "We were very good at that end, but not as good in the service end," said Santarelli. "And it was pretty apparent to us that although the marketing and design were very important to our company, the service area, which was always the laggard, was now the tail that was wagging the dog."

After agreeing in early 1993 on the need to expand capacity and add technology, Mikasa executives assigned Wamboldt and Santarelli the task of finding a DC location, developing a design, calculating the costs and presenting the plan to the executive committee.

First, they decided to bring in some help, and again they turned to SDI for assistance both with systems planning and site selection. Since Mikasa's earlier experience with the firm was positive and Wamboldt had used SDI's services successfully earlier in his professional career, both executives had a good comfort level with the company.

"As it happened, SDI did work for most of our major customers as well," said Santarelli. "On the other end of the pipeline, they were designing the distribution systems that received product, processed the product, and sent the product on to the customers' stores. So it was a natural synergy for them to tell us at this end of the pipeline, 'this is what your customers are going to want when it gets to our system at the other end': the scanning technologies, conveyor characteristics, labeling information and so forth."

Site Selection
Site selection and building/systems design proceeded on separate but parallel tracks over the following months. "We pretty much knew we wanted to be along the East Coast because most of our customers were still East Coast people and a lot of our product comes from Europe," said Santarelli. "And we knew we wanted to be by a port because the overwhelming majority of our product is still imported."

Expansion was not practical at their existing properties in Secaucus, and large tracts of property for new construction were scarce and very expensive. The team instructed SDI to perform initial site evaluations elsewhere, based on such criteria as highway access, port proximity, land characteristics, labor availability, and quality of life issues.

SDI used computer modeling of various cities, including demographics and incentive packages offered by competing communities. The models also included costs of freight and shipping times to and from various locations. "We tried to optimize the location based first on the port and then the travel time and major highway systems needed to service our customers," said Santarelli. He and Wamboldt then examined nearly two dozen sites as far inland as Valdosta, Ga., but all within range of a port: Jacksonville, Savannah, Charleston, Baltimore or Norfolk.

One of the first places they visited was the Charleston-Savannah region. At the time, Charleston was reeling from the announced closing of a naval base and the associated loss of 22,000 civilian jobs, Santarelli said, and wasn't quite ready to deal. "But Savannah was better organized, and they had a large parcel of land on which they intended to build an industrial park, and it was pre-permitted in many respects. That looked to us to be a little more attractive, and we decided to design the facility and locate it in Savannah."

Building/Systems Design

	"One of the complexities that most people might miss is that we are dealing with a very difficult commodity." - Anthony F. Santarelli of Mikasa

"One of the first things we did was to undertake a study of our own operation - the number of truckers that come each day, how many cartons we ship, employee productivity levels, how many SKUs we carry, how many of those are active and how many inactive, what our customers wanted, what they could want down the road, how the landscape was changing, and so on. At the same time, SDI made inquiries for us among our customers: What do you like about Mikasa, what don't you like, what are they doing right and not doing right...," said Santarelli. "That was a very lengthy process, because studying our system and laying it bare involved looking at the tremendous detail provided by our computer people as well as data gathered by people literally doing a time-and-motion study on what goes on in our building. We also tried to list all the things we knew were wrong or that created problems, as well as the kinds of things we wanted to be able to do. We worked together under the premise that we would design a system - the best system we could - and then build the building around it."

According to Wamboldt, Mikasa backed into the size from the volumetrics - the result of studying anticipated volumes over the coming 10 years, and using the cubic measurements of products to extrapolate storage and processing space requirements. They decided to design the building to handle five years' of growth from the date of completion at the very least.

"One of the complexities that most people might miss is that we are dealing with a very difficult commodity," said Santarelli. "We have over 20,000 SKUs that range from a tiny demitasse teaspoon to a giant vase. They are almost always fragile, there are incredible size and weight differentials, and the products come in from 150 different factories ... to bring that all together and design a home for each component and proper handling procedures was a tremendous logistical challenge."

After going through several warehouse designs, they ended up with a fairly conventional building with a 35-foot overhead clearance and a footprint covering 1.2 million square feet.

Site Selection Redux
However, problems were surfacing at the Savannah site. "We had three well-known companies come in and do borings, and each company came back with a different analysis as to whether or not we could ever stabilize the ground, and how much fill you would have to bring in to compact it," said Santarelli. "We faced the potential that we may never get a totally safe and steady base no matter what we did, so we decided we had to look someplace else."

By this time, Charleston's leaders had recovered from the initial shock of losing the naval base, said Santarelli. Moreover, Interstate 526 - the Mark Clark Expressway - which had been under construction on Mikasa's first visit to the city, now was open, providing a link to the previously isolated Cainhoy Peninsula, where the Mikasa facility now stands. The highway meant easy access to the new Wando Welch Container Port and the North Charleston Port.

SDI initiated discussions on Mikasa's behalf with the various governmental agencies regarding investment/incentive opportunities, then Santarelli and Wamboldt worked out a package for Mikasa. They also worked closely with the Charleston Regional Development Alliance. "So much of South Carolina's investment plan is clearly codified under legislative process, and this made it very easy to see what was being offered," said Santarelli. "There were a number of issues to be negotiated, but much of it turned out to be very clearly spelled out.

	"In a facility that big, it could be a quarter mile just to walk from one shipping door to the other." - Harry J. Wamboldt of Mikasa

"For instance, when we first came through, as a means of addressing the base loss, the state was offering a $1,500 per job tax credit on an annualized basis. By the time we had proceeded a year into the process, they passed a new law, and that tax credit went up to $4,500. So for us, it went from $4.5 million in tax credits based on the number of employees we would have up to in excess of $13m over the course of 20 years. That's a huge tax credit, for us, but it was spelled out in the law and the state had taken that action because they were addressing the loss of thousands of jobs." Another big plus for Mikasa was the job training opportunities offered by the state.

Building Design Redux
While this activity developed on the site-selection process, Mikasa decided to take another look at the building design. "The project designed for Savannah was very much a traditional box, but Harry and I never really were comfortable with the enormous travel times involved in a 1.2 million-plus-square-foot site," said Santarelli. "The travel distances were huge."

"The more we looked at the travel distance, the deeper we got into the whole issue of proximity and work time and how long it takes a person to travel 1,500 feet with an order picker versus 500 feet," added Wamboldt. "In a facility that big, it could be a quarter mile just to walk from one shipping door to the other. All that became more critical as we looked at it, so when we went back to Charleston [to deal] with them regarding sites, we decided to go back and re-engineer the building."

Armed with the volumetrics, a basic systems design and a new time window, they decided to figure out: how to close the footprint; how to facilitate future expansion without incurring half-mile distances between docks; and how to achieve better energy conservation. They assembled a team of people that included representatives from the major contractors: Metric Constructors of Marietta, experts in big box construction; McGregor Associates of Atlanta, architects that had worked with Metric on other projects and also were experienced with the big box format; warehouse management system provider Manhattan Associates; Fraser Industrial, provider of the rack system; and SDI, which had been involved deeply in the systems design and integration.

During those discussions, one of the engineers asked if Mikasa ever had considered high-bay storage in a dark building. They hadn't, so Wamboldt and Santarelli flew to Cincinnati to check out an American Greetings Card facility. "Although it was a small facility, they were using 589s [pallet picker/transporters made by Raymond Corp.] in a high-bay area with no lights," said Santarelli. "Harry and I were amazed."

After a subsequent visit to a high-bay, no-light Sears facility in Canada, the building planners had a new breeze to tack. "We realized we didn't need to have a light that punches down many, many feet to light up nothing - all you need is task lighting, and we could save a chunk of electricity that is really wasted," said Santarelli. "What you really need in a distribution facility is someplace to store the goods, and the ability to get those products out and process them. So the storage area became one element, and we decided on high-bay in order to keep the footprint small."

They knew how big the storage facility had to be with respect to the number of pallets: The volumetrics study indicated that 105,000 pallet locations would accommodate five years' growth. Mikasa also knew it needed to find a sizeable chunk of land, a tract large enough to accommodate significant future expansion. That planned expansion also helped to drive the design process. "We had SDI and the architects design the building as though it was four times its present 580,000-square-foot size," said Santarelli. "That way, when we go to phase two and phase three and phase four, we already have in place the infrastructure - the water supply, fire protection, sewerage, for example - to fully service each additional expansion without having to tear up systems." This also affected dock locations, the orientation of the racking and conveyors, and the location of firewalls.

Resolution on these issues was reached and Mikasa announced on March 12, 1996, its intention to build a $60m, 580,000-square-foot distribution center that would be the anchor for the Charleston Business Center, an industrial park located on the Cainhoy Peninsula.

The high-bay portion of the building is 70 feet high and rack-supported, while the low bay area is of more typical construction. According to Santarelli, melding the two different construction processes took some work, particularly on the architect's part, making sure that the joining wouldn't cause any problems from a floor or roof standpoint.

The walls are tilt-ups with appropriate firewalls, and all can be punched through to accommodate expansion. According to Wamboldt, they will be able to continue conveyors into the new additions and will have systems in place that can automatically initiate fire control measures at the points where firewalls will be penetrated.

Operations
About two-thirds of Mikasa's incoming freight arrives at the two closest terminals - Wando Welch and North Charleston - both located right off I-526. Remaining shipments arrive at a third terminal about 15 miles away.

Eighty percent of the containerized freight bound for the DC is pre-cleared and pre-released when a vessel arrives. For the Atlantic trades, Mikasa has contracts with Polish and DSR Senator, Star Lines and Mediterranean Shipping. (On the Pacific side, it uses Hapag-Lloyd, OOCL, K-Line, Mitsui OSK, NYK, APL and Evergreen.)

Cartage from Charleston to the DC is handled by Old Dominion Freight Lines. The containers are delivered to Mikasa within 24 hours from the time of release at the piers, and are staged for unloading. Customs work is handled by New York's D.F. Young and, locally, by D.J. Powers.

Each item that comes into the building immediately is weighed, then scanned by a Cubiscanner, a computerized device that determines the cubic measurements of the item. First, the master carton is weighed and scanned, and its dimensions and weights stored in the system. Then, to capture the weight and dimensions of each component of the master carton, one individual box inside the master carton is weighed and scanned, then one individual item from a box is removed, wrapped as for shipping, and weighed and scanned.
Products are put away in the appropriate high-bay storage area by operators using double-pallet 589s equipped with task-lights.

Orders come into the legacy system in Secaucus - about three-quarters via EDI, the rest by mail or FAX. The legacy system allocates each order to the appropriate DC for the next day based on product availability and the customer service profile.

Timing is critical at the Charleston DC. At night the warehouse management system looks at the entire universe for the next day and calculates the replenishment stock to be drawn from bulk inventory. A team has to be on hand early enough to ensure that the replenishment stock is available when picking begins.

Mikasa selected Manhattan Associates' PkMS system for Charleston. "Their package really is designed for a distribution operation instead of being a modified version of a manufacturing and assembly program, and it is capable of doing a great deal of what we needed, plus it has far more capabilities than we could ever use," said Santarelli. The level of customization was about 20 percent - enough to meet their needs, but not so much as to be burdensome or create any barrier to taking advantage of system upgrades. The software is loaded onto Mikasa's IBM AS/400 mainframe.

	"We realized we didn't need to have a light that punches down many, many feet to light up nothing - all you need is task lighting, and we could save a chunk of electricity that is really wasted." - Anthony F. Santarelli of Mikasa

As opposed to picking individual orders, the Charleston facility processes orders in waves. All the orders that need to be processed in a day are broken down by SKU, and each bin is picked one time. Master-carton orders are processed in a separate area. About 70 percent of goods in the facility are pre-boxed in sets, and about 30 percent, such as wine goblets and dinner plates, are loose and need value-added services, such as repackaging and application of UPC codes. Products that do not need preparation are placed in blue plastic totes - one product type per tote - and sent by conveyor to the sorting station. At separate prep stations in an adjacent area, items that need to be packed individually for shipping and/or need individual UPC's attached are prepared and also placed in a blue tote by product type.

The conveyors move the totes to a tilt-tray sorter. There, an employee "inducts" the ordered products into the system by first scanning the UPC, then placing each unit into one of a constantly flowing line of 298 metal trays angled toward the employee. The bottom of the item covers "eyeholes" in the tray that allows the system to see which trays are empty and which have the particular items that are being inducted.

Existing technology had to be modified by SDI for the Mikasa DC because early generations of tilt-tray sorters were of the bomb-bay design, nice for dress shirts but a bit rough for wine goblets. Mikasa has two separate tilt-tray operations in Charleston.

The WMS program keeps track of which customers are going to get how many of each item. The tilt trays bearing products travel around a large oval track that has 298 shipping points. When the tray containing, for example, a wine goblet approaches the bin that has been assigned as the shipping point for a specific customer, the bottom lip of the tray drops away and the individual goblet slides gently into a delivery chute and ends up on the customer's accumulating tray. The same process applies to box sets.

Product after product is inducted and dropped at the appropriate shipping locations, and when a customer's order is filled, a red light alerts other employees that the order is ready to be packed and shipped. Flattened corrugated cardboard cartons of various sizes ride on cradles transported by a Jervis Web above the pack stations, and license plates are affixed to each carton as they are loaded onto the cradles. The worker forms the bottom of the carton, scans the license plate and the tray bin, which tells the Manhattan system to assign the content of that bin to that carton. The person also scans each item in the bin with a finger-mounted radio-frequency scanner that matches the item number with the customer's order. The system will not allow the induction of an overage or wrong item, and the employee gets an instantaneous response in the event of an inconsistency.

Once the order is completely packed in one or more cartons, the operator transmits that information and forwards the carton(s) via conveyor to a packing station where employees use plastic bags of warm expanding foam to fill the dead space in the carton and cushion its contents. Cartons then are sent through a machine that seals the bottom and top. At the panda (print-and-apply) station, a Veri-Code unit reads the license plate, then produces and applies the appropriate shipping label to a precise location on the carton, both as designated by the particular customer. For United Parcel Service shipments, a packing list is printed and applied automatically.

The sealed cartons ride on conveyor to another area where a mounted scale checks the carton's weight and compares the actual weight to the projected weight as determined by the PkMS system, based on the contents of the carton and the data gleaned from the Cubiscanner. If there is a discrepancy beyond a prescribed threshold, the carton automatically is diverted to a station for manual inspection.

The other cartons automatically are routed down a complex system of conveyors to the shipping area, where they are assembled, by customer, on 1.25-inch wooden slipsheets already equipped with license plates on all four sides. Employees "wand" the pallet ID tag and associate all the cartons with that pallet ID, then the software directs the employee to put that pallet in an elevated storage rack on the shipping dock.

"The system now knows that this location has a pallet for Macy's 34th Street location, and there are 22 cartons on the skid," said Wamboldt. "We know exactly where in our building every box is for every customer for every shipping location they have."

"We wanted to be able to store outbound shipments in a way that doesn't tie up the floor but so that we can get to them easily," added Santarelli. "We wanted to be sure that we could store three days' worth of shipping at the peak day of the year in these racks and be able to retrieve individual shipments without having to tie up the floor."

Each day the shipping dock manager presents the guardhouse with a list of incoming carriers and their pre-assigned doors. While many customers arrange their own transportation, Mikasa has designated a few outbound carriers to transport product to its own retail stores and to stores that do not designate a carrier. One primary partner is C.H. Robinson, a truckload company based in eden Prairie, Minn. C.H. Robinson worked with Mikasa in Secaucus prior to construction of the Charleston DC and now coordinates, on a national basis, multiple-drop deliveries that allow Mikasa to ship LTL quantities while taking advantage of truckload rates.

When a C.H. Robinson driver or other trucker checks in at the guardhouse, he is assigned a door and given a beeper. Simultaneously, a message instructs a dock operator that the carrier has arrived and the WMS system guides the operator to all of the locations for all the shipments that driver is going to take. Using double-reach lift equipment, the operator plucks a loaded pallet from a pallet storage rack, drops it at the end of the aisle and heads back for another pick out of the storage rack. Meanwhile, workers with walkie talkie units take the pallets to the assigned dock, thereby ensuring that the more expensive double-reach equipment is not tied up with garden-variety work.

When the trucker signs out, the system transmits an electronic message to the customer, informing him that the carrier has picked up the load, which, for example, consists of 142 cartons on 16 pallets weighing 2,753 pounds. The message also details exactly what is in each box.

Given the complexity of the materials-handling technology, the Mikasa DC has an in-house professional engineer, Mark Jackson, and his facilities and maintenance team includes the specialist who installed the systems for SDI. A worrisome consideration for Mikasa was the possibility of equipment downtime, and their solution was to build in equipment redundancy. For example, the expanding foam machine at the packing station is mounted on a carousel alongside an identical unit. If a breakdown occurs or the operating unit simply runs out of bags, the operator pulls a pin, rotates the back-up unit into place, and contacts a maintenance operator to deal with the replaced unit. Mikasa maintains on hand more than $500,000 in spare parts - every critical component.

"With radio frequency, scanners, 15 miles of conveyors ... we have to have back-up equipment so that if anything happens, we don't go down," explained Wamboldt. "Mark's commitment is that he can have almost anything in this building back running within an hour. We had a major motor failure - one of three major motors - and 45 minutes later he had a replacement installed and running."

The building is designed at peak day in 2002 to handle 95,000 cartons in 15 hours. Historically, the company's operations have been seasonal, with orders increasing in the third and fourth quarter in preparation for the holidays. This shift in volume toward year-end is expected to continue as more of the company's customers adopt EDI and quick-response strategies.

Mikasa began receiving product at the Charleston DC in July 1997. "Manhattan was able to give us the software in modules, so we didn't have to wait for the entire package to be developed and then throw it in and start testing it," said Santarelli. Mikasa first installed the receiving module, then the module for put-away. In September, it brought in the picking module and started picking some early orders. After weeks of trials and some debugging and tweaking, Mikasa took a physical inventory on Jan. 15, flipped the switch and began to ship and process orders at the DC on a full-scale basis.

Now, the DC ships a third of the company's business and runs an eight-hour shift as well as a parcel shift from 5 p.m. to 10 p.m. On June 5, Mikasa's board of directors decided to close the Secaucus facility and absorb that work in Charleston.

"Secaucus will begin to phase down through the end of the year," said Santarelli. "We then will take an inventory, the goods will be trucked down here, and by March the Secaucus distribution facility won't exist anymore."

Mikasa's design to integrate highly sophisticated software and hardware at Charleston won the company this year's Best in Logistics award from the Voluntary Interindustry Commerce Standards Association. The award was presented in June at the VICS Vision Summit 98 achievement awards ceremony in New Orleans.

According to VICS, "Mikasa has become a strong partner in the quest to provide value-added, post-manufacturing services ... and represents a new breed of specialty product marketers and suppliers committed to supply chain excellence."