The need to process both build-to-stock and build-to-order products within the same consolidation center dramatically raises the supply-chain performance threshold, but that's only one of the challenges facing the logistics team at Pella Corp., the nation's leading manufacturer of premium windows and doors.

Add to that mix the natural fragility and other unfriendly shipping characteristics of the product line, a disparate network of modest manufacturing sites, and the notorious unreliability of advance planning in the building trades - there always are revisions - and the complexity reaches daunting proportions. To claim control, Pella turned to the Logistics Execution System (LES) from McHugh Software and an enterprise resource planning system from Oracle. The primary goal is to coordinate the flow of business information across the company in general and to boost productivity in the warehouse environment in particular.

A family-owned business based in Pella, Iowa, about 45 minutes east of Des Moines, Pella commenced operations in 1925 as the Rolscreen Co., with flagship products based on a patented, disappearing window-screen technology. In 1992, with many more product lines on offer, the company changed its name to Pella Corp. Over the past three decades the company has earned a reputation for selling high-end, luxury and custom wood-based doors and windows, with its products often gracing the pages of Architectural Digest and glamorous home-building journals.

Pella offers consumers and professionals a full range of residential and commercial products under three distinct product lines: Architect Series, Designer Series and ProLine.

The Pella sales branch network operates Pella Window Stores, Windowscaping Centers and Selection Centers. Pella Windowscaping and Selection Centers are designed to help homeowners make the most informed window and door decisions as they build or remodel. Offering complete resources and unique design ideas, these centers help guide consumers in selecting the "perfect look" for their homes.

Pella has manufacturing facilities throughout Iowa: Designer Series and Architect Series products are built at its 1.65 million-square-foot plant in Pella; in Carroll, an automated plant manufactures ProLine doors and double-hung windows; a plant in Story City produces ProLine casement windows; a factory in Shenandoah manufactures custom and commercial products; and a manufacturing facility in Sioux Center produces Pella's Architect Series casement windows. Pella's newest facility is a Northeast regional warehouse in Gettysburg, Pa. It will open later this year, to be followed next year by manufacturing operations in Gettysburg.

Pella is an interesting study in contrasts. It is a people-friendly, non-union company that offers fairly generous benefits, bonus plans and attractive, profit sharing opportunities. Listed last year as No. 47 on Fortune Magazine's roster of "Best Companies to Work For," Pella moved to No. 21 for 2001. The company is, in some ways, old-fashioned. Pella accommodated its considerable growth over the past two decades not by dramatically expanding its key facilities but by launching new manufacturing sites in other small Iowa towns, such as Story City, Carroll, Sioux Center and Shenandoah.

"We like to spread the wealth around," explains Jennifer Grove, a Pella spokeswoman. "Sure, we could make a manufacturing plant that has 1,200 employees, but we try to keep it within a magic 350 to 600. Basically we look for two elements: the best opportunity for a quality work force, and a city that will embrace us as a corporate citizen."

Warm and fuzzy though that image might seem, inside the company is all business. Since encountering and subsequently embracing the inclusive, continuous improvement practice of kaizen during a visit to a United Technologies plant in Tennessee in the early 1990s, Pella executives routinely have relied on kaizen sessions to drive improvements throughout the company and its subsidiaries. Nearly a thousand of these sessions - most of them involving a select team focusing on a specific process - have occurred within Pella over the past 24 months.

	Pella embraces a "focused factory" and in-sequence manufacturing strategy where most production lines are self-contained units that make all their own parts for a continuously changing mix of products.

"Overall process improvement is a company mantra around here," Grove acknowledges. "We examine every process - it can be as small as the process the administrative assistants employ when they answer the phone, or it can be a whole value chain such as an order entry system." Kaizen sessions have resulted in hundreds of efficiency gains and cost reductions, from a steady shortening of lead times and inventory turns to greater productivity from workers to reduced levels of raw materials inventory at plant locations. On this latter note, for example, glass suppliers that used to ship two-week supplies to Pella now shuttle sequentially loaded, custom-cut glass to Pella's production lines several times each shift. Production lines have been worked and re-worked in kaizen sessions. As a result, the company virtually has abandoned its once-common practice of batch-producing parts and subassemblies for its plants on dedicated production lines. Instead, Pella embraces a "focused factory" and in-sequence manufacturing strategy where most production lines are self-contained units that make all their own parts for a continuously changing mix of products. The few batch production activities that do take place have been dramatically reduced in quantity - some from two-week inventory batches to two-hour supplies - and are closely coordinated with production line schedules.

Consolidation Center
While Pella's site-selection strategy works well in the employee and community relations, it adds considerable complexity to the logistics challenge. Several years ago the company formalized a consolidation center at its Pella site to serve as a hub of sorts. Using McHugh's transportation management system for load planning, Pella's managers manipulate the routing of the company's fleet of 12 road units as well as its core group of contract carriers to shuttle finished products from the various manufacturing sites to the consolidation center in Pella. There, individual elements of each customer order are combined and shipped out to customers. Carriers backhaul lumber, glass, plastic and other raw materials to the consolidation center, which feeds the materials back to the manufacturing sites.

Though it plays its numbers close to the vest, Pella acknowledges that the company's chain of 70 largely independently owned Pella Distribution Network outlets generates the largest share of sales for the company. However, after years of watching market share default to Anderson Windows and other competitors that stock products at category killers like Home Depot and Lowe's, Pella launched a no-frills ProLine product series in 1993 for the home improvement market and steadily gathered market share.

Pella further expanded its product offerings and sales volumes through acquisition, first buying Viking Industries in Portland, Ore. Now operating as a wholly owned Pella subsidiary, Viking Windows and Doors brought to Pella a customer base stretching from the Pacific Northwest to Denver. Unlike Pella's wood-core products, Viking makes vinyl windows and doors. The addition of Viking strengthens Pella's market penetration, giving it a product for the Pacific Northwest where vinyl is a more popular construction material. Pella's wood-based products continue to be strong in the Midwest, North and Northeast. Pella's wish list didn't stop there. It also acquired Cole Sewell Co., a storm door company based in Clear Lake, Iowa. The next acquisition was Pease Industries in Fairfield, Ohio, near Cincinnati, which now makes entry doors and side lights with both Pease and Pella brands.
Sales grew, shipping volumes were on the rise. "Our market share has doubled in the past five years," says Grove. "It's become quite a challenge on the distribution front."

As volumes continued to rise, continuous process improvement efforts kept pointing to the need for information technology systems improvements. In 1999 Pella management decided to explore the ERP offerings. With the guidance of Deloitte & Touche, Pella appointed a cross-functional search team with representatives from order entry, customer service, finance, warehousing, information technology and each of the manufacturing sites. After first focusing on best practices in its different disciplines, the search team worked with D&T to structure Pella's expectations from an ERP environment and to present those requirements to vendors.

During this process, it became apparent that the warehouse management system elements to the primary ERP packages fell short of Pella's needs.

"We wanted a WMS vendor that had experience both in build-to-stock and build-to-order environments," explains Gina Singer, manager of logistics engineering and development at Pella. "And we needed someone who could go beyond talking the talk. We needed to see customers who were doing it. Some of our facilities are solely build-to-order, but others are 70 percent build-to-stock, 30 percent build-to-order, so we needed to have a system that could handle both processes."

There was no question that Pella needed help on the warehouse management front. "Our previous system was pretty prone to things getting lost," says Singer. "We had several people who were 'finders of lost windows.'"

The array of homegrown legacy systems used at the various manufacturing sites were passive in the sense that workers unloading a truck would put an item away in an available slot, then plug that location information into the WMS. Consequently, put-away schemes had to be simple, but what Pella really needed was more complicated put-away schemes that could maximize the efficiency of the outbound loading process. "At our other facilities that are both build-to-stock and build-to-order, they actually had as many as three different systems that the operator would have to log onto in order to load a truck," says Singer. "They took the stock items out of one system and live orders from another, while work-in-process was kept in a third system."

The mix of build-to-stock and build-to-order requirements drastically trimmed the ranks of eligible WMS vendors, Singer recalls. "When you are making a build-to-stock item, you have a part number that you are stocking, and you replenish a forward pick area and you cycle count these part numbers. But in the build-to-order environment, the product actually comes off the line with a customer order and customer address attached to it. Each build-to-order product coming off the line is destined for a specific customer, and the process of tracking each one of those unique items as they make their way through the warehouse and then picking them for outbound shipping to customers was foreign to a lot of people."

Pella selected McHugh's LES package, including its transportation, warehouse and labor management modules. There were three basic reasons that McHugh won out, according to Singer. First, Pella had been using the McHugh transportation management system (TMS) since 1995, and Pella familiarity with the software gave the vendor an additional foot in the door. Second, Pella wanted to minimize the number of vendors, so being able to get all three modules from one company - and the associated functional transparency - was a big plus. And third, McHugh had other customers that were doing stock and custom manufacturing with the same system.

On the ERP front, Pella picked Oracle. Implementations of both IT systems presently are under way. Oracle went online in Story City earlier this year and it was a seamless transition, says Singer. Oracle implementations at the remaining Pella sites and subsidiaries will take place over the course of the three-year rollout. D&T continues to assist with the Oracle implementations.

Implementation Agenda
However, on the WMS front, Pella moved much more quickly. "We saw how we could get some benefits right away on the warehouse side, so we decided to go ahead and implement it simultaneously while we were starting up the Oracle project," says Singer. First up was Pella's smallest site, Story City, which does both custom and stock production. After a January implementation and slight de-bugging, the focus shifted to the company's largest manufacturing site, in Pella, where the implementation is ongoing. Next up will be the Carroll site, followed by the new warehouse facility Pella is building in Gettysburg, Pa. The entire rollout should conclude by the third quarter, with Pella handling the implementations without consultants other than the McHugh technical people. Custom modifications have been few, Singer adds.

All product orders received by Pella have a ship date. "That ship date is sacred to us," explains Eileen Burns, logistics systems administrator for Pella. "We nearly always ship the order on the scheduled ship date - rarely early, rarely late." Pella also tries to avoid dropping orders early because in building materials the specifications often change from the original blueprint designs as one gets closer to the actual use date.

Build-to-stock orders have a lead-time of four days, custom orders are seven days. "When an order is entered Monday a.m., it will ship out Thursday," says Burns. "We start load planning Monday afternoon, and we finish that load plan and send load tenders to the carriers on Tuesday. Any product that has to move between manufacturing sites moves on Wednesday, and it gets loaded on the outbound truck and is picked up on Thursday. That's why some of our in-line sequencing is so important."

	"We nearly always ship the order on the scheduled ship date - rarely early, rarely late." -Eileen Burns of Pella Corp,

Shipments to customers move exclusively over the road. Full truckloads head to the Pella Distribution Network outlets, and multi-drop truckloads feed pool distribution points and higher volume national chain stores. Ninety-five percent of Pella's production is shipped from the consolidation center.

According to Burns, Pella uses the McHugh TMS to coordinate its shuttle routes. It not only builds stops in those shuttle routes to match the outbound routes, but also times them so they arrive at the consolidation center in sequence to match the outbound system.
Having the LES suite up and running won't necessarily cause radical changes in lead times, Singer says. "We have pretty aggressive lead times - the most aggressive in the window and door manufacturing industry - so there's not a lot of time to take out," says Singer. "We're pretty lean."

Instead, the logistics modules should produce efficiencies of a more traditional nature. For example, Pella stands to gain some valuable increases in labor productivity because of the pick mechanisms provided by the McHugh software. Since the old Pella system did not have directed put-away, workers in the consolidation center had to arrange their different orders by ship date and then by customers. With the new system fully online, there will be a directed put-away for each item brought into the consolidation center, and the system automatically will direct to that same location all subsequent windows for that particular customer order. "With the new system, we're making it pretty difficult to put items in the wrong place," says Singer. "Now when it's time to load the truck, we know where everything is." And by directing the exact placement during put-away, the system encourages development of a mind-set that embraces, willingly or otherwise, best practices, she adds.

Another advantage appears as the directed put-away and optimized storage area frees up more space for manufacturing. And Pella sees new efficiencies as the load-planning capabilities of TMS capitalize on the vision of the WMS, together yielding an optimized plan to load product at the manufacturing sites in a manner and sequence that minimizes handling when the shuttle truck reaches the consolidation center.

Pella appears in no rush to embrace the more overt labor management aspects of the software suite. The company traditionally has not tracked productivity to the degree provided by the labor management system, which puts a time/date stamp on worker activities. Pella apparently is not using engineered standards - standards based on detailed motion studies by industrial engineers - to measure productivity and is content at this time to collect data.

Though it's too early for results, Pella managers look forward to the future dividends expected to flow from the LES. "McHugh's transportation component paid for itself the first year," points out Lee Talma, Pella's manager of logistics. "It has minimized the handling of product moving between our manufacturing sites. With the additional components, we will have one point of contact for all of our logistics system requirements."