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In creating a new distribution center in Tijuana, Mexican grocer Calimax went from the Dark Ages to the 21st Century in one not-so-easy step.
It was a journey for which Tijuana-based Calimax wasn't entirely prepared, even if the results were more than worth the effort. Director of logistics John Grimaldi hasn't led a sheltered life; he was born in Venezuela and studied in Italy. But even he admits to "shock" over the lack of technology and training at the old facility.
Calimax, the brand name operating under the umbrella of Central Detallista S.A. de C.V., is a regional grocery chain with 45 stores in Baja California, and two in the Mexican state of Sonora. Its 100,000-square-foot warehouse in Tijuana was built to support five stores. It ended up handling 35, with no end in sight to growth.
Clearly it was time for a new DC, with accompanying state-of-the-art warehouse management system (WMS). Not one for taking half measures, Calimax went in search of a facility that could support its needs for the next 20 years.
After a delay caused by economic recession in Mexico, Calimax proceeded to design a 500,000-square-foot building, including 250,000 square feet for dry storage, 120,000 for perishables, and the rest for offices and maintenance shops.
It had no choice but to build from the ground up. The old facility had nothing remotely in the way of modern technology, Grimaldi says. There were no systems for gathering critical data. Product was stored haphazardly, from floor to ceiling, with no assigned pick locations.
Productivity levels were at rock-bottom. Brad Bolinger, director of services with EXE Technologies Inc., saw four men load a pallet onto a truck, each one taking a corner. Forklift moves in the crammed warehouse were down to about four moves an hour. In short, says Grimaldi, "the building was obsolete."
The quality of personnel was no better. Workers' average education level was below the second grade. The majority of supervisors had never reached high school. And no one was accustomed to having his performance measured - let alone being penalized for errors.
On the technology side, Calimax opted to scrap its homegrown system and go with the EXceed WMS software of Dallas-based EXE Technologies. It ended up acquiring the full suite, with modules for receiving, inventory control, cycle-counting and shipping.
With its pressing need for a modern solution, Calimax might have been in no position to strike a deal. But Grimaldi had one card to play. He knew EXE had no installations in Latin America at the time. So he bargained for a deep discount, in exchange for serving as the vendor's showcase customer in the region. The arrangement appears to have worked for both parties; EXE now has some 23 systems in place throughout Latin America.
Implementation of EXceed went smoothly. Calimax essentially bought an off-the-shelf product and made almost no modifications to it. "The only trouble," Grimaldi says, "was getting people who didn't speak a word of English to learn a system that was only in English." To ensure that things went right, he negotiated for an EXE trainer to be available for three months, instead of the standard 30 days.
Bolinger says EXE focused on training supervisors, who then brought the remaining staff up to speed on radio-frequency units and other aspects of the software. He admits to surprise at how fast the workers acquired the necessary expertise. "I did not give them enough credit," he says.
Following installation of EXceed, productivity soared. A series of escalating incentives, tied to increasing levels of efficiency, helped raise activity in the DC from 50 cases an hour to 200, and from four pallet moves an hour to 22, all within a year. On some days, forklifts are making up to 27 moves an hour - "as good as any in the U.S.," says Grimaldi.
Calimax now handles four times the amount of cases with 20 percent fewer people. The number of pickers has been cut in half. That has led to a reduction in cost per case of between 7 and 8 percent. Average inventory levels have fallen by nearly 25 percent, and the retailer has seen a 16-percent increase in net profit and return on assets at the warehouse, according to an independent study by Penn State University.
Calimax plans to expand its retail network by five stores a year over the next several years. At the same time, it will continue to implement additional pieces of the EXceed suite, including RF receiving and support for cross-dock activities. "The system is so rich," says Grimaldi, "that we haven't used it all."
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