Until its purchase last year by Ecolab Inc., a global developer of industrial cleaning and maintenance products, Daydots was a family business. Started in 1985 by Mike Milliorn, Andy's father, Daydots began with its namesake product: color-coded day-of-the-week labels that help restaurants and food-service providers use chilled and frozen prepared food on a first-in, first-out basis. The company has since grown to 3,500 SKUs and revenue of $23m. Despite its relatively small size, Daydots opted to install an SAP enterprise system. It was unsure, however, whether SAP's warehouse solution could meet its needs.
Q: Daydots has come a long way in 20 years. Tell us a little about that progression.
Milliorn: Our namesake product was very successful, but over time we realized that the labels were really just one part of a complete food safety system. There is also sanitation and cleaning, so we began selling a lot of hand soaps and cleaning detergents and a lot of food-handling tools like the gloves and hair nets that kitchen workers use. Another example would be color-coded cutting boards that allow food workers to use dedicated equipment for chicken and vegetables. And we also sell crossover items that are related to physical safety. For example, we sell a lot of bright blue bandages because these are easily visible should one fall into the food. And there are tools to prevent slips, trips and falls and so on. We have a full range of restaurant supply items that are used in conjunction with food safety efforts.
And, of course, Ecolab is the world's leading provider of soaps and sanitation chemicals to the restaurant industry, so we are now dovetailing our efforts with theirs.
Q: Have you always been responsible for supply-chain management at the company?
Milliorn: No, I got involved by a very roundabout path. My background is in printing management. When we started our company we were buying our labels from a label printer and redistributing them. Then, in 1990, we decided we would buy a printing press and begin manufacturing our own labels. Once we had the printing press, people started knocking on the door and asking us to make labels for them and soon we had not only our food-safety labeling company, but also a custom printing company. So I obtained a degree from Clemson University in Graphic Communications, which is a well known program for printing and print management, and I ran our custom printing facility for a number of years, until we decided to sell that and strictly focus on the food safety products. When the printing operation was sold, I had to reinvent myself.
At the time, Daydots' distribution center was not very sophisticated. We still had a fairly small number of SKUs so it really didn't have to be, but we believed we were just on the brink of some big changes. Jack-in-the-Box and some other folks had some very high profile mishaps with their food handling, which was really bringing food safety concerns to the forefront. The National Restaurant Association started to spearhead a food safety campaign and we saw that the whole issue was really gathering steam. We felt we needed to start putting more effort into our DC operations. It took us three or four years and several iterations of technology but we have finally gotten the DC to a place where we are proud of it and it certainly is not holding us back anymore.
Q: How big is your distribution facility?
Milliorn: Our facility is 100,000 square feet. As far as volume, we are shipping 15,000 to 16,000 packages a month, almost all domestic. We have licensees and distributors in some foreign countries but those would be going out in pallet loads. Most of our shipments are parcels shipping to the actual end user restaurant.
Q: What were the primary issues you wanted to address?
Milliorn: I'm sure that ours is a familiar story. We had started out using a homegrown sales and inventory management software package that had evolved through the years. In the late '90s, we decided that we needed an ERP system if we were going to grow like we wanted and do the things we wanted to do. We knew it was a bit of a stretch for us, but we decided to go with SAP. We wanted to think bigger than we actually were. So we did an implementation of SAP in '99. At that time, I think we were one of the smallest companies that SAP had worked with. The implementation went well, but everyone we talked to told us that we really didn't want to use SAP's warehousing tools. They were really strong in financials and materials management, but it seemed they were just not quite there yet with warehouse management. So we continued to limp along for a while with some very weird interfaces with our homegrown system.
Then we bought two horizontal picking carousels from White Systems and our integrator suggested that we implement a small WMS package-really, it was a location management system-and the integrator would interface that with SAP. So that was a step up for us. Integrating the carousels into our processes really got us on the road to some good efficiency on the picking side. But we soon started really feeling the headache of having two separate inventory systems. We were selling out of one inventory in SAP, but picking and warehousing out of this separate inventory and WMS system and the two rarely matched. It was very difficult to reconcile them.
Our goal from day one has been to pick, pack and ship orders the same day they are received. So every order we receive today ships today, and the inability of these inventories to agree was causing major pain. We would be selling and promising things in Customer Care that we actually didn't have on the shelf. I started doing some research and began to realize that we needed to get all of this WMS functionality inside SAP so that we could all get on the same page and have full visibility. By then I was hearing that SAP had really come a long way with its WMS and a lot of the functionality that had been missing in the past was now coming online. I thought it was a good time for us to take a look at it and I called our local SAP consultant. What we got from them was a very typical answer: if we told them what we wanted the system to do, they could configure it to do that.
I just wasn't happy with that. I figured that if we were really going to reinvent how we were doing things, then I wanted to adopt a lot of best practices and find out how other warehouses were solving the same problems that we were facing. It was at that point that I decided we really needed a specialist consultant and, after doing some research, I came across Catalyst and its SAP practice. What I initially liked about Catalyst is that they had what I wanted-people with practical knowledge of running warehouses who could help us streamline our operations, not just implement software and configure it to do what we already were doing. They came in and helped us do some evaluations of our operations and then once we started working on the software side, they were able to interface those new process changes into the software.
Q: Were you concerned that Catalyst would push its own WMS product as opposed to SAP's product?
Milliorn: Obviously, I knew that Catalyst had both a strong SAP practice and its own well-known WMS package. And, I admit I had some concerns that Catalyst might be predisposed to steer us toward its own product. But we decided to leave our options open. They had listened to us and we had been on some field trips and tours and seen both systems in action. We really felt comfortable leaving it up to them to evaluate our needs and suggest to us what they thought would be the best solution. They did a thorough analysis and in the end they suggested the SAP implementation. There were features that Catalyst had that SAP lacked, but they said that at the rate SAP was investing in R&D, it would soon offer those features as well. Secondly, we already owned an SAP license, which was a big cost advantage because we would have had to start from ground zero buying a Catalyst license. This recommendation certainly gave Catalyst tremendous credibility, though, and we selected them to do the implementation.
Q: And how did the implementation go?
Milliorn: The implementation went great. We particularly benefited from the blueprinting process. We started with a clean sheet of paper. Instead of setting out simply to recreate in SAP what we already were doing, we asked how we wanted things to work. Some of it was a re-creation, but we also made significant changes that allowed us to achieve improvements in accuracy. We spent about a month just blueprinting the processes and then we went back through and designed the RF system.
Q: What were the main issues you wanted to address?
Milliorn: There were two issues I really wanted to focus on. One big area where we needed help was in keeping our same-day shipping commitment as we added SKUs and order volume. We had two picking carousels and two other static picking zones with about 3,500 SKUs. At the time we had room for a third picking carousel, which has since been added. So I looked at this and realized that as we added more items and more zones, the roundtrip for a single order was going to take longer and longer and I was concerned about meeting our same-day commitment. That was the first area where we really needed some help.
Another area where we needed help was with accuracy. We were very accurate picking from a pick-to-light carousel, but all of our picking from static shelves was prone to error as well as our packing operation. Both of these were areas where we knew RF technology would help us.
Q: When did you go live?
Milliorn: We went live November 2003. We had some troubles in November and December of that year. We were seeing some things that didn't come out during the testing. Then we had a learning curve through January and February of 2004. I was beginning to have doubts-the system was working fine but we had not seen any improvements in efficiency or accuracy. Of course, I was really curious as to why this was happening and I talked to Catalyst and we were about to start some more studies. Then, around March, the system really came into its own. Our operators became more comfortable with it and we really started to see the results we had been expecting. No further intervention was required.
Q: What is the most important lesson you learned in this process?
Milliorn: Focus on the blueprinting. The end result doesn't have as much to do with a successful software implementation as it does with examining your processes. What we strive to do here is create processes where average people can achieve great results. Everyone wants the Dream Team, but in reality that is never going to happen, so you had better figure out how to succeed without it. That's what we have tried to do. We took a lot of decisions off the warehouse floor. Once an order hits the DC, it is a straight shot. Our workers know exactly what they need to do to get it out the door. The RF procedures we developed pretty much walk them through it, step by step. All they have to do is follow the bouncing ball, which is the instruction on their screen. So I would tell anyone embarking on a similar project to focus on the blueprinting big time.
One other area where we fell down was in failing to test enough. You need to test these things within an inch of their life. We tested every process and every transaction individually, but when they started interacting with each other with multiple users and things like that we discovered a few cracks that took us a little while to overcome.
Q: Can you share data on your improvements?
Milliorn: Absolutely. In 2003 our order accuracy was 99.84 percent on outgoing shipments. We averaged 22 errors a month or 266 errors on the year. For 2004, we are averaging 7.5 errors per month. So we are 99.95 percent accurate, and that is with a 17 percent increase in package volume. Through November of 2004, we had shipped 173,000 packages with 82 errors.
Our throughput also has improved. In 2003 we averaged 7.78 packages shipped per person hour. Through the end of November 2004, we were at 8.46 packages per person hour, so we are getting almost an extra package per person hour out the door. We have seen a 17 percent increase in package volume this year and only a 13 percent increase in the number of hours worked so our manpower has not increased proportionately to our workload. Since the implementation, we have continued to leverage the system to make improvements. We have decreased the workload in our consolidation area by 50 percent with 75 percent of all orders now going straight to packing. We accomplished that by reslotting some items and doing a few software tweaks. And, of course, we no longer have the problem of disparate inventory numbers. We have seamless integration and order visibility from customer care all the way to the warehouse floor. We can see every order and each pick as it happens if we want to because we are getting real-time pick and pack information. We have visibility that we never had before.
These are improvements that we wouldn't have been able to make before, but with a robust system like SAP you can start leveraging a lot of stuff.
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