On the back of a phenomenal growth curve in computer games over the past few years – a curve that is predicted to grow even more strongly for the foreseeable future – supplier EB Games faced some formidable challenges in meeting its logistics and supply chain demands.
The company recently worked with integrated supply chain solutions specialist Dematic to upgrade and automate its Brisbane distribution centre pick line to enable EB Games to meet its needs for the next five years and beyond.
The video game industry continues to grow at a rapid rate, with predictions that the worldwide market will grow its current annual revenues to $US 46.5 billion by 2010, based on current compound growth rates of nearly 12% a year. This growth reflects the changing role and popularity of computer games, which now appeal to everyone from grandchildren to their grandparents.
Since opening its first retail store in Sydney in 1997, EB Games has experienced phenomenal growth. Now with 2,000 employees and 250 stores located throughout Australia and 30 in New Zealand, it is the largest specialist retailer of computer entertainment in the country.
EB Games carries all the major brands of games, as well as the accessories that go with them including books, trading cards and toys. It carries mainstream products from Nintendo, Sony and Microsoft and also other software suppliers. The range also includes peripheral products such as steering wheels, speakers and keyboards.
The company moved into its current facility in Pinkenba, not far from Brisbane Airport, in October 2000. A purpose-built facility, it features 2,400 bulk pallet positions, a two-level mezzanine, 56 bays of carton live storage (CLS) and a conveyor transporting cartons to the dispatch area.
The facility was built when servicing just 44 stores and was adequate for the size and the nature of the business at the time. However, by late 2006 it became apparent that existing pick procedures certainly wouldn’t manage the projected growth of both the company and the industry.
According to distribution director, Andrew McDonald, EB Games realised it had to invest in the latest supply chain technology if it was going to keep up with current and predicted demand.
“We recognised that we had to automate the pick operation if we were going to cope with the growth of the business and the demands from our retail outlets,” he said.
“Previously we operated a paper-based pick system that has become obsolete: mistakes were being made, the operation was very labour-intensive and it was hard to monitor the accuracy and speed of the pickers.
“So we spoke to a number of suppliers about introducing the latest technology to the operation. Dematic representatives were across the issues, and in my opinion they appeared to be the industry experts in paperless picking, pick-to-light and voice picking,” said McDonald.
“Also, EB Games is a global organisation and Dematic had been involved in a number of similar upgrades in different parts of the world. I was able to talk to our management of these facilities and, based on their feedback and the competitive nature of the quote, we decided to go with them.”
Included in the upgrade were implementations of:
• Dematic voice picking in the bulk storage area, which manages 70 SKUs including the bulkier items such as computer hardware, speakers and consoles;
• Dematic pick-to-light in the carton live storage (CLS) area, which manages 2400 SKUs;
• Dematic PickDIRECTOR software, which is interfaced with the in-house warehouse management system designed by EB Games.
“Obviously, there was a significant amount of work and liaison between Dematic and EB Games both here in Brisbane and in the US in terms of the interface specifications,” said McDonald.
“We had a two-week installation period, which was pretty seamless. Dematic upgraded each of the four aisles of carton live storage one at a time, leaving the other three operational, which minimised disruptions.
“Our US host engineer specialist ran tests on the interface for two days and once each test was consistently accurate we went live on August 29, 2007 – a joyous day!” he said.
“Our US engineer had been involved in three similar pick to light upgrades around the globe and he said this was the easiest. “We had Dematic engineers on site the week we went live and I think we only needed to consult with them once. It went very smoothly from day one,” said McDonald.
“In this industry timing is critical. Computer game players are very passionate and like to be first with the very latest releases: if you can’t deliver, they’ll find a supplier who can.
“There is little consumer loyalty these days, so we pride ourselves in a fast turnaround of orders.”
EB Games operates an intranet accessible by each of its stores. This provides daily updates on what’s coming up, new release dates and so on.
Each of the stores places orders on the distribution centre via EDI (electronic data interchange) with a 24-hour turnaround of orders in the pick module. The stores are replenished up to six days a week and the DC can be shipping between 100 and 150 pallets and up to 80,000 items a day in peak periods; the average is 50,000 items a day.
“Orders are received via EDI and uploaded to the warehouse management system which then releases the picks for the day to Dematic PickDIRECTOR software,” McDonald said.
“This releases the picks in eight waves with orders for the most distant stores picked first and local stores picked in the afternoon.”
According to EB Games operation manager, Darren Ryle, there have been a number of benefits derived from the implementation of the new technology – some of which were expected and others which were not.
“We’ve seen a number of improvements to the operation since implementing the system,” he said.
“For example in the bulk area where we are voice picking, the pickers are able to cluster pick up to four orders at once, which has pretty much doubled the speed of picking in this area.
“Picking accuracy is up around 99.14%, and across the team, I’d say productivity and efficiency has improved by about 50%. We’re picking more products more accurately with 30% less staff.
“We’ve also been delighted with an unforeseen benefit – the increase in the morale of warehouse staff,” Ryle said.
“The new technology has made a big difference to the way our pickers operate and people are a lot happier. With the previous operation the CLS area, where fast-moving product is stored, would get very congested and the only way we could cope was to have a lot of staff picking in the same area.
“On hot Brisbane summer days it’s not pleasant working in close proximity with a large number of other workers,” he said.
“Now with the Dematic pick-to-light system, pickers stay in their particular zone and there is no congestion. Pickers are also walking up to one-third less in distance because the system calculates the most direct path between picks.”
According to distribution director McDonald, the transparent nature of the Dematic software has enhanced management’s ability to better manage the operation.
“The software enables us to track the performance of individuals as well as team statistics. Staff are rewarded for higher productivity and we are now able to identify those members who are performing well – or under-performing,” he said.
Under-performers may require more training or might have to find a new department to operate in.
“When we first looked at the upgrade, I projected a return on investment of three years and that will be about right,” said McDonald.
“Due to the performance of the system we’re now examining the implementation of Dematic put-to-light, which will enhance our cross docking area. We’ve also entered into a remote monitoring and maintenance agreement with them.
“If there is a problem, the Dematic people can access the system remotely, fix the issue and get things happening; it’s all just a phone call away.
“All things considered, we’re very happy with the new system and we’ve been very impressed with the service. I would have to say that both have surpassed our expectations,” McDonald said.
For more information, please contact Alex Heska at Dematic on (07) 3394 8377.
*Excerpt from MHD Supply Chain Solutions, May/June 2008 (pp.36-40)