Photo: Kathmandu’s general manager supply chain Caleb Nicolson and national distribution manager Shawn Silk.
Travel and adventure brand Kathmandu has established one of Australia’s first purpose-designed omni-channel DC in Melbourne.
The world of Kathmandu
Kathmandu’s Truganina DC is responsible for distribution across its Australian retail network and to online customers globally.
“While the majority of our online business is currently in Australia and New Zealand, last year we launched a global website, so we are now responding to more demand,” said Kathmandu’s general manager supply chain Caleb Nicolson.
The Truganina DC is 25,000 square metres. It’s built for growth, and made it possible for Kathmandu to consolidate its previous operations.
A bigger, smarter DC
The Kathmandu Supply Chain team started the journey about five years ago. “We knew we had to change, we knew we needed a larger site, the key question was what was the most appropriate design and automation,” said Mr Nicolson.
Kathmandu evaluated a range of order fulfilment options including zone-routed picking and goods-to-person (GTP), and it took six to 12 months before the business got to the point where it was clear that a batch-pick sortation solution would be the best fit.
“There were a lot of drivers for change,” said Mr Nicolson.
“The first one was that the lease on our building was ending, and we had run out of space and couldn’t meet our operational output per day.”
Kathmandu was seeking an operation that enabled high fulfilment responsiveness, which was critical, given the success of its strong promotional model.
With its previous discrete order picking strategy, Kathmandu’s staff would walk the DC 116 times to service its 116 stores. With the new batch-pick sortation system, they only need to walk the DC two to three times a day.
“With turnover increasing at double-digit rates for the last seven years, online has been a huge growth area for us.
“Our goal with the new DC is to be able to dispatch every order as it’s received on the day or, if not, the following day,” said Mr Nicolson.
Kathmandu has made a significant investment in systems in recent years, with its network built around responsiveness.
When a customer buys an item in a Kathmandu store, it is in demand in the DC the very next day, with all out-of-stocks prioritised for picking.
“With our new batch-pick sortation system, the pick accuracy is far beyond what we could achieve with our previous manual processes,” said Mr Nicolson.
“The trick for us has been to determine the timing of batch releases, aiming anything that’s been ordered in the morning to be dispatched that afternoon.”
Prior to implementing the system, Kathmandu contacted suppliers and changed packaging and barcodes etc. to maximise the volume of product and the width of its range that could be handled by the system, with items that transfer via the sortation system being the most cost-effective path to its customers.
The sortation system also provides a flexible conveying solution, with large items capable of being handled across two cells.
Seasonality and peak periods
With its promotional model, Kathmandu experiences the majority of demand during sale events, which are effectively at the middle to end of a season. This means Kathmandu’s range launch or initial push quantities are potentially lower than for a traditional retailer.
A traditional retailer may push 50-60% of their volume at the start of a new season, before switching to a replenishment model.
“Kathmandu’s seasons are quite different,” said Mr Nicolson, “We have three seasons and our range launch volumes are less than half the industry standard due to our promotional model and the majority of demand occurring during key promotional periods.
“We saw the need for a logistics system that could be very responsive, as we needed to maintain high service levels for highly variable demand in stores.
“For us, the ability to have a system that had the flexibility to scale up output on a Monday without a linear relationship to labour is really key.
“Under our previous manual pick method, if we wanted to increase output by 50%, it was basically 50% more people in the building. That all changes with a sortation system, particularly when you’ve got the batch-pick opportunity.”
Kathmandu’s DC was designed to accommodate growth. The capacity of the sortation system can be scaled up by adding more store or online chutes, which gives Kathmandu flexibility based on where its business grows.
The company currently inducts goods into the sortation system from one end only, and it is possible to significantly increase throughput by inducting from both ends. It can also put a mezzanine floor above the pick module, and extend the building at a later stage.
“We also ran a really high pool of agency staff, particularly in the last year within our old distribution centres, so we knew – and the narrative to our team was – as we transition people across, our existing and core Kathmandu people would have a role, because we’d be able to remove the agency element from the business,” said Mr Nicolson.
Automated split-case sortation
Dematic has implemented many cross-belt sorting systems for full case sortation in Australia.
“What was really new about the Kathmandu facility is that we’re using the crossbelt sorter to do split-case sortation to individual stores,” said Dematic’s solutions manager Darren Rawlinson.
“We take a batch of the store orders, together with some e-commerce orders, and group the demand.
“The pickers then pick those items and feed them into the sorter, which automatically allocates the picked items to the relevant stores,” he said.
Full cases can also be picked in the system. These are picked in the same manner and loaded onto the conveyor system, or, if they’re required to be broken and fed to individual stores, they feed up onto a mezzanine area ready for induction into the crossbelt sorting system.
The system can sort up to 254 store destinations together with the e-commerce areas and packing areas.
Because the crossbelt sorter does not rely on gravity and gives a positive sortation action, the system can handle a very wide range of products from a small compass packed in a plastic wrapper, all the way through to a large sleeping bag.
When Kathmandu is picking a batch of orders for stores, it also considers family groups, with the system allocating each store and family group combination to a chute. When an item is scanned on the sorter, the control system looks up to see which stores require that product, and then sorts it into the chute that has been allocated for that store and that family group.
Going to a batch-pick concept means labour can be kept relatively static, even though Kathmandu is dealing with some very different throughput days.
Picking e-commerce orders for free
One of the challenges Kathmandu faced is that e-commerce is a rapidly growing part of the business.
“What we saw with batch picking was a unique opportunity to pick e-commerce orders essentially for free,” said Mr Rawlinson. “The way we achieve that is by grouping those orders in with the store orders, so that if any store needs a product that’s been ordered online, the operator is simply told pick two instead of one.”
The items are sorted to a Dematic RapidPut wall, where an operator carries out a final sortation for the e-commerce orders and assembles those ready for packing.
At the put wall, an operator is faced with a chute where all the items for e-commerce orders have been consolidated.
The operator scans an individual item, and the system looks to see if the order has already been allocated a cubby in the put wall.
If it hasn’t, it allocates the cubby closest to the operator. After the item has been allocated to a cubby in the put wall, a put-to-light (PTL) display comes on at the front of the wall, directing the operator to the position in which they need to put the item. They then press a button to confirm the put operation.
The system automatically selects a small cubby for small orders and a large cubby for larger orders.
Each of the put walls has 144 locations, meaning that one put wall can deal with 144 e-commerce orders at any one time. On the rear of the put wall, lights indicate the next order to be packed.
With the configuration of the system, an order can be picked, processed, packed and fed to dispatch shortly after that order is made available for picking.
For more information visit www.dematic.com/en-au/.