What about the backroom?

February 9th, 2010

The focus in the backroom is to do more with less, and retailers are looking to logical layouts and space-saving strategies and equipment to help accomplish this.

According to industry figures the amount of space devoted to backrooms has steadily declined over the past several decades.  In the 1970s backroom storage accounted for about 30% of a store’s square footage, but that amount has dwindled to 15% or less today.

One of the key drivers to this downsizing is just-in-time inventory management.  The idea is to minimize the amount of inventory that is held as back-up stock at all points in the supply chain and to increase the frequency of store deliveries.  More accurate POS data, allows operators to identify more precisely how many of each product sell each day, and then to order just enough to hold a store over a one- to three-day cycle.

Store friendly deliveries
Another goal of current supply chain thinking is to transfer as much inventory from the delivery truck directly to the sales floor rather than keep stock in the backroom.  This approach is aimed at reducing handling costs.

Fifty to 60% of supply chain costs are in the last 100 meters. Traditionally, the backroom was where most of this cost occurs as received orders are broken down, sorted by aisle and then loaded on carts to be taken to the sales floor.

Today, many retailers are pushing backroom activities back into the distribution center.  As store orders are picked, pallets are built so that merchandise is arranged by store aisle and merchandise adjacency - known as “store-friendly deliveries.”  This strategy involves merchandise pallets that can go directly from the truck to the store’s sales floor, where they are broken down and put on the shelves.  The goal is to minimize handling.

Keeping track of the hundreds of variations in store layouts that can exist even within a single chain can be mind-boggling.  However, it is possible to prepare store orders at the warehouse so that most pallets are sorted by store aisle.

The trade-off, of course, is extra warehouse labor costs, but retailers still come out ahead. In fact, a “store-friendly delivery” strategy typically increases warehouse labor by 25%, but can also decrease store labor by 33%.

In terms of time this trade-off amounts to a savings of 16 seconds per case handled.

Entry Filed under: Design & Layout, Distribution Operations, General, Logistics Strategy