Wholesale gives way to direct-to-store and automatic packing
Mississauga, Ont.—Shifting from wholesale distribution to direct-to-retail is challenge enough, let alone adding in an automatic pick/pack system. But as Montreal-based Imperial Tobacco Canada Ltd. discovered, a lot can be achieved with the right partners, and carefully-chosen technology.
Back in 2005, managers at Imperial Tobacco felt the business had hit a plateau. A consulting company was brought in to look at the distribution network, and the idea of direct-to-store delivery was born.
Under the old system, employees picked case quantities and sent them to wholesalers. Fast-forward to today, and the company ships directly to 25,000 retail outlets coast-to-coast.
“The speed to market is 24 hours from the time the sales rep gets the order to delivery throughout Canada,” said Pierre Gibello, manager of secondary supply chain with Imperial Tobacco, speaking at the recent Supply Chain & Logistics Canada conference in Mississauga, Ont.
Imperial worked with Ryder Canada to put the direct-to-store network in place. It was an easy decision to make, given Imperial had partnered with Ryder since 1997. Today, Ryder manages seven of Imperial Tobacco’s eight Canadian DCs.
Because cigarettes are sold in multiple package sizes, and Imperial also sells loose tobacco, the DCs carry 150 SKUs. That kind of variety is good for customer satisfaction, but it created hurdles for stage two of Imperial Tobacco’s plan—automation.
“We were looking for a technological breakthrough to [further] improve our productivity,” Gibello said. His team scoped out ideas at other Imperial operations.
In Brazil for example, a DC employs an automatic picking system. But the facility deals with only one product—the king size 24-pack. That specific system wouldn’t suit Imperial’s Canadian operations, where products come in 10 different sizes. “Given the velocity of our market in Canada, this didn’t satisfy our needs,” Gibello said.
Instead, the team decided they needed an automated system to place tobacco products into shipping cases. The question was how would they do it? A request for proposals (RFP) was issued but “the results, unfortunately, were not that exciting,” he said. “The cost of the robot was too expensive [and] there would have been no payback.”
The team realized an off-the-shelf product wouldn’t work. Instead, it brought in two automation companies and put them in a room with Imperial Tobacco staff and Ryder. The companies worked together to craft a new RFP for a non-traditional customized system. The RFP was sent to nine suppliers, but only five bid. Axium Inc. (Montreal) emerged the winner.
“Axium had the software to let the robot know where the [item] had been placed,” Gibello explained. That capability was key to the project, as Imperial didn’t want to invest in vision systems for the robots.
The plan received the board of director’s approval in 2009, and has since been deployed at DCs throughout Canada—the two largest of which are in Montreal and Brampton. In between, there were months of trial and error. “The scope was huge,” Gibello recalled.
“In the spirit of a true partnership, we decided to have two project managers,” he added, referring to the leads from both Imperial Tobacco and Ryder. Project headquarters were at Axium, for a couple of reasons.
“We didn’t want the project to be completely known,” Gibello said. “Plus, Axium has access to all the technology, testing, etc.”
He recalls the team repeatedly watched the line in action, then headed into a boardroom or lab to fine-tune it. Basing the project at Axium allowed for these on-the-fly modifications, he explained.