Dairy Crest's UK Distribution Center Continues To Set The Standard For Chilled Dairy DC's

When the United Kingdom's leading dairy needed to consolidate distribution from 14 manufacturing facilities into one national DC, they teamed up with Dematic to produce a state-of-the-art facility, that could accommodate aggressive future growth anticipated through brand acquisitions. Six years later this DC continues to set the benchmark within the chilled dairy market for handling expanding volumes, complicated mixed-pallet orders and extremely short lead times.

Anyone in the UK knows the name Dairy Crest. Their brands are family favorites, found in millions of fridges throughout the country. Their butter and spreads business produces a range of popular brands including Clover - the UK's best selling dairy spread, Utterly Butterly, Country Life - the number one English butter brand, and St. Ivel Gold. Dairy Crest's cheeses can be found in Britain's supermarket delis and aisles everywhere, with brands like Cathedral City - the nation's favorite cheese brand, Blue Stilton, Davidstow - one of Britain's best-selling cheddars, Over the Moon, and Wexford. They are also one of the UK's largest purchasers of fresh milk, buying approximately 2.4 billion litres every year, marketing and selling a number of brands including St. Ivel Advance, Rachel's Organic milk and Frijj - the UK's leading flavored milk. Additionally, they home deliver milk to 1.1 million households - 350 million bottles of milk a year.

Since 1992 Dairy Crest has been in a steady expansion mode. A joint venture with Yoplait established Yoplait Dairy Crest (YDC), responsible for producing and marketing chilled yogurts, desserts, cottage cheese and ice cream. It is now the UK's leading manufacturer of fromage frais, children's chilled yogurts and desserts.

In 1995 Dairy Crest acquired a leading cheese company, Mendip Foods Limited. Three years later, in 1998, YDC bought Raines Dairy Foods, which significantly expanded their chilled yogurt market. 1999 brought the acquistion of Millway Foods Ltd. by Dairy Crest, and in 2000 the dairy and cheese businesses of Unigate PLC. In 2002 they acquired the St. Ivel spreads business, in 2004 an interest in the English Butter Marketing Company, and in 2005 Starcross Foods. Today, Dairy Crest is the UK's leading chilled dairy foods company, and one of the ten largest food companies in Britain, with over 7,500 employees across 20 sites throughout the UK, Ireland and France.

This rapid growth brought the necessity to consolidate the company's distribution configuration, which up until several years ago was not centralized – shipments were being made to retailers from no less than ten different production facilities throughout England. Their customers were placing one order, but in effect getting multiple separate deliveries coming from different locations.

Additionally, a change in the late 1990's to the retail supply chain in the UK jump-started the change in Dairy Crest's distribution set up. A lot of their customers, to get the throughput through their own distribution centers, moved to what is known as "day-one for day-two" distribution, where they order their products every day for next-day delivery to their DC. That's the way the whole industry in the chilled dairy and chilled food market works within the UK now. A lot of Dairy Crest's products, historically, were on longer lead times. Their cheeses, for instance, which require cutting and packaging, would be ordered day-one, but not usually delivered until day-ten. They would go direct from the factory to the retailer, and the retailer usually would put in the order for cheese once a week, or possibly twice a week.

Other food manufacturers have had to deal with this change in distribution, but not on the same scale as Dairy Crest's 50 million-case annual throughput. This was the trigger point for Dairy Crest to build a central distribution center, capable of efficiently handling higher volumes, higher pallet make-up complexity and shorter lead times.

"Our primarily function is to distribute our company's products to UK retailers for sale and for foodservice industries", says Andrew Watson, Distribution Director for Dairy Crest. "We have over ten production facilities in the UK, and we have four factories in France under the Yoplait banner which provide us with product on a daily basis. It all comes down to this one national DC in Nuneaton, about 100 miles northwest of London, and then we consolidate orders. We get the spreads from one factory, butters from another factory, a different factory supplies our liquid milk. Our convenience cheeses, blue cheeses and pre-packed cheeses come from other facilities. Our clients will order typically about mid-day, then we will pick their orders through the night - which will be across the range of the Dairy Crest products - and then we deliver from midnight onwards. It's a 24-hour, 364-day operation."

"Most of our competitors don't operate in as many market sectors as we do", continues Watson. "Our closest competitor that provides a line of dairy products is 50 percent smaller than us. Some of our competitors may have bigger brands in terms of spreads or butters, but we are the most broadly based company in the UK doing full dairy. Our product range is enormous. This means that when we fill an order for our customers it usually contains a higher number of different items than our competitors. Only 20% of our throughput is full pallets, the remaining 80% is mixed. When we were shipping direct from each of our manufacturing facilities the percentages were reversed. The switch to ‘day-one for day-two' distribution added a higher level of complexity to our distribution."

"When we first started looking at building a central DC we also had to factor in the company's plans for market growth both in terms of increasing existing product sales and in terms of brand acquisitions," adds Watson. "Dairy Crest has been focused on building leading positions with branded products in markets across the dairy sector. This trend would continue, so the DC had to be capable of handling tremendous growth in product volumes. Since the time that the DC opened in 2000, we have acquired four companies and/or brands, and the DC has easily assimilated this volume. We currently dispatch 250,000 cases daily on roughly 2,500 pallets, and maintain in storge over 12,000 pallets of finished goods."

"Also, we designed our DC to house cheddar in maturation," continues Watson. "We receive cheese in block form from our production facilities, and we hold it in controlled store temperature of 9 degrees centigrade for up to 12 months. Simple operation, but very intense in terms of storage – a 35,000 pallet store for this maturation process."

Dairy Crest Selected Dematic Corp. (formally Siemens Logistics & Assembly Systems, Inc.) to design and implement the central DC. Dairy Crest initially had a very cohesive idea of what capabilities they wanted – requirements for total storage, how many pallets an hour to move through the facility and to move in and out of the storage locations. After a thorough analysis of their needs, Dematic came back with a broader material handling solution that encompassed all aspects of their DC operation, including improving automation in their picking process and implementing a state-of-the-art WMS package. That solution delineated what the internal part of the building would look like. Dairy Crest then found a contractor to build, in effect, a shell to go around it. The 240,000-plus square-foot building got constructed first, and Dematic proceeded to build-out the material handling equipment (MHE) systems to go inside it.

With the design settled, the first challenge was the tight time scale. Placing the order to go live was quite a short period, about 12 months. Dematic had to work intensively with the builder to make sure the building interfaced perfectly with the MHE systems, such as in building out the multi-level mezzanine structure that gave a second picking level in the picking hall. The mezzanine structure itself was integrated by Dematic, who brought in their own sub-contractor to build it out.

The Dematic design called for integrating a monorail system to carry pallets through all phases of the DC. It was hung directly from the building structure at a high level. The monorail can carry in 200 pallets an hour, and bring out 230 pallets an hour. Basically interlinking all production areas of the DC, transporting pallets between storage and picking, and between picking and shipping.

The monorail is the heart of the pallet transport system. It is a single track, Dematic DSB Monorail with 28 suspended pallet carriers, and approximately 150 meters long, fed by conveyors from the different areas. Pallets come onto, and are taken away from the monorail using conventional pallet conveyor systems. There are five lifts for moving pallets between levels in the building as well. The inbound product-laden pallets go into storage. Then, when required, they are taken to the picking area. From the picking hall, once complete, the customer's order-specific pallets go back on the monorail and are taken to the shipping area. The entire areas that the monorail connects - including storage, picking and shipping - are confined to a closed environment maintained at 2 degrees centigrade.

"Dematic designed a total site-wide solution for Dairy Crest," says David Jefferys, who headed up the project for Dematic's UK offices. "Before designs were finalized, we developed computer simulated models for Dairy Crest of our proposed system undergoing accelerated production levels. We wanted to know how the system would perform well into the future with increased production loads. Every MHE system detail, from receipt of the product into their DC to shipping out to the retailer, was thoroughly simulated before the design was accepted."

"The system runs smoothly," continues Jeffreys. "Incoming pallets are transferred from trailers to infeeds on automated receiving conveyors via ride-on powered pallet trucks. The pallet identity is verified against information held in the warehouse management system (WMS). Pallets are moved to one of the two finished goods stores - fully-automated high-bay warehouses - via the monorail. The monorail enables load stability to be maintained, due to the gentle nature by which the pallet is handled."

"The finished goods store offers over 12,000 pallet storage locations, spread across five aisles, each of which is served by a high capacity, double-pallet handling storage and retrieval crane," Jeffreys says. "Typically, goods remain here for no more than a few days before being transferred via the monorail to the picking hall. The five storage and retrieval cranes replenish the picking aisles automatically (A total of 17 automatic storage retrieval systems - ASRS - were installed in the building). The picking staff is guided by radio data terminals (RDT's) to product-pick locations, while traveling around the area on ride-on pallet trucks. Picking slots are provided with 1,200 different picking lines through 980 locations. When picking is complete, the pallet is fed into an automatic in-line shrink wrapping machine, and then through an automatic shipping label applicator, before being transferred to the dispatch area via the monorail or powered pallet truck. In dispatch, staff floor-marshal the pallets to ready them for loading onto trailers."

The huge, state-of-the-art, cheese maturation store is structured with free-style, high-rise racking 30 meters high -17 vertical pallet positions - standing on 50,000 square feet of floor space. Because the cheese is stored for a year or more, the pallets are slow moving, about 20 pallets an hour. This seven-aisle facility is served by two storage and retrieval cranes, which can transfer between aisles via two mobile transfer bridges running across the front of the racking. The cheese can be retrieved and transferred to an output conveyor spur via a shuttle car, ready for dispatch to Dairy Crest's cheese cutting and packaging facility.

Siemens also implemented a WMS application tailored precisely to the requirements of Dairy Crest. Product coming in is tracked with EAN 128 pallet labels. This is a European spec bar code, which contains the ASN (Advanced Shipment Notice). As soon as each pallet is received and scanned, it associates with a prior electronic-received purchase order. It can then be put straight into the conveyor system where it is automatically booked in. They know precisely what that product is, and how many cases are on the pallet.

The WMS also integrates with Dairy Crest's sales order processing IT platform, creating a seamless path from the customer through to the dispatch of picked goods. Real-time in this system exemplifies extreme versatility as orders can be amended up to the last minute, accomodating any changes in customer requirements.

With picking, the WMS includes the ability to continually assess future order requirements, and assign and replenish picking locations. The order picking software employs systems to ensure pick pallets are assembled correctly. Volumetric data, "crushability" factors and customer-specific delivery requirements are factored in. The software also includes a load planning facility, which splits and assigns loads into trailer-sized quantities and dynamically allocates dispatch bays.

Yard management is also encompassed by the WMS, with the movement of trailers monitored and controlled with the help of two dedicated shunting vehicles equipped with on-board RTD's.

"We selected Dematic because they have done a number of other similar dairy DC installations throughout Europe," says Watson. "We also felt that they had the ability to design, manage and integrate a large project like ours."

"We greatly benefited from putting all of our activities together," Watson adds. "Our customers are now happier. By moving our stock control next to our transport we can now run efficient transport out of the distribution center, where as before our distribution vehicles might have only been 60 to 70 percent full. We have moved the distribution point closer to some of our factories, and all of our stock is now in one building and on one system. This has proved a worthwhile investment for Dairy Crest."

Order fulfilment is up to 99.9 percent. Stock turnaround decreased from 24 hours to 14 minutes. Accurate fulfillment of incoming orders within tight deadlines is consistently achieved, despite the fact that the product range handled has become more diverse and the demand for more frequent delivery of smaller-quantity orders continues to grow. Dairy Crest now regularly dispatches products within 6 hours of receiving an order.

With their new national DC in place, and having been reality-tested for the past several years, Dairy Crest is now firmly positioned for capturing more market share of the UK dairy business, and providing streamlined service to their clients for years to come.