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Customer service needs led this packaging provider to bring its DC operations back to life...
 Sweetheart Cup, the leading U.S. producer of food and beverage packaging, watched customer dissatisfaction grow over a 15-year period of successive company buy-outs. Three years ago, senior management committed to improving customer relations by updating the company's distribution and manufacturing strategies
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"Keeping ahead of meteoric growth and change in the fast food industry forced us to rethink and retool virtually every aspect of our business," says Tom Pasqualini, vice president of logistics for Sweetheart Cup.
The Progress Group was brought in to redesign Sweetheart's five largest distribution centers and to leverage the company's logistics management information systems, to better meet customer demand and to improve the productivity of logistics operations. Managing the number of SKUs in the network, and reducing the number of DC locations holding them, were quickly identified as keys to success in the project.
Customer Focused
"Not so many years ago, our business was less complex and more predictable," Tom says. "Today, most of our customers have grown to view food and beverage containers as being almost as critical to their marketplace image as the menus that differentiate them from a steadily increasing number of competitors."
Managing the security and supporting logistics of McDonald's seasonal marketing campaigns, or providing a unique package for each flavor of Ben & Jerry's ice cream drove SKU counts "through the roof," explains Tom.
But a swelling of customer complaints about service levels forced Sweetheart to rethink the number of SKUs it held and to improve predictability of demand. "In the past, it was more acceptable to fill their orders with shipments from two or more of our 14 manufacturing locations, but not today," says Bill McLaughlin, CEO of Sweetheart. "It is our job to get their orders to them on time on a single truck. We recognized that the key to meeting such diverse needs would necessitate a comprehensive build-to-order capability."
This required a complete update of Sweetheart's information and communication infrastructure, the heart of how the business needed to work in the future, and the secret to solving the riddle of customer-generated SKU proliferation (vs. operational desire for simplification and reduction).
Starting the Heart
The Progress Group facilitated the design of a set of incremental steps to accomplish Sweetheart's objectives. The steps were sequenced and integrated into a comprehensive reengineering project by TPG's Dave Stallard.
The first step was to collect, organize, and analyze data to show the magnitude and frequency of customer demand on the DCs. The first major learning from this effort was that customer requirements were different on each DC, and that a "universal" solution would not likely solve the problem.
 The second phase took place at the Conyers facility, just outside Atlanta, where camcorders were used to study the major functional tasks at the site, such as putaway and replenishment. Dave explains that the camcorder was set up to record the tasks being performed, and then the tape was reviewed and analyzed by the warehouse team. The team was asked to look for alternative ways of performing the task.
Then, the alternative methods were taped to see where improvements would result, and where further thoughts might be needed to meet the company's objectives. This step, says Stallard, created a genuine sense of ownership in the team members, because they actually created new processes, and the performance targets that went with them. "In the process," Dave explains, "they discovered that the Golden Rule works as well in building DC performance expectations as it does in other aspects of life, and that anticipation is the secret weapon that distinguishes high-performance from the average.
Phase three of the reengineering effort involved the preparation of reports for each location, providing a blueprint for the revised operation and layout of the facility. A common set of principles for achieving productivity were also created. This, Dave says, provided a common framework for organizing the distribution centers.
"The objective of the warehouse reengineering series has resulted in Sweetheart realizing all of the potential benefits of its warehouse management system. Each DC's management team learned how to profile its storage arrangements to match the item movement activity for each Strategic Business Unit."
This profile led to the discovery that more aisles with more shallow floor storage lanes can actually result in an increase in effective inventory holding capacity. In the Dallas DC, for example, the increase was 14%.
Currently, Sweetheart is looking at making additional changes in warehouse design and service strategies that will continue to benefit its customers, and Tom says TPG will be at the helm of this project.
This is good news to TPG because it also benefited from working with Sweetheart. "The most enjoyable part of this project for me," says Dave, "was seeing people grow in capability and team effectiveness, as they developed preferred methods and productivity expectations for their warehouse work."
-TPG
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