Creating profit
CASE STUDY
D.E MASTER BLENDERS 1753
A TRUE SHOEHORN INSTALLATION
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ACTIW SYSTEMS CASE STUDY 2013
ABSTRACT
Actiw offers an automated warehouse system that provides unmatched pallet density and flow in restricted and
odd-sized spaces where automation would generally not
be viable. Douwe Egberts Master Blenders 1753 is one of
the leading coffee and tea manufacturers in the world. It
was facing a problem where its existing, manually operated production warehouse could not match increased
capacity requirements. The space was restricted so capacity could not be increased through expansion, leaving
automation as the only option. The purpose of this case
study is to explain how the problem was solved with the
ACTIW System and what the monetary benefits of that
decision were.
D.E MASTER BLENDERS 1753 IS AN INTERNATIONAL
COFFEE AND TEA COMPANY, HEADQUARTERED IN THE
NETHERLANDS. THE COMPANY HAS NET SALES OF
2,7 B€ AND HAS 7 500 EMPLOYEES (2012). IN JUNE
2012 D.E WAS SEPARATED FROM THE CONSUMER
GOODS GIANT SARA LEE, AND IS NOW TRADED ON
THE EURONEXT STOCK EXCHANGE IN AMSTERDAM.
D.E POSSESSES AN EXTENSIVE RANGE OF HIGHQUALITY COFFEE AND TEA PRODUCTS AND BRANDS,
INCLUDING: DOUWE EGBERTS, SENSEO, PILÃO AND
PICKWICK.
D.E IS PRESENT IN 18 COUNTRIES, AND
COVERS 52 COUNTRIES THROUGH ITS GLOBAL
DISTRIBUTION NETWORK.
INTRODUCTION
D.E Master Blenders 1753 (later D.E) is one of the largest
coffee and tea companies in the world. D.E handles the
manufacturing and distribution of a large variety of different coffee products and brands. These products are
available around the globe. Global sales in coffee and tea
are growing, around 8 % a year. Premium coffees and especially single serve offerings are growing the fastest. For
D.E, this means that the logistics system is under pressure
to handle higher volumes and higher frequencies.
This was especially true for the warehouse adjacent
to the production facility in Utrecht, Netherlands. The volumes were rising, driven by the new Senseo product line,
and the capacity of the manual warehouse was irretrievably becoming inadequate. Matters were made worse by
the facts that also during any update or installation work,
the warehouse had to remain operational and that the
space was challenging, to say the least.
Actiw offers a unique, ultra-high density warehouse
system that is particularly suitable for automating existing warehouse space. Traditionally, automating 5-10 meters high spaces is not regarded as viable, especially if the
space is also otherwise of a challenging shape. This white
paper will prove that the Actiw system is a perfect solution for these kinds of situations. In fact, even if building
a new automated warehouse would be possible, the option of boosting an old storage room is many times more
viable, both from economic and environmental aspects.
READ FURTHER, IF YOU WISH TO:
• Understand what problems D.E Master Blenders 1753
was facing in increasing the capacity of their existing
warehouse
• Figure out why D.E chose Actiw and how the system
was implemented during ongoing operations
• Learn what kinds of tangible business benefits D.E has
been able to gain by automating their existing manual
warehouse
ACTIW SYSTEMS CASE STUDY 2013
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INCREASING CAPACITY IN
EXISTING SPACE
− WHAT WAS D.E’S PROBLEM?
“The capacity and efficiency of the production warehouse had been an issue already for some time, but it was
the volume increases due to the new Senseo productline that finally got things moving”, Jos van Velthoven explained the situation in 2004. Mr. Velthoven functions as a
project manager for development projects at the Utrecht
site. He has been working for D.E’s technical department
since 2000. The department is responsible for maintenance and rollouts both in production and logistics.
D.E was established in 1753 in Joure, Netherlands,
and it was a family-owned business for more than 200
years. Some 40 years ago, the company was acquired
by the consumer goods giant Sara Lee International. In
June 2012, Sara Lee was split into two separate entities:
Hillshire Brands and D.E Master Blenders 1753. Hillshire
Brands concentrates on the North American market and
is listed on the New York Stock Exchange. D.E Master
Blenders 1753 is aimed at the international market and is
listed on the Amsterdam Stock Exchange.
The factory in Utrecht produces 3 kinds of products:
Senseo coffee pads, vacuum-packed and soft-packed
coffee. D.E was the first, with the Senseo product-line, to
introduce the new type coffee pads. The Senseo coffee
brewing system consists of disposable pads, produced by
D.E, and special coffee makers, manufactured by Philips.
One pad produces one cup of coffee. From the logistical
perspective, Senseo pads are not very densely packed resulting in lightweight and high number of pallets.
The vacuum and soft-packed coffees come in ½, 1
and 1 ½ kg packages. These types of packages are denser, meaning that more coffee leaves the warehouse on
a smaller number of pallets. The vacuum packed coffee
has the special characteristic that it must be stored for 24
hours to ensure package integrity. Thus, the production
warehouse must be able to accommodate 24 hour buffering of the vacuum packed loads. In total, the warehouse
is responsible for handling 55 000 tons of goods, or 160170 thousand pallets, each year.
The production warehouse is business critical for
D.E. The production unit runs generally at full capacity
at all times and the palletized products are moved directly from the production line into the production ware-
house for dispatching. This means that any disruption in
the warehouse operation would force the shutdown of
the production unit as well. This had two direct consequences on any development initiatives regarding the
warehouse. First, any chosen automation system had to
be highly reliable and come with high degree of redundancy, meaning operationability also during partial shutdown. Second, the warehouse had to remain operational
also during installation.
The warehouse, adjacent to the factory, has approximately 30 x 30 meters of floor space and is roughly 5
meters in height. The entire space is scattered with supporting building columns, widened at the top like mushrooms, adding a lot more challenge to the design of any
system within these confinements.
Before the project with Actiw, the warehouse was
operated manually and pallets were stored mainly block
stacked directly on the floor, or in some places on two
pallet high racks. The warehouse was able to store a couple of hundred pallets at a time and its sole purpose was
to function as a dispatch area. All goods were loaded onto
trucks and moved to a D.E operated Distribution Center a
few kilometers away. The production warehouse was unable to handle any direct deliveries to customers and was
struggling to handle the increased number of pallets.
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ACTIW SYSTEMS CASE STUDY 2013
THE ACTIW SYSTEM
− HOW DOES IT WORK?
Actiw’s patented system works like a large sliding puzzle
on multiple layers, with dense storage at every position
in its height, width and depth. In the most typical setting,
the Actiw system is used for handling pallets, but it can
easily be applied for other loads as well, e.g. paper rolls
and steel products.
THE SYSTEM IS COMPRISED OF FOUR KEY
ELEMENTS:
• Deep Lane Transfer (DLT) – Mechanical DLT carts
transport loads within the deep lanes (storage lanes)
Each deep lane is operated by one DLT cart with a cable-driven lift mechanism to pick up and deposit the
loads on the lane with no certain fixed positions or
cells, enabling filling of the lane segments maximally.
• Cross Aisle Transfer (CAT) – Cross aisles split deep
lanes into shorter segments. CAT carts transfer loads
from one deep lane to another, moving perpendicularly to the deep lanes.
• Vertical Transfer Lift (VTL) – Lifts or lowers loads
between levels, also used to interface with incoming /
outgoing material flows.
• Software – Orchestrates pallet transfers in a series of
movements using route-solving algorithms.
CHARACTERISTICS OF THE ACTIW SYSTEM:
• Storing as well as inbound and outbound handling are
independent features, allowing an increase of throughput flow without compromising the system’s storing
capacity.
• Loads move simultaneously, on multiple levels. The Actiw system offers an unmatched combination of highdensity and flow.
• There are no full height empty aisles for the transfer devices, as in stacker crane storage systems. This increases
density and maximizes space utilization without compromising handling capacity.
• Loads ride on carts that are pulled by cables. Since the
carts themselves have no power, they are easy to maintain and extremely durable.
• All electrical components and drive units are located
outside the rack structure and they operate independently. This enables quick and safe repairs with high
level of system redundancy.
• The sophisticated software determines the ideal path
that a unit should travel within the system and the ideal
position where it should be stored.
• The system integrates seamlessly with other material
handling systems. Its versatile, modular design can be
adapted to changing requirements. Native features of
the Actiw system accommodate first-in/first-out delivery, sequencing, picking, staging or any other order fulfillment strategy. Actiw enables optimization of storage
and handling processes in a variety of environments.
“ACTIW IS THE ONLY MAJOR INNOVATION IN UNIT LOAD
MATERIAL HANDLING TECHNOLOGY INTRODUCED IN
THE LAST 30 YEARS”
– Pete Hartman, President of Retrotech Inc.
ACTIW SYSTEMS CASE STUDY 2013
IMPLEMENTATION IN THE MIDDLE
OF ON-GOING OPERATIONS
− WHY DID D.E CHOOSE ACTIW?
“ACTIW OFFERS MAXIMUM FLEXIBILITY
WITH MINIMUM COMPLEXITY” - Jos van Velthoven,
Project Manager of D.E Master Blenders 1753
D.E MASTER BLENDERS 1753, NETHERLANDS
BUFFERING, SORTING AND DISPATCHING SYSTEM
As mentioned before, the idea to develop the warehouse
operations was not a totally new idea. Already back in
2002, the department for processes and technology identified a capacity issue in the warehouse. External consultants were invited to conduct a pre-study. At this time, Actiw was contacted for the first time and Actiw’s personnel
visited the site in Utrecht.
Due to internal issues and lack of urgency at D.E, the
project was, however, delayed for 2 years. By 2004, the
Senseo product line was hitting off and the volumes
were increasing. “At this point it was clear that the option
of continuing as before no longer existed”, Mr. Velthoven
says. At this time, he was appointed the technical project
manager.
D.E restarted the warehouse development project on
the basis of the earlier conducted studies. In the end, it
was the six main characteristics of the Actiw system that
sealed the deal:
•
•
•
•
•
•
Handling capacity
Space utilization
Selectivity
Sorting & Staging
Redundancy & Maintenance
Modularity
•
•
•
•
Delivered in 2006
~1 000 pallet positions
Handling capacity 210 pallets/h
One system level is directly mounted on the floor to
accommodate an additional storage level
• Integrated sequencing & staging
• Versatile functions and material flows
• Delivered on time
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ACTIW SYSTEMS CASE STUDY 2013
HANDLING CAPACITY The Actiw system has, due to
its design, an inherently high throughput rate. Actiw uses
dynamic pallet positioning within the rack, where transfers are carried out by independent handling devices for
each direction (x, y, z).
The days on hand time directly affects the required
handling capacity compared to the total storage capacity.
If it is less than 10 days on average, Actiw is competitive.
But, when it is less than a day, as in the D.E case, Actiw is
superior.
SPACE UTILIZATION Actiw is designed for ultra-high
density and can adapt well to cumbersome space requirements. Due to the compact size of the mechanical
structures and carts, the system’s space requirement is
low.
Actiw can be installed on standard floor space designed for conventional warehouses, generally without
any modifications. It can utilize the given height very efficiently, because the first level can be installed very close
to the floor and the highest level close to the roof structure. Especially in situations where an additional storage
level would barely fit due to height restrictions, Actiw can
comply better and more often than competing technologies. This was the case at D.E, where the first level was
installed directly on the floor to accommodate one additional level.
The layout of the Actiw system need not be of cuboidform, but it can be built in a non-symmetrical space even
on multiple building floors. These Actiw system’s properties of ultra-high density and flexibility are particularly
valuable in special applications. High density is especially
valuable if more capacity is required in a cramped existing space or if additional space is costly or impossible
to build. Flexibility allows Actiw to be applied to inconvenient spaces. Both of these limitations were true in the
D.E case, where the space was limited with no expansion
possibilities and scattered with building columns.
SELECTIVITY Accessibility and density are somewhat
trade-offs of each other. Actiw suits best environments
with more units per SKU (Stock Keeping Unit) where date
code and lot number segregation is not as critical and accessibility to products is more serialized. This enables high
density, but with its dynamic sequencing capability Actiw
is still able to adapt to different order fulfillment strategies, like First in First out (FIFO) or Last in First out (LIFO).
“The warehouse efficiency is measured by overall flow,
meaning how fast you can get goods out of the warehouse, and how well the first in first out principle can be
followed. It is, however, understood that a compromise
has to be made between these two”, Mr. Velthoven explains.
Generally, Actiw is competitive when the number of
SKU’s compared to total storage capacity is lower than 10
%. If this figure is lower than 5 %, Actiw excels. At D.E, the
average amount of SKU’s per pallet places was an excellent match.
SORTING & STAGING The dynamic internal handling
characteristics of the Actiw system mean native sorting
and staging ability. Actiw minimizes the need for connecting conveyors and other equipment to enable automated filling up of loading docks. This ability was crucial
for the D.E case as the space left for truck loading was very
limited and thus it was important that the pallets came
out in exactly the right order as no room for “double staging” existed before loading the pallets into trucks.
ACTIW SYSTEMS CASE STUDY 2013
REDUNDANCY & MAINTENANCE The modular design
of the Actiw system translates into high system redundancy. Even with a partial shutdown, Actiw provides full
functionality (with reduced capacity). All electrical equipment and drive units are placed outside the rack structure
and only standard off-the-shelf components are used,
giving the Actiw system very good maintainability.
MODULARITY Actiw’s modular structure makes it possible to build the system in phases, ensuring operationability also during installation. In addition, it enables system expansion without disrupting the rest of the system,
while requiring no investment in additional load moving
equipment (e.g. conveyors). Thanks to several shoehorn
installations and over 20 years of experience, Actiw has
unmatched competence in securing no-disruption implementation of projects.
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Actiw delivered the project during 2006, on time and according to specifications. It was a big leap from a small,
manually operated loading buffer shipping to a single
destination, into a fully automated buffering, sorting and
dispatching system with tripled capacity, enabling shipments to multiple direct destinations. “The project with
Actiw was definitely a success”, Mr. Velthoven compliments, and continues “Everything went quite smoothly.
After commissioning, only small improvements have
been made. The software has been updated and a pallet
control system has been implemented to ensure pallet
homogeneity. All in all, the operational costs have been
very moderate.”
“The proudest conclusion for me, however, was that
the automated warehouse was built into a running process without delays”, Mr. Velthoven says, and continues
“The design of the system supported the phasing of the
project very well.”
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ACTIW SYSTEMS CASE STUDY 2013
PAYBACK IN 2 ½YEARS
− WHAT WERE THE RESULTS?
The main reason driving the automation investment of
the production warehouse was to increase handling capacity and thereby ensure trouble-free production. The
efficiency gains and the following cost savings were an
extra bonus. The following calculation shows, however,
that even without the capacity issues the automation
project would have made sense from the cost savings
perspective alone.
Before the introduction of the Actiw system, D.E used the
warehouse for direct dispatching to its own distribution
center. After the implementation, D.E was able to have
direct factory deliveries to its customers, in addition to
the direct flow to the local distribution center. The Actiw
system buffers, sequences and stages the loads. With the
extra capacity, the system can be utilized as buffer storage as well. Before, 100 % of all goods were moved to
the distribution center, while today 30 % of goods can be
directly delivered from the Actiw system. In addition, the
operations became considerably more efficient and accurate.
These benefits translate into direct cost savings. In
this case, the cost benefits were divided into the following categories:
FACILITY:
50 k€
Before After
•
•
•
•
•
PRODUCT DAMAGE:
60 k€
Facility
Product Damage
Machinery
Labor
Transportation
Before After
TOTAL YEARLY COST:
MACHINERY:
190 k€
2.4 M€
– 47 %
Before After
LABOR:
900 k€
Before After
TRANSPORTATION:
1.1 M€
Before
Before After
After
ACTIW SYSTEMS CASE STUDY 2013
FACILITY Before, yearly maintenance had to be done in
the warehouse due to wear and tear caused by collisions
and scratches from the forklifts operating with a high flow
requirement in a very tight space. This, approximately
50 000 €, annual cost was eliminated by introducing the
Actiw system.
PRODUCT DAMAGE With a higher level of automation,
the product damages have been decreased by over 80 %.
Before, most damages incurred as forklifts were collecting
or putting away loads in the cramped space. Now, as all
movement all the way to staging is automated, also damages have significantly diminished. The annual level of
product damages has come down from a 60 000 € level
to around 10 000 €.
MACHINERY Earlier, 5 rented forklifts were continuously
in operation at the warehouse. Now, the number of forklifts is reduced to 2. Before, the annual cost of forklifts was
in the range of 190 000 €, while after automation this figure dropped below 60 000 €.
Actiw’s operational costs sum up to ~30 000 €, including annual maintenance and hot-line support. In total,
the operating cost of machinery was reduced by 56 %.
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LABOR The reduction of manual operations and, thus,
the need of forklift drivers show accordingly in labor
costs. Supervision and management remained at the
same level, both before and after.
TRANSPORTATION The largest transportation savings
are gained by Actiw system’s capability to handle also direct deliveries. Before, all products had to be moved to a
distribution center. This caused two types of costs. First,
the truck cost of moving goods between warehouses.
Second, the cost of extra storing and handling of goods
at the distribution center.
With the Actiw system, approximately 30 % of the production volume can be directly delivered from the production warehouse. This, naturally, implies 30 % savings in
internal transportation and off-site storage, cutting costs
from the 1,1 M€ range down to approximately 760 000 €.
The investment in the Actiw system was around 2
M€. In addition, D.E renovated the building and installed
a new sprinkler system for an additional 400 000 € at the
same time. In total, the initial investment was 2,4 M€.
When we combine this information with the efficiency gains explained above, we can model the investment.
5 M€
PAYBACK TIME:
2.5 YEARS
CUMULATIVE CASH FLOW
ROIC:
42 %
ROI:
DISCOUNTED YEARLY
COST SAVINGS
442 %
NPV
10.6 M€
INITIAL INVESTMENT
It’s evident that the Actiw system has been a financially
successful investment for D.E from the cost savings pointof-view alone, even disregarding the fact that it was a
business critical investment and that much larger business benefits were gained by enabling smoother and
higher volume production.
All key indicators for the investment are highly positive. When using a WACC (Weighted Average Cost of
Capital) of 8 % for discounting future cash flows, the investment has a payback period of 2 ½ years. ROIC (Return
On Invested Capital) during the first year is 42 %. When
terminal value is included in the calculations, the ROI (Return On Investment) is 442 % and we arrive at a 10,6 M€
NPV (Net Present Value) for the investment.
“It was a very good decision to automate and choose
Actiw as a partner. I genuinely enjoyed the project
with Actiw. They kept their promises, delivered ontime and charged nothing extra. In addition, it was
nice working together with Actiw’s project team, they
are nice guys!”, Mr. Velthoven concludes.
Actiw Oy is a Finland based manufacturer and systems
integrator, specialized in intelligent and sustainable automated warehouse and loading solutions. Actiw has a solid
track record with dozens of successful installations and
pleased clients; Actiw’s automated material handling projects have been executed since mid-1980. The company
has invested strongly in developing their own, unique automated storing, sequencing and loading systems for the
international market. For more information, please visit:
www.actiw.com | www.loadplate.com
Symbioosi Partners Ltd is a Helsinki, Finland, based sales
development powerhouse. Symbioosi has prepared this
white paper in cooperation with Actiw and D.E Master
Blenders 1753. For more information, please visit:
www.symbioosi.fi
Creating profit
Actiw Oy | Voimapolku 2 | FI-76850 NAARAJÄRVI - FINLAND
Phone +358 (0)207 424 820 | Fax +358 (0)207 424 839 | info@actiw.com
www.actiw.com | www.loadplate.com