Logistics as the Motor for Growth

March 21, 2005 by admin

Whether it’s storage systems for dangerous materials, handling devices, safety containers, or emergency showers, Denios AG stands for environmental and work safety. The young company has made a name for itself in this specialized area in a short time. Founded in 1986 as a two-person operation, Denios has grown into an international company with almost 500 employees and 10 national offices in Europe and the United States. It has an enormous portfolio of products. Denios develops, produces, and sells almost 5,000 products with various variants for environmental protection and work safety in companies. It serves customers in the pharmaceutical, chemical, and automobile industries, as well as mechanical engineering firms.
The demands on logistics grew as rapidly as the company. The capacity of the warehouse, formerly located primarily at an undeveloped area near the company’s headquarters in Bad Oeynhausen, Germany, had reached its limits. The work processes for warehouse management that had grown over the years without any use of IT, the growth of the product portfolio, and the increasing number of orders made it increasingly difficult to guarantee optimal readiness for delivery. The product catalog lists most of the 5,000 products it contains as immediately deliverable. That means that once ordered, products should arrive at the customer’s location on the next day; large-volume shipments sent by forwarding agents should arrive within three to four days.
To be able to react quickly to orders, Denios decided in December 2003 to rent a 10,000 square meter warehouse some 12 kilometers from the company’s headquarters and set up a new logistics center there that would supply end customers and the firm’s European locations.
But Denios wanted to do more than just set up a big warehouse. It also wanted to establish new logistics processes and implement an IT-supported warehouse management system. The goals of supplying customers within one day, reducing the number of errors, and guaranteeing product quality would be easier to reach in an enclosed building rather than in an open space.

RF scanner connection

For its warehouse management system, Denios decided on SAP R/3 and its warehouse management functionality, along with the Radio Frequency (RF) component to connect scanners. Because the company’s headquarters had worked with SAP R/3 4.6C since 2001 and planned to connect its subsidiaries to the ERP solution step-by-step, SAP warehouse management software was an obvious choice to help the company lower its overall cost of investment.
The SAP project began in the middle of January 2004. Three months later, Denios had successfully implemented the warehouse management and RF functionality. itelligence AG, an IT service provider, stood by Denios as its implementation partner.

Quantum leap: new warehouse, new processes, and new software

The project faced an unusual challenge: the warehouse had not yet been set up when the software was implemented. The warehouse building with its places for 3,600 pallets, ground-level shelving, and lanes had to be planned in parallel with the implementation. At the same time, Denios had to create a new logistics strategy that included all delivery processes. For example, Denios required different processes for end customers and its own subsidiaries along with different supply zones for goods so that it could optimize the load on trucks. Given these multiple requirements, Denios first decided to set up executable processes, like those for picking and shipping, and then to improve them step-by-step as employees became more experienced with them. Thanks to this approach – and right on time with the move to the new warehouse – the warehouse management system was ready for production in May 2004.

Moving 3,000 products in 100 truckloads

Denios moved almost all warehoused goods from Bad Oeynhausen to Löhne in a single weekend. About 100 truckloads of products made the trip and were posted into the new warehouse management system. Approximately 50 additional truckloads arrived in the next two weeks. The move involved a total of 3,000 products.
On the weekend of the move, the pressure on employees was tremendous. Ultimately, they had to deal with and cleanly post an enormous quantity of goods in a new location, a new organization, new processes, and a completely new software solution. Picking was to begin as early as the following Monday in the logistics center to process and deliver orders throughout Europe. The change led to a brief delay in deliveries, but thanks to the hard work of employees and consultants, some of whom worked double shifts, the delay was quickly overcome.

Lower number of errors with increasing volume of deliveries

Now, 12 employees at the warehouse and 5 employees at other locations use the solution for distribution, and the new logistics processes have been adopted. Compared with the earlier situation, warehouse management is now much more effective. Employees process a high volume of piece goods with a low rate of errors. The success partially derives from the ability to divide tasks more distinctly between picking, packing, and shipping. But the new processes also demand more precision. When goods are received, the individual materials are posted to SAP R/3 piece by piece. The warehouse management solution then displays the intended warehouse locations to the user. These kinds of demanding work processes did not exist earlier. When the company started, it was enough for employees to know the location of a given product. But given the growth of the company, this approach could not be maintained in the long term without allowing the company’s ability to deliver to suffer.
Today, mobile scanners create a receipt for each individual goods movement. At goods receipt, employees use their devices to read the barcode of the materials. They then use the materials management functionality of SAP R/3 to post the materials. Afterward, the materials are taken to their assigned storage location. For an outbound delivery, employees enter the appropriate data and the scanner leads them to the storage location of the desired product, where they post the withdrawal. They then take the goods to the packing location. If the complete information for an order is present at that location, the application generates an appropriate message. Thanks to the complete documentation of goods movements, the stock in the warehouse always agrees with the data in the system. Deliveries occur without errors and without delay.
Thanks to its integration with production planning functionality, warehouse management also supports the smaller production areas in the warehouse – those that assemble customer-specific storage systems, for example. A production order in production planning triggers material availability and, ultimately, a transport order in warehouse management.

Mapping special processes

Warehouse management also supports a variety of company-specific processes that itelligence was able to map with the assistance of user exits. For example when employees bring goods for delivery to the packing location, the software displays the delivery number on the scanner. Employees always know the precise delivery for which they have picked goods. At the packing location, the goods are consolidated with documentation, such as product information and operating instructions. Another processes developed for Denios enables splitting delivery orders and consolidating them in one packing zone. The products are stored at various locations and then picked by various lifts and employees.
Looking to the future, the investment in the new logistic center and its software systems was certainly worth it. The increased storage capacity and cutting edge IT sets the course for further growth at Denios.

Sabine Höfler

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