Now: Modernization and digitalization of supply chains

For the future and competitiveness of their own company – the goal of the retail sector must be the modernization and digitalization of supply chains.

Interesting figures, data and facts can be found at the end of this article as a downloadable PDF.

The goal of the retail sector must be the modernization and digitalization of supply chains

In the retail sector, a distribution center (also called a branch warehouse) is the basis for the rapid provision of goods within the shipping network. Originally, this was the key difference compared to traditional centralized and decentralized warehouses, where goods are typically stored for longer periods.

In distribution centers, goods – similar to logistics centers – are only transshipped, not stored. They serve as the central hub for suppliers, from where the goods are then immediately distributed to the branches.

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A logistics center, in turn, is a collaboration of several companies that jointly organize and carry out the procurement of purchased goods and the distribution of their own products using company-owned vehicles from the logistics center.

The possibilities offered by digitalization are blurring the lines between the advantages of different storage methods and forms. It's no longer possible to make a blanket statement about which is more cost-effective or better.

While the focus was once on organizing and implementing a smooth supply of goods, the job profile has changed due to growing customer requirements and wishes:

• Seamless continuation of supplies in crisis situations (e.g., the Corona pandemic)
  • Buffer storage: For e-commerce, retail and manufacturing industries
• Closing supply gaps in rural regions
  • Local decentralized hubs – logistics centers
  • Autonomous retail systems
• urbanization
  • Delivery service: Alternative last-mile delivery
  • Autonomous retail systems
• E-commerce
  • Same day delivery, everywhere: Well equipped for no-line commerce
  • Autonomous retail systems
• Autonomous power supply
  • Tightening of climate targets – by 55 percent by 2030
  • Green Deal: CO2 neutral by 2050
  • CO2 neutrality with photovoltaics – Learn from Amazon

And because all of this is not something that can happen overnight, but rather requires taking measures and setting the course now, it is worth taking a look at Asia, more precisely at Japan, which is already quite a bit ahead of us in this regard:

• Japan is already working on the future of tomorrow
• Urban growth – How Japan is setting the course for the future

Netto: The goal is to modernize supply chains across Europe

Netto's warehouse optimization, sales and distribution center strategy.

The first Netto supermarket opened in Copenhagen on April 1, 1981, in response to the entry of the German discount retailer Aldi into the Danish market. Netto entered the German and British markets in 1990. Netto is a European discount retailer owned by the Salling Group, formerly Dansk Supermarked.

In 1995, Dansk Supermarked acquired the Ed (Europa Discount – Supermarket) stores from Carrefour, a major French supermarket chain. Also in 1995, it expanded into Poland with the Netto brand, and seven years later, its first store opened in Sweden. The company was founded by Herman Salling in 1960 as Jysk Supermarked (Jutland Supermarket). From 1964, when Herman Salling entered into a joint venture with the AP Møller-Mærsk Group, the company was known as Dansk Supermarked until 2018. In 2017, AP Møller-Mærsk withdrew from the group. Salling is now the sole owner and has changed its name to Salling Group A/S.

Since its founding in 1981, Netto has quickly grown to become the second-largest retail company in Denmark. Netto currently has more than 700 stores in Denmark and neighboring countries and continues to expand. In October 2003, Netto opened a new distribution center in Køge, on the outskirts of Copenhagen.

With 224 stores in Denmark alone, Netto has expanded to over 700 stores in Sweden, Germany, Poland, and England. The driving force behind its success has been Netto's unique business policy, which consists of limiting the number of everyday items—from groceries and other goods—to approximately 1,000 and offering them to customers at the lowest possible price

Due to the identical names of the stores, Netto ApS & Co. KG (yellow and black logo – “Netto with dog”) can be confused with the larger Netto Marken-Discount AG & Co. KG (yellow and red logo – “Netto without dog”). They are two independent companies – Edeka, owner of Netto Marken-Discount, however, held a 25% stake in the German subsidiary of the Danish Netto retail chain from 2005 to 2012.

Netto's sales volume has steadily increased over the years. Various measures, expansions, and staff increases were implemented to meet the rising demands, but eventually the capacity limits of the existing distribution center were reached. Utilization was almost at 100 percent.

A new distribution center needed to be built. DAIFUKU was awarded the project because of its decades of experience in the material handling industry and its flexible system solutions, including full automation.

The new center was built to increase logistics efficiency for a growing number of products and to accommodate future business expansion. As one of the largest centers in Northern Europe, it incorporates the latest technologies to ensure a high degree of automation in distribution operations.

For this purpose, DAIFUKU built an automated pallet warehouse with approximately 17,000 storage locations. After-sales engineers are responsible for maintenance. With regard to the technical availability of the system, DAIFUKU responsible for managing the product lifecycle at Netto.

Continuous warehouse optimization

For most plant manufacturers, the primary focus has traditionally been on getting a system through the warranty period as cost-effectively as possible. DAIFUKU , however, takes a more holistic approach. This is reflected, for example, in DAIFUKU's daily analysis of system availability and performance reports. Should a gradual decline in performance be detected, or should a component repeatedly malfunction, DAIFUKU immediately implement modernization measures in consultation with Netto's responsible parties. Maintenance is therefore not performed at fixed intervals, but rather as needed. This allows necessary maintenance work to be carried out much more efficiently and thus more cost-effectively.

Details on implementation

The modernization became necessary because the number of different products had almost tripled since the facility was commissioned. In contrast, the quantities of individual items to be picked had decreased significantly. The trend toward ever-increasing product variety on supermarket shelves and ever-smaller quantities per item, which are accordingly stocked, remains unbroken. However, the capacity of the existing Netto warehouse had reached its limits – instead of the planned two-shift operation, it was now operating seven days a week in three shifts.

One challenge during the modernization was the limited time available for modifying the warehouse technology. The top priority was to ensure that ongoing operations were not disrupted in any way. Therefore, the warehouse, with its 23 aisles, picking system with tilting tray sorter, three automated and two manual packing areas, and a shipping/buffer system with sorting transfer vehicles (STVs), remained fully operational. However, it was optimized by modifying eight aisles for the temporary storage of pre-picked customer pallets. For example, the throughput of the picking stations was increased, thereby reducing waiting times for manual order picking. Overall, the system was significantly relieved of its workload, freeing up sufficient time for maintenance and system upkeep.

The concept, based on an economic benefit analysis by DAIFUKU called Quick Study ^™ , included the construction of an automated high-bay warehouse with eight aisles and more than 6,000 pallet spaces on 2,080 square meters for shelf-stable foods, wine and spirits, as well as non-food items. Eight stacker cranes are used here, and the new warehouse area serves as a pre-pack warehouse with a shipping buffer function. Before the modernization, the existing shipping lanes were barely sufficient for handling the significantly increased volume of goods. This resulted in frequent waiting times when loading trucks. The new shipping buffer alleviates this problem.

To integrate the processes in the storage areas, DAIFUKU a tilting tray sorter by adding 28 additional destination stations, each with a packing station. Furthermore, DAIFUKU a bypass using conventional conveyor technology. Due to the system's high utilization, the sorter's conversion had to be completed within a single weekend while operations continued. An equally tight timeframe applied to connecting the eight new storage aisles to the STV loop in the pre-storage zone.

Due to the high speeds of the rail-guided vehicles and the optimized material flow, the loop can continue to operate with the same number of vehicles. In addition, DAIFUKU a special picking area with automated staging for quarter pallets, which previously could only be handled manually. The warehouse now utilizes ergonomic handling equipment, 24 inclined roller conveyors, an automatic film wrapper, and an automatic pallet inspection system.

Which direction is the development taking and why

The retail sector is currently undergoing a period of transformation, which brings with it numerous new demands on logistics and the supply chain.

The complete outsourcing of maintenance, repair, modernization and continuous process optimization is increasingly replacing traditional after-sales service.

Digitization with its accompanying globalization, rapidly evolving customer expectations, and the growing e-commerce sector are also reinforcing the trend towards an outsourcing strategy for intralogistics in many small and medium-sized enterprises.

A research study by DHL Supply Chain found that 48% of companies use a combination of internal and outsourced logistics solutions.

The challenges facing the retail sector are more diverse than ever. Rising costs and increasingly eroding prices are forcing companies to operate as cost-effectively as possible along the entire supply chain. A key area of ​​focus is personnel and energy costs in warehousing. Further developments with a significant impact on logistics include global expansion and the consolidation of locations, which are now essential for retailers to remain competitive. Moreover, the ever-increasing procurement of goods from the Far East, along with the rapidly growing product variety and the associated smaller production runs, are creating new demands.

DAIFUKU offers automated logistics solutions tailored to the needs of the retail sector. These include energy-efficient storage, conveying, and order picking technologies, as well as specialized applications for unloading containers and palletizing containerized goods.

Developments in the industry necessitate increasingly frequent adjustments to intralogistics and ever more complex automated systems. It is therefore hardly surprising that companies are increasingly choosing to outsource comprehensive areas of technical service for their logistics facilities to the equipment manufacturer.

Retail in Denmark – Retail industry in Denmark

English version – To view the PDF, please click on the image below.
English Version – To view the PDF, please click on the image below.

E-commerce in Denmark

English version – To view the PDF, please click on the image below.
English Version – To view the PDF, please click on the image below.

Food discounters in Germany

German version – To see the PDF, please click on the image below.
German Version – To view the PDF, please click on the image below.

Netto Marken-Discount

German version – To see the PDF, please click on the image below.
German Version – To view the PDF, please click on the image below.