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Finance

Locating technology drives down costs, boosts asset management

Two years ago, Associated Food Stores (AFS)—a major player in the wholesale grocery business in the western intermountain states—was using 127 people to track assets across its 600-plus-acre distribution center and warehouse in Salt Lake City.
Written by Debra Young, Contributor

Two years ago, Associated Food Stores (AFS)—a major player in the wholesale grocery business in the western intermountain states—was using 127 people to track assets across its 600-plus-acre distribution center and warehouse in Salt Lake City.

“The process was so dynamic,” recalled Tim Van de Merwe, AFS internal logistics manager, “that by the time the information was entered [into our yard system], it was obsolete.” With data accuracy running between 60 and 70 percent, Van de Merwe added, “We might as well have gone back to pad and pencil. We were using fancy technology but not realizing any benefit.”

When the operation was moved to Farr West, UT, Van de Merwe decided it was a good time to look for a more flexible, dynamic yard system to manage assets across the new one-square-mile distribution center.

Ousting the old, unforgiving technology
According to Van de Merwe, the old Dallas system (now EXE Technologies) was very rigid and unforgiving. It also wasn’t very user-friendly.

“There was a real angst among users,” said Van de Merwe, “whether it be a clerk or a guy on a forklift, to use the technology.” Most of the anxiety was due to the precision required for data entry. There was a full page of information, with multiple fields, that had to be completed on every truck. If just one character or one space were off, the entire field would be rendered useless.

“The misentries and delays were submarining our operation,” explained Van de Merwe. “In an industry as dynamic as ours, data is worthless if it isn’t 100-percent accurate.”

So AFS went looking for new technology and, when it came to evaluating vendors, AFS was nearly as unbending in its demands as the old yard system it was looking to replace.

First, AFS told every prospective vendor that it wouldn’t pay a single dime until the technology was up and running. Van de Merwe said AFS expected the chosen vendor to meet a tight, fixed budget and had no intention of paying out the project in stages.

“This project was a risk for us,” he said, “so I wrote into the contract that payment would be upon delivery.”

Second, competing vendors had to prove—in advance—that they could actually deliver what they promised. AFS set up a minienvironment (a 100 x 100-yard area) and asked vendors to come in and set up their wares.

“We wanted them to demonstrate that their proposed solution was going to work,” said Van de Merwe.

It was the third criterion that actually scared much of the competition out of the ring. AFS insisted on a six- to nine-month ROI, guaranteed.

“We knew this technology would be obsolete before it was even installed,” said Van de Merwe. “And in retrospect, we were right. The stuff I’m using now, even though it’s only a year and a half old, has been supplanted by better, more ruggedized hardware. AFS didn’t want to be paying off this technology over the next four or five years. We wanted an ROI in six to nine months so we’d be freed up at the end of the year to reinvest.”

By the end of the grueling evaluation, AFS had eliminated RandTec and EXE.Dallas, leaving only OMI International in the running. “Even though OMI’s MDS (Mobile Distribution System) had some bells and whistles that were different from our old Dallas system, we didn’t see any real benefits to changing until OMI mentioned that they could link their technology to tags (wireless radio transmitters) that could automate data entry,” explained Van de Merwe.

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