CASE STUDYD.E MASTER BLENDERS 1753

A TRUE SHOEHORN INSTALLATION

Creating pro�t

2 ACTIW SYSTEMS CASE STUDY 2013

ABSTRACT Actiw offers an automated warehouse system that pro-vides 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 oper-ated production warehouse could not match increased capacity requirements. The space was restricted so ca-pacity 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.

INTRODUCTIOND.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 dif-ferent 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 es-pecially 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 vol-umes were rising, driven by the new Senseo product line, and the capacity of the manual warehouse was irretriev-ably 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 exist-ing warehouse space. Traditionally, automating 5-10 me-ters 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 solu-tion for these kinds of situations. In fact, even if building a new automated warehouse would be possible, the op-tion 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

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 HIGH-QUALITY 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.

ACTIW SYSTEMS CASE STUDY 2013 3

INCREASING CAPACITY IN EXISTING SPACE − WHAT WAS D.E’S PROBLEM?“The capacity and efficiency of the production ware-house had been an issue already for some time, but it was the volume increases due to the new Senseo product-line that finally got things moving”, Jos van Velthoven ex-plained 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 mainte-nance 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 re-sulting 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 dens-er, 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 buff-ering of the vacuum packed loads. In total, the warehouse is responsible for handling 55 000 tons of goods, or 160-170 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 di-rectly 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 conse-quences on any development initiatives regarding the warehouse. First, any chosen automation system had to be highly reliable and come with high degree of redun-dancy, meaning operationability also during partial shut-down. Second, the warehouse had to remain operational also during installation.

The warehouse, adjacent to the factory, has approxi-mately 30 x 30 meters of floor space and is roughly 5 meters in height. The entire space is scattered with sup-porting building columns, widened at the top like mush-rooms, 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 cou-ple 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 un-able to handle any direct deliveries to customers and was struggling to handle the increased number of pallets.

4 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 ca-ble-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 perpendicu-larly 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 through-put flow without compromising the system’s storing capacity.

• Loads move simultaneously, on multiple levels. The Ac-tiw system offers an unmatched combination of high-density and flow.

• There are no full height empty aisles for the transfer de-vices, as in stacker crane storage systems. This increases density and maximizes space utilization without com-promising handling capacity.

• Loads ride on carts that are pulled by cables. Since the carts themselves have no power, they are easy to main-tain and extremely durable.

• All electrical components and drive units are located outside the rack structure and they operate indepen-dently. 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 deliv-ery, sequencing, picking, staging or any other order ful-fillment 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 5

IMPLEMENTATION IN THE MIDDLE OF ON-GOING OPERATIONS − WHY DID D.E CHOOSE ACTIW?

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 iden-tified a capacity issue in the warehouse. External consult-ants were invited to conduct a pre-study. At this time, Ac-tiw 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

D.E MASTER BLENDERS 1753, NETHERLANDSBUFFERING, SORTING AND DISPATCHING SYSTEM

“ACTIW OFFERS MAXIMUM FLEXIBILITY WITH MINIMUM COMPLEXITY” - Jos van Velthoven, Project Manager of D.E Master Blenders 1753

6 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 trans-fers 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 re-quirements. 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 de-signed for conventional warehouses, generally without any modifications. It can utilize the given height very ef-ficiently, because the first level can be installed very close to the floor and the highest level close to the roof struc-ture. Especially in situations where an additional storage level would barely fit due to height restrictions, Actiw can comply better and more often than competing technolo-gies. This was the case at D.E, where the first level was installed directly on the floor to accommodate one ad-ditional level.

The layout of the Actiw system need not be of cuboid-form, but it can be built in a non-symmetrical space even on multiple building floors. These Actiw system’s prop-erties 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 exist-ing space or if additional space is costly or impossible

to build. Flexibility allows Actiw to be applied to incon-venient 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 ac-cessibility 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 strate-gies, 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 ware-house, 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 ex-plains.

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 excel-lent match.

SORTING & STAGING The dynamic internal handling characteristics of the Actiw system mean native sorting and staging ability. Actiw minimizes the need for con-necting conveyors and other equipment to enable auto-mated 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 stag-ing” existed before loading the pallets into trucks.

ACTIW SYSTEMS CASE STUDY 2013 7

REDUNDANCY & MAINTENANCE The modular design of the Actiw system translates into high system redun-dancy. Even with a partial shutdown, Actiw provides full functionality (with reduced capacity). All electrical equip-ment 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 pos-sible to build the system in phases, ensuring operation-ability also during installation. In addition, it enables sys-tem 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 im-plementation of projects.

Actiw delivered the project during 2006, on time and ac-cording 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 ship-ments to multiple direct destinations. “The project with Actiw was definitely a success”, Mr. Velthoven compli-ments, 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 pro-cess without delays”, Mr. Velthoven says, and continues “The design of the system supported the phasing of the project very well.”

8 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 ca-pacity 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 stor-age 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 ac-curate.

These benefits translate into direct cost savings. In this case, the cost benefits were divided into the follow-ing categories:

• Facility• Product Damage• Machinery• Labor • Transportation

MACHINERY:

PRODUCT DAMAGE:

FACILITY:

Before After

Before After

Before After

Before After

Before After

190 k€

60 k€

50 k€

LABOR:

TOTAL YEARLY COST:

TRANSPORTATION:

900 k€

1.1 M€

Before After

2.4 M€

– 47 %

ACTIW SYSTEMS CASE STUDY 2013 9

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 dam-ages 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 fork-lifts is reduced to 2. Before, the annual cost of forklifts was in the range of 190 000 €, while after automation this fig-ure dropped below 60 000 €.

Actiw’s operational costs sum up to ~30 000 €, includ-ing annual maintenance and hot-line support. In total, the operating cost of machinery was reduced by 56 %.

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 di-rect 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 pro-duction volume can be directly delivered from the pro-duction 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 efficien-cy gains explained above, we can model the investment.

CUMULATIVE CASH FLOW

PAYBACK TIME:

2.5 YEARSROIC:

42 %ROI:

442 %NPV

10.6 M€

INITIAL INVESTMENT

DISCOUNTED YEARLY COST SAVINGS

5 M€

It’s evident that the Actiw system has been a financially successful investment for D.E from the cost savings point-of-view alone, even disregarding the fact that it was a business critical investment and that much larger busi-ness benefits were gained by enabling smoother and higher volume production.

All key indicators for the investment are highly posi-tive. When using a WACC (Weighted Average Cost of Capital) of 8 % for discounting future cash flows, the in-vestment 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 (Re-turn 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 on-time 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 | Voimapolku 2 | FI-76850 NAARAJÄRVI - FINLANDPhone +358 (0)207 424 820 | Fax +358 (0)207 424 839 | info@actiw.com

www.actiw.com | www.loadplate.com

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Actiw Oy is a Finland based manufacturer and systems integrator, specialized in intelligent and sustainable auto-mated warehouse and loading solutions. Actiw has a solid track record with dozens of successful installations and pleased clients; Actiw’s automated material handling pro-jects have been executed since mid-1980. The company has invested strongly in developing their own, unique au-tomated 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

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