Magazine Article | February 14, 2017

What Powers The TSC Supply Chain

Source: Innovative Retail Technologies
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By Matt Pillar, senior executive editor, Innovative Retail Technologies

$6.78 billion Tractor Supply Co. demands uptime from the mobile devices driving innovation in its warehouses and DCs.

Brentwood, TN-based Tractor Supply Co. is the favorite retail destination of the hobby gardener, backyard chicken farmer, and anyone who likes to spend time turning up dirt, tinkering with tools and power equipment, or raising animals, from kittens to horses. The 79-year-old company’s widespread appeal — borne of a carefully curated merchandise selection that attracts rural folks and urbanites alike — has fueled its growth from a mailorder catalog to a $6.78 billion multichannel retailer operating 1,600 stores and employing 24,000 associates in 49 states.

A Snapshot Of The TSC Supply Chain
The mix of merchandise carried by Tractor Supply poses some unique challenges to its warehouse and DC operations. While more than 40 percent of its sales comes from its livestock and pet supply category, approximately 20 percent comes from seasonal, gift, and toy items. Other items the store carries vary from small products such as linchpins and brake lights, to medium items such as leather footwear and clothing, pet food, and supplies, and large items such as truck toolboxes, riding lawn mowers, and utility vehicles.

More than 70 percent of the products the company sells flows through its eight primary distribution centers in Arizona, Georgia, Indiana, Kentucky, Maryland, Nebraska, Texas, and Washington and two additional cross-dock facilities in Texas. These smaller facilities are primarily responsible for handling palletized products, such as wood shavings used for animal bedding and wood pellets used for home heating. The cross-dock centers were designed specifically to handle high-volume, low-value bulk products with fast turnover in stores. The remainder of its merchandise is shipped directly to stores from any one of the company’s nearly 1,000 vendors.

“We have a pretty big focus on being able to trace product movements through the network, to know where items are at any time. We leverage that data to make efficient allocation decisions.”

Tom Hutchins, VP of technology and IT strategy, Tractor Supply Co.

In 2014, Tractor Supply also began implementing a demand planning system designed to analyze sales patterns — both historical and in real time, and leverage predictive analytics modeling to help its merchants and inventory managers make more informed inventory and allocation decisions.

Finally, while e-commerce currently accounts for less than 1 percent of annual sales at Tractor Supply, the company is investing for the future of omni-channel retailing. In 2016, it implemented buy online/pick up in store capabilities at 700 stores.

Its unique inventory mix and logistics configuration, combined with e-commerce initiatives hitting its more than 5 million square feet of warehouse and DC capacity, require Tractor Supply’s investment in some robust supply chain technology.

Supply Chain Investment Supported By Mobile
Tom Hutchins is VP of technology and IT strategy at Tractor Supply, and as such, he’s responsible for the implementation of much of the retailer’s supply chain technology. Flexibility, he says, is key. “There’s a significant amount of effort in balancing our queue, including accommodating weight handling characteristics that vary a lot from season to season,” he says. “A spike in the sale of riding mowers in the spring changes the entire approach to DC operations compared to the spike in gift items we see during the holidays.” From a DC automation perspective, he says scalable conveyors and material handling systems — as well as the software that controls them — are central to the success of those transitions.

“A spike in the sale of riding mowers in the spring changes the entire approach to DC operations compared to the spike in gift items we see during the holidays.”

Tom Hutchins, VP of technology and IT strategy, Tractor Supply Co.

Beyond enabling the sheer movement of its widely variable merchandise mix, supply chain technology at Tractor Supply must also accommodate product traceability. “We have a pretty big focus on being able to trace product movements through the network, to know where items are at any time,” says Hutchins. “We leverage that data to make efficient allocation decisions,” he explains. Other technologies utilized in the DC include demand planning, forecasting and replenishment, warehouse management system (WMS), freight scheduling, and import management.

“We average about 60 RF [radio frequency] scanning devices within the four walls of each DC,” says Hutchins. Those devices are generally scanning guns used for picking large items, receiving inventory into the DC, or scanning outbound inventory. “Those devices give and receive data to and from the WMS, which drives all the activities that take place inside the DC,” says Hutchins. Those activities, in turn, rely on other tools, such as voice picking, depending on the scenario and what’s being picked. “We have an extensive road map for our DCs, focused first on process, then on technology and the infrastructure that supports it,” explains Hutchins. In DCs, those RF devices that chronicle the movement of all inventory coming and going are a cornerstone technology. As such, they need to promise uptime all the time, and that requires dependable power.

Batteries: The Unsung Hero Of The Supply Chain
Since 2014, Tractor Supply has been leveraging a managed service called Test & Replace from its aftermarket battery supplier, Global Technology Systems (GTS). “We’ve been sourcing GTS batteries and charging cradles to power the RF units in our stores for years,” says Hutchins. “Their equipment powered our store-level inventory management and counting efforts prior to bringing them into our DCs.” In addition to better-than-OEM battery life, the in-store implementation was driven by space efficiency. “We can charge three batteries in half the shelf space required to charge two using an OEM product,” says Hutchins.

In the much larger DC environment, Hutchins cites productivity gains as the most obvious benefit of longer battery life — and a better system of battery management. “If a battery fails mid shift, it creates a lot of footsteps,” says Hutchins. And as we know, footsteps — whether they’re necessary to pick and put or to change a battery — are the antithesis of DC efficiency. “A team member with a failed battery has to find a place to plug in an auxiliary charger and get to the RF room to obtain a new battery before picking up where they left off. In a large distribution center, that can amount to a significant loss of productivity,” he says.

On-the-job efficiency aside, battery management is also a productivity drain on other large enterprises. Where thousands upon thousands of mobile device batteries are in service, determining which are functional and which aren’t isn’t as straightforward as it sounds. In a recent interview with Innovative Retail Technologies, Larry Murray, CEO and founder at GTS, analogized that conundrum in no uncertain terms. “A five-gallon gas can should hold five gallons of gas,” he explained. “If it’s dented, its capacity is diminished. It will fill more quickly, and it will appear to be full though it’s only holding four gallons.” Newer batteries, on the other hand, charge more slowly, but last longer between charges. Discerning between the good and the bad is challenging, and keeping the bad batteries in circulation exacerbates the inefficiency issue. When a bad battery only lasts a few hours per charge — yet keeps making its way back to the device — the “footsteps” problem cited by Hutchins becomes too common an occurrence. What’s worse, because associates think they’re using good batteries that recover quickly in the charger and show a full charge when put back in the device, they often conclude that rapid battery depletion is a device issue. Sending those devices off for analysis and repair is costly and, more often than not, wholly unnecessary.

“We’re very proud of our sustainability accomplishments, and we make it a goal of as many strategic and tactical initiatives as possible.”

Tom Hutchins, VP of technology and IT strategy, Tractor Supply Co.

“Prior to leveraging the new service, Tractor Supply relied on DC associates to mark new batteries’ in-service date with a permanent marker,” says Hutchins. “That only gave us an indication as to when the battery might reach end of life if the marker didn’t wear off, as it typically did. So that method was ineffective,” he says.

The Test & Replace service from GTS consists of a simple, proprietary battery tester and mobile app that allows Tractor Supply team members to quickly identify and replace bad batteries on-site. Tractor Supply piloted the system in its Franklin, KY, DC and has spread the initiative to the rest of its DC sites over the past two years as each has come due for a refresh. Bad batteries are earmarked for recycling, while good ones remain in service. “This technology tells you the battery’s status, eliminating guesswork on our part,” says Hutchins. The testing device couldn’t be simpler — a green light means good to go, orange indicates a three-to-six month prognosis, and a red light means it’s time to recycle and replace. On the back end, GTS receives data from the application and automates the resupply of fresh, modern mobile device batteries when they’re needed and where they’re needed.

Battery Recycling Supports Sustainability
Tractor Supply strives to be a socially responsible brand. Hutchins says the company manages an ongoing stewardship program that focuses on environmental sustainability. Its Brentwood-based store support center, built in 2014, is LEED (Leadership in Energy & Environmental Design) silvercertified, as is the company’s new Arizona DC. “We’re very proud of our sustainability accomplishments,” says Hutchins, “and we make it a goal of as many strategic and tactical initiatives as possible.” Those examples abound. The company is currently engaged in a major energyreducing LED lighting retrofit in its stores. In its stores and DCs, a cardboard recycling initiative resulted in the recycling of 21,277 tons of cardboard in 2015 alone. That effort contributed to 85 percent of DC-generated waste processed through the company’s recycling efforts. But the retailer doesn’t just recycle its own waste, it encourages community participation. An in-store oil recycling program, for instance, saw Tractor Supply customers bring 76,373 gallons of oil in for responsible recycling reuse in 2015. The company recycles wood pallets, vehicle batteries, and, of course, mobile device batteries. “GTS handles battery recycling for us at several locations,” says Hutchins, “and while we haven’t measured the direct impact, there’s no question that to the extent that we can extend battery life and dispose of fewer batteries, the Test & Replace program is absolutely in line with our sustainability initiatives.”

The Impactful Simplicity Of Battery Management
Hutchins says that as with anything undertaken by an organization as large as Tractor Supply, seemingly small gains can have a significant impact. “Our primary focus is around managing total landed cost, from source to shelf, and we have a very tight focus at that level,” he says. Between team members trying to manually determine the health of hundreds of batteries in a single DC and all the time spent by team members traversing the DC in search of batteries that work, it’s not difficult to see the kind of impact inefficiency can have on total landed cost. “There are so many steps to getting one piece of anything from start to finish in the supply chain. It’s a very complex environment,” says Hutchins. “That 10-minute loss of time that’s so easy to imagine could mean a pallet doesn’t ship, and that’s what DCs are all about — getting products to stores and customers.” That’s to say nothing of the inherent value of extended battery life in the devices that make your supply chain hum. For Tractor Supply, keeping those devices in service with an active battery management plan benefits stakeholders across the spectrum, from customers to store managers to the DC associates who use them. 