Figure 1: Dos Pinos distributes about 500 skus, most of which are dairy products.
The Cooperativa de Productores de Leche Dos Pinos, R.L., located in Costa Rica, is one of the largest and most well known food companies in Latin America. Dos Pinos specializes in milk production, milk processing, and distribution of dairy products in Central America.
In order to reduce the risk of imbalances of supply and demand for milk and also to share common resources for the collecting, processing and distribution of milk products, a group of milk farmers founded the company in 1947. Today, the company is owned by 1,500 milk producers, consolidates a daily production of 2.2 million pounds of milk, employs 3,000 people, and has a total annual revenue of US$280 million.
Dos Pinos has a vertical integrated supply chain that includes infrastructure for processing of animal foods and distribution of farm supplies, as well as dairy farms, a fleet of milk tankers, dairy processing plants and a distribution network.
Figure 1: Dos Pinos distributes about 500 skus, most of which are dairy products.
Milk is collected daily by the tanker fleet and delivered to one of the 2 dairy processing plants, where more than 400 skus, such as fresh milk, cheese, yogurt, ice cream, milk powder and aseptic packaged milk and juices are produced.
A main distribution center (DC) of approximately 100,000 square feet (10,000 square meters), which is adjacent to the processing facilities, receives the products by conveyor. Product is trucked from the main DC to approximately 10 regional warehouses or directly to customers within 50 kms. Typical customers include grocery stores, convenience stores, and tiny local shops.
Distribution is based on “pre-sales”: A salesperson collects orders from about 90 customers a day and uploads them to the DC each afternoon. During the evening the DC processes the orders, picks the product, and loads the delivery trucks. On the next day, each truck visits a route of about 60 customers. About 100 trucks are loaded out of the main DC.
Dos Pinos distributes around 500 skus and will be adding another 150 soon. To account for future growth, it must plan for about 700 skus. There are 370 skus in stock, 70 built to order for export to the US, and 150 new skus, (some of which will replace some of the 370 skus).
The warehouse consists of three zones, one each devoted to ambient, refrigerated, and frozen foods. There are about 150 skus in the ambient zone, 200 in the refrigerated zone, and 150 in the frozen. Each zone is operated as an independent facility, with its own workers, trucks, and shipping schedule.
The chilled spaces are especially expensive, with space in the frozen area costing more than 3 times that if the ambient area. To protect product against loss of refrigeration, the DC is connected to two different regional power grids. In addition, it has its own emergency generators.
All storage in the facility is for pallets and most of it is 1-deep pallet rack. There are some 2-deep rack and one region of pallet flow rack. All racking is unusually sturdy (and therefore expensive) because Costa Rica is a geologically active area, with frequent earthquakes.
All of the chilled product is packed in identical crates (blue plastic, open-top containers). Crates are stacked 42 to a pallet (7 per layer, 6 layers high).
Upper levels (2 through 5) of pallet rack hold reserve stock in shared storage. All piece- or carton-picking is from the ground level. Full pallets are picked from reserve and the ground level is replenished from reserve.
All skus in the 3 temperature zones have at least one fixed active pick location on the ground level. Some of the fast-movers are given several pallet positions. It is thought that this will reduce congestion because these skus will not need replenishment during picking.
The current storage is as follows:
Fresh milk is the fastest-moving product. Over 300 pallets are shipped each day. It is picked from floor stack on the shipping dock.
Faster-moving refrigerated product, such as fresh sour cream or fresh juice, is stored in and picked from pallet flow rack: 11 lanes/level x 17 pallet positions/lane x 3 levels = 561 pallet positions.
The movement of product is quite stable, without significant seasonalities except for ice cream, which is especially popular around Christmas. (During 20-27 December 2007 the demand for ice cream increased by 40 percent.) The number of requests (picks) are fairly constant throughout the year) but the quantity requested may vary. Fridays are the highest-volume days.
Ambient product turns every 15-20 days. This is longer than for other products because the Tetra Pak must remain in quarantine for 5 days to ensure that the packaging is secure. Refrigerated product turns every 6 days; and frozen product turns every 12-14 days.
All orders are picked to pallets, pulled by manual pallet jack. Full pallets, which is mostly milk, are picked by forklift truck. The pick path is up one side of the aisle and back down the other side. When a picker fills a pallet, he takes it to shipping, gets a new pallet and resumes picking his order.
Product that is to be sent to the 11 regional DC's is picked in the morning. Yesterday's orders are picked 2-10PM. The three main types of orders are small routes, pre-sales, and supermarkets (large orders).
An order picked in the DC is actually the aggregation of all the orders of the customers on the same route, so, from the point of view of the order picker, the truck is the customer. Therefore, if three stores on a route each order half a pallet of milk, the order picker will see one request for a one and a half pallets. When the truck arrives at a store, the delivery team will pick the product for that store from the truck, as if from a mobile warehouse.
A typical order is completed by a single picker, and comprises 3-4 mixed pallets of about 35 cartons each, plus another 4 pallets of fresh milk.
Order-pickers in the frozen zone take a 20 minute break to warm up after every 45 minutes work in the warehouse.
Labor costs are about one-eighth those of the US.
Receiving fresh milk Fresh milk arrives every day from farms. It is the basis of most of the Dos Pinos products. |
Manufacturing An ultra-modern facility prepares a variety of dairy products, plus an increasing range of related foods. |
Packaging Product leaves the packaging line, is put into crates, and delivered via conveyor to the DC. |
Refrigerated, frozen shipping Note the refigeration units on the trailers. |
Ambient shipping Supplies are received at the far right. |
Delivery truck One of many types of delivery truck. |
Entering refrigerated zone The refrigerated zone is kept at 10 degrees Celsius |
One of the chillers Refrigerated space is very expensive. |
From manufacturing Cartons arrive by conveyor and are palletized for storage. |
5-high pallet rack This pallet rack is of extra strength because Costa Rica is located in an earthquake-prone region. |
Staged product High-volume movers are staged before being loaded into 17-deep pallet flow rack. |
Back of pallet flow rack 17-deep x 3-high, flowing to the staging area within shipping. |
Loading pallet flow rack The rollers have brakes to slow the movement of the pallet forward. |
Restocking Ground floor positions are restocked from above. |
Storage addresses All are located on the first level so they can be scanned. This is row RB, opening 11. |
Order-pickers Each order-picker pick eaches and crates to a pallet. |
Picking pieces to a carton Almost every pick line requires some piece-picking. |
Order-pickers …travel down the left side of the aisle, return on the right. |
Staged for shipping This pallet goes onto the truck serving route 90. Pallets of milk are in the background. |
Loading a truck Columns of crates are pulled off the pallet onto the truck, to get a tight pack. |
Ice cream in frozen area Ice cream is the most seasonal product, with demand increasing by 40 percent over Christmas. |
Order-picker in frozen area Workers must take a 20-minute break every 45-minutes. |
Ice on the pallet rack The frozen area is maintained at -28 degrees Celsius. |
2-deep rack in ambient area Product is picked off the front pallet on the ground floor. |
Picking from 2-deep rack When the front pallet has been depleted, it is moved forward and a new pallet is inserted at the back. |
Picking in ambient area The containers shown here are "Tetra Paks". |
Structured pallet Product has been stacked in bands to simplify unloading from a side-entry deliver truck. |
Split-case quantity A typical truck order will include both cartons and pieces. |
Staged ambient product This will be loaded and sent in the morning. |