AWG’s all-in-one distribution hub in Hernando, Mississippi, has been a huge investment and massive undertaking for the company. The AIO facility is providing immediate and long-term sustainable benefits to the membership, according to AWG.
The first of its kind in the U.S., and just the third such facility in the world, the AIO will replace warehouses in Southaven, Mississippi and Memphis, Tennessee, while also housing an expanded variety of items and new products.
By substituting technology investments for human capital, it will reduce operating costs and provide a more reliable source of supply, all while significantly improving the product assortment available to member stores, the company stated.
While numerous benefits are associated with the AIO and its technology, none will be more apparent than pallets arriving at member stores. They are stacked better, resulting in less damage and fewer errors. Similar products are segregated together for easier and more efficient handling at the store, and fewer totes and pallets will be needed.
As a result, unloading time at stores will be reduced, fewer returnable assets will be handled, less time will be spent addressing credits and out of stocks will be dramatically reduced. All of this adds up to savings for AWG members.
The AIO will provide the Mid-South division members with a full assortment of product categories and serve the entire membership and non-members with health and beauty, seasonal, specialty food, cigarettes, tobacco and a new extended variety of ambient and fresh-frozen items.
The AIO occupies 124 acres, nearly one million square feet of floor space and is more than 80-feet tall throughout. It accommodates all product temperature zones and is expandable for future growth. It also has unique features, including a state-of-the-art non-ammonia refrigeration system, 10 pressurized banana rooms, docks on both sides of the building to ensure end-to-end temperature control (promoting food safety compliance) and five high-capacity generators to ensure uninterrupted operations.
AWG President-elect Dan Funk said the co-op is in the process of moving division operations into the AIO distribution hub, “as well as a lot of our centralized and future capabilities for expanding variety in that building and being able to support members not only in Mid-South but across the company with expanded variety. A lot of our legacy, Valu Merchandisers business will be coming through that facility.”
CFO Gary Koch said the site uses automation and technology to take out some of the human error that can occur in selection, “because nobody’s perfect … occasionally you’re going to grab from the wrong bay or do something that is a slight error. This takes most of it away.”
The AIO distribution hub also has allowed AWG to go from picking individual units in non-food items to a case-driven or inner-pack type of unit.
“Our unit of measure has changed. That’s been the next transition that is really affecting retailer behavior, getting them to understand and do everything more like it was in grocery,” Koch said.
The AIO now is handling fresh meat and more than half of frozen products. Koch said when everything has been moved to the AIO, the Southaven facility will be shut down. “Once that’s over, we’ll be back to seeing more of the benefit. Sometimes you’ve got to go through a little uneasiness to get to that end objective.”
Shelly Moore, AWG’s chief information officer, said she is excited about using data to transform the business. In the AIO facility, the use of data drives the automation.
“Understanding things such as product length, width, height, weight specification, all of those things are critical to driving efficiency and that automation. There are a lot of new learnings for the organization in terms of data, data quality, data governance … To me, it’s a critical part of what we do in technology and using that data to drive efficiencies.”
According to Emile Breaux, SVP, chief sales and support officer for AWG, the AIO distribution hub addresses a challenge many across the industry are facing as far as workforce.
“We’ve got more work than we can say grace over,” he said. “Unfortunately, manual labor-type roles are not what … most people are looking for in their career. So we found a way to leverage automation to account for that.
“That’s really what Hernando represents, our attempt to mitigate any risks with limited labor. Moreover, it’s the accuracy and our ability to service our members in a way that reduces damage and reduces credits, improves assortment of items that we can make available throughout the network and do it in a way that’s fiscally responsible.”
Breaux added he believes automation will play a key role in the future of AWG’s facilities.
“What the all-in-one is really about is how can you take the most labor intensive, the most capital-intensive components of our distribution, like our each pick, and put that in one spot and service a big chunk of the network from that singular capital investment. That’s really what Hernando is all about.”
He said he believes other AWG distribution centers will include some level of automation in the future.
“How do you improve accuracy and the construction of pallet and service levels to your customer and also continue to reduce your reliance on a difficult labor environment? I think automation is the wave of the future,” Breaux said.
SVP of Merchandising Tye Anthony said he believes the AIO could have the “greatest impact on our co-op ever. The possibilities and the abilities to capitalize on that facility are enormous across our entire membership.”
After years of planning and construction, Anthony looks forward to seeing the AIO in operation.
“Our members are excited about it, obviously. It solves a lot of challenges in this business, whether that be labor, whether that be transportation, whether that be the ability to become more productive, all those things. It solves a lot of those challenges that the whole industry is going to continue to face. Our timing on that thing was impeccable … Hats off to our people who manage that whole process.”
James Neumann, former retailer and AWG board member and now SVP of special projects, said automation is a “great alternative” to continual turnover and other labor challenges.
He said AWG put a lot of time and research into the decision to move forward with the AIO, including selecting WITRON as its automation partner. AWG executives took board members to multiple sites where WITRON had installations operating to gain a better understanding of what they were proposing for the AIO and how it would help the co-op.
“As independent retailers, we’re skeptical of spending a lot of money on something that we’re unsure how it’s going to benefit [us],” Neumann said.
Automation takes out some of the physicality of the work, allowing AWG to train a more technical workforce that has a longer future with the company.
“It allowed us to invest heavily in a facility that has a much higher ceiling capacity, allows us to offer new offerings to our members by expanding our variety and specialty food. It’s allowing us to get into refrigerated and frozen specialty for all of our member stores for the first time. It gives us a tool that’s incredibly more efficient and accurate for our membership, and able to do it at a lower operating cost over the long haul.”
According to Neumann, everything should be transitioned to the AIO by the end of the year.
He added that while there is a lot of automation being used in the industry, “no one in North America has done a facility like we did in Hernando, and there’s only three in the world that have all temperature zones – frozen, refrigerated and ambient – and does each pick for specialty food, general merchandise and health and beauty care under one roof. No one’s ever done it.”
He said it has been a massive undertaking, and “there’s been nothing remotely close to it in the history of our co-op.” While there have been some bumps in the road, Neumann said the AWG team has been “exceptional” in getting the AIO to “run like a top now.”
As the AIO distribution hub was being proposed and now has begun operations, AWG’s member retailers are starting to see the benefits from the co-op’s investment in automation and technology.
David Ball, board member and owner of Kansas City-based Ball’s Food Stores, said the $350 million capital expenditure was the largest in the co-op’s history. He said the AIO is an example of President and CEO David Smith’s leadership and vision.
“We will hold the trophy for at least six months or a year of being the most innovative, technology-driven warehouse in North America, if not the world. That’s a big deal.”
Steve Edwards, owner of GES Inc., which operates Edwards Food Giant and Cash Saver supermarkets in Arkansas, said the AIO will serve all of his stores.
“When that thing gets finished, it’s going to be a good deal … it’s really going to be a big savings for everybody in the company.”
Kim Eskew, chairman and CEO of Springdale, Arkansas-based Harps Food Stores, said moving to the automated facility “puts us ahead of the game and in the direction that the whole world is going to probably wind up going, as it becomes nearly impossible to find people to do that job.”
He commended Smith on having the vision for the AIO.
“His leadership through that has been steadfast and resolute.”
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