Americans’ spending habits are shifting dramatically, with an increasing number of consumers supplementing brickand- mortar retail store visits with more frequent comparison shopping—and buying—online via desktops, laptops, smart phones and tablets. According to the Census Bureau of the U.S. Department of Commerce, e-commerce spending in the first quarter of 2017 reached $105.7 billion—a 4.1% increase over the fourth quarter of 2016, when shoppers spent $102.7 billion online in the peak holiday season. That figure also represents a 14.7% increase over first quarter 2016, and 8.5% of total retail sales.

1. LIVING LOGISTICS
RETAIL
DISTRIBUTION
LIVING LOGISTICS

2. RETAIL DISTRIBUTION
Whether a facility replenishes
brick-and-mortar store inventory,
fills e-commerce orders, supplies
wholesalers—or serves a combination
through an omni-channel approach—
an investment in automated storage
and handling significantly minimizes
labor costs and boost throughput.
THREE IDEAL AREAS FOR
AUTOMATION INVESTMENT IN
RETAILDISTRIBUTIONCENTERS
THREE IDEAL AREAS FOR
AUTOMATION INVESTMENT IN
RETAIL DISTRIBUTION CENTERS

3. INTRODUCTION
Americans’ spending habits are shifting dramatically, with
an increasing number of consumers supplementing brick-
and-mortar retail store visits with more frequent comparison
shopping—and buying—online via desktops, laptops, smart
phones and tablets.
According to the Census Bureau of the U.S. Department of
Commerce, e-commerce spending in the first quarter of 2017
reached $105.7 billion—a 4.1% increase over the fourth quarter
of 2016, when shoppers spent $102.7 billion online in the peak
holiday season. That figure also represents a 14.7% increase
over first quarter 2016, and 8.5% of total retail sales.
This dramatic uptick in buying online has forced retail
distribution centers, which historically shipped palletloads of
products to brick-and-mortar storefronts to replenish store
shelves, to make changes within their inventory handling and
order fulfillment processes. Not only must they now cope with
an enormous increase in unit-level picking to fulfill individual
consumers’ online orders, they must also stock a broader
and more diverse range of stock keeping units (SKUs). That
includes stocking out-of-season items—such as summertime
décor to satisfy a customer hosting a Hawaiian-themed New
Year’s Eve party, for example—in order to compete with online
behemoth Amazon. And, they must deliver low prices and
enhanced customer service offerings, such as later order cut-
off times, next- or same-day delivery, free shipping, and other
perks to attract and retain shoppers.
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4. Meanwhile, omni-channel retailers who serve multiple
channels must also accommodate changes in storefront
shopping. To minimize the amount of inventory held at
one retail location, while maximizing the product diversity
available to shoppers, distribution centers are replenishing
stores more frequently with smaller shipments of mixed
and broken-case products. Further, store replenishment
shipments must be built to match each location’s specific
layout, or planogram.
This minimizes the amount of time required of store
associates to restock shelves or hanging racks, because
shipments have been organized to follow their logical travel
path within the building.
In addition to the increased competition to attract and
retain customers while remaining competitive in this
increasingly omni-channel marketplace, retail warehouses
and distribution centers must overcome a variety of other
hurdles in this new era of constant change.
E-COMMERCE AND
OMNI-CHANNEL

5. And they’re not alone. Research conducted by Deloitte
Consulting for the 2017 MHI Annual Industry Report,
“Next-Generation Supply Chains: Digital, On-Demand
and Always-On,” identified three top challenges faced by
manufacturing and supply chain industry leaders, including
those in e-commerce and omni-channel retail:
Hiring and retaining a skilled workforce (63%)
Customer demand for faster response time (55%)
Customer demand for lower delivered costs (53%)
Many retailers are reeling from the pressure. Sears
Holdings, for example, announced 43 Sears and Kmart
store closings in July 2017. That brought their total store
closures to 267 for the calendar year, and reducing their
total footprint to roughly half the number they operated
in 2012.3
In explaining the closures in a corporate blog,
Sears’ Chairman and CEO Eddie Lampert wrote, “Changes
in consumer behavior are driving our vision and actions,
and we continue to transform our business model so that
our physical store footprint and our digital capabilities
match the needs and preferences of our members.”4
Sears isn’t the only merchant struggling to make the
transition to the new world of omni-channel retail; multiple
retailers have announced store closings and/or bankruptcies
in the first half of 2017:
J.C. Penney closed 138 stores
Gymboree filled for Chapter 11 bankruptcy and stated
plans to close 450 stores
H.H. Gregg filed for Chapter 11 bankruptcy and closed
all 220 stores
H.H. Gregg filed for Chapter 11 bankruptcy and closed
all 220 stores
MC Sports filed for Chapter 11 bankruptcy and liquidated
all 68 stores
Payless ShoeSource filed for bankruptcy protection and
announced plans to close 804 stores
RadioShack filed for a second bankruptcy in two years
and closed more than 1,000 stores 5
2
MHI. “2017 MHI Annual Industry Report – Next Generation Supply Chains:
Digital, On-Demand and Always-On.” April 2017. Accessed July 11, 2017.
https://www.mhi.org/publications/report
3
Wahba, Phil. “Sears Is Closing Another 43 Stores.” Forbes.com. July 7, 2017.
Accessed July 10, 2017. http://fortune.com/2017/07/07/sears-stores-closing/
4
Lampert, Eddie. “Transformation Update.” SHC Speaks. July 7, 2017.
Accessed July 10, 2017. https://blog.searsholdings.com/eddie-lampert/
transformation-update/
5
Carrig, David. “Sears, J.C. Penney, Kmart, Macy’s: These retailers are closing
stores in 2017.” USA TODAY. July 7, 2017. Accessed July 11, 2017. https://
www.usatoday.com/story/money/2017/03/22/retailers-closing-stores-sears-
kmart-jcpenney-macys-mcsports-gandermountian/99492180/

6. Despite the extensive number of storefront closures,
shopping in person is not likely to entirely disappear. That’s
because retailers with traditional brick-and-mortar outlets
can leverage their real estate to differentiate themselves
from online-only merchants by giving customers the
opportunity to interact with, handle or try on items.
Plus, “order online / pickup in-store” options offer customers
quicker gratification than waiting for a parcel delivery.
Further, returning defective or unwanted items purchased
online to a store for an immediate refund is a quicker, more
convenient—and frequently more appealing—alternative to
shipping the item to a returns processing location.

7. So how can e-commerce or omni-
channel retailers equip their
warehouses and distribution centers
to address these current challenges
and still remain flexible enough to
adapt to future changes as well? The
answer lies in automation.
By implementing scalable, flexible automated material
handling systems to replace one or more manual
processes within a facility (including receiving,
putaway, storage, picking, replenshiment, or packing)
an operation can significantly minimize its labor costs
while dramatically boosting throughput, and achieve
an anticipated return on investment of three years or
less. And, with a system constructed from modular,
durable, reconfigurable and expandable components,
an automated retail fulfillment operation will continue to
deliver value long after it has paid for itself—regardless
of shifts in SKUs, order profiles, peak periods, labor
availability or distribution channel volumes.
This white paper explores three areas within a retail
order fulfillment operation where automated storage
and retrieval systems can make a key impact on an
organization’s ability to stock more diverse inventory
and remain cost-competitive while meeting customer
expectations—regardless of the fulfillment channel.

8. Carton receiving in most warehouses can be one of the most labor-intensive and manual
processes within the operation. That’s because it typically requires as many as eight
separate manual steps to handle product from the point of receipt until it is retrieved for
order fulfillment. These steps include:
SEMI-AUTOMATED CARTON
RECEIVING AND PUTAWAY
With an automated, single-touch receiving system—such
as the One-Touch system from TGW Systems—seven of
those manual touches can be completely eliminated. That’s
because the system only requires one initial point of operator
interface with the inventory: manual unloading of cartons
from the back of the trailer.
This system is outfitted with an extendable belt conveyor
that is reaches into the back of an open trailer parked at the
dock. An operator unloads the cartons one at a time, placing
them on the belt. From that point, the system automates all
receiving and putaway processes: automatically scanning,
weighing, validating the purchase order, reconciling the
receipt of the carton, determining the ideal storage position,
routing the carton via transport conveyor to an automated
storage and retrieval system, and directing the system to
store the carton for later automatic retrieval.
This cuts labor requirements by as much as 75%, as well as
dramatically speeds up the receiving process—making new
inventory available for picking and fulfillment of individual
and store replenishment orders in minutes, rather than hours
or days.
1. Unload each carton individually from the trailer,
placing it on an extendable conveyor
2. Sort and segregate cartons by SKU
3. Scan each carton to receive
4. Place cartons on pallets for transport by forklift to
point of putaway
5. Transfer cartons from forklift to rack or shelving for storage
6. Removal of cartons from storage rack for order fulfillment
7. Scan to confirm retrieval of correct SKU
8. Place cartons on conveyor or forklift pallet for transport to
pickfaces or outbound shipping

9. The automated storage and retrieval
system (AS/RS) is served by single-
mast mini-load cranes. Each crane is
equipped with a belt-driven, dual load-
handling device that can store and
retrieve up to 240 cartons, totes or trays
of varying dimensions (and weighing up
to 220 pounds) per hour. Because the
system reaches heights up to 82 feet,
it maximizes the overhead space within
a facility. This reduces storage square
footage requirements by as much as 40%.
Further, the system’s dynamic software
optimizes the putaway location of each
SKU, tightly compressing items into
highly dense racking to minimize wasted
space. Through the combination of
reduced labor, faster receiving, increased
storage density and near-instant inventory
availability, systems like the TGW’s One-
Touch routinely yield between 25% and
40% internal rate of return, frequently in
less than two or three years.

10. AUTOMATIC STORAGE AND
RETRIEVAL / REPLENISHMENT
To eliminate this issue, an automated, shuttle-based
residual picking buffer—such as one built on TGW Systems’
STINGRAY AS/RS—offers high-speed order fulfillment and
automatic replenishment of allocated inventory. The system
is engineered to keep one carton of every active SKU within
the shuttle system. When a SKU is needed for order fulfillment
of any type (direct to consumer or store replenishment), a
shuttle automatically extracts a required carton from the
AS/RS and conveys it to a goods-to-person picking station.
There, the required number of items are removed and sent
along a unit sortation system for order consolidation and
packout.
If the carton has any units remaining after picking, the carton
is closed and the residual stock is routed back to the AS/
RS. The next time that SKU is required, the system sends
the residual carton from the shuttle-based AS/RS, as well
as one (or more) full carton(s) of safety stock held in a mini-
load AS/RS (acting as secondary storage) to ensure the
total quantity required is available. Both cartons are routed
to the goods-to-person picking workstation, where the
correct number of items are removed and sent along a unit
sortation system for order consolidation and packout. Order
batching is eliminated; instead, all orders, regardless of their
destination, are interleaved.

11. REPLENISHMENT OF FORWARD PICK INVENTORY CAN ALSO BE A LABOR-
INTENSIVE, TIME-CONSUMING PROCESS WITHIN A CONVENTIONAL
RETAIL DISTRIBUTION CENTER. THAT’S BECAUSE OPERATORS HAVE TO
LOCATE ADDITIONAL STOCK, REMOVE IT FROM ITS STORAGE LOCATION,
AND TRANSPORT IT TO PICKING AREAS. DEPENDING ON THE VELOCITY
OF THE ITEM (FAST-, MEDIUM- OR SLOW-MOVER), SKUS CAN BE STORED
IN DIFFERENT AREAS OF A CONVENTIONAL WAREHOUSE, POTENTIALLY
REQUIRING EXTENSIVE TRAVEL TO RETRIEVE IT.
Operators simply pull the required number of items from
each carton and singulate them onto the unit sorter, which
diverts each item (or case) into specific chutes for pack-out
to an individual customer address or for customer pickup at
a store, or to a palletizer to build store-friendly palletloads for
replenishment.
Built on the STINGRAY shuttle system for automated, forward
pick inventory storage with automatic replenishment from a
TGW mini-load system, retailers can achieve highly dense
storage in a footprint that is 80% smaller than a manual
warehouse. Each system stores totes, trays and cartons of
various sizes in single-, double- or multi-deep configurations.
With the variable load-handling device, the shuttle interfaces
with goods measuring from 6 x 8 to 35 x 31 inches and
weighing up to 110 pounds. To prevent downtime, the system
includes multiple layers of redundancy for a high reliability
rate of 99.8%. It also reduces manual replenishment labor
from 70% to 90%.
By eliminating the labor required for inventory replenishment,
increasing storage density, and automatically retrieving and
storing SKUs—regardless of their pick velocity—systems like
TGW’s Residual Solution generate up to a 30% internal rate
of return, often in three years or less.

12. GOODS-TO-PERSON
ORDER FULFILLMENT
Further, manual picking involves much more than simply
grabbing an item off a static storage rack or shelving unit.
Instead, picking in a conventional distribution center usually
entails an operator following a paper printout of instructions
about what items to pick and where they are stored. The
picker first must travel to and search for each correct
storage location, then refer to the printout to figure out how
many items are required from each pick face, pick the items,
mark the paper to confirm the pick, and deliver the items
for packing. Even fast-moving items, which can represent
20% to 30% of the total inventory of a facility, can require
anywhere from 70% to 80% of labor hours to pick—often at
rates ranging from 45 to 100 order lines per person per hour.
The installation of a fully automated goods-to-person
system for split-case picking—such as TGW’s FlashPick—
significantly increases productivity, improves accuracy and
reduces labor costs. With this system, items are stored in a
shuttle-based automated storage and retrieval system. As
orders are generated for fulfillment direct to customers or
for store replenishment, products stored in totes, trays or
cartons are pulled from the shuttle AS/RS and delivered via
conveyor to an operator.

13. MANUAL ORDER PICKING IS WIDELY REGARDED AS ONE OF THE MOST LABOR-
INTENSIVE AND COSTLY PROCESSES WITHIN A DISTRIBUTION CENTER. IN
FACT, ESTIMATES PEG ORDER PICKING AS REPRESENTING UP TO 55% OF
A WAREHOUSE’S TOTAL OPERATING EXPENSE.6
THAT’S DUE MOSTLY TO THE
TRAVEL BY PERSONNEL IN A CONVENTIONAL, MANUAL FULFILLMENT OPERATION
ACCOUNTING FOR BETWEEN 50% AND 60% OF A FULL TIME PICKER’S TIME.7
Pickers remain in a fixed location and all products
are delivered to them at ergonomic workstations
outfitted with either light- or voice-directed
picking systems. An operator takes the required
number of items out of the storage tote or carton,
and places them directly into the outbound order
carton or pouch for shipment to an individual;
items destined for store replenishment are
typically placed in reusable plastic totes.
Because pickers no longer have to travel
throughout a warehouse to locate and select
items to fill orders, systems like TGW’s FlashPick
increase picking rates by as much as six times
faster than manual picking, reaching from 300 to
500 order lines per person per hour.
Further, fewer pickers are needed to achieve
those rates, allowing the current workforce to
accommodate a spike in demand at any time.
Additionally, training new hires or seasonal,
temporarypersonnelonthesystemisconsiderably
shorter, with new associates attaining full picking
productivity in hours instead of days. Such
installations typically deliver between a 25% and
40% internal rate of return, usually within two to
three years after system commissioning.

14. For more information about how an automated system
can be applied to improve your retail distribution center
operations, please contact Andy Lockhart, Vice President
of Integrated Systems Sales at TGW Systems, Inc. by calling
231.798.4547 or by email: andy.lockhart@tgw-group.com

15. CONCLUSION
Regardless of a retailer’s customer base—direct to consumer, brick-and-mortar store replenishment, wholesale
shipping, or a combination of the three—implementing flexible, scalable automation within one or more order
fulfillment processes will significantly reduce labor costs while increasing throughput at rates that support a return
on investment in under three years, as well as continue to serve the operation far beyond achievement of initial
payback.
Achieving very late order cut-off deadlines with minimal
lead time for higher service levels
Supporting more frequent store replenishment deliveries
of mixed and broken-case SKUs.
Supporting an increase in e-commerce parcel deliveries
direct-to-consumer and direct-to-store.
Integrated, automated solutions constructed with TGW’s modular, durable, reconfigurable and expandable
components are already in place in hundreds of operations worldwide. Companies are leveraging these systems to
remain competitive in the changing retail landscape by:
Accommodating seasonal peaks without hiring
temporary personnel.
Maximizing inventory variability and variety
demands by efficiently handling an increasing
number of SKUs.
Increasing throughput and productivity despite
challenges currently associated with attracting
and retaining a qualified workforce.

16. www.tgw-group.com
TGW Logistics Group is a global leading systems provider of highly
dynamic, automated and turnkey logistics solutions. Since 1969 the
company has been implementing different internal logistics solutions,
from small material handling applications to complex logistics
centers.
With about 2,600 employees worldwide, the Group implements
logistics solutions for leading companies in various industries. In the
business year 2015/16, the TGW Logistics Group generated sales
revenues of $563.5 million (532 million Euros).