Neuco Inc., a well-known master distributor of HVACR controls, is the winner of Distribution Center magazine’s first-ever Golden Warehouse Award.

They won the award by bringing  together elements of planning, both short term and strategic, and a structured commitment to expanding their capacity to handle additional orders. And they did all of this while not missing a beat and fulfilling all their existing orders.

The seeds of the award actually go back to 2012 when Neuco completed an expansion of 18,000-square-feet, a multiuse structure connected to their existing building. Stock levels and inventory options increased for the Downers Grove, Ill., wholesaler in the wake of that expansion.

Then, in 2013, business got better. “It was a good year for the controls business, and orders increased,” says Neuco President Paul Neustadt. Despite the expansion and with increased orders, it became apparent that either another expansion externally might be necessary or they could look within and find a solution: It began a material handling solution.

Neuco hired an outside consultant and carefully took input from staff, which led to a complete realignment of how and where they handled shipments. It wasn’t easy at first because some of the suggestions seemed at odds with how Neuco might have viewed handling a part. There was also a reconfiguring of space usage. Neuco didn’t just solicit employee suggestions; they paid careful attention to their ideas.  Paul Neustadt recalls one employee explaining to him, “It’s crazy. We’re walking over that all day long, when we could shorten the trip and save lots of time.”

What makes Neuco’s approach to the entire process astounding is the directive they gave to their consultant: “We don’t want to lose any people,” according to Neustadt.

In the world of supply chain and logistics, the mantra of improved efficiencies and its corollary of lowering costs are usually associated with a work force reduction. Not in the case of the Neuco operation.

Many companies tout the value of their employees, a pro forma approach that has a tinge of good public relations. But does the executive team really believe it?

Neuco proves that it does. One of the secrets to the implementation of the new conveyer and carousel system was simple, direct and so obvious that many businesses might have neglected it. Neuco explained to everyone what was occurring, why the improvement would make their work easier and, most importantly, how it wouldn’t cost any jobs.

The result was that employees pitched in with suggestions that Neuco and their consultant worked into the overall plan.

In an interview with Neuco’s Jon Neustadt, vice president, and Scott Kohler, purchasing manager, at the HARDI Purchasing Optimization Conference in Newport, R.I., when asked what tips they could share with other distributors, they proffered:

  • Get buy-in from the staff. They didn’t say it but implied that not doing so wasn’t a “death sentence,” but it could delay a project or increase costs. Explain that it benefits the staff as well as the customers.
  • Ask for input. This is the secret treasure trove. After all, they’re on the floor dealing with shipping issues every day. They probably know more than you do.
  • Plenty of Planning. It might seem obvious, but you’ll run into unanticipated problems. Go over all the details and ensure that you’ve allocated enough planning time.
  • Question the consultant. The consultant will have plenty of suggestions. Don’t be afraid to ask why. More importantly, if he suggests something that still runs contrary to your view or common sense, press him for an answer.
  • Get on the floor. Before you begin the actual implementation, scout the area. But even more important, according to Jon Neustadt and Kohler, is remaining on the floor once you’ve changed the workflow. And this doesn’t mean just one day.  It could last for a week or more. Problems will arise. Being close by shows your concern and reduces communication time when those packages start to zip by.

When asked what’s next after this warehouse improvement and winning the award, Paul Neustadt paused and said, “Well, we bought the building across the street.”

But that’s another story.

Gustave A. Larson Company

The “Honorable Mention” Golden Warehouse Award Goes to The  Gustave A. Larson Company

Larson has two distribution centers, one in Pewaukee, Wis., and the second in Laramie, Wyo. They also maintain four distribution hubs that support the warehouses. They are in Plymouth, Minn.; Indianapolis, Denver and Salt Lake City. Larson operates 46 stores in 13 states.

The distribution centers include a full scanning system to locate and track product. Cycle counting is done on a daily basis to keep the inventory accurate, which allows the buyers to order the correct inventory. The rate for pulling refill and order memos is 99.97 percent accurate; Larson accomplishes this by quality checking product before it leaves the building.

They operate a fleet of five semi-trucks and three straight trucks that allows overnight delivery to 95 percent of its stores. The remaining 5 percent get second-day delivery. The distribution fleet of trucks runs an average of 730,000 miles annually, with a perfect safety record. Larson uses preferred LTL carriers and 3PL full truckload carriers.

“The dedication and commitment of our employees and logistics to service our stores make the Gustave A. Larson Company a leader in serving its customers, “ says Dean Borkowitz, distribution, fleet and safety manager.  “Our philosophy is a customer-first focus, and we do everything possible to fill our orders as quickly and correctly as possible. We’ve been able to accomplish that because we have a diligent, bright and hardworking staff.”