The future of distribution? Mercadona’s fully automated operation

1. Depot profile The future of distribution?Mercadona’s fully automated operation

2. Mercadona – background • Mercadona is the leading supermarket company in Spain with a base in Valencia. It’s name comes from mercado (market in Valencian) and dona (women in Valencian). Mercadona employs 63,500 people, two-thirds of who are women. • Mercadona has grown from just 3 supermarkets in 1980 to over 1,300 in 2011. A limited range discounter, it operates an EDLP strategy and has approximately 8,500 SKUs offering shoppers the promise of ‘always low prices’. • The retailer uses a five-pillar strategy with a focus on the boss (customer), the worker, supplier, community and capital. • The retailer’s innovation model focuses on four areas: the concept, processes, technology and product related innovation Source: IGD Retail Analysis, 2011/Mercadona. Key – LL-DS = limited line discount supermarket

3. Mercadona – logistics strategy • Mercadona has invested heavily in its logistics infrastructure, and has a strategy of using a high degree of automation in its distribution centres • Mercadona has worked with the German integrator Witron and uses its systems and technology in many of its sites • Existing sites: • Ribarroja de Túria (Valencia), Antequra (Málaga), Sant Sadurní d'Anoia (Barcelona), San Isidro (Alacante), Huévar (Sevilla), Granadilla de Abona (Tenerife), Ciempozuelos (Madrid), Ingenio (Gran Canaria). • New sites: • Villadangos del Páramo (León), Guadix (Granada), Abrera (Barcelona). • Satellites: • Mercapalma (Palma de Mallorca), Hospital de Órbigo (León), Plaza (Zaragoza). Source: IGD Research/Mercadona/Agencia Española de Seguridad Alimentaria y Nutrición/Grupotec

4. Mercadona – logistics strategy • Mercadona’s rationale for using automation is to; • reduce reliance on manual labour • reduce the physical stress on employees • optimise the store supply system • increase cost efficiency - cost per m3 • reduce energy consumption • Mercadona also maximises its fleet utilisation through its “estrategia del ocho” or strategy of eight, ensuring vehicles are utilised in both directions when collecting from suppliers, and delivering to stores • At Ciempozuelos it works closely with the hauler Acotral Source: Mercadona

5. The Ciempozuelos facility • Ciempozuelos is located just south of Madrid and the site runs 24 hours for 5.5 days per week • The facility handles dry grocery, produce, chill and frozen products and has an on site bakery • The site employs around 700, around half of that required by a manual site • The operation started operating in June 2006, after an 18 month build period • Ciempozuelos delivers to stores in the Madrid city and surrounding district areas • It is a highly automated operation with; • automated, centralised ordering process and electronic invoicing • pallet delayering • storage for pallets, layers and individual cases • store order picking Source: IGD Research/Mercadona/Agencia Española de Seguridad Alimentaria y Nutrición/Grupotec

6. The automation used • The Ciempozuelos facility uses Witron technology throughout its operation • Pallet Storage – Pallet storage Stacking Machine – PS2M • Order Picking – Order Picking Machines – OPM comprising: • Delayering • Automated case picking – case order machine – COM • Manual picking low volume – dynamic picking system – DPS • Manual picking hard to handle items - module picking system - MPS Case order machine Dynamic picking system Tray and tote conveyors Source: MaschinenMarkt/MMLogstiK/LogisticsIT/Witron/Warehouse News

7. Ciempozuelos - internal view Source: Mercadona/Witron/MMLogistik

8. Ciempozuelos - key statistics OPM – Order Picking Machines, COM - Case Order Machine, DPS - Dynamic Picking System, PS2M –Pallet Storage Stacking Machine Source: Mercadona/Witron/MMLogistik

9. The product journey • Vehicles are unloaded manually in the receipt area • The drivers have to resolve any pallet compliance issues, those that cannot be are returned to the supplier • Pallets are placed by forklift onto infeed conveyors • Deliveries are slaved on to captive pallet that remain in the warehouse. This is because pallets from suppliers may not meet the standards required to run smoothly through the automation. • A barcode identifier on each slave pallet is used to the track the product while it remains in the warehouses • The site uses 800mm x 1200mm pallets, but also handles ½ and ¼ pallets on the slaves • Pallets are stored in the automated pallet stacking and storage machine, (PS2M) Loading docks Slaved pallet Slaved ½ pallets Source: IGD Research/MM LogstiK/ LogsitcsIT/Witron

10. The product journey • Products that required for case picking are automatically moved to de layering machines • Pallet layers are separated using lifting vacuum heads, and then the conveyor system divides the individual cases • The separate cases are then placed on trays and tote bins so they can be handled by the automation • Each tray and tote has a bar code, which becomes the identity of the case it contains to track it through the operation • Each tray is then placed in an automated tray store and waits to be planned into a store order. Totes are placed in a separate tote store Delayering Case tray Tray store Source: IGD Research/MMLogistik/LogisticsIT/Witron/Boxline/Qubica

11. The product journey • The totes are used for low volume picks and orders are assembled in a dedicated pick area, the Dynamic Picking System (DPS) which uses pick to light • When a store order is ready to be assembled the individual cases are retrieved from the tray store • Picked pallets are assembled using the case order machines (COM) • The cases are lifted by “fingers” which push through holes in the bottom of the tray • Pusher arms then slide the case into position on the picked pallet, which is lowered as more cases are added Case order machine Source: MM LogstiK/LogisticsIT/Witron

12. The product journey • Heavier and more resilient items go at the bottom of the order pallet, and lighter, more fragile products go nearer the top • Assembled orders are built and handled in three sided frames until the order is stretch wrapped • Cases which cannot be handled by the automation are manually assembled • The picked pallets are then wrapped and labelled • Orders are despatched to store on pallets Assembled store order Source: MMLogstiK/LogisticsIT/Witron

13. For further information This presentation has been produced using IGD sourced data and readily available secondarily sourced information To gain further insight on the developments in Stocked Supply Chains see the presentation here: For more information on the Spanish Supply Chain see our country profile: here: Read IGD’s best practice case studies on supply chain collaboration: here For any other information, please email Nick Downing at nick.downing@igd.com or call him on +44 (0)7730 822274