Seattle is a city where many global mega corporations started their businesses. For this year’s GFSI Conference, a Discovery Tour was planned and held in Seattle, in partnership with three famous companies. I am here to recap the Discovery Tour, which took place the day before the Conference and included visits to Costco, Amazon and Starbucks!
Costco Wet & Dry Delivery Center
Costco, one of the world’s largest retailers, opened its first warehouse in Seattle in 1983 and now has more than 800 worldwide. Their headquarters are still located just outside of Seattle, Washington. There are 24 distribution centers around the world including in Japan, and we visited an enormous center located in the shadow of Mount Rainier. The center handles a total of 4,000 items and has a turnover of about $1.2 million.
Costco, a warehouse-type store, has a business model focused on returning most of the profits to member customers by keeping product margins very low, at 8-14%, while earning most of their revenue from their membership fees. In order to keep margins as low as possible, various measures to reduce costs are also implemented at distribution centers. For example, a custom-built forklift made exclusively for Costco has a very long lift handle and can carry five pallets simultaneously. Speed is very important because a large amount of goods are purchased and moved. The mechanism is built to complete the transfer to the shipping truck in about 2 hours from the arrival of the goods. An inventory management system using RFID (Radio Frequency Identification) has been introduced to allocate cargo to destinations numbered from 1 to 50.By reading the tag (RFID) containing the chip with a reader, the destination in the warehouse is automatically instructed, so that the person in charge does not get lost.
Cargo is more expensive than the cost of labour. Thus, the machine automatically simulates the layout of the cargo so as to minimise the waste of space and allocates it. The person in charge should follow instructions instead of making a decision on their own, so there is no mistake in making the decision. By avoiding waste in this way, it is possible to receive, move and ship large quantities of goods in a short time. They have also reducing costs by changing the material of pallets from wood to plastic. Although it costs more money, about $50 to $80 each, plastic lasts longer than wood. In addition, plastic is lighter than wood, so the weight of the item to be lifted will increase.
In terms of quality control, a dedicated building is prepared for quality inspection, especially for fresh products. The floor in the warehouse is cleaned daily, and insect control is managed by a third-party organisation. The number of employees working in the warehouse is about 450, and the employees work in shifts 10 hours a day from Monday to Friday. Because the salary is set relatively high and employees receive other benefits, the job retention rate is good; the turnover rate is less than 2%.
Amazon Go & Spheres
No company besides Amazon has so thoroughly changed the game for retail companies. Amazon Spheres, where we visited on this tour, is one of the cutting-edge innovations made by the founder Jeff Bezos. The spherical structure that appears in the business district is a new office design that could only be done by Amazon, which is the largest employer in Washington State.
Over 40,000 plants are planted throughout the office, just as if it were an office in the Amazon. The concept of this office is to increase relaxation through the use of many plants and aquariums. This has led to a work environment that encourages employee morale and creativity. Various types of seats and tables are prepared, and there are not only normal desks, but also a space where people can work while lying down.
Amazon Go Store
The defining feature of the Amazon Go store, which currently operates in four cities across the USA (Chicago, New York, San Francisco and Seattle), is that they use the same technology as that of autonomous driving, such as computer graphics, sensor fusion, and deep learning. You enter the store by holding the 2D barcode of the dedicated application with credit card information registered in advance over the entrance gate.
All you have to do is put the items you want in your own bag, go through the exit gate and go outside. There is no need for checkout, the most stressful part of shopping. It contributes to reducing stress on buyers, because they don’t have to wait in line and don’t have to spend time on self-checkout. The store offers ready-to-eat side dishes such as sandwiches, sushi, and fruits, as well as snacks, drinks, bread, cheese and wine. The store is about the size of a convenience store. Inside the store, there is also an Amazon Go branded eco-bag, which seems to be popular as a souvenir. The number of stores is expanding, and a new type of store called Amazon Go Grocery, a slightly larger store that handles fresh food, opened in Seattle on February 25, 2020.
Starbucks is currently partnering with the bakery “Princi,” founded by Rocco Princi of Italy, and there is a lively bakery “Princi Kitchen” in the Starbucks Reserve Roastery & Tasting Room. Bread baked at the store can be enjoyed with coffee on the spot. The bread is best within 4-5 hours of when it’s baked, and the store makes every effort to deliver fresh baked bread to customers.
The bread industry requires a lot of labour from early morning until late at night, but mass production has been achieved by introducing machines that can mold the dough into the desired shape. Delivering the dough made in the central kitchen to stores and baking them in-store is another method that has also succeeded in keeping the bread fresh. The point is that the final process, including salads, is performed at the store. Also, bread ingredients cannot be used unless approved by Princi. As an inside story, raspberry jam was not approved, so the bread using the jam was not sold. It is understandable that the bakery is here today because of making bread with effort by using ingredients that meet strict standards.
The 2020 Discovery Tour was a very meaningful tour that lead to a better understanding of three companies that originally started in Seattle. Thank you very much to everyone who spent their time organising and guiding the tour.
This post was written and contributed by:
GFSI Japan Local Group Communication WG
Quality Assurance Division