A Customized Solutions Specialist
Walton, Kentucky USA
By: Evan Armstrong
Paul Verst – Chairman & CEO
Jim Stadtmiller – CFO
Todd Johnson – President & COO
Macy Bergoon – SVP IT
Daniel G. Montgomery – SVP BD & Marketing
Will Schretzman – Vice President of Packaging
Dean Hoerlein – Vice President of Distribution & Fulfillment
Tom Morris – Director of Transportation
Verst Logistics Overview
Walton, Kentucky-headquartered Verst Logistics can mistakenly be lumped into the basic pallet-in, pallet-out regional warehousing third-party logistics provider (3PL) category. However, once you begin looking at its operations, you realize Verst Logistics has developed many high-level customized solutions for its customers in e-commerce fulfillment, contract packaging, value-added warehousing and distribution, and transportation management.
Founded in 1966 by William G. Verst, Verst Logistics has grown to $230 million in gross revenue with a staff of 1,900 employees. It manages 23 warehouse locations having a footprint of 6.5 million square feet with operations in Alabama, Arizona, Kentucky, Indiana, and Ohio. Verst Logistics is one of the largest contract packaging providers in the U.S. with 16 production lines packaging over 100 million units per year. It strategically uses its ISO 9001 Certified transportation operations to support warehousing customers with 150 tractors and 400 trailers, and Verst Logistics’ non-asset based domestic transportation management operation handled over 25,000 shipments in 2019.
Its value-added services and capabilities include line-side manufacturing support, sequencing, light subassembly, kitting, pick/pack, co-packing, reverse logistics, quality inspection, container filling, shrink and pressure sensitive labeling, vendor managed inventory (VMI), and LTL to truckload consolidation and route optimization. Customers include marquee brands Toyota, Kroger, Jim Beam, P&G, Celanese, L’Oréal, and Honda.
Verst Logistics is driving continuous improvement throughout its organization in multiple ways and has adapted Lean Six Sigma improvement processes in its operations to take out waste and improve performance. Some of the tools being utilized include customer and internally driven kaizen events, value-stream mapping, cause-and-effect diagrams, and suggestion boxes. Before each shift, managers meet with frontline workers to review key metrics, which are posted in each operation, and discuss any operational issues. Formal customer feedback is provided by customer QBRs (quarterly business reviews) and annual customer satisfaction surveys for each of its four service lines. Verst Logistics also performs employee surveys to keep a pulse on employee satisfaction levels and to identify areas for organizational improvement.
To support its operations, Verst Logistics has deployed a solid suite of tier-one systems including HighJump – Accellos warehouse management system (WMS), McLeod’s transportation management system (TMS), Nulogy for contract packaging, and Microsoft Dynamics for customer relationship management (CRM). In addition to using McLeod for route optimization, dispatch, and operations management, its trucking operation has GPS tracking on trailers, onboard computers, and onboard drive cameras to help drive continuous improvement. The trucking fleet has been ELD compliant since 2006.
As part of our site visit, we had the opportunity to review multiple operations which are detailed below.
Contract Packaging Operations
In Hebron, a short drive from its Walton, Kentucky headquarters, Verst Logistics manages an ISO 9001 Certified, 400,000 square foot contract packaging operation. The three-shift, five-day-a-week operation has 52 full-time and 225 temporary employees and packages over 100 million items annually. Featuring 10 shrink sleeve labeling lines, two pressure sensitive labeling lines, a shrink can label line, a bottle fill line, and two specialized wafer packaging lines, it is one of the largest contract packaging operations in the U.S.
The operation is Global Food Safety Initiative (GFSI) certified, FDA registered and inspected, a current Good Manufacturing Practice (cGMP) operation, and has an ABC License to store alcoholic beverages. To ensure product quality, it has a Quality lab and specialized Quality Assurance team to drive adherence to procedures and drive process improvement. Nulogy’s packaging system helps manage the packaging functions and is integrated with Verst Logistics’ HighJump WMS for overall warehouse management.
Most of the packaging work is for customers in Personal Care & Household Cleaners, Food & Beverage, and Wine & Spirits industries. It serves over 200 accounts which include key customers P&G, Kroger, Kraft Heinz, General Mills, PepsiCo, Jim Beam, Coca-Cola, AB InBev, MillerCoors, and L’Oreal. The operation’s main key performance indicator (KPI) is Perfect First-Run Packaging Performance which it has been consistently performing at over 99%. To ensure a chain of custody, all packaged items can be tracked by lot and serial number.
The first customer operation we toured was for filling and shrink sleeving for fragrance bottles. Verst Logistics runs a 16 head bottle fill line and the filled bottles flow into a shrink sleeve labeling line. The shrink sleeve packaging line places the label sleeve over the bottle and then uses culinary steam to fit the sleeve onto the bottle.
The separate main packaging room is 35,000 square feet, temperature- and humidity-controlled, and operates in a clean-room environment with heavy-duty air filters to remove mold and yeast spores. Items being packaged on the day of our visit were Swiffer floor cleaner bottles, fragrance bottles, multiple food condiment bottles, and packs of sparkling water.
16 head bottle fill line
Shrink sleeving bottles and the final product
Shrink sleeve labeling lines in the main packaging room
It only takes one day to set up a shrink sleeve packaging line. The real lead time required is to produce the sleeve labels which averages a month. Verst Logistics works with 30 sleeve label suppliers and 25 bottle suppliers. Labels are delivered on temperature-controlled trailers to avoid heat damage. Verst Logistics performs quality inspections on all inbound sleeves/labels prior to putaway in storage to ensure they will be ready for production. As a value-added service, Verst Logistics works with customers in developing bottles and sleeves so they work efficiently in the packaging process. Verst is able to price turn-key solutions per unit to customers where Verst procures all consumables and performs the transportation.
In a separate part of the operation, Verst Logistics has a 500 square foot clean room with two specialized packaging lines dedicated to a new waterless shampoo and conditioner product which is packaged into wafer-like packages.
Waterless shampoo and conditioner packages
Items being packaged in the main room on the day of our visit
Multi-Client E-Commerce Fulfillment Operations
Closer to the Cincinnati airport in Hebron, Verst Logistics manages a 396,000 square foot multi-client e-commerce fulfillment center. The operation has 95 full-time employees and ramps up to a staff of approximately 300 during the peak retail shipping season. In January, it processed 59,000 orders consisting of 373,000 units destined to business, consumer, and omnichannel customers.
A hobby crafting equipment and accessories manufacturer is the largest customer taking up a 140,000 square foot section of the warehouse.
Orders are picked in waves by carrier cut time and customer. The facility is within range for two-day ground package service to over 85% of the U.S. The cut time for next and second day air small package shipments is 2 P.M. Value-added services being performed in the operation include kitting, light assembly, retailer compliance and onboarding, labeling, repacking, returns management. VMI, and intermodal rail and domestic transportation management.
Verst Logistics uses HighJump’s WMS to manage the fulfillment operations and has a customer portal for visibility and real-time event notifications. SAP Business Objects is integrated with the WMS to produce 400 stock reports and over 1,200 customized reports for customers.
The operation has 40 pack stations which allow it to scale up and down based upon order volumes. Employees receive profit sharing based upon the operation’s productivity.
Continuous improvement initiatives for 2020 include ongoing inventory accuracy improvements, increasing workflow automation and use of robots, system enhancements, improving the case labeling process, and more customer and employee engagement.
The hobby crafting equipment and accessories manufacturer accounts for over half of all items shipped from the operation. Approximately 80% of its orders are for direct-to-consumer shipments. Upon receipt, Verst Logistics captures serial numbers on all of its each pick items. Case quantities do not require serial number capture and have their own pack out and ship line.
For “each” picks, the operation uses a fleet of 25 to 50 autonomous Locus robots depending on order volumes. The robots work in a “cobotic” role supporting pickers. Pickers work three aisles apiece primarily picking accessories and materials used with the machines.
After picking, the robots transport the items to open pack stations for packing and shipping. Orders average just over four items and min/max inventory levels are built into the HighJump WMS to trigger replenishment. Verst Logistics uses 15 carton types for packing out customer orders. As a value-added service, it is also managing all U.S. returns for the customer.
For its other fulfillment customers, orders are put in a queue and worked in waves. A specialized coffee company is the largest shipper to Amazon and the other customers have a mix of business-to-business and direct-to-consumer orders.
Orders for a meat products company are primarily business-to-business, with some direct-to-consumer shipments. As value-added services, Verst Logistics kits out orders for the company and builds displays. The operation has an onsite USDA inspector who inspects the meat products prior to shipping.
Autonomous “cobots” support pick-to-carton and smaller each picks
Hebron, KY Parts Distribution Center
Down the road in Hebron, Verst Logistics is also managing a 737,216 square foot parts distribution center (PDC) operation for one of the largest automotive manufacturers in the world. The PDC runs five days a week in two shifts and has a total staffing of 45.
Each day, Verst Logistics meets with its customer onsite management at 10 A.M. to review demand trends and operational matters. In-turn Verst Logistics has a meeting with its leadership team at 1 P.M. to plan for the day’s activities.
Verst Logistics manages six “milk runs” per day from its customers manufacturing plant to the PDC. On average between 1,100 to 1,500 parts numbers are held in inventory to support recalls. The parts on-hand include transmissions, airbags, and brake cables. Inventory picks range from individual items such as brake cables, to case and pallet picks. Standard parts orders destined to its customers other PDCs are received twice per day. Critical Vehicle Off Road (VOR) parts orders from dealers are usually received during the operation’s second shift and are shipped via air. The facility has 38-foot-high ceilings, 40 receiving, and 26 shipping dock doors. Staff perform cycle counts of each warehouse location each year to ensure inventory accuracy.
The operation’s Takt board is updated daily with metrics in five key performance (“success factor”) areas: Safety, Quality, Customer, Cost, and Development. Its KPIs include order on-time percent, lines shipped on-time, backorders, throughput, and task cross training. Metrics are reviewed at the beginning of each shift. In addition, the operation has 30-day smart goals and uses standardized A3 structured problem-solving forms to identify improvement areas, assign resources, and develop solutions to drive continuous improvement. As part of its continuous improvement efforts, the operations were able to increase the number of lines shipped on-time to 99.8%.
In July Verst Logistics doubled the size of the operation to manage all the automotive customers returns, and to date, the startup has been seamless with no disruptions.
Hebron, KY Parts Distribution Center
Hebron, KY Parts Distribution Center
Verst Logistics Operations Summary
Verst Logistics has been quietly growing its operations to meet the needs of customers in multiple vertical industries. It is now a domestic contract packaging leader having tier-one value-added warehousing and distribution and e-commerce fulfillment skills, with integrated transportation management solutions. Many of the relationships Verst Logistics has developed rely upon a custom solutions approach and tap its integrated capabilities. We anticipate that Verst Logistics’ customer base will continue to expand as more companies realize its service capabilities.
Sources: A&A Primary Research, https://www.verstlogistics.com