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Driving Distribution Excellence: Finding the Starting Line

It’s that time of year that tends to pass before you realize it.   The holidays are over, and before we know it January will be fading in the rear view mirror, and the collective February holidays remembering Lincoln, Washington and Valentine will be upon us.   Presidents and saints aside, for most distribution operations, wholesale retail or otherwise, this is a good time of the year to take stock of and evaluate an operation—a belated New Year’s Resolution, which if taken to heart and approached methodically, can return benefits before the end of the calendar year, as well as a roadmap for excellence in the years beyond the present.

First, let’s define excellence in terms that are meaningful for this discussion.  For our discussion it means a combination of a service level to customers (internal or external) at a cost that creates a competitive advantage for you business.   Simply put it means becoming a best in class distribution operation with which customers want to do business.   Two significant pillars supporting such an achievement are service and cost and the start of the year is an opportune time to examine where these both can be improved.   While there are many contributors to the service and cost levels of an operation, two components affecting both cost and service are personnel and productivity.

Saving the best for last, let’s put personnel aside for one moment and look at how we can evaluate the productivity of an operation.   First, from a service perspective there are several key questions to ask.   Have orders been consistently filled on time (per your promise to your customer)?   Have you maintained or improved your fill rate from previous years?  Do you even track your fill rate and on-time fulfillment performance?  Are orders arriving at your customer in good condition with a minimal amount of returns due to errors or damage?    Answering these questions will lead to several areas of inquiry.

First, if you do not track your fill rate such that you can answer the questions above, start.  You cannot manage what you do not measure.   If you have and it is below acceptable levels (which are industry and channel specific) evaluate the cause.  Curing out of stock issues is a very different remedy than addressing continually missed order deadlines for in-stock product.  The former will likely require the involvement of your procurement team, while the latter probably needs attention directed to your layout, processes and personnel within the distribution center.  If missed order deadlines are reducing your fill rate, examine the processes and layout in your facility, and in particular your picking area and, if one is present, your packing area.

Enhancing the productivity in either of these areas should serve to increase fill rate, while lowering cost per order as well.    Late orders should be reduced through the reduced order cycle time (the time between the point when an order drops to the warehouse floor and the point when it is packed and ready for shipment) which a productivity increase drives.  If productivity cannot be improved, then more labor may be needed in picking functions, packing functions or both.   Take care and ensure that it is not just one function that is slowing the whole operation.   Is picking underutilized because too few packers, pack stations or order finishers are holding up the process?  Then add packers or finishers only.  Are packing or finishing resources being starved and underutilized because too few pickers are assembling orders and feeding the packers?  Add pickers to strike a balance and keep both groups utilized.    This balance needs to be maintained at an overall average level and on a shift by shift and even hour by hour basis.

The layout of a facility is as important as the staff working within it.  Does your layout support your business properly?   Are you picking or retrieving product from all over a large facility and driving large amounts of time-wasting travel into the pick process when you should have a more condensed forward pick line?  Is your forward pick line too small and holding so little product that order demands often drain a pick location before it can be replenished from reserve stock?  Is product well organized and easy to find?  Have you outgrown a stock room approach where an alphanumeric sequencing of items drives storage and now need a software based locator system?  All of these questions, once answered, will point you down one of many potential paths for improving your service levels and decreasing costs.

All the layout and process evaluations, problem identifications and solution implementations are meaningless without quality personnel to manage and execute them.  The start of the year can be a good time to evaluate personnel throughout the operation to ensure any investment in process and layout is in the proper hands.   Most of us can drive a car, but not everyone could navigate an Indy car around the brickyard competitively.   In the end it is personnel that will ensure success.

At the management and supervisory levels, does the staff recognize the challenges of the business?   Are they already measuring those metrics we’ve discussed above that need to be measured prior to pursuing improvements?  If they do understand what success looks like for the operation, are they invested in achieving that success?  If the answer is no in either case seek to change that through education or personnel development.

Has the environment created a working staff on the floor that cares about succeeding each and every day?   Creating such an environment is a conspiracy amongst many factors.  These include providing the associates with the tools they need to perform the job (the right layout and equipment) the training to use those tools effectively, the understanding that it is recognized when they perform well and when they don’t (through compensation both monetary and non-monetary) and finally through communicating an understanding of not only how they need to perform their jobs, but in the overall scheme of things—why they need to perform their jobs in the prescribed fashion.

Personnel who know why jobs are constructed or need be performed in a certain way, all other things being equal, will usually be an asset to an organization.  They may even be able to substantively contribute to improving the operation, or demonstrate abilities that identify them as future supervisory or management resources.   The more they are aware of, perhaps because they are directly involved in performance measurement or developing performance improvement techniques or methods, the more they can contribute.  Additional insight doesn’t guarantee they will contribute at a higher level, but less insight almost guarantees they will not, regardless of the processes, equipment and layout present in any distribution operation.

Finding the starting line for distribution and logistics improvements is only the first step in the road to process excellence.  In some ways it is the easiest step to take, which is a very good thing, since it is also the most important one.
—Bryan Jensen, St. Onge Company

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