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Everyone Can Use a Regular Check Up – The Value of Distribution Center Audit

Distribution Center operations—from the smallest stock rooms to the largest multi-million square foot facilities—all have several characteristics in common.  Every operation has staff executing the required daily tasks, with tools, systems, equipment and other aids provided by their management; managers overseeing and guiding the operation, against standard operating procedures, planning forecasts and metrics, all of which are either actively developed or passively understood over time.   Every distribution center is similar in these aspects to every other center, but no two operations are exactly alike—just like people.   And just like people, the health and robustness of a distribution center operation often depends upon regular check ups to ensure the facility and operations are consistently performing at the peak of their potential, even as the facility ages, process demands placed upon it change,  and staff and management grows, shrinks or turns over time.  The best way to ensure the operation is performing as well as possible, is to give it check up, in short, a pre-emptive audit of sorts—not necessarily to address an identified issue, but to evaluate what the operation could be doing better, where it is falling short of customer requirements, and where it may be in danger of being outperformed by the competition’s operation.

Once you decide to perform an audit or assessment of your operation (pick which ever term you believe will evoke the least amount of adversity within your organization’s staff) there are several approaches you might take to executing the audit.  The detail level of the audit, particularly an initial diagnostic audit, is very important.  There are pitfalls associated with some “higher level” approaches as well as risks with an approach focused only on individual operating department details.  Operational audits cannot focus only on the discrete tasks within the operation and attempt to evaluate or optimize them.  The result of such an approach without a keenly developed awareness of the interdependencies of each of task within the distribution operation often leads to overall sub-optimization.   Likewise, simply evaluating the overall facility output in terms of cost per unit handled, or order fulfilled will provide information regarding where you stand as compared to benchmarked competition or operations, but may do little to inform where to specifically focus on how performance might be improved or costs reduced.  Alternately, a preferred approach is to evaluate each functional department, including operations management approaches and the tools available to facilitate those approaches, and optimize the entire operation by formulating solutions for each functional area requiring them, but that will also contribute synergistically toward the entire operation’s performance.

The audit should follow your process through your entire operation—from pre-receipt information visibility and planning against projected business, to physical receiving, put away, pick line replenishment (if applicable) order picking, packing, assembly, shipping and loading.  This operational observation allows to the team to perform many assessments and evaluations of the operation.  These observations should facilitate:

  1. Comparison of actual operations to previously established Standard Operation Procedures.
  2. An immediate breeding ground for ideas regarding improvements that could be made in the operation at the departmental level at the very least. This is the proverbial ‘low hanging fruit’ that could be easy to harvest.
  3. Develop an understanding current performance standards—in terms of productivity, accuracy, storage density effectiveness, overall facility throughput, safety and ergonomics—that can allow you compare your operation to other operations or industry benchmarks.
  4. Evaluation to determine if there are practices themselves may need further study.

The operational walk through, which should require anywhere from a full day to a week depending upon the size and complexity of the operation, should allow the assessment team to diagnose what might be improved.

Once the results of the operational evaluation have started to coalesce into potential action items, the management approach to overseeing the operation should be assessed for possible areas of improvement.   Are the methods of day to day management still viable and supporting the operation in the best way possible?   Are there enough management or supervisory personnel (span of control) on the floor, given the volume and complexities of the operation, to both address issues as they will inevitably arise and drive consistent execution?    Does management have a formal daily planner to evaluate staffing needs by department based on the complexion of each day’s workload?  Finally, are there set metrics that management is working toward achieving on a consistent basis?  Do those metrics effectively delineate all important components of the facility’s operation?

Finally, the assessment should review all areas that appear to require attention, and ensure that change in any one area of the operation will not be at the expense of another area.    In short, a synthesized list of improvements should be developed, with attention directed at improving the entire operation, rather than one area at the expense of others   Once the improvements needed have been identified, plans to address those needs can be developed—from operational changes, to equipment and layout changes and additions, to management practices and tool development.

This, of course, assumes the audit reveals multiple areas in need of improvement.  As with any check up, the patient might need little change in lifestyle or habits, or critical action may be needed.  Whichever is necessary, the only way to identify the path to improvement is to thoroughly, completely and openly assess the operation from the receiving dock to the shipping doors, and every process in between.
— Bryan Jensen, St. Onge Company

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