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Driving Distribution Excellence

Feb. 20, 2013
Finding the Starting Line
It’s that time of year that tends to pass before you realize it. The holidays are over, even January is fading in the rear view mirror, and the collective February holidays remembering Lincoln, Washington and Valentine are nearly upon us. Presidents and saints aside, for most distribution operations, wholesale, retail or otherwise, this is a good time of 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 provide a road map for excellence in the years beyond the years ahead.

First, let’s define excellence in terms that are meaningful for this discussion. It means a combination of a level of service to customers (internal or external) at a cost that creates a competitive advantage for your 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 you can improve both. While there are many contributors to the service and cost levels of an operation, two components affecting both items 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: Are you consistently filling orders 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 so that you can answer the questions above, start. You cannot manage what you do not measure. You have heard this forever, yet it is an absolute. It’s still surprising how many companies manage this iron clad rule. If you measure and find 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 present, your packing area.

Enhancing the productivity in either of these areas increases 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) that a productivity increase drives. If you cannot improve productivity, then you may need more labor 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. Do you starve or underutilize packing or finishing resources 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, 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 you 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 can 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 you need to measure before pursuing improvements? If they do understand what success looks like for the operation, then are they investing 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 giving the associates 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 nonmonetary) 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 to be performed in a certain way, all other things being equal, are usually 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 improvement 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 has 29 years of experience in retail and wholesale distribution, transportation and logistics and is a principal with St. Onge Company in York, Pa. St. Onge Company is a material handling and manufacturing consulting firm specializing in the planning, engineering and implementation of advanced material handling, information and control systems supporting logistics, manufacturing and distribution since 1983 ( Contact Jensen at 717/840-8181 or [email protected].