Are You Focusing on the Right Operations Goals?

The drive towards the “perfect order,” the elimination of customer charge-backs, and a reduction in returns are all key operational goals to ensure success. Such goals translate into the ability to maintain long-term relationships with customers, reduce supply chain costs, and eliminate unnecessary waste. Even so, it is always wise to ask, “How much does it really cost, and is the money being spent wisely?”

Granted, no one should run back to leadership and say, “Ninety-eight percent accuracy is good enough. Returns are okay. And those supplier charge-backs are just a part of running the business.” Instead, go back and evaluate where your efforts and expenditures are being focused. You might find you are getting little return in some areas and that much larger opportunities exist elsewhere.

For most operations, defining goals is the greatest challenge. Is it cost reduction? Better service? Increased profitability? Reduced damages? Reduced headcount? Or is it simply all of the above and without any capital infusion? Most managers will say it’s all of the above as they try to plug another hole in the operation with temporary labor—by stretching out pick-up times or auditing problem customers vs. fixing the process.

Short-term fix vs. long-term solution
Take a few minutes to list your goals. Assign priority to each goal based on directions from upper management, customer complaints, and cost centers. Next, list what you are doing to achieve each goal. Then review the answers. Look at where your efforts are focused and where your investments in equipment, systems, and labor are being spent.

The results might surprise you. Often changes made to achieve one goal hurt other goals. For example, in most operations, the first step taken to improve accuracy is to add labor to both check and recheck the order as it is picked and packed. The second step is to add labor to monitor the progress and to report follow-up on complaints. The third step is to declare victory, post weekly reports, celebrate successes, and believe your goal is achieved–when in reality, labor costs were increased, order processing time increased, and no improvement to the actual process of picking orders or location accuracy was achieved.

If this is all you do, the added labor is never removed, the process is never improved, and the costs to process more accurately are never questioned, because charge-backs, returns processing, and complaints are reduced. Maybe this is a good short-term fix, but it is not a desirable long-term solution.

The long-term solution lies in a mix of better training, real-time pick and pack confirmation, some degree of automation, and balancing the costs and benefits of some level of inaccuracy vs. customer expectations.

1) Training. Adding auditing to the process determines who is making errors and why. Auditing labor also lends to the belief that preventing errors is required. Initially, identifying the errors is labor’s job. Collecting data to allow others to prevent errors is key to developing training and eliminating auditing. When this happens, the auditors continue to monitor picker performance and validate only orders going to “problem customers.” In general, there are considerably fewer auditors required as training and process improvements are implemented.

Training of pickers and packers is based on judgment of their accuracy and speed. Processes to help confirm they are in the right location, to confirm they possess the knowledge to identify products easily and to track their progress on orders are all critical to success.

2) Real-time confirmation. Confirmation of transactions and movements can be done using manual methods, but this relies heavily on human accuracy and attention. A better way to confirm picks, put-aways, and receipts is to use automated data collection equipment such as radio-frequency (RF) guns, voice recognition devices, or pick-to-light (PTL) technology. The degree of confirmation is then dependent upon the value and sensitivity of the items being picked. For example, high-end jewelry might require each unit to be scanned or confirmed, while nuts and bolts might require a single confirmation of the item number and a manual entry of the quantity. Generally, RF scanning is used for pallet movements; RF scanners or voice recognition units are usually used for handling cases. A mix of voice, RF, PTL, and other technologies can be applied based on the need for unit-level picking or movements.

The advantage of using automated transaction confirmation is that operators can get instant feedback when they enter something in error—whether it’s the item number or the quantity—and can be directed to review and correct the transaction, as well as create the transaction information without additional data entry.

Another type of order confirmation involves a weight verification on full and partial cases that are picked and packed to ensure that they fall within a designated range. This will identify many incorrect case picks, shortages, and overages in unit picks and can also be combined with scanners to match pick labels with case labels.

3) Leveraging automation. For goals such as reducing labor, improving accuracy, or increasing throughput, automation is often the best tool. It does require the justification of an investment in equipment, systems, and significant process change, however. Most operations lack the skills to complete a solid business case. Leveraging external resources—such as consultants, material handling vendors, systems partners, or full-line integrators—adds significant value in developing a business case quickly and refining the solution to the best investment of both capital and process change management.

4) Balancing costs vs. performance/penalties. The key to all automation, systems, process changes, and overall operational improvements is doing what is right for your operation, your customers, and your future flexibility to handle change. Therefore, having a complete understanding of your goals, their priority in the big picture, and their impact on costs and operations will determine where you should focus.

The time required to conduct this level of analysis is significant. Many operations choose to use outside expertise to achieve it in a timely manner and to bring a fresh perspective to the problem. Regardless of how the analysis is done, significant internal resources and time must be involved. There is no cookie-cutter solution to designing your operation. Each operation has unique products, customer mixes, existing automation and systems, labor skills, capital availability, and evolving market conditions that will affect the ultimate solution and implementation steps.

But this does not mean that you should ignore how others have tackled challenges on the path to success or that it is acceptable to disregard accepted best practices. Review all options, understand the full impact of each, and focus on your most critical needs that provide the greatest payback.

Brian Hudock is a partner for Raleigh, NC-based Tompkins Associates (www.tompkinsinc.com), an operations-focused consulting and integration firm specializing in end-to-end supply chain solutions.

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