Receiving is the Rodney Dangerfield of operations, says consultant Wayne Teres: Few companies give it any respect.
But it is the most complicated function in the warehouse. One error can have a ripple effect.
“What happens on the receiving dock has a direct effect on customer service, and a lot of people lose sight of that,” says Bill Tyng, senior consultant at consultancy Forte.
Then there’s the impact on accounting, merchandising and returns.
Think your receiving dock measures up? Try these tips.
- INSPECT SHIPMENTS IMMEDIATELY.
That means the minute they arrive. “It’s a lot easier to fix a problem at the front end than having it float downstream,” Tyng says.
What should you watch for? Start with the count.
“If receiving doesn’t note the discrepancy when the count is under, the company might overpay, and back orders are likely to occur,” adds Teres.
And make sure that the items received are what you expected. Otherwise, you could end up with customer returns and further loss of time and money.
- CREATE A TROUBLE ZONE.
Gifts marketer Lenox has a dedicated area on its receiving dock for problematic cartons. “It’s not always possible to put away every box that’s received,” says Greg Petro, vice president of distribution. “Sometimes you have an unreadable number on the box. If something’s on the truck we weren’t expecting, we arrange the boxes in one area and attack the problem from there.” (See “Learning from Lenox,” below.)
- BE NEAT.
But don’t overdo it — you could end up hiding the problem instead of solving it. “Some management types take the approach that there’s some inherent beauty in having a neat and clean receiving dock,” Tyng says. “The object is to get the problem fixed.”
As Tyng sees it, a wayward box sitting in plain view is more apt to get the attention of the receiving manager. Your receiving dock may not win any Good Housekeeping awards, but at least you’ll have peace of mind knowing that the problem boxes are being reconciled.
- SET UP A DEDICATED TEAM.
People working the dock week after week get into a rhythm. “It’s like having a good infield in baseball,” Petro says. “Everyone has a defined role. They know which distributors are typically short with shipments — should there be a problem, they’re going to know how to resolve it.”
- KEEP A PAPER TRAIL.
That is, document repeat problems. Is the vendor shipping you goods without a purchase order? Or are you continually getting defective items? Record the invoice number, the non-conformance issue, and the quantity of the shipment. Then calculate the hours you spent correcting the issue, Teres advises.
“Once you know how much extra time you are spending and what it is costing you, you can determine a charge that you would assess the vendor,” he says.
And if the supplier fails to improve? You may have to make a tough business decision. To decide if that’s necessary, add the cost of the extra time to the cost of goods. Is the profit worth it? “In some cases, good business is to fire the vendor,” Teres says.
Who makes this decision? Usually, the buyer — with some input from the receiving dock. A strong-willed operations manager will sometimes suggest that a vendor should be booted.
- TELL ‘EM WHAT YOU WANT.
You can’t blame the vendor if your instructions are unclear. Develop a detailed written policy, and enforce it by instituting a charge-back policy on which both you and the vendor agree. Push compliance back up the supply chain,” says operations consultant Curt Barry.
“It’s a good idea to ask the vendors to review the policy, sign off on it and fax the signed copy back to inventory control. Many companies also have their compliance policy manuals on their Websites and give vendors a link to them,” he says.
- USE ADVANCE SHIPMENT NOTIFICATION (ASN).
Make sure you know what’s coming and when, and schedule your staff accordingly. And the best way to do it is through ASN.
“Receiving is a science, and we build in as many checks and balances as possible,” says Dino Martin, senior vice president of operations for toys merchant FAO Schwarz. “Using ASN allows us to plan how we’re going to manage all those shipments and which boxes have to be repackaged or have special ticketing requirements.”
Martin adds that FAO Schwarz has “a thousand vendors, from small mom-and-pops to larger players, such as Mattel. We don’t take anything for granted.”
Typically ASNs are linked to your vendor’s system and are part of the merchandise deal you strike. Those involving large freight carriers tend to be Web-based.
- SCHEDULE MORNING SHIPMENTS.
The carrier should have an appointment to deliver the goods. And when would that be? Morning is the best time because you can get the merchandise on the shelves that day. “And if the item is on back order, you’ll want to fulfill those orders first,” Tyng advises.
- BE CERTAIN THAT YOUR SYSTEM CAN RECOGNIZE A PALLET.
That may sound silly, but it’s a serious concern. Be sure your warehouse management system can distinguish between pallets, cartons and other units of measure. When you receive a full pallet of shrink-wrapped items, you should receive it as a pallet with X number of cases instead of breaking it down. Case in point: If a pallet has 50 cases and each case has five pieces, that’s 250 units per pallet.
If your system doesn’t recognize a pallet, you could be assigning the wrong equipment to put the merchandise away, Tyng says. “And if you’re dealing with a case, you would use a stock picker to move the case versus a fork truck or reach truck for a pallet,” he adds. Also, subsequent moves within the distribution center could be confusing without identifying the unit of measure being handled.
- USE BARCODES.
The way your vendors ship you product determines the effectiveness of the receiving operation. S&S mandated two years ago that its vendors barcode boxes. “That way when we get them, we can just scan them into our system,” says Adam Schwartz, vice president of operations and supply chain for the educational products cataloger. “This speeds the receipt of the goods and ensures item accuracy.”
Without the barcodes, S&S would have had to hand-inspect the shipment. A big container shipment usually takes about two hours to unload, Schwartz notes. But S&S was able to reduce that last year for half of its deliveries. And this year? The percentage is up to 95%.
Learning from Lenox
Lenox knew that it had an inefficient receiving process. So it automated the system this past November. When did the gifts cataloger tell its suppliers? Oh, two years ago.
“We knew where we wanted to go and we began mapping out a plan with our vendors,” says Greg Petro, vice president of distribution for Lenox. “So now we’ve taken receiving into the [radio frequency] process and are using the existing technology.” In addition, the cataloger has eliminated the manual process by using barcodes and scanning within its warehouse management system from Manhattan Associates.
While Petro will not divulge costs, RF systems can range from $10,000 to $400,000 and more, depending on the number of users and complexity of the operation. Here’s how it works: Lenox runs a case level system, meaning that every carton has a 20-digit code contained within a generic master carton label. The ASN information gets loaded in the WMS system upon the scanning of a 20-digit code. Available inventory is automatically adjusted upon receipt and put away. Backorders are noted prior to receipt, and are sent to shipping once they arrive. “Our WMS is also connected into the order management system so the contact center staff have access to that information as well,” says Petro.
The payoff? A substantial savings of time and money. “Before the receiving process was automated, receiving a container shipment could have taken up to eight hours,” says George Eberly, receiving manager at Lenox. “All those goods needed to be counted, received, labeled and injected into the system, and that took time. Now we can turn around a 40-foot container in an hour or two.”
What’s more, Petro adds, instead of printing on the carton man-readable information regarding the item, “we have the vendor apply a label that contains all of this information along with the key barcodes that could not be printed on the cartons. In our old system, labels would have to be applied anyway.”
Lenox saves about a nickel per carton by avoiding having to print on the box, which adds up when you receive nearly 2 million cartons a year. The merchant has become more efficient throughout the distribution center. Since Lenox is at 99.8% inventory accuracy, “downstream activities” Petro says, such as replenishment, picking, and shipping, which rely heavily on accuracy, have seen productivity gains of 10%.