Dock-to-stock time is a KPI that measures the length of time from when a receipt lands on your dock until it is in a pickable or bulk reserve location. The dock-to-stock process involves aspects of purchase order writing, inbound transportation, receiving, staging, inspection and put away.
From an efficiency perspective, best-in-class companies achieve dock-to-stock in two to eight hours. To help achieve this quick turn time, larger ecommerce companies, retailers and multichannel merchants generally implement EDI technology solutions and vendor compliance policies.
By comparison, many small-to-medium-sized businesses may average 24 to 72 hours (or even longer) in dock-to-stock time to clear receipts. Turnaround time is only one factor to evaluate. There is a very real cost your company absorbs in the fulfillment center, accounting and purchasing from these related problems.
We will explain how to assess your processes, identify problems and costs for correcting errors, and lay out an action plan to proceed.
Performing the Assessment
To get a complete picture of the problems and solutions, the fulfillment center needs to collaborate with accounting and purchasing. Pick a representative time period such as a busy week to identify the problems, lost time and cost to the organization. Picking too large of a timeframe will not be manageable.
Trace inbound receipts and create flowcharts of what happens when various error conditions occur, and when receipts are fully compliant and can be put away. Using flowcharts will show you how time consuming and expensive it is to resolve problems.
This reporting which will help in the study:
- Number of inbound receipts by type (i.e., merchandise, returns, supplies, other small package delivery such as mail).
- Receiving reports showing the status of each purchase order received, when it arrived and when it was cleared or put away, and errors.
- Customer reason for return reports. Does your company have a report that indicates by vendor and item why customers return products?
At a high level, what major problems are immediately apparent which negatively affect performance? What prevents stock from being immediately received and put away? Here are eight areas to analyze:
Inbound Visibility and Management
Do carriers show up without appointments? Does this cause truck yard congestion and make it difficult to plan dock labor on a daily basis? Is there an effect on the staging area?
What carrier damage issues do you have? Are there problems with vendors not following routing guides, resulting in higher transportation costs? Are there problems with on-time deliveries?
Efficiency is expressed as the time to clear a receipt and put to stock in hours. What is your standard vs. the actual hours to process? Let’s say your standard is 24 hours. For the representative period of time, for each receipt, place them according to their total time from receiving to put away in one of three categories:
- Best performers: look at the top 10%. What is their range and average?
- Median performers: what vendor receipts are in the middle? Go 5% above and 5% below the median receipt time. What is their range?
- Bottom performers: how many elapsed hours as a range and average?
This will begin to show you more about the elapsed time spent correcting problems. What are the really reliable vendors? Which are always a problem?
Dock and Staging Space/MHE
What issues are there from a physical facility perspective? Is there congestion caused by insufficient docks or equipment? Is the dock undersized for the volume of receipts? Is the square footage sufficient for staging? A business that is growing may have outgrown your docks and staging, especially during peak periods.
Fulfillment Center Vendor-Related Problems
Do you have standards for receipts? For example, are vendors following standards for external carton labeling? What are the costs to correct problems like packaging, kitting, remarking, labeling, etc.? From a quality assurance and inspection perspective, does purchasing provide product specifications to vendors?
Other Department Problems
In purchasing and accounting, what increased costs are incurred to resolve paperwork and vendor issues? What problems are there with the purchase order, receipt and invoice matching within acceptable tolerances so the invoice can be paid? This applies to merchandise, supplies, freight and logistics services.
Put Away Process
Do you have system functionality to cross dock high-priority items and backordered products directly to the packing area? What prevents timely put away once stock is ready for storage? Do you have sufficient staff and material handling equipment?
Increased Inventory Levels
Are vendor receipts arriving off schedule based on the requested purchase order’s delivery date? How do delivery date and dock-to-stock efficiency affect inventory turnover?
Cost of an Error and Lost Time
As mentioned, be sure to identify the typical time lost to correct various types of errors. In a typical operation without vendor compliance policies or EDI, the costs will be surprising. If you are paying $12 per hour for labor, the fully loaded cost including benefits, recruitment and training is over $20 per hour.
Suppose a vendor receipt has a packaging mistake and you have to correct 1,000 units received before they are ready for sale. At one minute per piece, the $20 per hour rate means the vendor’s error costs you $0.33 per unit (1,000 units takes 1,000 minutes or 16.66 hours, times $20/hour = $333.33 or $0.33 per unit).
Process Improvement Recommendations
After identifying problems, come up with the necessary steps to reconcile and correct. Is there “low hanging fruit” that brings immediate benefits with the least amount of change or cost?
Working with purchasing and accounting, what operational costs can you reduce for the various solutions you propose? Develop a plan of action with suppliers to lower costs and make process improvements, and bring management into the review and decision-making process.
Recognize that vendor compliance policies, when enforced, will bring down the cost of your operation.
Getting inbound receipts right when they arrive has process, dock-to-stock turnaround and financial benefits for your company.
Brian Barry is President of F. Curtis Barry & Company