Perfect measurements don’t have to be out of reach. If your productivity and efficiency numbers have zero sex appeal, the solution isn’t a drastic overhaul. Rather, it’s a methodical, step-by-step procedure to whittle the business into shape.
The process starts by assuming that your ultimate goal is to provide outstanding customer service. With that in mind, you must identify areas for improvement in your facility, examine what other companies do to enhance fulfillment and customer service, and evaluate your processes against industry benchmarks.
Customer service is more than a friendly voice on the phone at the call center. You may think that your distribution operation is customer-friendly, but do you know for sure? Although surveys or focus groups can help, the simplest, most effective way to determine how you are doing and to guarantee success is assessing your fulfillment center. If your operation is efficient and your workers are well trained, adequately informed, and recognized for their accomplishments, you will likely be well on the path to not only meeting but exceeding your customers’ expectations.
Creating the well-proportioned business you want is surprisingly easy. The five-step plan described below gives you a painless makeover.
1 KEEP YOUR WORKERS HAPPY
It is amazing how many shortcomings in an operation can be overcome by a motivated group of workers. It is also amazing how much people can achieve if they have the right equipment, technology, training, and feedback. Greg Anapol, vice president of call center operations for OfficeMax, suggests these ways to foster a positive workforce:
Pay a competitive wage, whether your company is national, regional, or local. Make sure that compensation rates take into account the complexity of different jobs in the warehouse.
Use effective measurement systems. Good gauges of individual performance help motivate employees to work to the best of their abilities. Consider using measurements to implement a pay-for-performance program, which also can be a big motivator.
Recognize employee contributions. Workers in the warehouse often don’t get a lot of positive reinforcement. Recognizing all types of achievements — even a performance improvement of 5% to 10% — can help generate enthusiasm and excitement.
Implement reliable training programs. Make sure that employees know exactly what they need to do and understand how their job benefits the company. Don’t restrict training to new hires; conduct refresher sessions to make sure that the policies and processes in place are being followed. Recognize employee achievements such as completing forklift driver certification by posting the certificates prominently.
Help employees gain new skills. Take advantage of the technology and capabilities (such as access to the Internet) that you have in the DC. Give workers the opportunity to learn new skills.
Pay attention to retention. Don’t get overly confident if your turnover rates are dropping. In a softening economy, employees are less likely to jump ship and will focus on the job they have. A slow turnover rate may trick you into ignoring problems that could lead to a mass exodus later on. Continue to monitor worker satisfaction so that you can keep valuable employees regardless of economic conditions.
2 ANALYZE YOUR OPERATION
Customer satisfaction starts from within, so take the time to understand what is going on within your facility.
Inspect processes. Walk through the warehouse; gather all business documents, including manuals, forms, and so on; and interview management and staff. Ask questions. Is your facility at or nearing capacity? Will it accommodate growth? How much? Next, make a detailed flow chart of procedures. Scrutinize each area and list options for improvement, along with costs and benefits. Collect and categorize data about your products and procedures. Examples of this exercise are shown on page 34.
3 EXPLORE SOLUTIONS
The next major issue to consider is the physical facility. Remember to think three-dimensionally. Are you using the building’s clear height? Are mezzanines or work platforms in place? Perform a feasibility analysis that considers facility modification or expansion, new construction, and cost of improvements. Also take into account the impact of e-commerce operations, if any, and changes in products or services. Returns processing often trips people up, so plan for it carefully.
Once facility issues have been addressed, you must determine how much and what types of technology to implement. More is not always better. Invest in technology that promotes timely and accurate information flow between customers and your fulfillment business.
4 GET VENDOR SUPPORT
Creating a vendor compliance program can shift responsibility for some of the processes or services presently performed in your warehouse to your suppliers. Your operation becomes more efficient when product arrives already bin-boxed, labeled, and bagged. These vendor-supplied, behind-the-scenes services help in achieving a competitive advantage.
Matters to consider when developing a vendor compliance program include labeling standards for both product and cartons; carton and pallet construction (dimensions, label placement); shipping document standards (bills of lading and packing lists); freight presentation requirements; and the use of automatic shipment notices and electronic data interchange.
Other important considerations are shipping/routing guidelines (truckload versus LTL, small shipments); appointment scheduling; receiving; returns to vendor; invoicing procedures; and charge-backs.
5 START SMALL
You can’t make it to the cover of the swimsuit issue overnight, and neither can your operation. Short daily workouts can often result in significant gains in productivity, customer service, and employee morale. Here are some examples:
- Move things around. Relocating a packing area in one catalog operation improved flow, kept employees out of the cold, and reduced dock congestion.
- Divide and conquer. Segregating box-making and packing allowed a wholesaler to justify a carton erector and improve throughput by 20% while reducing repetitive motion injuries.
- Take a walk. Once a week, tour the facility to observe what is happening and identify problem areas.
- Maintain comprehensive operating statistics. You will be able to see trends and act on them as well as compare yourself to your competition.
- Give your customers shipping options. For example, don’t send the item next-day air if they need it in a week. You can save money and still meet their expectations if you get it there in three days through effective freight management.
- Conduct an audit at least once a year. Where do you stand against the business plan? Are all your workers properly trained? Are mobile equipment operators correctly certified? How ergonomic are your processes?
- Act swiftly. The best-laid plans will not work if they are never initiated.
Louis J. Cerny, Jr., is vice president of Sedlak Management Consultants in Richfield, OH. He may be contacted by phone at (330) 908-2100 or by e-mail at [email protected].
Go With the Flow
FLOW CHART ITEM: 1
AREA: Receiving. DESCRIPTION: The receiving process uses forms that contain duplicate data. Important field information such as purchase order numbers must be written by hand. EQUIPMENT CHANGES: None. PROCEDURAL CHANGES: Eliminate unnecessary paperwork. Minimize size and content of forms to track merchandise. Use the same form to record merchandise movement rather than create new forms. IMPACT ON ORGANIZATIONAL STRUCTURE: Reduce paperwork, minimize labor requirements, standardize documents for ease of use across departments, and eliminate duplication. ECONOMIC REQUIREMENT: IS personnel and staff from the appropriate department must design and implement new forms. This includes conducting training and defining IS data field requirements. FUNCTIONAL REQUIREMENT: Use fewer documents to track and manage merchandise flow, thereby saving paper, reducing non-productive labor, and expediting throughput.
| Facility Characteristics | $50M to $150M | $150M+ | |
|---|---|---|---|
| Facility flow | U-shaped | Straight through | |
| Sales/1,000 sq. ft. | $500,000 to $1M | $1M to $1.5M | |
| Clear height | 20-28 ft. | 25-40 ft. | |
| Turns | 3-5 | 5-8 | |
| Average/peak ratio (outbound) | |||
| Non-seasonal | 1.5-2.0 | 1.5-2.0 | |
| Seasonal | 2.5-4.0+ | 2.5-4.0+ | |
| SKU velocity | 20% of SKUs = 80% of volume | ||
| with 10,000+ SKUs | 40%-50% of SKUs = 5%-10% of volume | ||
| SKU growth | _____ of sales growth | ||
| Staging | |||
| Receiving | 1 peak day unless fluid load or unload, | ||
| Shipping | then _____ day(s) | ||
| Returns | |||
| Fashion | 15%-20% | ||
| Non-fashion | 3%-10% | ||
| Facility cost | $32-$38/sq. ft. | ||
| Equipment cost | $20-$40/sq. ft. | ||
| WMS cost | $500,000 to $2 million | ||
| Cost as % of sales | |||
| Fulfillment | 3%-6% | ||
| Transportation | 5%-10% | ||
Form Fitting
For a cataloger of children’s clothing, improved measurements involved chipping away at redundancies. With acquisitions outpacing facility capacity, higher productivity goals to meet, and fulfillment center expansion under way, maximum efficiency was paramount.
To improve flow, the expanded facility used a straight-through pattern, with receiving at one end and shipping at the other. This replaced the former U-shaped flow that had placed receiving and shipping in the same dock area, resulting in congestion at the dock and excessive travel time to reserve storage. Previously, pallet racks stored less-than-pallet loads, and picking took place only at the floor level. In the reserve storage area, decked racks replaced selective pallet racks, improving utilization by 20% because of the removal of the “honeycombing” that partial pallets caused. Using order selector trucks reduced aisle width from ten feet to six feet.
In addition, a vendor compliance program instituted standard-size boxes, which enhanced rack usage and replenishment to the active picking area. The program reduced product labeling, bagging, and inspection by 50%; this also had the benefit of reducing backorders because merchandise was available to fulfill orders earlier than before. In the picking area, a mezzanine was installed along with a conveyor system to enhance flow. Finally, the company added a warehouse management system to allow for improved inventory accuracy, timely replenishment, and batch picking.
As a result of these measures, overall facility utilization increased by 40%, with labor decreasing by 30%. The order processing cycle time fell by 20%.
— LJC