POLITICAL AND ECONOMIC conditions seem bleak. Unemployment levels are near all-time highs. Small-parcel delivery costs are rising faster than anyone’s ability to recoup them. Paper and packaging expenses fluctuate with the instability of world markets. Today’s headlines? No, I’m talking about the news of a decade ago! But visionary leaders used a number of approaches then to fight their way to recovery and success — and so can you today.
Leverage technology
During challenging times, use existing and simple technology to reduce your costs. Try these easy techniques:
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Install an electronic customer service link that accesses your delivery carriers’ information.
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Be more selective about how many times you mail a catalog to infrequent buyers.
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Analyze the return rates of existing customers to see if you should stop mailing offers to them.
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Make sure your order management system has a “notebook” section to capture customer data.
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Use the PO system to analyze trends in purchases and combine inbound shipments.
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Use order-picking history files to look for slotting opportunities.
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Use your product and sales history file to cull under-performing products.
Use best practices
Years ago, the American Production and Inventory Control Society (APICS) was the only professional organization that helped me learn, grow, and solve problems. In 1996, the Supply Chain Council (www.supply-chain.org) was formed, and it developed the influential SCOR (Supply Chain Operations Reference) model. SCOR collects the best practices of more than 1,000 member companies in the areas of Plan, Source, Make, Deliver, and Return. The SCOR model offers a set of measurements and definitions that provide non-biased advice.
Six Sigma management systems work to eliminate process variability, the opportunity for which increases based on the number of discrete touches needed to execute an order. If you are 90% effective at doing things right the first time, you are at a 3-Sigma level — meaning that you will make around 85,000 errors for every million transactions. Multiply the number of process failures by the cost of acquiring customers and handling existing orders, and you’ll find that the risk exceeds $10 million in potential waste.
The “lean” process, based on the Toyota Production System, is a way to handle one piece at a time instead of processing large batches to be efficient. It is not uncommon for companies that make an operation lean to find up to 50% process waste. More important, they gain flexibility in how they accomplish the work required. By combining the best practices of supply chain management, eliminating waste, and reducing variability, any company can boost its operational and financial performance.
We now have better tools to manage business challenges. Take the time to understand them and develop the next generation of best practices.
Douglas Bley is a senior consultant for PRAGMATEK in Minneapolis. Reach him at [email protected].
A PERFECT 10
It is still true that the most important aspect of fulfillment is its human element. From the O+F archives, here are definitions that categorize positive and negative types of workers. What, we might ask, has changed in seven years?
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In work groups: People have no strong attachments to each other; put self-interest before team interests; place a premium on self-protection, caution, and security.
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In high-performance teams: Members work together for the greater good; respect others’ strengths; put team and company interests first; make cohesion, trust, and risk-taking the norm.
Typical CMS Costs
If you wanted to install this system in 1996, a year after it was first developed, costs would have fallen in the ranges below.
| No. of users | Software | Processor | Terminals | Printers | TOTAL |
|---|---|---|---|---|---|
| 5 | $90,000 | Model 9402-200 $50,000 | $10,500 | $9,400 | $159,000 |
| 15 | $112,000 | Model 9406-300 $90,000 | $35,000 | $15,600 | $253,100 |
| 100 | $157,500 | Model 9406-310 $145,000 | $70,000 | $29,200 | $401,700 |
| Source: O+F, May/June 1996 | |||||