Conducting a Post Season Audit, Part I

Although the 2007 holiday season hasn’t ended yet for many multichannel merchants, many of our clients are already preparing for holiday 2008. You should, too, by conducting a post-season audit. This process enables you to challenge your group to find ways to reduce costs and at the same time get critical data and observations to be used for the next holiday season.

In the first of this two-part series, we will cover the basics of performing a post-season audit as a base line for process improvement and cost reduction. Part II will discuss the major potential cost reduction areas of the distribution center.

The first step in the audit is to form a post-season review team, which should include fulfillment supervisors and some key personnel in the DC. The team’s observations of what went right, what was marginal, and what needs to be fixed before next year should include finding answers to these questions:

● What was the labor cost per order shipped during the increased staffing period of your holiday season, vs. your balance-of-year average cost per order shipped? This identifies how effectively you used the temporary holiday labor and how it performed.

● What was the cost of training the seasonal labor force? Were they brought in at the right time for sufficient training and to match volume surges, or were they on the payroll too early?

● What was the found error rate and subsequent rework required? Are they higher than normal? Why did they increase?

● Did you use your experienced associates to pick and teach seasonal temps to pack? You should: It is easier and faster to teach packing than to teach picking, and if you use your experienced people to pick, your error rate should be lower.

● Did you cross-train all regular associates to pack during the course of the year? Were they available to fill in for peaks after performing such tasks as receiving, put away, administrative/clerical, etc.? This enables you to hold down the number of seasonal temps required.

● What was the rate of overtime during the holiday season versus the balance of the year? Also calculate labor man-hours per order shipped during the holiday season vs. the balance-of-year average. Low wages paid to temps may drive down the cost per order, but man hours used will identify your true performance.

● What was the turnover rate for seasonal employees and for what reasons? How many rehires did you have to make, adding to training cost and putting inexperienced people to work? Too frequently, inexperienced and insufficiently trained people make little contribution and drive up costs.

● Were there any issues with shortages of supplies? Why?

● How did holiday volume perform to the sales forecast? A post-season audit is critical to understanding DC management’s responsiveness.

● How did the DC perform daily against order volume? Did the facility fall behind scheduled shipments? How far behind by day? What was the order carryover identified as both orders and a percent carryover by day?

● Did your carriers perform? Were their pickups on schedule?

● Were there any bottlenecks in the flow of work? Why did they occur and how can they be averted next year?

● What was your post-holiday season rate of returns? What were the reasons for returns, which were DC related (i.e. picking error, broken in transit, etc)? What was the turn around period between receiving the return and processing refund or exchanges? Any areas or bottlenecks in the returns process that need to be corrected? Was there sufficient receiving space? Did it infringe on outbound space?

To help answer these questions, use departmental reports throughout the center. These include transaction volume reports for orders received, picked, shipped, manifested, returns, back orders processed; service levels achieved (standard or plan and actual) payroll and productivity reports (budgeted and actual); DC inventory control reports about inventory adjustments, products not found in picking process, error reporting, etc.

Curt Barry is president of F. Curtis Barry & Co., ( a multichannel operations and fulfillment consultancy based in Richmond, VA.