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Turbocharge your facility with a snag-free systems retrofit What’s certain in this world besides death and taxes (apologies to Benjamin Franklin)? Lack of guarantees. No project comes totally risk-free, no matter how much thought or planning went into it. Some element of the unknown is associated with just about every task carried out in today’s workplace. In particular, refurbishing outdated systems carries major hazards.

Pulling off a successful retrofit involves identifying the relevant risk factors, developing a plan to minimize or eliminate their effects as much as possible, and perhaps most important, getting the project under way quickly and smoothly. When you begin a major retrofit of a fulfillment operation, you cannot jeopardize the facility’s capacity to continue operating during the modernization process. If not planned properly, the retrofit project could cause significant delays in shipping customer orders or even a total shutdown of shipping operations.

Assuming that an appropriate design has been developed, the first step in understanding the risk associated with retrofitting is to establish clear goals. Once you define these, you can develop a master schedule, setting a time frame for each of the individual tasks. This process will help identify interdependent activities and an overall critical path for the project.

Control yourself The next step in evaluating project risk is to determine if the risk factors are uncontrollable or controllable. Events such as a fire or severe weather are external risks that are simply out of one’s control, although, with proper planning, their consequences can be minimized. Fortunately, most of the risks that you are likely to face, and that you can reduce or eliminate, are internal ones. The following are some risks you can minimize:

Picking the wrong project manager. Good organizational and communications skills, coupled with a sound understanding of daily business operations, are vital. It is equally important that the project manager be dedicated to the project full-time and given the authority to make timely decisions. Too often projects get off track because the project manager has many other responsibilities not associated with the retrofit. This in turn creates delays in critical processes such as data gathering and decision making.

Forming a project team haphazardly. Select team members for their ability to contribute to the project and not simply because they are “available.” The team should consist of people from areas of the organization that will either influence the modernization project or be directly affected by it. These areas will typically include members from operations, information systems, engineering, quality assurance, sales, marketing, and logistics. Be sure not to overlook valuable input from fulfillment center workers (receivers, pickers, shippers) and supervisors.

Choosing an inexperienced external partner. The retrofit of a fulfillment operation often requires external resources to complete the project. It is important that you partner with an experienced firm that has a proven track record with similar assignments. Outside contractors may specialize in project planning or implementation but lack the experience and responsibility to provide both, posing an additional risk to your company, as you will need to secure and manage multiple contractors without being able to hold them accountable for a solution developed by others. To avoid putting the entire project in jeopardy, consider partnering with a firm that provides a turnkey solution.

All systems go During the planning phases of a retrofit project, you will need to combine historical information about order and SKU dynamics with growth projections and project goals. This is to avoid developing flawed designs derived from incorrect data. Be sure to use a minimum of one year’s worth of information to capture seasonal spikes in volume, and set up a series of working sessions between the project team and the chosen outside partner to verify data and operational concepts.

Don’t overlook processes controlled by external organizations and their potential impact on the design of the new system. For example, you may consider enhancing your receiving functions by incorporating advance shipping notices (ASNs), only to discover that certain suppliers cannot comply with the information requests. You should identify such situations and determine whether they are controllable, and find a way to resolve them.

Whether you’re adding an in-line bar code scanner or installing a new WMS, your IS department and operations personnel will be affected. You can minimize technological risk by defining communication links between the host system and the new technology; ensuring that all systems have the capacity to meet current and projected volumes; and investing in reliable and proven technology.

Although you may have identified risk factors at the beginning of your retrofit, they must be monitored and reassessed throughout. Risk management is a closed-loop procedure that updates risk analysis and associated processes.

Since you have no influence over uncontrollable risks, your focus should be on minimizing their consequences. When the risks can be controlled, they can be reduced or eliminated. In a team brainstorming session, compile the various risk factors and list them in a matrix, accompanied by explanations of their possible effects.

After listing each risk factor, assign a probability to each occurrence and the level of risk associated with that event. This will allow the team to focus on the most likely events that could occur. You do not need to make this a complicated statistical analysis, but rather a realistic description of mishaps to watch out for. Of course, even the most comprehensive analysis will not capture all potential risks, so you must update the matrix on a regular basis.

Keep in mind that the level of risk associated with a project tends to be inversely related to the amount of time and/or data available. Hence, fast-track projects carry greater risk than similar ventures with longer lead times, because external partners may have difficulty responding quickly, and little time is available to take corrective action in the event of an error or change in design parameters.

Don’t forget the importance of response planning, which includes developing solutions to each of the risk factors you have identified, in addition to preparing for new problems that may result from the proposed solution. For example, if a vendor tends to deliver warehouse equipment late, you may solve the problem by using a different supplier. But the alternative supplier may provide low-quality materials – not an issue with the original vendor.

You must also create a reliable plan to fall back on if your primary solution doesn’t work. Let us assume that during the retrofit, the order picking process is going to change from discrete fulfillment to batch picking. If the process is implemented but doesn’t flow through shipping properly, you need to be able to restore the original method until the problem is resolved.

Expect the unexpected The benefits of a retrofit can be substantial, but sub-optimal system performance is often a real danger if you don’t consider the following risks:

Poor training. In many cases, training is centered on the system, not on individual job functions, and the new procedures may overwhelm staff members. Proper focus and job aids, coupled with expert advice from your systems integration partner, will ensure peak performance as operators advance along the learning curve. Providing suitable training to people with the appropriate skills and experience poses another challenge. As systems become more intricate, you may need to upgrade staff in key positions.

Adverse impact of non-automated operations. Managers usually apply the Pareto Principle to automation – high-volume, repetitive tasks can often be automated at a savings. But problems can arise when the automated workload has to be integrated with non-automated processes. For example, if you install a new conveyor system during the retrofit, the picking productivity rate of conveyable items skyrockets as that merchandise is delivered to the correct sortation point in short order. Difficulties begin, however, when non-conveyable product needs to be consolidated with the order, as this is a slower pick process. The pick wave cannot be closed out until all product is received. This creates downtime in the automated portion of the system. These types of situations need to be addressed in the planning phases of the project to ensure timely order processing and optimal system performance.

Rapid change in product mix. If a system is designed to accommodate a certain mix of orders, it won’t perform as expected if the order profile changes quickly and significantly. Simulation is the best way to check the performance of a proposed system and should always be carried out before the design of the new system is finalized.

Lack of performance measures. When you develop your business case for a retrofit project, you make numerous key assumptions about productivity rates, which have a great impact on system payback. These assumptions include picking rates, packing standards, truck loading rates, and so forth. But you’ll face major pitfalls if your system planning doesn’t include plans for measuring and reporting on the key variables that determine the success of the business plan. The variables can be measured by the host system, WMS, controls system, or manually. List the standards on a single page and distribute it as widely as possible. Combined with goal achievement incentives, this step will help minimize snafus.

Software snags. The programs controlling most of the systems installed in automated fulfillment centers are considerably more sophisticated than those used five or ten years ago. Do you have knowledgeable staff available to use the new software? It is not necessary to employ programmers for this purpose, but some people may need to be specially trained and placed in charge of the upgraded system.

Commitment phobia. System enhancements are not always purchased with the full support of those who have to use them. Employees may fear loss of jobs or be reluctant to deal with technology, which can considerably reduce their desire to learn how to use the new system properly. Get buy-in from workers during the beginning stages of the project by soliciting their ideas and educating them about the solution selected.

Sometimes, project implementations don’t go smoothly, and as the saying goes, it’s not because people plan to fail, but because they fail to plan. If you are planning a retrofit, be sure to include experienced team members and conduct a thorough risk analysis. At worst, you will help minimize project risk; at best, you will install a stellar system that works wonders for your operation.

As you might expect, back-to-school is a critical season for BIC Corporation, a major manufacturer of writing instruments, shavers, and lighters. When the Milford, CT-based company decided to modernize its distribution facility in Charlotte, NC, one phase of the project needed to be completed in less than three months to begin shipping orders before the school season began in June.

The 300,000-sq.-ft. Charlotte distribution center, with approximately 1,500 active SKUs, processes nearly 85% of the volume BIC ships in North America. During the back-to-school season (June through August), the peak-to-average ratio for product shipped is 3.3, or over 300% of the daily average in the remaining nine months of the year. Keeping up with this volume usually required temporary staff and a great deal of overtime, including working six to seven days a week.

In March 2000, BIC approached Fortna, Inc., a systems integrator, about retrofitting the facility to cope with demand. The project included installing a high-speed sorter, implementing new picking procedures, and revamping inventory placement in the forward picking modules. Several challenges were immediately evident. The material handling system had been designed by a third party but not yet implemented, and BIC wanted to verify that the system would produce the desired results. With less than twelve weeks allocated to it, the retrofit was a fast-track project; on-time completion was vital because of seasonal shipping requirements. Also, operations had to continue during the entire process without disrupting customer service.

For the BIC/Fortna team, the first task was to determine engineering, equipment, programming, and installation lead times. On the heels of this evaluation came a risk assessment meeting to pinpoint specific tasks, time frames, and potential risks. All team members attended this brainstorming session. Using a large dry-erase board to draw a risk analysis matrix, participants identified key tasks and assigned them to the appropriate people. At this stage, back-up plans were devised to minimize risk. For example, the team built a temporary “work-around” shipping system so that the batch picking process could be implemented before the automatic sortation system went live. This allowed employees to be trained on new picking procedures while creating space to start constructing the sortation system. The work-around also helped reduce risk, as the old conveyor control system was left intact.

All activities were carefully coordinated, including timely material deliveries and mechanical/electrical installation during the third shift. Inventory rearrangement took place over an extended weekend to minimize any confusion of product locations. Initially constructed with only half of the shipping lanes, the sortation system still enabled the operation of the work-around shipping method. A second long weekend was the only opportunity to cut in the new sortation system and controls. If there were glitches, reinstalling a few sections of existing conveyor could reactivate the old system.

The close attention paid to risk management enabled the project to end on time and function as expected. A scheduled debug process was completed within two weeks. BIC gained a significant increase in shipping capacity and faster order cycle time. Along with the retrofit, the company set up an incentive program for the distribution center employees to keep their motivation high. Reduced staffing hours provided lower-than-budgeted overtime, and resulted in several work-free weekends – a BIC first.

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