Spotlight on NCOF

Welcome to our continuing series highlighting the speakers of the National Conference on Operations & Fulfillment, which Multichannel Merchant co-sponsors with the Direct Marketing Association. This year’s conference was held in Schaumburg, IL from April 29-May 2. This month, Susan Rider, president of Upton, KY-based operations consultancy Rider & Associates, discusses some highlights from her NCOF session, “The Top 10 must do’s for operational excellence.”

Is operational excellence an illusive dream? I think not, but it is a definite commitment of time and talent every day. Below are four steps that will help you achieve this goal.

Communicate

As in every part of your life, communication is essential. Supply chain communication across your network can make the difference on whether you achieve a good result or bad.

Train

Another common problem is quality training or the lack of training. The typical large distribution center has a 40% turnover rate per year. Depending on geographic location, it could be more. A good training program is essential and could increase productivity 10%-20%.

Know your operation

Start by going through a process flow mapping and then audit the process. Are these steps occurring in the warehouse? Have associates created a more efficient work-around? Now look at each component: is there a better way of doing this task? How can you reduce walk time or touches out of each component? Would an investment in equipment or technology reap big returns in any step?

Then map the process to key performance indicators. Evaluate your metrics compared to others in like industries. What gets measured gets noticed!

Improve internal service

Every department needs to know who their customers are and communicate with them. Survey them and find out how your support teams can better serve them. This will increase productivity. For instance, IT, maintenance, and human resources are suppliers to operations. If IT doesn’t support with good systems or a fault tolerance plan, operations will fail. If maintenance doesn’t maintain a sorter and it goes down, operations fails.

Order fillers support shipping. If order fillers do not finish a wave on time, shipping is back-logged. You get the picture. Develop a team of customer service professionals and you will increase productivity without adding cost.

SPOTLIGHT ON NCOF

Welcome to our continuing series highlighting the speakers of the National Conference on Operations & Fulfillment (NCOF) which Multichannel Merchant presents with the Direct Marketing Association. This year’s NCOF conference was held in Schaumburg, IL, in May. This month, George Mollo, president of Nanuet, NY-based consultancy GJM Associates talks about what you must know about your inbound freight costs.

Inbound freight costs are generally hidden in your cost of goods but average 2% to 4% of revenue. To reduce the bite to the bottom line, consider these suggestions:

  • Review your “prepay and add” vendor invoices. These occur when your vendor selects the carrier, prepays the freight, and adds the cost to your product invoice. Look for verification of actual costs (carrier’s freight bill) and any additional handling fees. The industry average markup for handling is about 40%. Only allow prepay and add-freight terms when you can verify that your vendor ships at a lower rate than your negotiated carrier rates.

  • Establish a third-party consignee billing account for vendors that ship small-package shipments (under 250 lbs.) to you via United Parcel Service or FedEx. By doing so you will be charged only the actual shipping costs rather than the additional handling charge by the vendor. You will also build a larger volume base upon which you can negotiate your overall UPS/FedEx rates.

  • Review your “free freight” terms with frequently used vendors that offer them. Determine the average unit freight cost using your own carrier rates, shown as a percentage of product cost. Using this target percent, renegotiate “freight out” pricing with your vendors. If you can lower your unit cost, then freight is not “free.”

  • Audit your actual paid-freight bills. There are several reasons to do so: to verify actual freight-bill discounts from those stated in your tariff contract; to identify additional fees such as single-shipment charges or notification charges; to determine if you can negotiate FAK (freight all kinds) rates; to ensure that proper product classifications are being used rather than NOI (“not otherwise indicated”). By verifying actual freight bills you can determine if the carriers have given you “paper rates.” If you can negotiate FAK rates to group product classifications for billing under a lower rate class before your discount, this will reduce your actual freight charges.

SPOTLIGHT ON NCOF

This is another installment in our continuing series spotlighting speakers at the upcoming 17th National Conference on Operations & Fulfillment (NCOF), which Multichannel Merchant co-presents with the Direct Marketing Association. This year’s NCOF will be held in Schaumburg, IL, from April 29 to May 2. This month, Rene Jones, founder of Burbank, CA-based supply chain services provider Total Logistic Solutions, talks about properly processing returns through receiving.

Returns and receiving are inextricably linked to the effectiveness of your distribution center. Yet few companies understand the relationship between receiving and returns — and therein lies the problem.

To process returns effectively, your organization needs to make returns a top priority. Many times returns processing takes a back seat to other processes, so a root-cause analysis is rarely performed. Putting off returns processing can lead to picking errors and further warehouse inefficiency.

Many don’t have a person dedicated to processing returns. To select the right people you must focus on what a person can do and not what kind of equipment they have at their disposal.

Before enlisting an employee to handle your returns, you should ask several questions. For instance, does he know the product line? Can he work in a fast-paced environment? Is he good with numbers? Does he have a problem communicating? Does he understand the importance of the receiving department?

The right people are most likely already in the organization; in fact, bringing a new person in off the street to receive goods can sometimes create problems.

To ensure proper receiving and returns processing, you might want to institute a “day’s work in a day” policy. That means if a return comes in today, it must be processed today.

Everyone in distribution should know that the outbound is dependent on the inbound, and that backorders are filled when receipts are completed. Most DC personnel will tell you the bulk of their orders are processed late in the day. But that’s because the receiving reports are usually entered toward the end of the day. Instead of waiting until the end of receiving to enter the data, you might key in the information after every fifth or 10th load received. This will ensure a more equal distribution of the work for your picking department.

SPOTLIGHT ON NCOF

Multichannel Merchant will be previewing the smartest practices and other need-to-know information from the 17th annual National Conference on Operations & Fulfillment (NCOF), which we copresent with the Direct Marketing Association. This year’s NCOF will be held in Schaumburg, IL, from April 29 to May 2 (for details visit www.ncof.com).

This month, NCOF speaker Sam Flanders, president of Durham, NH-based Warehouse Management Consultants, talks about identifying challenges and opportunities in your distribution center.

If you are like most DC managers, you know that your operation has many challenges that your employees grapple with on regular basis. You may have grown to accept some of these problems, but you can break out of this “that’s just the way it is” mode of thinking to identify, document, and prioritize challenges — and ultimately implement improvements.

The key to identifying challenges is to systematically and objectively observe your operation. For example, to identify packing challenges you should observe the pack area for one or two hours during a busy time. What activities could be improved? Do bottlenecks occur? Is equipment placed to make packing easy, or should it be rearranged? How easy is it to get packages sorted to a carrier bin? How much work does it take to get the packages to the truck?

As an observer, you may be locked in to a particular way of thinking and simply not realize that another alternative is possible. So you might consider using a new employee or perhaps even an outside resource to observe activities for you. A new resource will not be as willing to accept things as normal, especially if he is encouraged to find areas for improvement.

Once you collect all the data, organize and prioritize the information into an action plan. Pick something that will have a high payback but will be fairly easy to deploy. Knocking off an easy project will help you to build some momentum for more-difficult projects. Then you can prioritize and work on the rest of your list as time permits.