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SCM Savings: People, Process, and Productivity

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[ Business]

Okay, yes, I know…this is going to sound like a broken record…

You don’t need the latest ERP package or other SCM software to improve your distribution center operations. True, technology plays its part as an enabler; however, the majority of the savings are found in an area often overlooked:
Processes (and yes, don’t forget those people behind them)!

As you add on more suppliers, SKUs, customers who generate more complex order requirements, your organization often works around the complexity that these challenges bring, leading to inefficient processes. The result? Higher error rates, lower productivity and late orders. Here are three process areas that can improve the situation, and they can be implemented using your current staff.

Process area #1: Inbound – everything begins here

Is your Inbound area a constant bottleneck? Why? Lack of appointment scheduling, poor pre-receipt planning and documentation, and incorrect purchase order information will bring any dock to a halt.

This is the source of problems that, if not corrected, will precipitate and multiply their effects throughout your operation (exponentially), creating inefficiencies and ultimately affecting your end customer. Eventually, you have to fix the problem (e.g. wrong item shipped) later adding even more cost. Why not fix the problem the first time around? Do you have documented processes for the following areas?

- Appointment scheduling

- Pre-receipt planning & document preparation

- Vehicle arrival & unloading procedures

- Quality control procedures

How well are they followed? Investing time to ensure that your associates are trained and aware of these processes will pay dividends later in the form of decreased credit invoices, less damages/returns and higher profitability.

Process area #2: Picking – the most costly activity in your operation

Since approximately 50% of laborbour hours are attributed to picking in a typical distribution centre, even incremental improvements will have a significant bottom-line impact. The largest component of picking time is travel time (the time it takes for the picker to get to the next pick slot). By reducing the travel time, the picker spends more time picking, less time traveling, thus, improving picking productivity. A number of solutions will facilitate this:

- ABC analysis to identify fast, medium and slow SKUs to re-profile layout

- Introducing flow rack for smaller items to free regular pallet slots

- Multi-level picking & shelving for very slow items

- Batch picking for small volume orders

How are new items slotted in the distribution center? Unless there is a defined process, usually everyone is “too busy” to do it properly with the end result being large traveling distances for pickers and a corresponding loss in productivity.

Process area # 3: Realistic Work Productivity Standards – must be set

One operation I have visited measured productivity as cost per case. While this is an important managerial-level metric, it does not translate well to the distribution center associates. For example, when ten receivers are scheduled in Inbound, but only seven are available due to illness or holidays, the cost per case will increase (full-time absent workers are still being paid) for that period; however, the productivity may actually increase due to fewer associates dealing with more volume. Thus, management will observe a decrease in productivity when it actually increases during that period. Simple logic, that is often ignored, or just plain missed! Consequently, this does not motivate the team to improve.

Instead, it is important to measure cases per hour and set a target for the month. Compare this to last year’s actual productivity and year to date. These are meaningful numbers that can, when tied to an incentive program, motivate the team to increase productivity. If you currently use a time and attendance system (TMS), you can easily modify the reporting outputs to include departmental productivity, whether it is Inbound, Putaway, Replenishment, Picking or Shipping. Once again, by having a process to measure and monitor productivity properly, realistic expectations can be communicated to all associates. Don’t forget about your people, people!

By implementing processes for the above three areas, distribution center operations will run more smoothly despite all the complexity that exists and continues to develop.

You know, it always comes down to people and process…yeah, yeah, I know…broken record. How about a few of you sharing your thoughts on these type of subjects!

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Michael Stolarczyk is currently Senior Director, of Business Development for Exel in their Westerville, Ohio General Office for the Americas. He is also on the Board of Advisors for West Virginia Universitys School of Business.

Michael’s Blog: http://blogonlog.blogspot.com

SCM Savings: People, Process, and Productivity
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