Go Forward

OPERATIONSNew processes are necessary for your organization.

By Scott Deutsch

I recently visited a third-generation wholesale distributor whose business was being challenged by its customers’ growing service level expectations. It appeared to the company’s owner that consumer supply chain advancements were hindering his business’ ability to keep up while providing no protection to its profitability.

While the business attempted to keep up with the times, its technology infrastructure investments have been targeted. Much of its investments have been around improving the technical knowledge of its sales and support teams to further differentiate and create a value proposition that has been able to limit margin shrinkage. The company has also invested heavily in its fleet operations, which has enabled its to greatly expand their delivery frequency and reduce parcel costs dramatically.

Although these investments have been helpful in stabilizing their business, my conversation with the owner quickly turned to “what’s next?” – a question that the business’ team cannot seem to answer in solidarity. Most of the choices were deemed too expensive or too risky to move forward with and the team was subsequently asked to present second round options that offered minimal risks and timely measurable results. He asked me to help evaluate current operations and assist in developing a plan moving forward.

Asking Questions

After I brought out my team to do a facility walk-through and observe the business’ operation, I asked the owner three simple questions:

1. When was the last time his team challenged their workflow processes to better align around how their business was organized today, especially with the growth of eaches and smaller orders versus just two years ago?

2. Have you ever analyzed your actual fork truck movement to help you understand if your slotting was optimized?

3. Finally, what changes has the team made these past two years to improve overall worker productivity in the order fulfillment picking process?

He said his team last really dissected their workflow processes about 24 months ago when they implemented a new warehouse management system within their enterprise resource planning solution. I asked him if his business changed over the past 24 months, and of course, it had. 

Now, all the company’s customers were receiving smaller orders with greater frequency. The owner smiled and said that virtually all his customers were being given vendor managed inventory contract treatment, with limited contract or purchase minimum commitments. He admitted that his cost per line item had increased, primarily because of the increased number of smaller order line item picks. These smaller orders were also causing the team to spend extra operational focus on the waving/batch picking process and bundle additional assignments to provide longer-duration worker assignments.

The growth of smaller orders was also creating new issues at the outbound staging dock, which was creating higher truck turn times and increased lost product because of space organization challenges. The company’s overtime has increased by 20 percent this past year to keep up with the growth. This was an area he thought should be prioritized in order to provide quick results. Fortunately, our conversations were focused on reducing margin leakage.

Looking at Processes

I continued to probe the owner on the process that impacted almost 60 percent of his workforce – the picking process. I asked him to tell me what they currently did differently in this area versus before they implemented their new WMS. He proudly said that they upgraded to newer and faster handheld scanning devices, but pretty much kept their existing processes intact.

I asked him if he would be interested in increasing worker productivity by 30 percent with his new WMS and the newer scanning devices? Of course. I told him to seriously look to implement voice technology for picking. Voice solutions had matured quite a bit over these past few years and that his solution should be operational within 90 days and the technology would expect to show an return on investment in under nine months. Importantly, he did not have to be tied to having his very expensive WMS providers consulting services organization after he went live, like it used to be. I strongly advised that he should add voice to the list of solutions for his team to pursue.

Our conversation then turned back to my question about understanding the physical movement of the company’s fork trucks. While I was trying to get the owner to think about the movement of his lift trucks, I was really trying to get him to think more broadly about the operational layout and organization of his facility. His truck movement was an easy way to visually understand the inefficiencies of their facility. I was trying to get him to think beyond a basic slotting review. I was challenging him to look at their operation and organization in the face of today’s reality – that his industrial customers were also consumers. And as a consumer, their expectations of service had dramatically changed these past two years. While two-day delivery used to be considered a privilege, it is now almost always expected. It’s one of the reasons his business invested in expanding their fleet these past few years.

At his point in our discussion, he got what I was driving toward. Operational improvements – while not “sexy” – can provide great value to the bottom line. I was trying to get him to look at items that could produce quick results. None of these items was “big bang” in nature, but they offer valuable contributions to a more efficient operation.

What’s next for you?

Scott Deutsch is the president of Ehrhardt + Partner, North America, a global WMS/WCS/voice solutions provider with more than 500 team members and 1,000-plus customers. Scott has 20 years of sales and marketing experience in vertical application software companies. 

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