I interviewed Steve Hopper who has spent the last 25 years focused on improving warehousing, distribution and logistics supply chain operations. He is an industrial engineer and has been involved in everything related to streamlining processes in warehousing, distribution and logistics operations; from material handling systems to warehouse management systems, facility design & planning, network optimization etc. He has worked with a lot of clients over the last few years, helping them to drive down costs and improve performance levels in their distribution operations.
How can you simplify processes in the distribution center?
I found that over the years there is a lot of 'meat on the bone' in the distribution center. Most people don't realize how much of an opportunity there really is to streamline things at the distribution center level. By doing that it results in a couple of significant benefits to the company:
Cost reduction – we all know how important that is especially these days in the competitive economy we live in, with the challenges we face from a global economy standpoint where labor costs continue to increase. With these kinds of things going on it is very important to be competitive from a cost standpoint, but there are other benefits as well associated with customer service levels improving; being able to do more for the customer and being more responsive to the customer, etc.
When it comes to specific process improvements, typically I start by jokingly say I think about sex. What I mean by that is SECS which is an acronym for Simplify, Eliminate, Combine and Standardize. Doing that process where you examine an operation in a distribution center, whether at the macro level; it could be a facility wide or even network wide process you will look at, or it could be at the micro level where you are actually looking at what one operator does when they perform their task.
S- The first step is to simplify. In other words look at the activity and try to figure out how we can make that activity occur in fewer steps, to simplify work that is done, to use the right tool for the job.
E- The second step is eliminate. In that process we are eliminating wasted motion. We are eliminating wasted steps in the process that don't need to happen. Very often we will flow chart out a process and for each step of that process we will ask ourselves “is this really adding value to the process or is it some Bureaucratic step taking place and have people really thought about why they do this particular step?”
C- The next step is combine, meaning looking at different steps in the process and figuring out what can be done at the same time. Very often we find that two different things are going on that are being done in a linear fashion when frankly they could be done in parallel, saving time in the process.
S- Standardize. Once we have really simplified the process, making that process a standard process so that people can be trained in how to use the process. They understand what the standard process is. They can be held accountable for the process. It makes the overall operation on a repetitive basis be much more efficient.
These are really the steps we use in the distribution center to simplify an operation.
What specific impact can business process simplification and improvement at the DC have on a business?
I mentioned the cost benefits a little earlier. That is a really big one. I don't believe in the one size fits all answer to a question like that but it is very common when I go into a distribution operation and just look at labor alone, without even getting into some of the other benefits of improvement in terms of space or customer service levels etc. Just looking at labor alone I typically find that if an operation hasn't standardized their processes and looked at things like engineered labor standards and haven't looked at these standard operating procedures (SOPs) to really streamline the process. There is probably an order of magnitude of 25% or more of labor productivity that can be available. That can translate into some really significant dollars when you get into large distribution operations.
What we are talking about here is the cost factor. There are also revenue impacts on these kinds of approaches where if you can process orders out in one day rather than two days it can have a very significant impact on your sales. The more streamlined the distribution center operation is the more money you will save not only in terms of the process itself but also the more money you can bring in on the top line as a result of improved sales.
Can you provide an example of a DC process that needed simplification?
There are a lot of them! I will just use a couple of examples. Very often I will see at the network level transportation networks that have multiple steps in the network that frankly can be reduced in terms of the steps.
Shipping directly from the vendor to the store. You bypass the DC altogether. Many companies have not taken the time to analyze what their networks look like, where the demand and supply is and processes and activities that need to take place in between. By doing a DC bypass they can actually save quite a bit of money in their transportation, labor etc.
Another example on a more micro-level was that I was at a major food company and was watching the way they were unloading their trucks. I happened to notice that they were re-assembling pallets at the receiving dock that came from their own plants. They were re-assembling from a top tier that had been stripped down on top of the stretch wrap pallets on the trailer. They began asking questions and realized that they thought they were saving money by doing an extra layer on top of these stretch wrapped pallets in the trailers. They thought they were saving money by cubing out the trailers to the tune of several million dollars per year. But they never looked at the impact on labor and space at the DC level and at the manufacturing plant. They could have well been spending ten million dollars a year or more than they were saving in transportation costs. Looking at things holistically is another thing I find a lot of issues around. Companies are not taking the time to look at processes holistically. They tend to get tunnel vision and look at one particular element of the process and not the impact on the overall operation.
There are a lot of ways companies can streamline things and be much better off for it.
How can a WMS software help improve processes at the DC?
One of the strengths of a WMS is the idea of standardizing process. Most major WMS are set up and configured for the operation and in effect what you are doing inside the WMS is that you are setting up a standard process that the system will drive. The system will direct operators to perform according to the process. That can be a double edged sword. If a process is set up poorly in the WMS you may be standardizing a bad process. I call that 'paving the cow path'. You don't want to do that.
Assuming you have taken the time to steamline the process and figure out how to use that concept of SECS (Simplify, Eliminate, Combine and Standardize). Once you develop that and configure that in the WMS, the WMS will drive the processes to fit that, assuring that you are following the best process for every operator that is using the system. WMS's really have a strong capability to do that.
If a labor management system is used in conjunction with the WMS that can add additional value in the process because now you are not only driving the process with the WMS and hopefully people are using the correct process, but are also actually tracking the labor data by associate in the warehouse. You are being able to reward people that are performing well and following the process. You can use it in discipline as well and work with the associates who are not following the process.
All in all you end up with a big opportunity for labor savings and process improvement.
STEPHEN T. HOPPER, P.E.
Inviscid Consulting, LLC
Phone: +1 404.832.LEAN (+1 404.832.5326)