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2017

Many projects often fade away over time and fall well short of their original goals.  People face many very real challenges in leading these projects.  So how do you avoid having your project become another program-of-the-month and disappear from view?  Is there a formula?

 

As we have discussed in other blog posts we have tackled Inventory Turnover several times, amongst many other challenges.  We have doubled turnover and achieved industry leading results in very short periods of time.

 

Your challenge may be trying to improve Inventory performance or trying  to create a transformational improvement in some other area.  We have found that there is a formula and a set of key principles that are critical to driving the game changing results you are looking for.

 

 

 

Any specific Game Changing situation may only require you to use either some or all of these elements.  Regardless of which of these principles you find appropriate, together they can provide the formula you require to achieve dramatically different results than have ever been achieved before.

 

 

Call To Action

In order to mobilize the organization around the change that you are undertaking you need to have a Call to Action.  You  may have pressure from competitors or from your investors.  Or you may have a proactive drive to lead the industry.  Whatever the motivator, your transformation requires a  Call to Action that everyone can understand and everyone can rally around.

 

 

Executive Sponsorship

Everyone is usually very busy doing their day-to-day jobs.  If you want to get their time and attention you will often need visible Executive Sponsorship in order to ensure that everyone understands that focussing on your project is a priority and not just an afterthought.  Otherwise you will be begging for support which will be very difficult to get and sustain.

 

You will likely come across obstacles whether they be sacred cows,  resources, individuals or processes for which some level of Executive support will be necessary to overcome.  An Executive Sponsor is essential.

 

 

Global Goal Alignment

There are many, many metrics that are involved in running a business.  However to drive your transformational change project you need to focus on a single, global goal.  That requires a separation of the metric which represents the end result you are striving to accomplish from the other sub-metrics which are enablers to, or variables in, achievement of the overall global goal.

 

Additionally you need to ensure that everyone is aligned around the global nature of the goal.  While everyone needs to achieve their own local targets those local objectives are not the end objective. They are merely the pieces you need accomplished so that the global goal is met.

 

 

Project Name

Distinguishing the Game Changing project you are working on from everything else going on in your organization requires that it be very uniquely framed for everyone.  A powerful way to achieve this is to name your project.  This name will become the very visible and clear rallying point for your initiative.

 

When anyone hears your project name they should understand the overall goal, their role, the progress, and the next steps.  They should also understand from the name what new paradigms it represents.

 

 

Cultural Change

At its core every Game Changing transformation usually requires some level of change in the cultural norms.  You will require a culture that is results oriented with everyone on the field making improvements.  People will need to "embrace the possibilities" and be willing to challenge existing paradigms and sacred cows.  And you will need leaders who are dynamic ambassadors of change.

Your organization may already have some of these attributes.  Regardless you will need to ensure that this type of culture is prevalent in your organization as demonstrated by the actions taken in the name of your project.

 

 

Attack On All Fronts

Approaching a challenge in a piecemeal fashion or attempting to make change serially and incrementally will often drive minor improvements over a protracted period of time.  In order to make Game Changing results you may need to take a much more holistic approach addressing all dimensions, all processes, and all stakeholders simultaneously.

 

By attacking the problem on all fronts you will be addressing all perspectives including processes, customers, competitors, suppliers, resources, systems, and culture.  And by doing this in parallel you will be addressing the likely pressure to make changes quickly.  Time is often not on your side.

 

 

Process Based Focus

Trying to brute force the change you are making may give you short-term improvements but they are usually not long-lived as it is very difficult to keep up this level of manual intervention.

True change comes from attacking the processes that affect the metric you are looking to improve.  By having a process based focus you will end up making sustainable changes.  You will be creating and implementing a future state process addressing all of the deficiencies, inefficiencies and pain points with the current state process.

 

 

Governance

A process of governance and oversight provides the platform for you to keep your finger on the pulse of what is going on in your project in real-time.  Regular reviews will allow you to understand issues, make course corrections, and shape direction more rapidly.  Without any governance your project will quickly become rudderless and fall short of your well-intentioned objective.

 

It is key to ensure that the administration of governance for your project is not actually, nor perceived to be, a forum which is judgemental and unvested in the project.  Those who form your governance steering committee have to be willing to get their hands dirty and work to move the project forward and not just pass judgement on the work of others.

 

 

Clear Communications Strategy

Communicate!  Communicate!  Communicate!  As mentioned previously people are busy.  If people do not understand your objective, what is expected of them, how the project is progressing, or if they are not recognized then you will have not their attention and focus for long.  Reinforcing your messages will serve to embed these inputs into the culture and dynamic of your organization.

 

Success also breeds success.  As your project moves forward you want to communicate the small, and growing, successes.  Communication is central to the formula for success.  Momentum will build from this communication.  Otherwise inertia will set in and your project will stall.

 

 

Industry Leadership Competitive Hunger

Your single, global goal should be bold and be a stretch from anything currently being accomplished.  One measure of that target is Industry Leadership.  If you can get the competitive fire going in your employees I guarantee that they will step up to the challenge.

 

I have never believed that our competitors are any better than us or our employees.  It is important that this is understood so that everyone can get on board with raising the bar on expectations and results.

 

 

The Formula

When we have applied these principles in varying degrees, depending on the situation, we have been a party to some truly incredible game changing results and transformations.  We have referenced the application of these principles to the task of improving Inventory turnover performance.  Yet this formula of principles has been equally applied to many other challenges often with tremendous success.

 

Whatever your challenge requires, it is worthwhile to take some time at the beginning of your project to ensure that you are moving forward across many of these principles simultaneously.  There is no replacement for hard work and high energy.  But your leadership in these focus areas will pay dividends for you along your journey!

 

Check out Inventory Turnover Breakthrough (Part 3) – Double Turnover In 9 months!

#Inventory #SupplyChain #Business

Please check out our updated web site and our latest blog posts at https://supplychaingamechanger.com.

Selected as one of the Top 75 Supply Chain Blogs on the Internet.

We had to begin the transformation of the company's business processes to support the new business objectives.  Specifically the company was going to carry a dramatically different set of products which required a new set of capabilities in Strategic Planning, Merchandising, Marketing, Procurement, Inventory Management, Retail Operations and Logistics.

 

That scope defined the set of processes we needed to change first.  The overall goal was to enable the transformation of the company which would manifest itself in higher revenue, improved growth and profitability, greater customer satisfaction and superior employee engagement.

 

We decided to attack this by introducing the Lean technique of Value Stream Mapping to the organization.  We had to start with mapping the Current State process.

 

 

The company had no experience in Lean process improvement.  We started with clear articulation of the business goals and objectives, the scope of the process improvement we were undertaking, and the resultant improvements we were looking to achieve.

 

We assembled a Cross-functional team.  Even though none of the team members had been through a Lean transformation or Value Stream Mapping exercise before they eagerly volunteered to participate.  They all knew that the processes had to be changed and to their credit they took the leap of faith that this approach would drive that change.

 

We began with a single, blank sheet of easel pad paper taped to one end of the meeting room wall, and stacks of blank sticky notes.  With a dozen people in the room, and the process scope understood, I asked the question, "What is the first step in the current state process?"  It took some time to get started as people debated what the actual first step was, but we eventually agreed on what it was and wrote it down on the first sticky note to go on to the blank easel paper.  We had begun.

 

We continued slowly but momentum kept building.  Soon we started adding more and more sticky notes representing subsequent steps in the process. There was often agreement on the next steps but just as often there was either disagreement or a complete lack of understanding as to what the next steps actually were.  Regardless it often took a fair amount of discussion to establish what the next process step would be to be written on a sticky note.

 

While everyone was cooperative it became very clear that there were functional silos in the operation.  People were not aligned on who was responsible for what.  And all of this often lead to duplication of work, unnecessary iterations of work, and a lot of redundancy in the process which we could only have learned by mapping out the process.

 

Additionally we kept a running list of all of the pain points that we had with the process.  People had a lot of frustration with how things were done but to this point they had no forum to express their concerns let alone be invited to figure out how to improve the situation.

 

 

The process map kept evolving.  We identified multiple points where the process doubled back on itself, where people went through multiple (often dozens of) iterations of parts of the process.  People unknowingly passed on errors and quality defects further along in the process.  There was no visibility to any of this activity otherwise.

 

The process of discovery was absolutely wonderful to see, not only for me but for everyone in the room.  These were incredibly smart people who were the clear subject matter experts in each of their functional areas.  Yet there was no one who truly understood the entire end to end process.  And not one understood what happened when people passed on work or information of some kind to others outside of their own function.

 

It became self-evident to everyone in the room that there was tremendous opportunity.  We could reduce repetition of work, numerous iterations, variances, passing along defects and significantly streamline the process.  Everyone was enlightened!

 

—Everyone could easily see that there when we got to mapping the Future State process that it would be dramatically simplified.  An underlying premise was clearly that we would touch information only once in the new process.  Further we would be able to eliminate a lot of the pain points.  And frustrations that people had just lived with doing in their jobs day after day would be addressed.

 

We dedicated a certain amount of time every week to spend on the Current State mapping.  After many weeks we completed this first, critical step.  When we were done the entire meeting room was covered with sheet after sheet of easel pad paper.  Each piece of paper was filled with sticky notes defining the extensive, complex, and highly inefficient Current State process.

 

We had mapped out hundreds of process steps, dozens of unnecessary, iterative loops, and almost 200 pain points.

 

Most importantly we had made massive steps toward our goal of improving employee engagement.  All of those involved in the Current State mapping process were completely ecstatic about the experience they had.  They had become completely educated on how the end to end processes in the company actually worked.

 

People were excited most significantly that the prospects for making improvements when it came to defining the Future State process gave them hope for changes to come.  A lot of themes became apparent to all.  We needed to eliminate waste, get rid of redundancies and reduce duplication of work.  We needed to manage by exception only, and get rid of the complexity.

 

Word of mouth spread quickly.  People were excited as to when we were going to tackle other processes within the company.  Everyone wanted to participate.  We were well on the way to driving the Cultural change that was needed.  And that was at the core of the transformation we were undertaking.

 

 

Quotes from our Participants

We asked people how they felt about going through this experience.  Samples of their actual quotes speaks for themselves:

 

“This was truly a liberating process. We liberated our minds.  And we liberated all the existing processes from redundancies that had built up over the years”

 

“It was astonishing to see just what was needed to bring a product from vendor to customer.   And then realize that we have the knowledge and expertise to create a much more robust and effective way to operate our business.  Both our business and our customers will benefit from the re-design undertaken here.”

 

“Although we work across functional boundaries, our experience and progression is still within silos.  This process exposed me personally to a lot of learning regarding what people in other departments are doing.”

 

“ I truly feel for the first time that we will do what it takes as an organization to help make the business a “best in class”  experience.  From the employees at head office through to the customer experience.”

 

Our journey of business process transformation was well underway.  The next step was clear: we had to map out the Future State process.

 

Check out Global Process Excellence (Part 9) – Lean in Retail: Value Stream Mapping your Future State Process!

#Retail #Ecommerce #Lean

Please check out our posts at https://supplychaingamechanger.com.

Selected as one of the Top 75 Supply Chain Blogs on the Internet

"The system is down.  We can't ship any customer orders. We're not sure when the system will be back up again."

 

Coming into the Holidays, the busiest time of the year, that is the last thing that I wanted to hear.

 

I thought about it and said, "The Customer doesn't care."

 

From that point forward we pulled together the necessary resources and visibility to get the problem solved quickly.   But the message was clear: The Customer doesn't care about our internal problems.

 

 

Customers

E-Commerce customers are very clear in their actions and reactions.  They will go to your competitors as quickly as it takes to click if they have a bad experience with your company.  Not only  will your customers leave you, but they will tell other people about their bad experience.  This is especially impactful with the power of social media.  And other customers will leave you AND potential customers will never even give you a chance.

 

The customer experience spans the entire sales cycle.  From the time a customer enters your web site through to placing an order, entering their personal information, getting shipping updates and notifications, receiving their order, and dealing with your returns process (if necessary) you must ensure that your processes and systems are robust enough to provide a positive customer experience.

So it is quite appropriate to always remember that Customers do not care about your company's internal problems.  Whether your IT system is down, any of your equipment is down for maintenance, trucks are late, or you have run out of product, your CUSTOMERS DO NOT CARE.

 

To create a Customer-focussed culture it is critically important to drive home this message.  Whenever someone is telling you about a problem that is impacting your customers, without having a plan to address it, then you have to remember the mantra that "Customers do not care about your internal problems".

 

With this thinking in mind it is appropriate to take the steps necessary to mitigate, if not eliminate, any factors which may impact your ability to meet your commitments to your Customers.  And this is stretched to the limit, and beyond, during the Holiday season, the busiest time of the year.

 

Here are some of the areas that you should review:

 

 

Receiving

If you  do not receive product, physically and systemically, into your Distribution Centre, chances are that it will not show as available to sell.  Does your receiving process have enough capacity to handle the dramatically higher volumes coming in advance of the Holiday season?  You don't want unreceived goods sitting in trailers outside of your facility because you are out of capacity in receiving.

 

 

Systems

Your systems must handle the dramatically higher volume of transactional activity that comes during the peak season.  Further you must have backups and redundancy in place so that you can quickly get your systems back up.   Having your system down for even a few minutes can result in the loss of hundreds if not thousands of orders.

 

This covers all of your systems including your Order Management System, Warehouse Management System, Transportation Management System, Enterprise Resource Planning System, and Financial Management System.

 

 

Staffing

At the busiest time of year everyone is trying to recruit temporary employees to help support the higher seasonal volume.  It is also at that time of year when you need your employees to be their most productive.

 

Your HR team needs to be have their own staffing and processes in place to recruit, screen and hire a large number of employees quickly.  Further you need to train these new employees rapidly and efficiently.  And finally if you can't retain all of these employees you need to recruit and train even more employees.  Without this staffing you will not likely have the manpower to allow you to process all of your customer orders.

 

If you need to run multiple shifts per day, or run seven days/week, you should ensure that you are building the proper infrastructure to support that.  This means having the appropriate level of management, supervision and support services working on all shifts and every day.  Do you intend to staff a night shift entirely with temporary staff, all newly hired and recently trained?  You are most likely going to have a highly unproductive shift wasting both time and money.

 

 

Processing

Your Distribution Centre has many different operations.  Those operations which involve equipment (eg. sortation, labelling, conveyance) must have the capacity to handle the peak volume.  Are you offering a gift wrapping capability, or any form of packaging personalization?  Do you have enough of this equipment to support the higher demand?  Further you must know that this equipment will still need regular, if not more frequent, maintenance.  Foregoing maintenance at the busiest time of year can be a recipe for extended operational downtime and lost capacity.

 

It is also important to test the Quality controls in your process, especially with the number of new employees you have filling customer orders.   If a customer receives a damaged product, or the wrong quantity of product, you will have destroyed an otherwise good customer experience.

 

 

Transportation

For your inbound goods you need to have contingencies in place to ensure that goods will continue to come your way.  If you are shipping goods via ocean and your port of call is closed because of a dock-worker's strike you still need to get a hold of your goods.  You can always ship via airplane but that can be an extremely expensive proposition.

 

During the Holiday season all carriers are busy to the extreme.  They are handling an unprecedented number of packages that come every year with the boom in E-Commerce.  You need to ensure that you have worked with your carriers.  Show them your forecasts and secure the capacity you need in advance.   Additionally you need to ensure that cut-off times for pick up of customer packages from your facility are strictly followed by your operations and your shipping partners.

 

You must also consider what to do if there are weather related delays that can often come during the winter.

 

And you must be highly cognizant of your cut-off times for making delivery promises to customers.  Can you ensure that your customers will have their packages before Christmas if you take orders on December 22nd?  If not, you need to ensure that you set a cut-off date that is realistic.  Christmas is not when you want to disappoint a customer because your package did not arrive under their Christmas tree on time.

 

 

Product Supply

One issue to address is to ensure your system cannot take in more orders than you have product for.  This can be especially challenging during Black Friday/Cyber Monday.  Orders are coming in at an alarming rate.  It's better to test for this issue now.  This is much easier than having to call a customer to tell them you can't fill the order you just took from them.

 

It is also important to ensure that there is complete visibility to your promotional plans throughout the organization.  In the excitement of the Holiday season your Marketing team may be concocting all kinds of last-minute promotions.  But if your Distribution Centre and Supply Chain teams aren't aware of these promotions they will be caught flat-footed when it comes time to rapidly fill these orders.

 

 

Customer Service

The Customer Service team, or Call Centre, is a vital part of the operation. They deal with any customer concerns in real-time.  I admire the people in these positions.  They often have to deal with volatile and delicate situations.  Yet they remain patient as they work to solve the customer's problem.

 

During the Holiday season you need to ensure that your Customer Service team is also staffed and trained appropriately.  Especially given the higher level of transactional activity.  Nothing is more frustrating to a customer than calling Customer Service only to find the person on the other end doesn't know how to help.

 

 

Conclusion

Overall it is always a good idea to stress test your system, your processes, and your employees.  Run a simulation of Black Friday/Cyber Monday well in advance of  those days.  Flush out any problems and give yourself extra time to put preventive measures and contingencies in place.

 

When I hear someone tell me about an internal problem that will impact a Customer I tell that person that they will have to personally call the Customer and tell them about the issue.  When they look at me not knowing whether I am serious I tell them what they are going to hear from the Customer:  the Customer Doesn't Care!

 

Check out Omni-channel vs Multi-channel: How many E-Commerce Fulfillment Solutions do you have?

#Retail #ECommerce #Customer

Please read our other blog posts at https://supplychaingamechanger.com.

Selected as one of the Top 75 Supply Chain Blogs on the Internet

The box I was looking at in the Pick-To-Light (PTL)  lane was full of at least 1-2 dozen different skus with as many as one to twenty of each sku in the box.  It looked like the insides of a piñata in there.  Although a piñata is used in celebrations I was quite sure that when the retail store opened the box they wouldn't be celebrating.

 

All along the PTL conveyor every box looked like an explosion of different skus in different quantities.  At every station an employee was following the lights and picking a different quantity of each sku from one set of boxes and putting them in the "piñata" box.

 

I knew that this was the way it had historically been done, and the company had just spent millions and millions of dollars automating this historic process, but from a Lean perspective the whole approach was wasteful, slow, and expensive.

 

Was it really necessary to touch every single piece of every single sku multiple times?

 

 

The company had always managed their fulfillment and replenishment to the retail stores in this manner.  The stores may need only one piece of one sku on the shelf, and subsequently they expected the Distribution Centre to only replenish that one piece of that one sku.  And they expected that across thousands and thousands of skus.

 

But the company had embarked on curating a dramatically different product set.  Was it still necessary to allow one piece fulfillment and replenishment?  The company had not even considered this fundamental question which was why the old process had been perpetuated with new, highly advanced and expensive automation which at its core included the "PTL-piñata" fulfillment and replenishment process.

 

At the PTL workstations employees would open every single box that was shipped in from a supplier so that they could pick each piece individually out of that box and then put it in another box which, when filled like a piñata, would be shipped to the stores.

 

 

At the store they would reverse this entire process.  They would open each box and they would have to manually pick out and sort through every single item.  The box could contain dozens of pieces of dozens of skus  and the store would receive hundreds of these boxes each and every day.

 

All of this extra handling added no value to the product.  We were merely handling the product multiple times moving items from box to box to box because of an antiquated paradigm as to how to fulfill and replenish demand.   It was a complete waste of time and money.  At the same time there were constant pressures to reduce costs, increase speed, reduce product loss and damage, and increase capacity.

 

 

A No Touch Strategy

In thinking through this situation it occurred to me that we needed to reconsider the fundamental paradigm on which the company had always performed fulfillment and replenishment.

 

We needed a No Touch strategy.

 

There were several options that we could address:

 

 

Align Package Quantity to Fulfillment/Replenishment Quantity

First and foremost we had to work with our suppliers.  If we could reduce the quantity of pieces in each box that a supplier shipped to align with the general quantity that we fulfilled and replenished then when we received the box we would not have to open it in PTL and we could just send every box, unopened, to the store.

 

The Distribution Centre would not have to touch each and every piece, the Store would not have to sort through the piñata box, and we would dramatically reduce the amount of material handling, time, cost, the potential for damage and loss, and the time to do cycle counting.

 

And in reality this did not impact the cost of the products either.  Generally the suppliers could accommodate this change with no impact on their end.  If there was a cost it was nominal and it was the exception, but regardless it was far outweighed by the rest of the costs at the other end of the supply chain.

 

 

Cross Docking

When boxes come into the Distribution Centre most often they are received, put away on warehouse shelves, and subsequently pulled in some fashion for subsequent processing and shipping.  In its literal sense however the whole process of moving goods on and off of warehouse shelves is wasteful in that it does not add value to the product.

 

Wherever possible if you are able to cross dock product when it arrives at your dock and send that product directly to shipping, then you have eliminated the entire process of put away, storing and pulling.  Especially when your facility is running beyond capacity at the busiest time of year this technique will dramatically increase your effective capacity and throughput at significantly lower cost.

Further if you know where each box is destined before it ships from your supplier, you can have your supplier apply the shipping label to each box so that it can be automatically re-routed within your Distribution Centre right to shipping without the need for re-labelling.

 

 

Drop Shipping

In Retail you hear the phrase "endless aisle".  Customers want to buy thousands if not millions of different skus, and Merchants want to be able to provide that assortment to customers.  And if you are in the E-Commerce channel you are also subject to the market demands of fast, if not free (or low cost) shipping.  But the reality is your Distribution Centre has finite physical capacity.  So how do you meet these market demands economically?

 

A key approach in your No Touch strategy is drop shipping.  If your supplier can ship in an outer package that is acceptable then the supplier can ship your order directly to your end consumer.  This eliminates the entire requirement for your supplier to ship product to your Distribution Centre wherein you will receive, store, pull, pack and ship the product, all of which adds cost but no value.  By eliminating the middle man, which is your Distribution Centre,  you can ship products to your consumers faster and more cost effectively with a Drop Ship solution.

 

These are some of the key elements of a No Touch Supply Chain strategy. If you separate those activities which provide true value added services from those activities which, although they may currently be necessary, do not provide value add then you have taken the first step in identifying where you can eliminate waste with a low to No Touch strategy.

 

Every time you have to move, store, or handle a box or the contents therein you have an opportunity to figure out how to eliminate these steps.  All of these steps mean extra time, cost and the opportunity for generating defects.  Before you automate your existing process take a step back and consider whether you can dis-intermediate these non value added process steps from your supply chain.

 

Consider a No Touch Strategy to Change the Game!

 

Check out Global Process Excellence (Part 6) – Lean Transformation in Retail … Value Stream Mapping your Current State Process!

#Lean #ECommerce #Business

Please read our other blog posts at http://supplychaingamechanger.com.

Selected as one of the Top 75 Supply Chain Blogs on the Internet

In going door to door trying to sell a Freight Management service, as well as in my experience working in companies, I have had the opportunity to see a variety of ways in which companies, large and small, were managing their Freight and Logistics spend.

 

Most everyone felt they were doing a good job already.  But I've seen instances where Freight is one of the top 5 largest expenses within a company.  Yet it is managed by one or two people, with no support, and no visibility from upper management.

 

Depending on the industry  your transportation spend can make up anywhere from 1-10% of your company's total revenue.  Aside from the    cost impact the service implications of a poor Freight management system are enormous.

 

So do you have a strategy for managing Freight and Logistics or are you spinning your wheels?

 

 

 

Freight and Logistics

Cost is a very important reason to ensure that you have a robust Freight Management strategy.  The costs of inbound logistics, outbound logistics, poor delivery performance and your supporting organization can be large.

 

Service levels are another critical dimension.  If you are in the E-Commerce channel then you should know what customers want.  They want not only free shipping but they also may want same day or next day delivery.  If you are in a business supporting some manufacturing or retail industries you may also be subject to performance penalties if deliveries or late.

 

Supply chain visibility is also incredibly important these days.  If you are managing, or hope to manage, a reasonably effective supply chain you need to know when goods are coming in to your company, moving through your company, and leaving your company.  You can not get this visibility without a plan.  You must manage Freight and Logistics.

 

With all of that considered Freight Management can be a source of competitive differentiation and an enabler of strong financial performance.

 

So what is your Freight Management strategy?  Too often I have seen companies that fail to grasp the importance of having a strategy.  They are spending millions and millions of dollars on Freight without a plan.  They leave it to someone on the dock or someone at a desk to call carriers to deliver or pick up goods, and that is the extent of their plan.   Yet at the same time these companies can be highly defensive when you come in and suggest to them that you could manage their Freight for them.

 

There are many elements of a Freight Strategy which should include:

 

 

 

Insource or Outsource Decision

You should consciously, and objectively, decide if you are best served by managing freight yourself or outsourcing all or a part of this responsibility.

 

If you are going to do this yourself you have to be prepared to invest in the organization, systems, processes, cash consumption, and capital investment that goes along with a proper Freight Management capability.

 

If Freight Management is not a core competency for your company you should consider outsourcing.  This does not mean that you can't manage the day-to-day scheduling or carriers.  It does mean that you will gain tremendous industry expertise, greater spend leverage and lower costs, ready-made supplier relationships, expanded scope, and electronic connectivity.

 

 

Organization

If you are going to manage Freight yourself you need to invest in resource to support it.  It is not reasonable to expect someone with no training or expertise to merely arrange for trucks to arrive and depart with no ability to manage the larger strategy.

 

Again Freight Management not only impacts cost but service levels as well.  Many industries, whether in support of Just-In-Time manufacturing or Same-Day/Next-Day E-Commerce delivery require a very sophisticated and proven Freight Management system.

 

The design of your products and their packaging can also have a tremendous impact on your Freight requirements and spending.  It is important to have your Freight experts at the table as elements such as packaging are being considered.  I have seen examples where Merchants have selected products for which the cost of shipping exceeded the margin on the product many times over, all because the Freight team was not brought into the original decision making and planning process.

 

These capabilities can only be provided with the appropriate support team of subject matter experts in place.

 

 

Supplier Management

I have been in, and called on, many companies which have not only dozens but hundreds of different carriers around the world.  There have been no efforts at supplier consolidation or performance management.  The result is a very inefficient, costly, and unreliable delivery system.

 

Having a smaller set of preferred suppliers is important.  You need to be able to count on these suppliers to meet all of your delivery needs and requests.  You need suppliers who can grow with you and provide various lanes, modes and options.  And you need suppliers who can provide visibility through electronic connectivity.

 

You also need to be able to negotiate pricing and other terms and conditions with your suppliers.  When you have a decentralized, loose management structure it is likely that you do not have a standard set of contracts.  Further you are not aggregating your spend to maximize your own negotiating leverage.  Without any structure I have seen companies that have literally not negotiated with their suppliers in years.  They have no targets, no industry awareness, and they are most certainly leaving a lot of money on the table.

 

And as with any other supplier you should have a set of KPIs.  You also need a performance scorecard that you create and review with each of your carriers.  You must hold them to account in meeting your expectations.  Without this visibility you have no control.  And you have no ability to improve performance other than by relating anecdotal examples to your carriers.

 

 

Mode Management

Depending upon the size of your company, and the location of your suppliers, facilities, and customers, you may need to use some combination of road, rail, ocean or air transportation.

 

I have seen many examples where companies rely on air travel, for instance, in order to quickly ship from Asia to North America.  Yet just as often they do not understand that with proper planning they could be shipping via ocean and saving a considerable amount of cost.

 

 

End-To-End Supply Chain Visibility

Proper supply chain management requires visibility to where goods are throughout your supply chain.  This can only be accomplished if you are engaged with carriers that are enabled with electronic connectivity.  With this connectivity you should be able to see where goods are without having to pick up the phone or send emails and wait for responses.

 

You will also want this visibility anytime and anywhere.  That means that you need to have electronic access through your smart phone or tablet or laptop, and not just from your desktop.

 

 

Customer Expectations

As mentioned previously customers can be very demanding.  If you do not have a freight management capability that will meet their expectations then you will not have those customers for long.

Just-In-Time manufacturing can mean that you need to deliver goods within an hour or within hours of receiving a pull signal from your customer.  Otherwise you may pay huge penalties.

 

E-Commerce customers want free shipping.  They also want rapid delivery  (even though they don't want to pay for it) which can mean delivery as quickly as within one hour, but more likely Same-Day or Next-Day delivery.  The inability to ship and deliver quickly to these customers often means they will just go to your competition and order from them instead.  Further if you can not lower your cost of freight and logistics then this will severely impact your company's bottom line.

 

Meeting these expectations may also mean you have to be able to support new capabilities such as drop shipping from your suppliers to your customers, or cross-docking within your facility for fast turnaround.

 

 

Real-Time Freight and Logistics Industry Dynamics

The transportation industry is not without its incongruities or capacity constraints.  From time to time you will hear about a strike at one port or another.  Or during the Holiday season you will certainly hear about carriers stretched to their limit in terms of the capacity they have to deliver your goods.

 

Changes in capacity or larger industry dynamics can also impact the rates that you will have to pay for transportation and fuel.

 

Your team needs to have its finger on the pulse of what is going on in the industry.  Proper planning and advanced visibility will buy you time.  You need to ensure that you can proactively manage through all of these circumstances without causing a disruption in your supply line.

 

 

Transportation Management System (TMS)

As mentioned in our blog post Freight and Logistics (Part 1) – Why don’t you have a TMS Solution yet? I truly believe you need a TMS solution of some kind.  It makes the most sense these days especially with the advent of cloud based solutions.   Partner with a company that can provide you with a cloud based TMS capability.

 

This level of electronic connectivity should also provide a dramatic improvement in productivity.  The process of invoice reconciliation and error management which can be very time-consuming and costly if managed manually.

 

 

Environmental Impact

Everywhere possible you want to mitigate the impact of shipping on the environment.  Working with your carriers you should be able to reduce the number of miles that trucks travel.  Whether empty or half full you can take measures to reduce fuel consumption.

 

Increasing the density of your packaging (see our blog post E-Commerce Fulfillment (Part 4) – Stop Shipping Air!) can reduce both your cost and wasted fuel consumption.

There are numerous ways that you can take to reduce the environmental impact of shipping.  You must incorporate this into your Freight Management strategy.

 

 

Freight Management is critically important.  Every company has to move goods and packages from one point to another.  And it demands having a  strategy in place.  Proper Freight Management can be a source of competitive differentiation along with its impact on your financial performance.

 

Whether you choose to manage Freight and Logistics internally or to outsource it you still need a strategy.  Don't just go through the motions.  With a strategy in place you will clearly be moving forward!

 

Check out Freight and Logistics (Part 1) – Why don’t you have a TMS Solution yet?

 

#Freight #Logistics #Strategy

 

Please see our other blog posts at http://supplychaingamechanger.com.

Organizations that are either considered high performing or who aspire to become high performing understand that their employees are their greatest asset.  A company can only achieve its overall objectives if their employees are aligned, on board and driving toward those goals.

 

At its core your employees understand how well or how poorly the day-to-day processes in your company run better than anyone else.  They also have tremendous ideas on how to improve those processes, how to improve your metrics, and how to achieve your objectives.

 

So how do you tap in to that intellect, unleash those ideas, and empower your employees in an organized and efficient manner?  How do you get your finger on the pulse of what is on your employee's minds?

 

 

In one company I joined we had thousands of employees scattered both geographically and functionally.  We also had a company wide mandate to effect a fundamental transformation of the culture, the business processes, and the financial performance of the company.  We could only achieve those objectives if we had all of our employees on board and helping us improve the business.

I have a basic belief that your employees have a tremendous number of ideas on how to improve the business.  Virtually everyone wants to do a better job and make their company more successful.  The employees are often only missing the opportunity to have someone listen to them and to be heard.

 

We decided up front that we wanted to solicit ideas from all employees.  Whether those ideas were big or small was somewhat irrelevant as every improvement would move the company forward.  And at its core we needed to create a learning organization with a culture of innovation.

 

To get started fast we decided to create a single, central email address for all employees to send their ideas to.  The response was amazing.  We very quickly received a lot of ideas.  But the problem was that the email address was a very poor format for administering such a program.  We knew that if we didn't acknowledge each idea rapidly and provide a response of some kind that we would quickly squander all of the goodwill that goes with asking employees for their ideas.  We needed another solution.

 

 

Find Your Ideas Innovation Platform

We needed a platform which would allow us to efficiently solicit and administer a tremendous number of unfiltered ideas from employees.  We wanted a platform which was easily accessible and intuitive to everyone.  And we wanted a platform which would in itself represent the innovation that we were looking to cultivate from everyone.

 

Our team found an outside organization that had developed custom employee idea collaboration software (http://www.soapboxhq.com).  We worked with them and made adjustments to suit our purpose and quickly implemented the software.

 

Fundamentally the software allowed any employee to input an idea online, which every other employee (who was signed up) could see.  Employees had the ability online to make comments on any idea and they had the ability to vote (thumb up or thumb down) on any idea.  All of this was visible to every employee.

 

Further the tool allowed us to create reports automatically and it made the administration of the program much simpler and more manageable.  Most importantly the tool represented a step function improvement in our approach to employee collaboration and cultural transformation.

 

 

Employee Engagement

Employees immediately grasped the concept.  Within our first 18 months we had almost 3,000 ideas, over 5,000 active comments on those ideas, and over 70,000 votes (for or against) those ideas.  Hundreds of the ideas had been completely implemented and hundreds more were in the process of being implemented.  And we made a point of visibly recognizing everyone who submitted ideas as well as the successes that arose because of the individuals and teams whose ideas we implemented.

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The message was very clear.  Our employees did have phenomenal ideas.  They were just waiting for Executive support and for someone to ask them and to listen to them.  They just wanted the opportunity to be a part of the change we were telling them that we needed.  Subsequent employee opinion surveys showed a clear and significant improvement in morale and engagement from this initiative.

 

Many of the ideas were small and localized in impact but they were important nonetheless.  Other ideas evolved through the process of voting and commenting which made the original ideas even stronger.  And still other ideas could be combined given their similarity and commonality, creating even greater reinforcement for their importance.  Most importantly the employees had visibility to all of this activity and they enthusiastically participated in this collaborative community.

 

 

Challenges

Our challenge continued to be one of administration though it had been made much easier with the collaboration software.   For every idea we needed to provide immediate acknowledgement and thanks.  For every idea we had to ensure that there was an owner who would take up the responsibility to evaluate the idea and if it made sense to see it through to implementation.  And we had to ensure that the assessments and all implementation steps were acted on aggressively.  Indecision and delays would be detrimental to our progress.

 

You must have an administrative process of governance, and a leader, that will ensure that forward progress is made in hearing, assessing and deciding on each employee idea.  You need to provide visible and credible Executive sponsorship for the program and you need to demonstrate that you can break through barriers without which the momentum will fade over time.

 

Addressing these challenges systemically is critical.  Without a solution for this you will end up with a lot of unimplemented ideas and a lot of employees questioning the sincerity of asking for their input in the first place, all of which will undermine the cultural change you are after.  But if you can solve for these challenges you will truly have created a collaborative, innovative and learning organization.

 

 

Conclusion

Employees are tired of hearing Executives talk about the need to improve productivity and profitability but who then never give employees the opportunity to share and implement their own ideas.

To drive truly Game Changing results you need a team of motivated and engaged employees beside you.  No single person can do all of this alone and no single person is the hero.

 

Providing a platform to allow your employees to share their ideas and get the entire organization invested in implementing them will move you well along the path to becoming a High Performing Organization.  But that platform must be accompanied by a process of governance to ensure that active administration of the program is in place.

 

Allow your employees to share their ideas and you will build a culture of continuous improvement from these ideas, the subsequent actions and the ensuing results.

 

Continuous improvement is a journey and listening to your employees is the start of an ongoing conversation along your way!

When you order something Online there is great excitement in anticipation of opening your package when it arrives.  With any luck the company you have ordered from has provided a positive experience in the online ordering and payment process.  Now you are just waiting for the package to arrive.

 

Most recently we ordered a couple of items online.  They were relatively small items and could easily fit in the palm of your hand.  Within a couple of days a large box arrived at the front door.   I wasn't quite sure what it was because the box was rather big, big enough for a toaster or perhaps a couple of large board games.

 

I was surprised when we opened the big box, removed a bunch of crumpled paper and packaging material, and found the 2 small items we had ordered sitting on the bottom of this box.  The items could have fit inside a standard envelope.  Instead they were deliberately packaged in a box which could have held 200-300 of the items.

 

What a waste!

 

 

This has happened MANY times when ordering from MANY different companies, big or small.

 

There are many stakeholders negatively impacted by this wasteful practice and it is important to understand why this is unacceptable from everyone's perspective.

 

 

Online Customers

As a customer and a consumer I am certainly happy to receive the items I ordered online.  And the customer experience may have been great when I ordered the item.  But when I receive a virtually empty box with a couple of lonely items on the bottom a lot of the goodwill I had is squandered by the company I ordered from.

 

To me it signifies poor management on behalf of the company.  It suggests a lack of concern for the environment, whether that be in the extra cost of the packaging materials, the unnecessary filler/dunnage, or the extra fuel costs for the truck that had to deliver this unnecessarily bulky box.  It also suggests a  lack of focus on efficiency improvement and waste elimination. If the company is that inattentive to packing a box how do I know that the actual product I ordered doesn't also have some of that poor attention to quality built-in?

 

You should also know that even if the company tells you that you are getting free shipping, the shipping cost is just built into the price of the item you are buying.  So if shipping costs are higher than they need to be, you are also paying for it, even if that cost is hidden from you.

 

 

Company

In 2015 both FedEx and UPS declared that they were going to start charging shipping costs based upon the greater of the Dimensional weight or the Physical weight of a package, and not just the Physical weight.   The rationale is that the cubic size of a package can be very large, which occupies a lot of space when shipping, even though the item may be very light in physical weight.  As such just charging shipping based on Physical weight was no longer appropriate.

 

This change in calculating shipping costs can easily result in a 20-40% price  increase as compared to costs based on physical weight alone.  The profitability of E-Commerce fulfillment is already under tremendous pressure.  So why would a company knowingly add to that pressure by unnecessarily adding to their shipping costs by packing orders in boxes larger than are required?

 

Even if your company has a large variety of skus that you ship, you should be able to increase the number of package size options.  It doesn't have to be an unmanageable number of different box sizes, but the example I've shown here is real.  It is not an exaggeration and it is not an exception.  Companies need to do a better job here.

 

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In many cases these items are packaged manually.  As such your operators should be given different options for which box size to use to fulfill an order.  This can be visual or it can be programmed in such that the computer system recommends a box size to the operator.  In either case there should be a formal process in place to allow for better box size selection while still ensuring that your products will arrive intact.  There are many dimensional weight calculators available online to help you determine an optimal number of package sizes based on the size of the items that you ship.

 

Depending on your product this increased density will also allow you to get more packages on a pallet or in a shipping container.  Even if this means only one more customer gets their package delivered faster it is worth the effort.

 

 

Shipping Companies

Whomever your carrier may be they, like everyone else, are faced with the realities of ensuring they have enough capacity to deliver packages on time during the busiest time of the year.  The phenomenal growth rate of E-Commerce means that capacity constraints and the prospect of shipping delays are a reality.

 

If you are able to optimize your package sizes you effectively increase the capacity of your carriers to handle a higher volume of goods and support your growth.  This allows both you and your carriers to be more profitable and to deliver a better customer experience.

 

And as mentioned previously the more product you can get onto a pallet or shipping container means that there are more orders getting to your customers faster.

 

 

It is worth spending the time now to ensure that your package sizes and packaging are optimized.  Especially when you get in to the heat and stress of the Holiday period you must already have processes in place to ensure that this package optimization continues.

 

You and your organization need to pay attention to the entire end-to-end E-Commerce supply chain, not just the front end wherein you take orders.  You should never ship in a large box that which could fit inside an envelope.  It's common sense.

 

The result will be a better customer experience, better environmental stewardship, lower costs, higher profitability, faster delivery, and increased capacity for growth.  Your customers, your company and your carriers will all be better off for your effort.

 

It's a win-win-win!

 

 

#B2C #ECommerce #Logistics

Please read our other blog posts at http://supplychaingamechanger.com.

Selected as one of the Top 75 Supply Chain Blogs on the Internet

The Retail company I had just joined was undergoing a massive transformation.  Fundamentally the new merchandising strategy was to curate a dramatically different set of products from that which was carried historically, but in addition to what was carried historically.

 

This meant that an enormous number of the business processes had to be transformed to support the new product set because management of the new merchandise required much different capabilities in all aspects of running a retail company.  Not only did this transformation require new capabilities but it also required  improvements to productivity and efficiency throughout the company.  And overall this meant a need for cultural change.

 

I decided that I would introduce Lean process improvement techniques to this company.

 

 

I came from a Manufacturing, Operations and Supply Chain background so I spent a career surrounded by the application of Lean methodologies.  However when I started the discussion around deploying Lean at this Retailer virtually everyone had no knowledge of what Lean was.  I had to start with the basics.

 

Fundamentally Lean has as its objective the maximization of customer value while minimizing waste through the deployment of a variety of techniques designed to create continuous improvement.   While explaining what "waste" was took some effort, everyone could rally around the Lean concept and objective.  This gave me the latitude to now proceed with deploying various Lean techniques throughout the company.

 

There were a variety of business pressures associated with the transformation.  I translated these into opportunities for the deployment of Lean techniques.  Specifically we started with:

  • 5S
  • Value Stream Mapping
  • Kaizen
  • Pull Systems/Kanban
  • Gemba
  • Standardized Work
  • One Piece/Continuous Flow

5S is a basic but very powerful Lean technique.  It is a methodology aimed at creating and maintaining an organized and efficient workplace.  There were two areas which cried out for 5S: the Retail stores and the Distribution Centres.  Deploying 5S would be a great way to introduce Lean to thousands of employees in the company and begin the transformation.

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In the stores there was tremendous pressure to receive, sort, stock and manage an increasingly diverse and growing set of products.  While the store fronts usually looked neat and organized and well assorted the backrooms looked horrendous.  Boxes were everywhere.  Employees had to squeeze their way through small and congested makeshift aisles snaking between piles of boxes and goods.  It was hard to maneuver and harder yet to understand where anything was and where anything had to go. 

 

Productivity was poor and the safety hazards were real.And this was the state of the backrooms during the slower times of the year.  During the Holiday season when volumes and activity are orders of magnitude higher than the rest of the year the situation in the backrooms was so problematic that it actually negatively impacted customers, sales, and our employee's morale and safety.In our Distribution Centres the situation was similar.  Previous management had no experience at all with Lean process improvement.  While the general flow of goods was adequate it was clear that the Distribution Centre had not been optimized from a 5S perspective. 

 

Our new management however had the same background I had in continuous improvement and even greater experience in Lean management and Lean training.We made the decision to deploy 5S into over 200 stores in a few months (ahead of the upcoming Holiday season) as well as in the Distribution Centres.  This would be a great way to reach hundreds of employees and introduce them to Lean thinking in a short period of time and begin the journey of transformation and cultural change. 

 

Still most everyone had no idea what Lean was so we decided to pilot 5S in a few store backrooms.Every Backroom 5S kaizen would take approximately 3 days.  We would provide a training session at the beginning of each event which would be led by a trained Lean facilitator.  Employees from within, and outside the store, were invited to participate.  The functional area Executive would serve as the overall project Sponsor.  And there would be a well attended readout session at the end of every kaizen.There would be a formal Charter for every Kaizen event. 

 

The Charter would outline:

  • The Sponsor, the Champion, and the Facilitator
  • Process scope (Retail backroom receipt to put away)
  • Strategic Objectives (Increase cleanliness, organize work flow and improve product flow, increase inbound efficiencies and productivity, reduce dock to stock cycle time, increase the quality of the receiving process, improve safety)
  • Objectives/Targets (5S the backroom, high level map the inbound process flow, identify process gaps, create a 5S audit process, create a safe working environment)
  • Boundaries (Includes the entire backroom, flow of product from the dock to being ready for the store front, material handling equipment changes, process changes to speed up the flow of product, organizing and cleaning the backroom; Excludes system changes (given the short period of time))
  • Team Members, Additional Members needed, and Readout guests
  • Preparatory work required

 

With the Charter in place the team conducted the first pilot.  The results were absolutely remarkable.  The team took before and after pictures.  Anyone who had walked in to the backroom before the event would not have recognized it afterwards.

 

Backrooms are typically small but regardless the 5S team filled one entire dumpster with broken and unnecessary furniture and workplace items, old acrylics, supplies buried under layers of dust, and products either broken or too old to be sold.  The team found lots of aging product on the shelves which, with a quick call to the Merchants, they marked down and put out in the store front for fast sale.

The improvement in the process and product flow was dramatic.  Shadow boxes were evident to ensure everything that was needed had its predefined space.  Kanban squares were introduced into the operation.  Safety measures were put in place.   Lots of room on the floor and on the shelves was made available.  Where before people were tripping over boxes now there was a lot of capacity to seamlessly handle the peak demands of the coming Holiday season.

 

Most important was the attitude of everyone who participated in the 5s Kaizen which was evident during the Readout.  Their excitement level was through the roof.  Everyone had trusted in us that by participating in this event they were participating in the transformation of the company.  The 5S Kaizen exceeded all of their expectations.

 

People who may have been skeptical going into the 5S Kaizen came out as true believers.  Employees who had worked in the Backroom for years talked about this event being the single biggest change they had ever seen during their entire career at the company.  What they previously thought as impossible they now saw as not only possible but implemented.  Others told stories about how they took what they learned and told their families about it and how they were using Lean 5S to reorganize their garages and their basements.

 

The pilot was an overwhelming success!  Word quickly spread across the entire company and the momentum was increasing exponentially.  Everyone wanted to participate.  As opposed to us pushing Lean 5S on the stores they were pulling on us to roll it out to them.  Within a few months we had deployed Lean 5S to over 200 stores and over a thousand employees across the company.

 

The results were the same everywhere.  Process flow, productivity, safety, and capacity improved dramatically.  We eliminated waste, both physical waste and all of the elements of Lean waste (transport, inventory, motion, waiting, overproduction, over processing, defects and skills).  The employees were ecstatic about the improvements, the introduction to the Lean transformation, and the chance to participate in the change.

 

Our Lean journey had begun.  The deployment of Lean 5S proved to be a great decision.  It delivered results.  We had quickly gone from an organization that didn't know how to spell "Lean", and may have thought that Lean only applied to manufacturing operations, to an organization that was full of believers and employees who were eager to learn more and embrace the Lean transformation.

There was more to do.  For Lean is a process of continuous improvement.  And cultural change is also a journey and not an event.  There were many more techniques we had to deploy along the way.  But now we had an enthusiastic employee population that was on board for the journey and pulling on us for more.

 

This was another example of Global Process Excellence in action!

The Black Friday/Cyber Monday shopping extravaganza is now less than 3 months away.  While that may seem like a long time for functions such as Marketing or Sales, for your Supply Chain the Black Friday push should be on right now!

 

If you have products manufactured overseas for instance then if those products are not either on the ocean right now or en route over land to your Distribution Centres then you are already in trouble!

 

The success or failure of the biggest shopping period of the year, Black Friday and Cyber Monday, depends on a lot of things coming together involving all functional areas of your company.  Last minute preparations to work out the kinks on promotions or to make tweaks on your website can continue right up to when the ominous, and exhilarating, Black Friday clock strikes midnight.

 

But if your Supply Chain is not ready RIGHT NOW then you will have a rocky, stressful , and potentially disastrous Black Friday period.

 

What are the elements that should be in place to ensure that you have a successful Black Friday period, at least in terms of your Supply Chain readiness?

 

Black Friday

Complete Supply Line Visibility

Whether your goods are still being manufactured, in transit, or they are already in your stores or Distribution Centres, you need to know where your goods are.  When you are in the middle of the Black Friday period it is too late to learn that your products are not where they are supposed to be.

 

Now is the time to identify any problems or delays in getting your products where they are supposed to be.  You still have time to deal with supplier issues, transportations delays or fulfillment problems.  It's much easier, less expensive, and less stressful to fix these supply line issues now.  But you can only know about these issues if you have that visibility.

 

And the issues in your supply line are more than just about delivery quantities.  If there are quality problems, or specification issues, you need to know of these quickly so that you can take the steps necessary to get these corrected.  Even though time is not on your side you still have some time left to get these things done.

 

 

Fulfillment Solution Readiness

For most Retailers the Black Friday/Cyber Monday and Holiday season product has already started to flood in to their Distribution Centres.  The seemingly endless tsunami of product is hitting them now and will not ease up until likely late November or early December.

 

This is an early test of the readiness of your Fulfillment solution whether you have your own Distribution Centre or you are using a partner to provide this service.  Generally the Distribution Centre needs to have any system upgrades and performance enhancements in place now.  There will be no time for making changes later.  The process and procedures that you have now must be robust enough to withstand the overwhelming strain of the Holiday season.

 

Your Distribution Centre will also have to already been recruiting, training and staffing the personnel needed to handle this phenomenal workload bubble.  If you wait too late to bring temporary personnel on board then they will not be sufficiently trained when the volumes, and the stresses and pressures, are at their peak.  At that point quality issues will occur, deliveries will be missed and costs will soar all because you did not manage your staffing solution well.

 

Further there will be a ton of other companies competing for the same people you are trying to recruit at the same time.  This will continue during the Holiday period so the risk of attrition, and need to backfill people, will occur at the worst possible time of the year.

 

Physical space will be the other issue that will face you.  Likely during the rest of the year you have a lot of available space in your Distribution Centre.  But when the volumes and activity are at their highest you run the risk of not having enough space in Receiving, in your Storage areas, and in your Processing/Packaging areas.

 

This problem happened to me many years ago.  In mid-September we ran out of space.  The product was still arriving in record quantities.  But we ran out of space to store the goods until it was time to send them out to the stores.  Receiving backed up and trucks and trailers overflowed the parking lot.  We were on the verge of shutting down the operation due to this bottleneck.

 

And finally if you have Omnichannel fulfillment channels aside from your Distribution Centre (eg. physical stores, drop ship vendors) then you need to ensure that the processes, tools, systems, staffing and materials needed by each of these entities is in place and debugged.

 

 

Promotion Readiness

How frustrating is it to see that a company has advertised a great deal only to find that the product is out of stock when you go to order it online?      How does that happen?

 

Black Friday/Cyber Monday should be the time of year when the communications integrity between your Merchant, Marketing and the Supply Chain teams are at their peak.  The Supply Chain must know exactly what the promotions are and they must be able to confidently assure everyone that the product is in place in the appropriate channels to support the promotions strategy.

 

The Marketing team and the Merchants can quickly get caught up in trying to create last-minute promotions and deals to capitalize on the latest market intelligence.  This is great and everyone should support these opportunities for growth.  But if the Supply Chain team cannot support the last-minute promotions with the product necessary to meet customer expectations then there is a more dangerous risk of disappointing customers and losing them.

 

 

Logistics Delivery Channel Readiness

As with every other part of the Supply Chain the strain on your logistics engine will be highest at this time of year.  The largest companies like FedEx and UPS must constantly add capacity and capability to meet the ever-increasing volumes and demands for the latest possible delivery.

 

Customers will order your products in the Black Friday/Cyber Monday period all the way up to December 24th.  And they will expect that they will have those items arrive so that they can be under the Christmas tree.

 

But your Supply Chain team must know that every other customer is making the same promises to their customers.  All of this puts a phenomenal strain on the Logistics and Transportation companies.  You must work with your delivery partners to communicate your expectations, understand their capacity and limitations.

 

And then you must translate that into a realistic delivery commitment schedule that can be communicated to your customers.  There is no point in promising to deliver something by December 24th if your logistics partner can not meet that commitment.  You will lose customers and jeopardize your business if you make false promises.

 

System Integrity/Robustness

And none of this can work without readiness in your IT systems and infrastructure.  The IT systems have a relatively light load during the rest of the year.  But during the Black Friday/Cyber Monday period your order management, distribution, allocation, replenishment, and financial systems will be subject to a level of transactional activity that can be many orders of magnitude higher than ever before.

 

This is not the time of year when your system can go down.  If there is any disruption at all your then your customers will instantaneously go to your competitor's website.  They will abandon their orders, they will tell friends about their bad experience with you, and you will find that those orders are lost forever.

 

While there are certainly enhancements and improvements that have been made to your IT system since last Holiday season, and your growth expectations are even higher, you must ideally test your systems at peak volume, off-line, prior to the Holiday season.  The risk of failure is too great otherwise.

 

 

Conclusion

The Black Friday/Cyber Monday Holiday period can be exhilarating.  While you want to be able to handle more orders than ever before, if your Supply Chain is not ready then you will very likely fail.

Look over the entire ecosystem of processes, resources, tools, equipment and materials that constitute your Supply Chain.  Test the capabilities and readiness in all of these areas in advance.

 

From a Supply Chain perspective most organizations are dealing with the higher Holiday volumes right now.  So problems and kinks are being experienced today.  Work out these issues, fine tune your readiness for Black Friday/Cyber Monday, and increase your preparatory plans.

 

If you do this correctly then your Supply Chain will perform well.  While the volumes will be higher than ever before your Supply Chain team will handle it easily.  Make your Holiday season busy, but boring, from a Supply Chain perspective.

We launched the Global Inventory Turnover Breakthrough project on April 1st.  It was not a joke.  Our challenge was to improve Inventory turnover from 6.3 turns to over 8.6 turns within the year.  This was a level of achievement that the company had never before reached.

 

But we had the Call to Action.  Our Inventory turnover was perennially the worst in our industry.  Our Inventory levels were consuming an enormous amount of cash as well as creating a lot of expense in carrying charges.  And this had the effect of driving our Return on Invested Capital to very low, unattractive levels.  Further there were ongoing complaints that even though we had a lot of inventory we  never had all of the right material that was needed.

 

We had the motivation to turn this situation around.  What we didn't know is that we were about to make history and go from Worst to First!

 

 

The official launch was a conference call and involved everyone in Supply Chain and Process Management from all of our facilities around the world.  While there were many other stakeholders that we would need to quickly reach out to we knew that tasking the Supply Chain team, the team that managed all supply/demand planning, all parameter management, and  all purchase order placement/alteration, was of immediate importance.

 

We were taking the Holistic Approach as described in Inventory Turnover Breakthrough (Part 1) … Go Back To The Basics!.  The challenge was too large and the time too short for us to do anything but tackle every angle at once.  Further we had defined the main levers which control the rate of moving inventory in to the company, through the company, and out of the company (see blog Inventory Turnover Breakthrough (Part 2) – Define and Manage The Levers!).  This determined which processes that had to be improved globally.

 

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Further we had identified excellent leaders to lead the various Global Process teams.  These people were truly great change agents who were able to work around the globe seamlessly and push the envelope of what could be accomplished.

 

We quickly followed up the launch conference call by travelling to all of the regions around the world, meeting with the teams from every facility.  The face to face communication was crucial as we had to impart the seriousness and immediacy of our collective task, we had to address any resistance up front, we had to communicate the behaviours we needed in the culture, and we had to mobilize everyone around the challenge.

 

We employed the Attack on all Fronts approach (see our blog Hedge Your Bets For Success … Attack On All Fronts).  As such we needed every Facility, every Customer team, and every Global Process team to understand our objective, to rally around us, and to drive the targets that we gave to each of them.  If everyone played their part we had a great chance of meeting the challenge.

 

Additionally we began a weekly process of governance with each of the Facilities, each of the Process team leaders, and each of the Customer team leaders.  Time was not on our side and we could not wait to see results only once a month and then react.  We didn't have the time to make any extensive changes in our I/T systems.  We needed much more rapid feedback on what was working, what wasn't working, and where we had to make course corrections, shape behaviours, and blast through obstacles and sacred cows.

 

This level of focus and on-the-field leadership allowed us, most importantly, to create the Cultural change (see our blog Inventory Turnover Breakthrough (Part 4) – Creating the Culture to Break Barriers!) that was at the core of what was needed in order to get the results we were looking for.  The current situation was the result of years worth of behaviours, beliefs, processes and practices.  We had to fundamentally change how people worked each and every day across the entire planet, and we had to do it fast.

 

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The frequent reviews and governance allowed us to shape the behaviours needed to drive transformational change.  We needed people to be results oriented.   We needed them to make commitments and be held accountable to meet those commitments. We needed people to embrace the possibilities.  And we needed people to believe in themselves and take risks. We had very smart employees and I didn't believe for an instant that our competitors were really better than us.  As such there was no reason we couldn't surpass them and Change the Game!

 

As we proceeded through the coming weeks and months it was obvious that various elements of the project were proceeding at different paces.  Some Process teams and some facilities got off to a fast start.  Others took more time to get going due to inertia in the system and culture.  This helped to inform where we needed to spend our time to ensure that everyone was in a position to hit their sub-targets.

 

But we had set the sub-targets such that we would over-achieve the goal if everyone did their part.  The sum of the individual targets would far exceed our overall goal.  By the end of the first quarter we had improved our Inventory turns by 1.1.  This was a level of achievement which hadn't been seen in a long time.  It also moved us out of last place relative to our competition.

 

There had been a lot of success achieved in all of the Process, Facility and Customer teams.  We communicated this success across the entire company, from the CEO on down.  We highlighted the successes, communicated the next immediate steps that we needed to take, and we adjusted the sub-targets upward.  And we went back on the road to meet everyone around the world to give them the same message face to face.   This constant communication at all levels continued throughout the project.  Momentum was building!

 

Over the coming months we continued the same on-the-field behavioural focus getting into extreme details and eliminating roadblocks, whether process based or behavioural, along the way.  Friendly competition started building between the Process teams and Facilities to see who could improve the most.  And everyone was, more than ever before, acutely aware of how important this project was to the success of the company.  Our gun sights were set on catching the competition.

 

After the second quarter we improved our inventory turns by another 1.1 turns.  Doing this 2 quarters in a row had never been done before in our company, and had rarely been done by any of our competitors.  We moved from last place to being in third place as compared to our competitors.  Further we had almost achieved our end of year goal 3 months earlier than planned.  What had been a seemingly impossible goal only a few months before was now within our reach.  The excitement and motivation were palpable.

 

Heading into the final quarter of the year we set our targets even higher.  We went back on the road to ensure we continued to build on the momentum and to recognize the great results so far.  Only 6 months before there was a lot of concern and skepticism about whether the goal could be accomplished.  Now the paradigm and prevailing view was one of how far beyond the goal could we actually go.

 

FROM WORST TO FIRST!

We finished the year with a quarterly turnover improvement of 1.3 turns, our third consecutive quarter of improving turns by at least one full turn.  This had never been done in the history of our industry.  And when all of our competitors results for the quarter were published publicly the result was in:  we had gone from being the worst in our industry in Inventory turnover to being Number One!

 

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The pride in that accomplishment from everyone in the organization was absolutely incredible.  To become the industry leader was phenomenal.  We had reduced inventory by hundreds of millions of dollars.  We had reduced carrying charges, and improved profitability, by tens of millions of dollars.  We had catapulted our Return on Invested Capital performance to also lead the industry.  And we not only didn't compromise a single customer delivery, but we increased Customer satisfaction as the quality of the Inventory was improved immensely.

 

We travelled around the world one more time meeting with all of the teams involved and recognizing all of them on their incredible accomplishment.  Rarely had the organization had the opportunity to celebrate such a remarkable achievement.  The pride and the happiness on everyone's faces made all of the work worthwhile.

 

And because we focussed so intently on making process based improvements and changing the culture we had created sustainable results, which continued for several years thereafter.

 

On our journey from Worst to First we had truly Changed the Game!

How many times have you looked at your operation and thought about how you would re-layout and streamline the process flow if you had the chance?

 

When you are starting with a new, empty facility it is clearly much easier to layout the operations to make the best possible flow of materials and processes.  But when you have an existing operation which has evolved over a long period of time, you are likely faced with utilities, equipment, infrastructure, walls, and paradigms all of which have resulted in a rather inefficient flow of materials and people and processes.

 

This was the situation we had in one of our Distribution Centres. In this particular Distribution Centre the current layout of the operation had been the result of many iterations of adding new customers, new products and new processes over time with the associated fluctuations in demand for everything.

 

Yet with the launch of our Global Process Excellence project we had unleashed our employees to make the improvements they had imagined could be made for a long time.

 

 

 

The Current State Operation

The situation, through no one's fault, was an operation that had material flow akin to what you would see on a spaghetti diagram.  All of the pieces were shoe horned in to take advantage of whatever space was available at the time.  Materials were moving in every possible direction.  The storage areas were scattered throughout the facility.  Raw materials storage was intermingled with finished goods storage.  And there was no single pattern of linear flow, from receiving to storage to processing to shipping, anywhere in the facility.


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Our Global Process Excellence program provided the catalyst for our employees to hit the reset button on how the operation was organized.  Previously they did not think that they had the support to make any significant changes.  That had contributed to the nature of the present layout since making only incremental changes suboptimized the overall efficiency of the operation over time.  We made it very clear: under Global Process Excellence (see our Blog Executive Sponsorship … A High Powered Enabler For Changing The Game) our employees had complete Executive Support.

 

With Global Process Excellence the employees felt empowered to step back and make the really big changes.  To create a Best In Company, if not a Best In Class, operation they would have to rethink the process flow for the entire operation in one fell swoop.  They were going to take the Holistic approach (see our Blog Inventory Turnover Breakthrough (Part 1) … Go Back To The Basics!) which had proven successful previously in driving truly Game Changing results.

 

The team clearly understood the objectives.  We had to lean out the operations and improve productivity.  We had to enhance our capabilities and increase our capacity.  We had to meet, and exceed, all customer expectations.  And we had to leverage our tremendous employee expertise and experience.

 

The team was also amongst our very best.  They fully embraced the Cultural Change which is at the heart of any Game Changing transformation.  They were results oriented.  They were change agents.  They embraced the possibility of massive change.  And they came to believe in their ability to make this kind of change happen.

 

They decided that they were going to rearrange the ENTIRE facility in one single project.  This meant moving all of the racking, all of the operations, and all of the materials.  They also decided that they were going to do this during the busiest time of the year!

 

The overarching cardinal rule was that they could not miss a single customer delivery and they could not introduce a single quality problem.  When I was asked to approve the project they were about to undertake I immediately said yes!  I believed in them implicitly.

 

The team set about to do all of the necessary planning.  This would require a level of coordination, synchronization, scheduling, communication and alignment unlike anything that most of them had ever attempted in their entire career.

 

The relayout and optimization that was planned would require the reconfiguration of a Distribution Centre operation of over 200,000 sq. ft.  Hundreds of employees handled millions of items through receiving, processing and shipping every month.    Thousands of pallets worth of raw materials and finished goods, and the racking and shelving to hold them, would also have to be moved.

And the team was going to accomplish this over an 8 week period, WHILE the operation was still running, during the busiest time of the year!

 

They began the process of developing intricate plans for the massive move.   Communications, planning, and the time commitment that everyone stepped up to were intense.  The team was self managed and held themselves to account.  They knew that the stakes were high, as was the reward, and they rose to their own challenge!

 

Once completed the facility would look dramatically different from before, with a highly efficient and streamlined operation.

 

 

The Future State Operation

 

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The team took the opportunity to document the execution of this remarkable project with time lapsed video.  Attached is the video link which I implore you to watch.

https://www.moduslink.com/resource/moduslink-brno-lean-deployment-journey-time-lapse/

 

The results were amazing!  They rearranged the entire Distribution Centre in 8 weeks.  The team never missed a single customer delivery.  There was no quality issue.   And all of the objectives were met, if not exceeded!

 

This accomplishment is an absolutely extraordinary example of a Game Changing initiative.  It started with a Call to Action.  It ended with an operation and a team that was stronger than ever before with a level of pride and trust that was unprecedented.

 

They challenged the paradigm of what could be done, they embraced the possibilities, and they attacked the problem on all fronts.

 

This was a great case study in Changing the Game!

 

 

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