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Three Process-related Ways to Improve Distribution Center Operations

Let’s get back to basics: You don’t need the latest ERP package or other SCM software to improve your distribution center operations. True, technology plays its part as an enabler; however, the majority of the savings are found in area we often overlook: our processes.

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

Process area #1: Inbound—everything begins here

Is your Inbound area a constant bottleneck? Why? Lack of appointment scheduling, poor pre-receipt planning and documentation, and incorrect purchase order information will bring any dock to a halt. This is the source of problems that, if not corrected, will precipitate and multiply their effects throughout your operation, creating inefficiencies and ultimately affecting your end customer. And then you have to fix the problem (e.g. wrong item shipped) later—adding even more cost. Why not fix the problem the first time around? Do you have documented processes for the following areas?

• Appointment scheduling
• Pre-receipt planning & document preparation
• Vehicle arrival & unloading procedures
• Quality control procedures

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

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

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

• ABC analysis to identify fast, medium and slow SKUs to re-profile layout
• Introducing flow rack for smaller items to free regular pallet slots
• Multi-level picking & shelving for very slow items
• Batch picking for small volume orders

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

Process area # 3: Realistic Work Measurement and Productivity Standards—must be set

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

Instead, it is important to measure cases per hour and set a target for the month. Compare this to last year’s actual productivity and year to date. These are meaningful numbers that can, when tied to an incentive program, motivate the team to increase productivity. If you currently use a time and attendance system (TMS), you can easily modify the reporting outputs to include departmental productivity, whether it is Inbound, Putaway, Replenishment, Picking or Shipping. Once again, by having a process to measure and monitor productivity properly, realistic expectations can be communicated to all associates.

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