For many multichannel businesses, life doesn’t slow down just because it’s January. A growing gift card business pushes shipments even after Christmas, and now is when efficiently processing returns is critical. Now is also the time to be looking at where bottlenecks and other issues occurred in the warehouse in order to make improvements.
While it’s still fresh in the minds of your supervisors and employees, find out where processes broke down – and what ideas they have for improving them. The focus of this type of assessment should focus on several key factors, which include:
Warehouse layout and product flow. Trace the flow of inbound product and returns and outbound customer orders. What do you conclude from this? Is your warehouse layout appropriate for peak shipping times? Where are the bottlenecks and what’s causing them?
Use of technology. Warehouses are no longer just metal racks that hold inventory. Efficient, profitable businesses understand that technology can play a vital role in supporting the customer, and profitability. Are your systems capable of efficient pick ticket batching, replenishment processes or inventory adjustments? Are you leveraging technology in the warehouse or simply just printing paper?
Use of material handling equipment. The same as with technology, the right material handling equipment (MHE) in conjunction with the right warehouse layout will reduce bottlenecks and streamline process – when done poorly it can sink a business. How could changes in your MHE boost your efficiency?
Warehouse labor. More than 50% of the cost per order is in labor. And more than half of the labor cost is in pick and pack. What processes and technology can eliminate “touches” of product? Did you have the right ratio of pickers to packers? How would the labor be affected if you had a more efficient layout, material handling equipment or utilized better technology?
By addressing these concerns now, you will be able to determine what changes need to be made, and have the time to implement, and test the changes. Incrementally raise the bar each January for higher productivity and efficiency. Depending on the types of changes that need to be made, these might take 4-6 months or more to fully implement.
In order to maximize your time, and to have an outside, objective review of your processes, have F. Curtis Barry & Company assist you with a warehouse assessment. We can assist your current warehouse staff and management in the process, and oversee the implementation of any recommendations. Don’t miss this opportunity to make changes for the 2015 season. Visit our website to review our warehouse assessment consulting services.
Inventory. As you assess your company’s 2014 performance, be sure to include an objective evaluation of how well you planned and managed it this year? Was it anywhere close to being optimal (i.e. acceptable under or overstock levels)? Did the management of inventory positively service your customer and gain the sale?
In the last couple of years inventory availability has really become central to how well omnichannel retailers can sell to the customer from a variety channels, stores and distribution centers. Surveys show that more than 50% of the time the customer starts the selling transaction with an inquiry about inventory availability and/or comparison pricing. Then the omnichannel delivery mechanisms of ordered on the Internet picked up at the store; or ordered on the Internet and shipped from the store, or shipped from a company DC become crucial. In order to capitalize on omnichannel, Wal-Mart, Target, Kohl’s, Neiman Marcus, etc. have made tremendous systems changes to “open up accessibility” of their inventory at both the store, and distribution center level. Frankly, it’s impressive the inroads they have made.
For catalogers and direct marketing operations, inventory management has also been key. Even more so because they often did not have stores where additional sales could be gained; or over stocks could be liquidated.
Here are a couple examples of inventory best practice assessments we have recently completed. In a large retail company with sales over $500 million we found that a SKU Rationalization was in order. The company had more than 600,000 SKUs and the department, classes and products needed to be reviewed totally to reduce SKUs; reduce dollar investment; and improve inventory turnover.
In another omnichannel business, our inventory best practice assessment recommended that the company research, and select new combined systems for planning, managing and evaluating items in its stores and catalog operations. This allowed the existing inventory staff to be more productive as the company grew.
A starting point for an inventory best practice assessment should include:
Review of key metrics such as initial order fill rate, final fill rate, backorder, cancellation rates, etc. and a benchmark comparison;
Review of all the processes of planning, purchasing, weekly forecasting, inventory management and methods for keeping stocks lean;
Identify how product sells differently between retail stores, direct marketing and catalog channels and Internet promotions;
Critique of the major decision making reports and displays;
Organizational review and assessment of planning, buying and rebuy decisions;
Contact F. Curtis Barry & Company to talk about how an inventory assessment can improve your management of your inventory and in turn improve your customer service and profitability. Visit our website to read more about our inventory best practice assessments. We look forward to talking with you in the near future to get started.
For many multichannel retailers, this past holiday season brought about many challenges, the least of which were systems challenges. The system challenges certainly impact the overall business flow and processes, but more importantly they negatively affect the customer, company productivity and your company’s profitability.
With customers having been conditioned to good experiences with other retailers such as Amazon.com, Walmart and Target – you must also compete with them when the customer's expectation is so high. Now is the time to look back at this past season and reassess these system challenges, and how to set a plan for making changes in 2015.
Companies should take this opportunity to evaluate and act on these system issues while we are still early in January. By focusing on these systems issues now, retailers can ensure that impactful changes can be implemented and tested prior to the peak 2015 season.
1. Evaluate your current order management system in place. Evaluate your internal business applications and determine where the gaps exist and where functionality is needed (e.g. order entry, marketing, merchandising, warehousing, etc.). It is also a good opportunity to understand what best practices are being used by other retailers, and what best in class functionality is available from commercial order management systems.
2. Evaluate the current interfaces. The days of simply just batching data and passing them once a night from one system to another are over with – or at least they should be. The problem is that many businesses may have best in class systems, but they have failed to properly develop the interfaces; or upgrade interface functionality. Often times this means that functionality in one application, or another, is not available because of a poor integration. The best applications can become highly ineffective if they can’t communicate all of the data necessary, in a timely manner.
3. Develop an action plan. Once the applications and interfaces have been assessed, and you understand how other retailers are leveraging technology, it’s time to develop an action plan. These aren’t IT projects, but a full company effort in which IT is one partner at the table.
FCBCO can help your company with these system challenges in order to be ready for 2015. Our 30 years of experience allow us to assist our clients in the following ways:
Assess the current order management system and interfaces to other systems to identify gaps and shortcomings.
Provide an outside, independent perspective on multichannel best practices, as well as what is available from commercially available systems.
Supplement your IT staff, and assist management with the ability to identify potential gaps of both internally developed applications and commercially available packages.
Assist with the prioritization of the action plan to ensure the most critical items are addressed and implemented and thoroughly tested.
Assist management with getting system users to think differently when it comes to functionality and how technology can help solve business problems – instead of the same old “because that’s the way we have always done it” mindset.
Assist with the development of business requirements for functionality and interfaces to either evaluate commercially available systems, or to assist with the development of internal applications.
Evaluation, selection and contract negotiations of commercially available applications.
Assistance with project managing and testing plans for both internally developed applications and commercially available applications.
Most importantly, F. Curtis Barry & Company can help you understand the strategic direction for the order management system project, the investment costs and the benefits of these projects. Visit our website to review our order management system consulting services. We look forward to talking with you in the very near future to get started.
Since 1983 F. Curtis Barry & Company (FCBCO) has focused on assisting companies with maximizing their internally-developed order management systems through enhancements. We assist with internal development projects, as well as system selection and project manage the implementation of commercially available order management systems when the internal IT staff did not have the bandwidth to do so. Here are some examples:
Prioritization of an extensive list of modifications. Based on FCBCO’s experience we prioritized items that were industry best practice, provided a quick ROI and were needed for moving to a new payment processor.
Internal management of IT and implementation of PCI-DDS for a women’s apparel direct marketer.
FCBCO assisted with the development of internal system requirements. For a large food gift marketer, we wrote requirements for their implementation into the corporate order management system which other brands use.
Industry knowledge. Having worked with hundreds of companies on internal systems, we bring industry expertise and best practices to internal IT projects.
Supplement internal IT skills during implementation and conversion. These activities include defining user requirements, detailed modification design, data conversion and cross system integration specifications.
Project management. During the past year we have project managed implementations of several commercial systems; with extensive integrations from ecommerce engines to warehouse management systems.
System selection. Assisted a multichannel gift company with our expertise and methodology for the search, selection and implementation of a new order management system that literally replaced all existing functionality they were utilizing.
Whatever your system projects might be this year, FCBCO is confident that we can assist your organization; whether it is enhancing you internally developed systems or with the search and selection of a new order management system. With over 30 years of experience with all different types of retailers and direct marketers we are focused on one thing, making you successful in your system endeavors! We look forward to hearing from you soon to discuss your system project. Visit our website to learn more about our order management system consulting services.
Customer expectations are dictating changes in how they shop from companies, whether you are a retailer, wholesaler or manufacturer. In turn, retail companies are responding with new strategies to present advertising offers, make the sale, and serve the customer. In addition to shopping in-store, customer orders can come from e-Commerce sites, call centers, in-store kiosks, tablets, smart phones, laptops, etc. The order fulfillment options include shipping customer orders to stores for customer pick-up, shipping orders from stores or fulfillment centers, and drop shipping to customer homes. Providing a convenient shopping experience for an increasingly time-starved customer may be the difference between making a sale or a customer giving the sale to a competitor.
These forms of omni-channel shopping are not for all customers. However, for the increasingly technologically savvy customer – who often is your younger shopper – it is essential. There are major retailers that now have as much as 9% of total company sales coming from this form of retailing.
It's also important to take a holistic view of customer shopping. A holistic view means recognizing that the synergy that occurs between the channels will mean higher sales in total than if you treat them as separate channels and don't optimize customer service across them.
Technology is certainly key to providing these omni-channel services, but the bigger issue is how to re-conceptualize your retail model to stay connected with browsing shoppers and customers, and how you make the sale. Here are some tactics retailers and direct marketers are using:
- Connecting with customers that are "pre-shopping" will give your merchants and marketers ideas of what they are looking for
- Keeping customer bases up-to-date on the latest offers, no matter where the customer is
- Using location history to promote in-store and cyber special events
- Increasing lifetime value by suggesting complementary products
- Reducing cart abandonment with offers and communication
- Nurturing loyal customers with special offers
Key Factors in Maximizing Omni-channel Shopping
- Practical, easy shopping is about convenience. It's about providing customers the options which allow them to shop when they want and from where they want. Online convenience begins with an easy-to-navigate, online shopping experience from websites and mobile devices. In shopping studies we do, this is still a major issue with many companies.
- Being in-stock when the customer orders. For many retailers these customer facing approaches mean they have to make inventory availability accessible. Systems have to reserve inventory to customer orders, whether it be for pick-up at the store, fulfillment from stores or DC's, or drop shipping from vendors to customer's homes and businesses.
- Merchandising your website. Are you offering the same product as in store? Some retailers offer extended sizes, product line extensions, and web exclusive product lines not available in stores.
- Building the infrastructure. Great technology is one thing but having the people, systems and facilities in place to deliver the product is at the heart of making the sale. As an example, a high percentage of orders resulting from e-commerce, catalog and call center sources are small orders of three items or less. The processes and methods used to pick and ship these small orders in DCs has to be very efficient. These are different systems and methods from what retailers use to crossdock inbound product and replenish store stocks. Call centers and order management systems also have a role in this new infrastructure.
- Changes to store operations. We often hear from store managers, "These shopping methods often give the omni-channel customers the best selling merchandise." We also hear that we are using store personnel to fulfill orders and instead of being on the sales floor. Again, we have to adopt a holistic view of customer sales. Retailers have to make decisions about taking back returns at the store level that were fulfilled by another channel.
- Shipping & handling. Omni-channel often means we have to get the order to the customer. We all know there is no such thing as "free shipping." Historically, many direct businesses offset some of their product picking and shipping costs by charging shipping and handling fees. Shipping and handling costs are a major percent of the retail order value. Customers are savvy and they don't want to pay excessive shipping costs. Amazon's Prime and competitor ShopRunner have created marketing approaches and low cost shipping that puts pressure on all other retailers and direct companies.
We expect that in-store retailing will be the predominant form of shopping for a long time to come. However, omni-channel strategies need to be addressed by all retailers today. The technologies and new forms of omni-channel marketing and fulfillment cannot be adapted successfully overnight. The customers and the competition are driving the way customers shop.
Often times we meet with multichannel companies that don’t have reporting that accurately reflects the inventory turns, or they debate how significant this KPI is, and the need to analyze turns. By taking a financial view of inventory turns, companies can manage the inventory asset even better, which in turn leads to stronger profitability. Larger retail and multichannel businesses manage turns tightly in order to remain competitive and drive profit margins. Companies must bear in mind that on the balance sheet, inventory is typically one of the largest assets.
By managing turns, multichannel businesses are able to benefit the overall business in many ways. These include the ability to:
Reduce the total amount of inventory maintained on hand. This reduction in inventory means less capital invested in inventory, which can be invested in other aspects of the business.
Reduce the overall operating expenses, and carrying costs associated with the storage and maintenance of the inventory throughout the supply chain. These costs can range from 12% to as high as 25% of the net sales in some organizations.
With the reduction of inventory, companies are able to run a more lean supply chain, and reduce the size and expense within their distribution centers.
For companies that are struggling to understand the value of inventory turns, or those that are just beginning to think about implementing this KPI, in its simplest form it allows you to understand the length of time it is taking you to recover the dollars invested in inventory. For a business that is only turning the inventory two times per year, it is taking you six months to recognize that revenue invested in inventory. Turns of four times per year it is 90 days to recognize the dollars. For any business that is concerned about cash flow, this is a critical KPI to keep in mind, and to regularly review with management.
The chart below is based off of some of our multichannel clients; it allows you to understand how these businesses are managing the inventory asset. Additionally, we have shared the number of SKU’s, the number of merchandise vendors and an idea of net sales.
In contrast to the above businesses, the growth of many large multichannel businesses and retailers hinge on managing the inventory turns. The chart below reflects the inventory turns for publicly traded companies based on their 10K filings. As you can see, many of these businesses are turning the inventory every 60 days to as much as every 30 days or so.
For businesses to maintain and improve efficient inventory turns, you must look at your internal processes including planning, purchasing, managing inventory and the timely liquidation of overstocks. Companies must look at how each of these can be improved, and become more efficient. Additionally, you must implement and utilize reporting and KPI’s to understand the business better, which include not just turns, but also returns and cancellations, GMROI, sales to stock ratios, backorders and fill rates.
By measuring the business overall and comparing these KPI’s to other efficient and profitable businesses, you can establish a plan for improving the overall health of your business. Inventory turnover is key to the entire process, and to the health of your business. Implement these KPI’s and use them to monitor your business and identify areas of improvement.
F. Curtis Barry & Company is always available to help in analyzing and reviewing your inventory turns and other inventory metrics that you are using. If you would like to discuss, please reach out to Jeff Barry at 804-457-4028 or firstname.lastname@example.org.
At this time of year most companies are preparing their capital budgets for fiscal year 2015. And as part of this exercise many CTOs are tasked with coming up with financial estimates for system improvements. Regardless of the system (order management systems, warehouse management systems, retail management systems, POS systems, inventory management systems, etc.) that is being considered for replacement or upgrades; there are several items that need to be considered regarding the cost of software and what it means to your business. The following points will help you better understand that there are more software cost considerations than just the licensing of the software itself.
From an application licensing perspective, review the pricing model and any optional modules that may be necessary to support the functionality within your business. If your company needs some additional unique functionality that is an optional component of the vendor’s offering then you will need to include these costs as well. In most cases these optional or "bolt on" additional modules come with a price.
Much of the software being offered today comes both as a licensed model and a SaaS model giving you different options to acquire the software, and with the SaaS model an easier cost to absorb. The implementation and conversion costs will be the same regardless of the pricing model you choose and you will want to do the math to determine where the SaaS model becomes more expensive than if you would have purchased the license model.
Will you host the application internally or in the "Cloud"? There are different cost considerations for both of these. If the vendor is supplying the hardware for the application and database servers, be certain the hardware is both sufficient to support the organization and that you are budgeting for any additional hardware that will be needed. Remember to include an environment for testing, training and software upgrades. Redundancy is also another factor to consider whether this is done internally or in the "Cloud", it needs to be budgeted for as well.
Understand the vendors’ maintenance and support plans and when payment is due. Many vendors charge these annual fees once the application is delivered/installed. Annual software maintenance can range from 18% to 25% or more of the MSRP or originally proposed license fees.
The implementation of any software will incur one time start-up costs for the vendor’s project management (PM), travel to your facility to perform the Discovery/Gap Analysis. There will also be on going site visits by the vendor for follow up items, training, conference room pilots, and go-live assistance. If the proposed PM fees don’t look realistic, then you need to increase the time/dollars for these various services.
For items such as training and implementation services, understand the number of days being proposed and what roles or tasks will be performed by the vendor. Be careful of terminology like “the normal training days are X” or “the standard project management days are Y.” As stated above, is it realistic? Make sure the “typical” or “standard” days are sufficient for what you need to budget for.
If you are unaware at the time of budgeting whether or not there will be a need for modifications, you should plan some contingency dollars. A fair number would be in the neighborhood of 25% of the base software license costs; should it be needed. If not needed, these budget dollars will give you more flexibility if there is a need for allocation of more dollars in other areas that may have been under budgeted.
All budgeted dollars so far have been focused on the vendor’s costs and have not addressed planning for internal expenses for traveling to perform the due diligence of vendor's client site visits and a site visit to the vendor finalist's headquarters. Be cautious as internal expenses are usually less budgeted for and can lead to project overruns fairly quickly.
Besides the travel for site visits described above, you will need to consider the following:
• Any increase in payroll or overtime to complete the project
• Hiring of temporary labor or outside resources, such as consultants or programmers
• Upgrades to other networked hardware
• Conversion effort costs
Travel expenses are one example of internal expenses to potentially budget for. It’s often necessary to travel to and from vendors’ facilities, as well as travel expenses for the vendor to be onsite at your facility. These expenses can be as high as 15% to 18% of the total services for the project.
Formalize a full budget before proceeding, being sure to build in sufficient dollars for items such as services, programming and training that may not have been sufficiently budgeted for by the vendor. By clearly defining your budget, you can avoid being one of the 49% of companies that exceed their IT budgets.
You can never budget for every cost that will occur so you will want to build in a 20% to 25% or more contingency for the overall project. It is better to do this than underestimate what else may be needed and have to go back to management for additional dollars, if the those dollars are even available for the project.
Giving consideration to all of these additional and potential costs for a system project will greatly assist in creating a much more accurate budget for planning fiscal year 2015, for any system replacement or upgrade project. If you have any questions about a systems project that you are planning or would like to ask questions about specifics of what you read, reach out to Jeff Barry at 804-457-4028 or email@example.com.
For operations professionals in retail and direct commerce, we all know the drill, the risks and rewards of Christmas. With peaks that can be 5 to 15 times higher than the average week, if you get behind processing orders, you may not recover until Christmas is over. For many companies, their entire year’s profit results from the 4th quarter’s sales.
Along with these blessings come the challenges of hiring seasonal associates, integrating them into your workforce effectively, dealing with planned volume and the continued chaos that disrupts the flow of your operations, among other things.
Most companies do their post-mortem for Christmas in January and February while Christmas past is still fresh in their minds. This gives time to consider how major improvements and budget requests for changes in warehouse systems, warehouse layout, material flow and process changes, material handling equipment (MHE) and conveyance systems can be made to improve throughput, storage capacity and reduce cost per order.
While there may not be time to make these major changes, here are 20 important best practices every company should consider and can implement before Christmas. These can make big differences in the efficiency and customer service you provide.
The highest benefit areas you can affect are managing labor better (it’s 50% of your cost per order) - in particular the pick and pack departments which are more than 50% of your labor costs. Also, working with shipping carriers - probably your highest overall cost – on your Christmas plans pays off too.
Here are our picks to improve your operation this Christmas:
1. Establish Hot Pick Zones. Locate the best selling items in the most accessible storage areas such as ends of aisles without creating a traffic jam. This may only be 15 to 20% of your items. As much as 70% of a picker’s time is in walking; reduce walk distance and time and you increase productivity and reduce costs.
2. Slotting. What data can the merchants give you that gives additional sales velocity information that will help you with slotting product? Planned sales by item or POs expected to have high sell through during the period can greatly help. Again, reducing walk time of the pickers will improve productivity.
3. Improve packing productivity. Cushioned floor mats, tables with adjustable height to make them more ergonomic, large enough work surfaces, cubbyholes for inserts; are all beneficial. Make sure the cartons and packing materials are replenished to the pack stations so packers don’t have to leave the station and can maximize their productivity.
4. Managing your shipping expenses (prioritize orders to ship as many by ground as possible, i.e. move West Coast orders to the front of the queue and hold East Coast back to still meet promised receipt date). Be sure you have shared your projections with your shipping carriers. Can you get any extended pickup times for shipments and trailers to load during the day?
5. Alert your shipping carriers that you may need additional trailers for increased volumes. Rental trailers “spotted” on your lot can create additional seasonal storage space.
6. Seasonal managers. Which full time and part time associates can step up to be seasonal supervisors? Give them an incentive to do so for the peak season. At the end of peak season they give up the responsibility.
7. Best labor source. The most productive people are those that have worked for you in Christmases past. Stay in touch with them, nurture this resource and offer them an incentive to work this peak season.
8. “Recruit a friend”. Productive employees often know good people looking for extra money. Offer them a small bonus if you recruit a friend or relative.
9. Offer a bonus to work the entire season. Along with returning seasonal workers and recruiting a friend, offer an additional bonus to those that work the entire season. Quitting early can really hurt you.
10. Temp agencies. Some clients of our have had great results. It also gives you a preview of workers you might consider as full time associates. Companies often don’t want to pay the additional costs for these agencies.
11. Buddy system. Assign each seasonal associate a “buddy” that is a year around employee. Task the year round employee to be available to answer all the seasonal associate's questions and help them be productive.
12. Safety and security. Is your facility a safe place to work? Knowing how your facility changes with the volume, what should you change? Example: replenishment and put away in off hours to reduce aisle congestion.
13. Disaster response. Be sure the “telephone tree” is up-to-date in case bad winter weather throws you a curve. Are the seasonal workers on the lists? Do they understand the emergency plans?
14. Head off backorders. The #1 source for creating customer service problems is backorders not processing in the DC. Work with management to see if inventory control or the merchants can change their processes and follow up on open purchase orders two weeks in advance of expected receipt dates. It’s a busy time for everyone but this can give call center and web system info about item availability.
15. Second and third shifts. Put in place second and third shifts to keep up with the volume. Schedule replenishment tasks for off hours so that the bulk of the staff is not impeded by pallets, boxes, pallet jacks, forklifts, etc. in the aisles. This will improve facility safety too.
16. Work simplification. One of the hardest parts about using seasonal labor is they don’t know your system and processes. To improve seasonal associates’ productivity, break down complex tasks. You still have time to consider where in the operation you can break more complex tasks into simpler tasks. Many companies have items which require special and complex packaging (posters and prints for example). Full time packers know the process, but seasonal workers do not. Consider prepacking these items offline at Holiday to assure consistent and correct packaging. Chances are better the seasonal labor will be able to be more productive. Match seasonal skill sets to tasks.
17. Improve communication and productivity improves. Post standards, expectations and productivity numbers. Be sure to adhere to having daily floor manager and shift change meetings. Post on white boards strategically placed around your facility the main productivity rates and challenges.
18. Contingency plan. Have you worked out with your supervisors and senior management what your options are if the business is +/- 10-20% from your plan? Overtime, more workers, etc.? Where would you use more people effectively? Remember, more than 50% of the direct labor is in the pick and pack departments.
19. Reduce peak season production systems disasters. Stick to a policy of not implementing new systems and non-critical modifications September through December.
20. Continuous improvement. Keep a journal of problems and ideas encountered as a starting point for planning for next year. Invite a consultant in to observe your peaks this year to assist in making major process changes, product workflow and material handling equipment changes for next year and the peak season.
In the off season consider these additional labor best practices: Seasonal differentials and incentive pay; aptitude and selection testing; screening and back ground checks; adopt “flex hours” policy, overhaul your training program, etc. All these ideas can improve the quality of the hire and decrease attrition.
Making the best seasonal associate hire and managing the workforce effectively is at the heart of reducing costs and providing great customer service. Working with you carriers to fine tune the outbound brings big dividends too. Remember, it is still not too late to make some changes that will ensure a smooth and productive Holiday season.
Contact us if you would like to discuss how to implement some of these last minute ideas into your oepration. Reach out to Jeff Barry at 804-457-4028 or firstname.lastname@example.org to schedule a call.
I was talking to a client and he confessed that time had slipped away from them in implementing a full warehouse assessment. As he and I were creatively thinking what he can do in the couple months before this Holiday Season, here are three things everyone can do to improve Holiday season productivity.
1. Improve your odds with new employees
Hire right. How many times have you had new employees quit because they didn’t understand what the job entailed, or the new employee didn’t like the job once they tried it? No matter how good the person comes across in an interview, you can’t tell how well you’ve hired until they start working.
- Some companies have had good results by giving prospective employees some limited instruction and then letting them try the work.
- Determine if there are tests you can give that assess whether people can do the work or have a good chance of fitting into your culture.
- Use a “buddy system” with a seasoned employee in the department to get the new employee off to the best start.
- Look at whether you have an effective training program by function. Will cross training improve production and give you flexibility in staff utilization?
2. Measure employee turnover and do something about it
Set up a system to track and calculate employee turnover monthly. Develop a turnover report showing the number of employees hired, employees who started training, employees who left while in training and the number who leave once they graduate to the production staff. Establish an exit interview process to learn more about why people leave. Look at the turnover by months and years of service. Are you seeing turnover with long-term employees? New hires? Calculate the cost of recruiting, training and losing an employee and get management to understand the reasons and the costs. From there, establish a plan of action for change.
3. Set standards or expectations
There is an old industrial engineering axiom: You can’t improve something you haven’t measured. Set up production goals by department and individual. (Departments or functions include receiving, put away, replenishment, picking, packing, shipping, and returns.) There are two ways to do this: engineered standards, and benchmark goals or expectations. Engineered standards are expensive for small to moderate sized companies to establish and maintain. However, most companies can gain from setting expectations based on benchmarking with other companies. This will let you understand productivity, costs and best practices in other businesses. Study your operation and set up internal production standards that can be measured and are fair. Don’t just use someone else’s standards, as they probably will not fit your operation. The most important benchmark exercise is to measure your production against yourself, seasonally, by month and week. Increase the “height of the bar” over time and you’ll generally see overall productivity increase. The most difficult part of all this is getting accurate production data.
If you would like to discuss how we can help you improve productivity for this Holiday season, it is not too late to put measures in place. Contact Jeff Barry at 804-457-4028 to schedule a call or email him at email@example.com.
If you want to increase sales (and who doesn’t), you need to increase your initial customer order fill rate. About 50% of the time, when I’m working with direct merchants and I ask, “Are you measuring initial customer order fill rate”, I get the answer “Yes”. But 50% of the time as we talk through it, in reality they are not. What they are measuring is actually the backorder rate or the line item fill rate.
So what is initial customer order fill rate? It is the percentage of orders shipped complete within your fulfillment center’s order fill rate standards. In other words, if a customer’s order has 3 lines on it and you can only initially fill 2 lines, your initial customer order fill rate is zero.
In the definition above I mentioned “within your fulfillment center’s order fill standard”. Currently on average, that order fill rate standard for a fulfillment center is 24 hours (except for weekends where there may not be any warehouse staffing or orders being shipped). Also, to be competitive many centers are shipping more than 50% of their orders same day to cater to the customer’s “point, click and receive” mentality.
So what does initial customer order fill rate show? It shows how well you’re servicing the customer from an inventory perspective. For example, let’s look at the Apparel Initial Order Fill Rate graph featured. Since Holiday peak season is coming, let’s look at the last quarter of the year, weeks 39 to 52. This is an actual order fill rate graph for a customer we have just completed an Inventory Assessment for, and they had never measured their customer order fill rate. Think about this performance from the customer’s experience. The percent of orders shipped complete is between 65% and 80% each week. If you’re the customer, what is the impression of the service you get? Since it’s the major gift giving season, I would submit to you that the customer that experiences the 65% to 80% orders shipped complete is not the company that you as a customer will more than likely do business with again.
Here are some direct merchant industry fill rates to compare.
Initial Order Fill Rate
Customer orders shipped complete
Advanced fashion: 70%-80%
Reorderable, basic apparel: 80%-90%
Business products: 98%-100%
Final Order Fill Rate
Of the orders taken over the life of a catalog, the percentage of customer orders ultimately shipped 100% complete.
Advanced fashion: 90%-95%
Reorderable, basic apparel: 95%-99%
Business products: 100%
To return to back to the initial item fill rate and the backorder rates for a minute. Both of these measures generally are 10 percentage points higher than the initial customer order fill rate, because they don’t take into account the partial shipments of customer orders. Or said another way, they don’t look at it from a customer order perspective.
To be far the apparel client has some handicaps:
• 30% to 50% of items are new product, so there is no history by item for new products
• There may be only a single order or one reorder
• Exclusive and imported product are hard to deal with because of the long vendor lead times and higher reorder quantities often by SKU.
In summary, look at your initial order fill rates to see how well you are treating your customers and if you are able to get the product out to your customers in a timely fashion this holiday season. If you would like to discuss, we ask that you contact Jeff Barry at 804-457-4028 or email him at firstname.lastname@example.org.