What Are Typical Vendor Compliance Policies that I Should Include?

So you have made a decision to move forward to develop and implement a vendor compliance program. You have an idea of what should be included into the manual to send to your vendors, but your not quite sure that you have all of the right sections.
 
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What are Typical Vendor Charge Backs?

In developing dozens of vendor compliance manuals, we have seen a wide variety of items, categories, and lists of vendor charge backs. We feel like with a new compliance program, you should include the following, to start with:

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How Do I Utilize Slotting and Replenishment to Reduce Costs and Control Fulfillment?

Problem:

Just 20% of products produce 80% of your sales, while as much as 70% of a picker’s time is spent “traveling” between pick locations to fill an order.  Maintaining sufficient inventory in the pick slots is a challenging and dynamic process.

Solutions:

    • Develop a velocity unit sales report, ranking SKU’s from high to low to determine the key SKU’s that should be properly located to take advantage of their sales volumes.  By setting up “Hot Pick” zones where the high velocity movement products are located (slotted) in the most advantageous position for picking, you minimize walk time required.  Further reduce picking times by positioning faster selling items at waist height to take advantage of ergonomics.
    • Provide a variety of pick slot types and sizes to match the cubic velocity metric for each SKU.  Design a slot size and SKU assignment around a guideline that ensures enough space to store a minimum of one week’s average unit sales quantity, and continually review the effectiveness of slotting assignments by monitoring replenishment frequency of days on hand with the pick slot reports.
    • Combine both a min–max replenishment concept and one that is demand driven to insure product will be available in the pick slot when needed, with the vast majority driven by the min-max concept.
    • Single line orders are the fastest to pick; batch pick singles as much as possible.
READ: 27 Warehouse Layout, Design and Efficiency Principles
Benefits:

    • Reduce picking costs by reducing overall walking times per order.
    • Minimize the time wasted when a picker finds insufficient inventory (or “ can not find” product) in the pick slot to fill his order.
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How Can I Increase Throughput and Capacity in my Distribution Center?

Problem:

With the management mantra “do more with less,’ moving into a larger space is not an option; you need to get more throughput and increased capacity out of your current physical layout and facility.

Solution:

Our 18 Industrial Engineering Principles are the best foundation for maximizing throughput and capacity from an existing facility. Use these principles to rethink how you use your fulfillment center and develop the most appropriate solutions for your needs.
DOWNLOAD: Key Principles to Assessing Your Warehouse Operations

 18 Industrial Engineering Principles

    1. Involve your warehouse staff in decision making relating to facility layout or operations planning. Those people closest to the process usually understand it best. An effective consultant brings experience in many different environments,  improve capacity and throughput and can facilitate change.
  1. Make sure you are utilizing the potential storage space/cube of the warehouse effectively. Insure that vertical space as well as individual location cubic capacity is fully utilized. Maximize cube as well as ground level square feet.
  2. Focus on slotting, replenishment, and location control system. These three activities form the backbone of the operation and should be given the appropriate attention. If they are cared for, much of the rest of the operation will run effectively.
  3. Maintain flexibility in the operation and layout. Planning for unknown future changes to the business or fulfillment model is a necessity to avoid unnecessary costs to make unplanned changes to the facility and operation. Don’t develop a layout or process that is inflexible or scalable.
  4. Minimize congestion and interference with smooth flow. Avoid unnecessary congestion or overcrowding in the warehouse. The time lost due to overcrowding or congestion is significant.
  5. Reduce cost of fulfillment by simplifying the process. The more times you touch product the higher the cost per order.
  6. Use a variety of location storage media for slotting and reserve as dictated by item cubic velocity. The one-size-fits-all approach rarely works to maximize efficiency in space and labor performance.
  7. Minimize travel/walking time. Since more than half of the total labor time you pay for in the warehouse is spent walking, any efforts to reduce travel distance and time will pay off in reduced labor costs. Effective layout and slotting processes can help reduce walking time.
  8. Use conveyors for horizontal transport of product. Whenever possible, the use of a simple transfer conveyor system can improve operating efficiencies by reducing handlings and walk time. Make sure the cost of the equipment is justified. Conveyor selection is based on the size and weight of he product and the throughput volume. Accumulation has to be planned for in any conveyor design.
  9. Provide adequate accumulation and storage space on docks. Inefficiencies caused by lack of space on docks gets the operation off to a bad start and not only causes inefficiencies in the operations on the dock but ripples down to and can negatively affect other warehouse functions.
  10. Cross dock where possible. The ability to omit steps in the fulfillment process and take receipts directly to the packing/shipping function will save time. Consider using cross docking for back order processing as the item is received.
  11. Keep 10% of locations open and available. This may not be possible 100% of the time, but it is a key factor to have available space to store inventory in picking and reserve locations.
  12. Move as much product at one time as possible. Maximizing the product per trip will reduce the total trips and time required. Applications can be found in the picking, put away, replenishment, etc. warehouse functions.
  13. Have a well designed pack station. Since a high percentage of labor is spent in the packing function, it makes sense to insure that all of the required materials are available for the packer and that adequate work space is provided.
  14. Stagger shift start times. Make sure that your schedule for warehouse staff coincides with work being available. Consider off-shift activities to minimize interference with other warehouse functions.
  15. Aisle mapping. A simple process that validates that the correct item is in the assigned location will save headaches in other warehouse activities.
  16. Automation. Provide for the level of automation that can be cost justified based on your particular operation and cost structure. Look for 18-month payback as a guideline.
  17. Flow charts. Develop a process flow chart that tracks a receipt through the put away process and an order from replenishment to shipping, showing the path and number of times the product is touched.
READ: 27 Warehouse Layout, Design and Efficiency Principles
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When is 3rd Party Fulfillment the Right Outsource Option for You

Many multichannel merchants focus on how they can lower operating costs of their supply chain logistics when they consider outsourcing certain tasks. When you use third party fulfillment partners to outsource your operations, you also outsource the investment. Sounds obvious, but the magnitude isn't always clear until you're faced with replacing an order management system, moving into a new fulfillment space or upgrading your website and platform.

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Using Visual Management in Your Supply Chain Logistics

Visual Management is a powerful tool which is used significantly in Lean Manufacturing environments. It can also be very effective in fulfillment centers for training, increasing accuracy of pick/pack lines, and improving transactional efficiencies. It is a cornerstone of successful workplace safety programs.

So what exactly is Visual Management? Quite simply it is the deployment of visual aids and devices which allow people to more efficiently, more accurately, and more safely perform their daily tasks. One of the most common uses in our daily lives is the stop sign. It uses both color and shape to instantly communicate and define its purpose.

Graphics and pictures are also powerful visual aids. Everyone recognizes the United Way thermometer which uses clear graphics and bright color to let everyone know the status of the fund drive, and how far you have to go to meet the goal.
 
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Tips to Cutting Costs and Improve Customer Service in Supply Chain Logistics

Every supply chain logistics professional is constantly looking for ways to reduce costs and make the operation more productive. In today’s challenging economic climate, such efforts become even more crucial. Small steps that can help to save money may make a big difference. Our experience in supply chain logistics has been that often the same process improvements used to reduce costs also result in better service—and greater customer satisfaction. These are some of our top tips in supply chain logistics cost reduction.

Conducting an analysis of your current supply chain logistics operation can lead to big savings—essentially allowing you to increase capacity and space utilization without expansion.

Review Hiring, Retention and Turnover
Labor is your first or second largest expense after outbound freight in the warehouse. Review the reasons for attrition and work to reduce the turnover. Review hiring, retention and training practices. How well are you able to staff for the peaks?
 
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How to Make Vendor Compliance Programs Work For You

Of all the strategies for reducing costs in your business, vendor compliance programs may be the most underdeveloped. A well thought-out, formal vendor compliance program can reduce supply chain logistics costs, reduce freight costs, speed up order processing, and lead directly to increased customer satisfaction. In order to achieve this it must spell out your requirements and the charge-backs for vendors' non-compliance.

Without a formal vendor compliance program, your supply chain logistics has no recourse but to absorb both direct and hidden costs for noncompliance. Without compliance it is impossible for a merchant to implement advanced supply chain systems, ASNs, just-in-time inventory, source marking and ticketing, or RFID programs. A good vendor compliance program will not only avoid pitfalls but will reduce the time spent dealing with vendor disputes, claims, and charge-backs.
 
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Achieving a Single Version of the Truth

How many times does this happen in your company? You go to a meeting about sales performance, and Marketing says they think sales are up 3.5%, but the merchants disagree and say sales are up 6.3%. The specific numbers in this example aren’t important; the point is that the two figures aren’t even close. That’s the reality in most companies today.

Or, say management has tasked you with developing a report and you try and go back to prior results, maybe from a season or two ago. How many different versions of the sales, purchase and inventory plans are there? Which ones are the actual and which were prior versions?

Some might say "we could do a better job of controlling and eliminating versions of plans"—which is certainly true, and something every company should work toward. Or you may say "if we use only one enterprise system we can eliminate this dilemma". But that isn’t really the solution; such order management systems aren’t viable for most companies, and anyway, there are multiple data elements that are all valid for whatever processing order management system is being used. There isn’t a “single version of the truth”—one official set of figures for sales, inventory, plan, history, etc.

Take for example a product’s inventory. You can find sales plans on a user-derived Access system or Excel spreadsheets. A product’s inventory on hand in units and dollars occurs on your order management system. A separate best-of-breed warehouse management system will also include the same product on hand, but needs to be synched up daily. The finance system will also carry the total company inventory in dollars—probably not updated real time, but daily or weekly. You may also have a specialized standalone forecasting and inventory management system, to project inventory by promotion or catalog campaign.

Additionally, because the major transaction systems require a high degree of training, management does not use them as the source for their information. Management has to go to extremes to get what they need, either by requesting that department managers pull data or by using business analysts to come up with reporting. Because these are manual efforts using sources not originally geared to management’s needs, they are delay-riddled, error prone processes. And they still don’t deliver a “single version of the truth.”

You get the picture. There simply isn’t a “single version of the truth” for the major data elements used in many businesses. For management to have confidence in the integrity of the data they’re getting, I think the time has come to advocate and budget for projects that resolve these problems. Such problems are not new, and I believe they inhibit the effective management and growth of direct businesses.

Here is a hierarchy of solutions you should consider:

• Extract data from major transaction processing systems into Excel or other reports
• Access databases, and business analysts using OLAP tools
• Data warehouse products
Business intelligence tools with dashboards and analytics

It’s time to advocate with management for solutions to this problem. Especially in this recovering economy, knowing exactly where you stand is essential. You can only control expenses and inventory and know which products and promotions are working—and which aren’t—if you have accurate data on which everybody across the company can agree on. In our experience, companies that used business intelligence tools to overcome such information problems have been successful in getting a positive ROI from these types of systems within 12 to 18 months. And in today’s business environment, that’s a “single version of the truth” on which all companies can agree.
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Supply Chain Strategies to Control and Reduce Expenses

We all know we’re coming out of a tough business climate. With many companies ramping up for fall and holiday seasons, there is an urgent need to increase productivity and reduce costs without having to make major capital purchases to do so. Here are some supply chain strategies to reduce your cost per order, increase capacity without expansion, and improve service levels in your supply chain logistics. The source of this information is experience gained in our supply chain consulting work with multichannel companies, as well as from the Supply Chain Summit.

Perform an Operational Audit

A warehouse assessment is a great starting point. Warehouse assessments will identify your needs, and help recognize potential improvements to process, layout and use of space, staff productivity, warehouse management system (and peripheral systems) and freight analysis. The objectives are to lower the cost per order, increase storage capacity within the existing center, reduce inbound and outbound freight costs, and improve service levels and turnaround times.

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