Metrics, Benchmarking & Best Practices

Transcription

1 Metrics, Benchmarking & Best Practices Increasing DC Productivity & Efficiency

2 In this session Why qualitative and quantitative benchmarking go hand in hand Critical warehouse metrics WERC s DC Measure Study. Where does your company stand? A step by step description of an approach to benchmarking. WERC s Assessment Program

3 If you can t measure it, you can t manage it. ~ Peter Drucker

4 Benchmarking is The process of improving performance by continuously identifying, understanding, and adapting outstanding practices and processes found inside and outside the organization. Benchmarking (seeks) to improve any given business process by exploiting "best practices" rather than merely measuring the best performance. Best practices are the cause of best performance. Studying best practices provides the greatest opportunity for gaining a strategic, operational, and financial advantage. The American Productivity and Quality Center (APQC)

5 What we know Improve Processes Improve Metrics Improve Bottom Line

6 How do we know? Financial Metrics Distribution Cost per Unit Shipped Best in Class >.30 Median.86 $0.00 $0.10 $0.20 $0.30 $0.40 $0.50 $0.60 $0.70 $0.80 $0.90 Distribution Costs as a Percent of Sales Best in Class Median >2% 4% 0.00% 0.50% 1.00% 1.50% 2.00% 2.50% 3.00% 3.50% 4.00% Median Best in Class Source: 11 h Annual DC Measures Study, 2014.

7 Quantitative Benchmarking Data is Good but it is not Good Enough Quantitative Qualitative

8 Limitations of Traditional Financial Measures Financial measures tend to be lagging indicators. Leading Indicators (Performance Drivers) Lagging Indicators (Outcome)

9 Leading Indicators On time Shipments Lost Sales (Percent of SKUs Stocked Out) Dock to Stock Cycle Time, in Hours Order Fill Rate Pallets Picked & Shipped per Hour Distribution Costs per Unit Shipped Peak Warehouse Capacity Used Material Handling Damage Percent of Orders with On time Delivery There are hundreds of metrics referenced across industry associations

10 The WERC Research Team & Partners Research Team: Karl B. Manrodt, Ph.D. Professor, Georgia Southern University Donnie Williams, Jr. Assistant Professor of Logistics, Georgia College and State University Joe Tillman CTL Founder TSquared Logistics LLC Research Partner: Research Sponsor: Data Licensed By: 10

11 Who is in WERC s Study Who s reporting Manager 42% This year s combined survey had over 600 participants of which 424 provided usable responses Other 10% C Level 5% Senior VP 14% Director 29%

12 Who is in WERC s Study To whom they report Director, 24.0% Manager, 3.0% Other, 8.0% C Level / Board of Directors, 32.0% Senior VP, 33.0%

13 Who is in WERC s Study Breakdown by Industry Third Party Warehouse, 19.7% Life Sciences Medical Devices, 4.6% Wholesale Distribution, 3.7% Utilities/Government, 1.8% Life Sciences Pharmaceuticals, 1.8% Transportation Service Provider, 4.6% Retail, 21.1% Manufacturing, 32.1%

14 Who is in WERC s Study Nature of Work at the Facility Majority (66.8%) focus on case picking vs. pallets Type of Operation % of Total % Case vs. Pallet Broken Case Picking 37% Full Case Picking 29.8% Full Pallet Picking 12.9% Partial Pallet Picking 20.1% 66.8% 33.2%

15 Who is in WERC s Study Primary Customer Served Respondents serve customers across the supply chain Manufacturer Wholesaler/Distributor Retailer End User/Consumer 18.6% 36.7% 22.3% 22.3%

16 Who is in WERC s Study Demographics by Company Size < $100 Million 31.9% 37.4% $100 Million to $1 Billion 36.2% 34.8% % > $1 Billion 27.7% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0%

17 The most popular metrics are Metric In Order of Popularity Rank 2012 Rank 1. On Time Shipments Customer Internal Order Cycle Time Customer Total Order Cycle Time Customer Dock to Stock Cycle Time, in Hours Inbound Operations Order Picking Accuracy Quality Lines Picked and Shipped per Hour Outbound Operations % of Supplier Orders Received Damage Free Inbound Operations Average Warehouse Capacity Used Capacity Peak Warehouse Capacity Used Capacity Lines Received and Put Away per Hour Inbound Operations Backorders as Percent of Total Orders Customer Not in Top 12 Not in Top % of Supplier Orders Rec. w/ Correct Documentation Inbound Ops. 11 Not in Top 12

18 And the metrics are

19 On Time Shipments (1) Customer Metrics 100.0% 99.8% 99.8% 99.8% 99.8% 99.8% 99.5% 99.0% 98.5% 98.0% 98.5% 98.5% 98.5% 98.7% 99.0% 97.5% Median Best in Class 19

20 Internal Order Cycle Time (2) Customer Metrics Median Best in Class 20

21 Seven Steps to Successful Benchmarking Plan Step 1: Set benchmarking priorities Step 2: Identify the key processes to be assessed Measure Step 3: Collect data operational and managerial Step 4: Research and compare best in class performance to internal and external standards Compare Step 5: Identify gaps and reasons for low performance Step 6: Develop an improvement roadmap and set priorities Supply Chain Visions Source: WERC s Warehouse Manager s Guide to Benchmarking, 2 nd Edition (2010) Act Step 7: Close gaps and improve/refine processes

22 Plan Step 1: Set Benchmarking Priorities The best place to start is with a vision statement and values.

23 Plan Step 2: Identify Key Processes Consider narrowing down your list of what you would like to benchmark against

24 Measure Step 3: Collect Data Operational & Managerial Yourself (other locations) Customers Formal benchmarking services Industry Associations

25 Measure Trade Associations Networks Governments

26 Compare Quantitative Step 4: Research & Compare Best in Class Performance 2014 WERC DC Measure Report

27 Compare Qualitative

28 An example of this Receiving and Inspection Process Benchmarks Process Group Poor Practice Inadequate Practice Common Practice Inspection Cross Docking No inspection process at receipt No process to identify or expedite products Insufficient inspection to identify nonconforming product, essentially checking for damage only. No cross docking process Informal expediting of products Sufficient inspection to identify nonconforming product. Failing product is quarantined to prevent use Informal process with manual lists are kept to support cross docking of products needed for current orders and replenishment, Good Practice Sufficient inspection to identify nonconforming product which is then quarantined to prevent use or referred to suppliers within a prescribed timeframe Formal but manual process for crossdocking or immediate replenishment requirements for received product not in inventory but needed for current orders Best Practice Inspection process results in quarantine, immediate notification to suppliers & carriers and initiates return process System enabled alerts for incoming product s immediate order requirements, creating a crossdocking or immediate replenishment task upon receipt

29 Compare Step 5: Identify Gaps With process standards you can rank selected processes against the standard and identify the process changes required to achieve the target Scoring of the Receiving Inspection Process is Assessed as Inadequate Practice Review Process Attributes and Score Each Process Group 29 Source: WERC s Warehouse Manager s Guide to Benchmarking, 2 nd Edition (2010)

30 Compare Step 5: Identify Improvement Roadmap Warehouse & Fulfillment: Gap Analysis Process Rank Gap Poor Practice 1 Inadequate Practice 2 Common Practice 3 Good Practice 4 Best Practice 5 Receiving & Inspection Material Handling & Putaway Slotting Storage & Inventory Control Warehouse Management Systems Shipping & Documentation Picking & Packing Load Consolidation & Shipping Source: WERC s Warehouse Manager s Guide to Benchmarking, 2 nd Edition (2010)

31 Compare Warehouse & Fulfillment: Road Map Rating Tool Process Strategic Impact Cost/Performance Impact Total Rating Gap Receiving & Inspection 6 Material Handling & Putaway 6 Slotting 4 Storage & Inventory Control 5 Warehouse Management Systems 5 Shipping & Documentation 2 Picking & Packing 6 Load Consolidation & Shipping 4 High Impact Medium Impact Low Impact High Gap Medium Gap Low Gap Highest Priorities in Red Secondary Priorities in Green Source: WERC s Warehouse Manager s Guide to Benchmarking, 2 nd Edition (2010)

32 Compare Step 6: Identify Improvement Targets Warehouse & Fulfillment: Gap Review Process Rank Gap Poor Practice 1 Inadequate Practice 2 Common Practice 3 Good Practice 4 Best Practice 5 Receiving & Inspection Material Handling & Putaway Slotting Storage & Inventory Control Warehouse Management Systems Shipping & Documentation Picking & Packing Load Consolidation & Shipping Source: WERC s Warehouse Manager s Guide to Benchmarking, 2 nd Edition (2010)

33 Compare Step 6: Identify Improvement Targets On time shipments Twelve Key Metrics Major Opportunity Disadvantage Typical Advantage Best in Class Customer Metrics Internal Order Cycle Time Total Order Cycle Time Dock to Stock Cycle Time, in Hours Fill Rate Line Operations Metrics Lines Received and Put Away per Hour Percent of Supplier Orders Received Damage Free Lines Picked and Shipped Per Hour Capacity and Quality Metrics Employee Metrics Average warehouse capacity used Order Picking Accuracy Peak Warehouse Capacity Used Annual work force turnover Productive hours to total hours

34 Act Step 7: Close Gaps Warehouse & Fulfillment: Final Initiatives Process Rank Gap Poor Practice 1 Inadequate Practice 2 Common Practice 3 Good Practice 4 Best Practice 5 Receiving & Inspection Material Handling & Putaway Slotting Storage & Inventory Control Warehouse Management Systems Shipping & Documentation Picking & Packing Load Consolidation & Shipping Interim Target Highest Priorities in Red Secondary Priorities in Green

35 Act Step 7: Close Gaps Setting Targets Half Life Theory The half life theory suggests that an interim goal should be selected when there is a large gap to close Benchmark 98% Interim Goal 95% Current Performance 92% Interim Target

36 Benchmarking Challenges A study by Penn State found several key challenges among companies trying to benchmark Accurate/comparable data is the biggest barrier Implementing results Comparable processes Available resources Standard definitions Clear Goals for benchmarking Willingness to share Finding the right partner Senior management support

37 WERC s Assessment & Certification Program

38 What are our challenges? Customer Relations Automation Justification Bottlenecks Space Utilization Challenges Candid Employee Input Increasing Quality Cutting Cost Improving Productivity Improved Communication

39 Doesn t the industry already have this?... Publications & White Papers Trade Press Unbiased Assessment Consultants Facility Tours

40 Compare Qualitative

41 An example of this Receiving and Inspection Process Benchmarks Process Group Poor Practice Inadequate Practice Common Practice Inspection Cross Docking No inspection process at receipt No process to identify or expedite products Insufficient inspection to identify nonconforming product, essentially checking for damage only. No cross docking process Informal expediting of products Sufficient inspection to identify nonconforming product. Failing product is quarantined to prevent use Informal process with manual lists are kept to support cross docking of products needed for current orders and replenishment, Good Practice Sufficient inspection to identify nonconforming product which is then quarantined to prevent use or referred to suppliers within a prescribed timeframe Formal but manual process for crossdocking or immediate replenishment requirements for received product not in inventory but needed for current orders Best Practice Inspection process results in quarantine, immediate notification to suppliers & carriers and initiates return process System enabled alerts for incoming product s immediate order requirements, creating a crossdocking or immediate replenishment task upon receipt

42 Seven Steps to Successful Benchmarking Plan Step 1: Set benchmarking priorities* Step 2: Identify the key processes to be assessed* Measure Step 3: Collect data operational and managerial* Step 4: Research and compare best in class performance to internal and external standards* Compare Step 5: Identify gaps and reasons for low performance* Step 6: Develop an improvement roadmap and set priorities* Supply Chain Visions Source: WERC s Warehouse Manager s Guide to Benchmarking, 2 nd Edition (2010) Act Step 7: Close gaps and improve/refine processes

43 Assessment & Certification Process Application Pre Audit Survey Onsite Audit Day 1 Delivery of Results Process Improvement Workshop Day 2 Rate, Rank & Plan Pre Audit

44 Delivery of Results Process by Process review of the findings & observations. A review of the 3 Wishes.

45 Delivery of Results Comparable Base Scores Gap Analysis Process Group Below Needs Meets Good Best Minimum Attention Standard Practice Practice Receiving & Inspection Material Handling & Putaway Slotting Storage & Inventory Control Picking & Packing Load Consolidation & Shipping Shipping Documentation Warehouse Management System

46 Process Improvement Workshop An overview of the 7 Step Benchmarking & Road Mapping Model

47 Opportunities Resulting from Warehouse Audit Meetings Rate, Rank & Plan An exercise to rate and rank the potential improvements based on strategic importance, value and cost. The creation of an action item list with assigned responsibilities for further research, development and implementation of improvements. Item Number Rank or Priority Opportunity Name Detailed Description of Opportunity Describe Benefit of Taking Action Describe Potential Risks Potential Value: Direct Savings Other Factors Estimated Cost to Implement Time Required to Implement Strategic Value (1 3) Cost Impact (! 3) Perceived GAP (1 5) Owners: Enablers Individuals Processes Technology

48 Seven Steps to Successful Benchmarking Plan Step 1: Set benchmarking priorities Step 2: Identify the key processes to be assessed Measure Step 3: Collect data operational and managerial Step 4: Research and compare best in class performance to internal and external standards Compare Step 5: Identify gaps and reasons for low performance Step 6: Develop an improvement roadmap and set priorities Supply Chain Visions Source: WERC s Warehouse Manager s Guide to Benchmarking, 2 nd Edition (2010) Act Step 7: Close gaps and improve/refine processes

49 Benefits beyond what you can see Indentifying Process Degradation Morale True Comparative Differentiator Collaboration 49

50 Who has it APL Logistics (Colgate Palmolive Co.)* Aquarius Grupo SID (CP)* Colgate Palmolive Co.(13)* DHL (Unilever & CP)* FCC Logistic Spain (CP)* FM Logistic Poland (CP)* Frode Laursen Denmark (CP)* GE Industrial* Hunter Fan Company Ingersoll Rand/Trane (2) Kenco (Whirlpool)* LEGACY Supply Chain Services (GE Industrial)* Nexus Distribution CDC OHL (Starbucks Coffee Company*) (3) Scholastic National Service Organization Starbucks Coffee Company (5)* Swagelok OFC Component Warehouse Trojan Battery Company Unilever* Whirlpool (2)* Zimag Logistics (CP)* *Facility Certification pursued jointly by customer and logistics service provider

51 Resources /metrics The 2014 Conference Presentation Link to the 2014 DC Measure Study /facility_cert Resources

52 Michael Mikitka, CEO Warehousing Education & Research Council P: / mmikitka@werc.org