As we kick-off the New Year there are positive signs that the general economy is slowly improving. Unfortunately, with continued high unemployment levels, 2010 is on track to being yet another tough sales year for most consumer goods companies. For supply chain logistics operations, this means fewer resources and more emphasis on “working smarter, not harder” and similar platitudes that mean very little in the real world.

Without doubt, logistics executives and DC managers will be getting still more directives from on high that insist “we must reduce inventory costs” or “we must improve response times” and so forth. And, of course, the “we” really means “you."

While there may still be opportunities for improvements in some operations, it’s also a safe bet that after years of continuing pressures to become “lean and mean,” most operations that could be improved have been improved. Those that still have a lot of waste and inefficiency are probably as much the result of upper-management resistance to change or lack of resources to invest in enabling technology as anything else, and are likely to remain inefficient.

Finding the Real Problem

For those of you who are still committed to change, you may now be facing your greatest challenge - the dreaded assumptions of which we are all inclined to make. The following includes two of what I believe could be the most common assumption to beware of:

1. The first type of assumption is that the “Problem” (such as inventory costs or response times) is fixable by you.

Inventory costs, for example, might be caused by inflated (or inaccurate) sales projections. Or it could be there’s an unusually high rate of returns for certain items, and those returns aren’t calculated against projected inventory levels.

 

In the case of response times, if the company wants 90 percent of orders filled and shipped within 24 hours and it takes up to 24 hours just to get the order downloaded to the DC, there’s not much you can do even with the most efficient system.
 

In these situations, all you can do is try to calmly point out opportunities for improvements in other areas to make your area more efficient. And, in fact, better communications between departments can lead to great improvements in efficiencies such as faster response times and more accurate sales forecasting.

2. The second type of assumption is that the “Problem” is the real problem. It’s this second type of assumption that is most dangerous. It’s where assumptions are mistaken for facts - and these usually occur on the micromanagement level.

Let’s say the assumption is that “order fulfillment takes too long because our packing area is inefficient.” Is this really the problem? If, say, you have six packing stations, each equipped with a hand-held scanner to verify the shipment, perhaps fixed-location or wearable scanners might improve operations by as much as 10 percent (depending on the number and type of items being packed).

 

But, could the process be improved more dramatically by scanning and verifying the shipment as it’s picked directly into the shipping container? In some applications, this could eliminate as much as 50 percent of the activity in packing and could significantly streamline order fulfillment. It might even allow you to assign some of your packers to picking.

 

If you accept the assumption that the problem is in the packing operation as if it’s a fact, you miss the opportunity for making broader improvements.

 

Take another example - returns, which, in many companies, is a significant factor. The assumption might be that you need to streamline returns by allowing customers to use the Web to generate returns labels complete with bar codes. It’s true that scanning these bar codes can facilitate returning material to stock and adjusting inventory or directing returns to an appropriate processing area in the case of defects or damage.

 

But if those data aren’t (or can’t be) shared with Accounting, Sales and Marketing, they’re not being used properly (or completely). Whether the data are shared upon receipt of the returned item or taken directly from the Web depends on how the company operates. Here again, if you assume that the returns processing area is the only place you need to make improvements, you may be missing an opportunity - and possibly overlooking the root cause of the problem.

Final Thoughts

The danger in accepting assumptions as facts is that it instantly narrows your vision. And that, as even upper management knows, can be costly. Working on solving surface issues that are not the real underlining problem, is like spinning your wheels – it will generate some heat and noise, but not much traction.

Agree or disagree with Holste's perspective? What would you add? Let us know your thoughts for publication in the SCDigest newsletter Feedback section, and on the website. Upon request, comments will be posted with the respondent's name or company withheld.

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