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Great “distribution
potpourri” session at the RILA conference led by Mitch
Stover, Sr. VP of Distribution at Target, and Johnnie Dobbs,
VP of Logistics at Wal-Mart, not only for their insight, but
also for the fact that RFID hardly came up at all.
Quick summary of a few of the key discussion points:
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Challenges of going to 7 x 24
DC operations: Both have been very pleased with their
efforts, though acknowledged the issue can be difficult
when converting an existing DC versus starting a new
one in 24x7 mode. Both companies are running two sets
of shifts (4 x 10 and 3 x 12), with some weekend pay
premiums. The main point was that the benefits from additional
leverage of its distribution center assets was enormous,
not only in terms of reducing the needed multi-million
DCs, but also in improving store service levels. Stover
said Target really hasn’t had any store service
issues since they went to this schedule. Some keys to
success identified were to give pretty flexible scheduling
when converting an existing DC, really focusing on training
with the influx of new employees, and having consistent
supervisor/management personnel on the new shifts. Now,
both execs would like to see more of the vendors on the
same schedule.
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Both of course run heavily automated DCs operations,
and now are looking more at rifle shots to solve specific
problems. I liked Dobbs perspective, though, that “We
first say, ‘Let’s try to automate everything,’ and
then back off based on ROI." |
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Reducing operations is a big focus for both retailers,
often representing a third of total DC labor costs. There
continues in some quarters to be the misconception that
Wal-Mart had long ago leapt on the UCC-128/ASN bandwagon – as
Dobbs noted, they are only getting vendor ASNs from a portion
of their base, mostly for specific product types. So, both
companies have/will continue to automate receiving processes,
and this is another big driver of RFID, ultimately enabling
nearly unattended receipts. |
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Interestingly, contrary to the normal dialog these days,
both execs were positive on taking a base distribution/WMS
package and doing heavy modifications to it to meet specific
needs. As Stover said, “Target is a distribution
company – it’s a core competence,” in
explaining why the heavy investment in custom systems/functionality
is smart business for them. But both retailers continue
to add “bolt-on’ applications for specific
functions (areas of automation, for example). It was stated
that the base WMS almost becomes for them just the primary
vehicle to maintain transactions to all the corporate inventory,
merchandising and financial systems, with processing functionality
achieved with bolt-ons. |
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Both emphasized the need to understand all the ways inventory
can enter your DC. The fact that there are so many paths
(buyers, merchandisers, vendors/VMI, etc.) is in part what
makes the challenge of inventory reduction so great. |
Lots more than we have space for – go to RILA next year, where they will
probably do it again.
What are your thoughts on three-shift or 7x24 operations? Are some companies
building more DCs than they need to because they won’t take this step?
Will vendors to retail ultimately have to synch deliveries and operations even
more in tune with the big box retailers? And what can we do about all those
inventory paths into the system? Let us know your thoughts.
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