October 4, 2017

Sorting It Out: Managing Today's DC Requires Comprehensive Problem Solving Skills

The Analogy; “Can't see the Forest for all the Trees”, may be the Crux of the Problem

Distribution centers are typically, busy, noisy and often chaotic environments. Business managers are always on the lookout for problems (actual and perceived). They must be ready to make operational and/or systematic changes as may be required to “fix” a problem or satisfy new business requirements. However, before any corrective action can be taken there must be a clear understanding of the issues. The greatest challenge may be sorting out assumptions from the actual cause and effect.

For example let’s assume that a problem, such as elevated inventory costs or slow customer order response times, is the result of DC system deficiencies. However, consider the following:

Elevated inventory costs - 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.

Slow response times - if the company wants +95 percent of orders filled and shipped within 24 hours and it typically takes 18 to 20 hours just to get the order approved and downloaded to the DC, the problem is not in the DC.

Holste Says... If you assume that the physical returns processing area is the only place you need to make improvements, you may be missing an opportunity to lower cost and improve service at all levels of the process. What do you say? Click here to send us your comments

Therefore, real opportunities for improvement may exist in operations upstream from the DC. And, in fact better communications between departments can lead to great improvements in efficiencies such as faster response times and more accurate sales forecasting.

Another example is a type of assumption where the suggested problem is understood as being the real problem. It’s this type of assumption that is most dangerous. It’s where decisions are made based on erroneous facts. 

Let’s say the assumption is that order fulfillment takes too long because the 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, hands-free fixed-location or wearable scanners might improve operations. 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 alone, you miss the opportunity for making broader improvements. 

Take another example – “returns”, which in many companies can be a significant cost factor. Here the assumption might be that you need to streamline returns by allowing customers to use the Internet to generate return labels complete with bar codes (or including them in the shipment). It’s true that scanning these bar codes can facilitate returning material to stock, adjusting inventory, or directing returns to an appropriate processing area in the case of defects or damage. 

But, if that data isn’t available to be shared with Accounting, Sales and Marketing, it’s not being used completely or to its full potential benefit. Whether the data is shared upon receipt of the returned item or taken directly from the Internet depends on how the company operates. The point is - if you assume that the physical returns processing area is the only place you need to make improvements, you may be missing an opportunity to lower cost and improve service at all levels of the process.  

Final Thoughts 

The danger in accepting assumptions as fact is that it instantly narrows your vision and that can be costly. Working on solving surface issues, instead of the actual underlining problem, is akin to spinning your wheel – it will generate some heat and noise, but not much traction. But worse yet it could lead to bad decision which could just exacerbate the situation.

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