Holste Says: DC shipping volume is a shared responsibility among the various system equipment, control, and software vendors with the company assuming performance risk relative to satisfying its daily shipping volume expectations. What Do You Say? Click Here to Send Us Your Comments Click Here to See Reader Feedback

Because items such as the above are excluded from the MHS, there will be a gap and perhaps some confusion between the companies’ expected shipping volume and the MHS.

Understanding flow & volumetric data

When a company purchases a MHS, the system provider is obligated to satisfy specified handling rates for that system. Typically, in order to identify input and output rates for the MHS a flow chart is constructed – see “Uncovering Pathways To Greater DC Performance”. The flow chart shows all the departments that input volume into the system and the output requirements. At the completion of this flow charting analysis system planners will gain an understanding of what the handling rate requirements are for all of the functional areas within the system. This will then drive system design including equipment, controls, software, and cost.

It takes a considerable amount of analysis in order to determine the required handling rates of the various DC departments, i.e., receiving, picking, packing, shipping, etc. Handling rate calculations have a direct impact on system design, equipment selection, and cost. If the rates are understated, the company may need to frequently operate the system on an overtime schedule. If the rates are overstated, the system cost may be excessive.

Using volumetric data from the flow chart and factoring in forecasted sales growth, plus estimated system efficiency factors (loss time due to anticipated interruptions in flow), system designers will be able to determine flow rates for equipment and processes within the MHS. These flow rates are referred to as “Demonstrable Rate” and are used to “prove” system handling capability as follows:

Theoretically, if the MHS can meet, or exceed, the rate requirements (as stated in the flow chart), the “physical” system is then proven to be capable of satisfying the company’s requirements. However, the company is responsible for providing sufficient staffing levels to satisfy input and output production requirements. Peak periods may require extended hours and/or higher staffing levels.

Once the completed and proven MHS is placed into daily operation there will most likely be operational factors beyond the control of the system provider that can impact on MHS capacity, such as:

Variation in carton length, and conveyable product mix from the original design specifications

Excessive re-handling of cartons from re-circulation and/or cartons with bad (non-scannable) labels

Shipping lane and/or dock space availability issues

Inability to close out orders in a timely manner

Staffing, operator training and order accuracy issues

Taking the above into consideration, the company must understand the difference between demonstrable rates and expected shipping volume. There must be a clear understanding right from the get go as to who is responsible for satisfying expected shipping volume. For instance, when it is all said and done, if it takes more staff and/or time to ship the required volume than was originally forecasted, who is responsible?

An important clue lays in the fact that as long as the system provider can demonstrate that the MHS can perform at the specified rates, it has satisfied its contractual obligations – even if the overall DC operation is viewed as not meeting shipping volume expectations.

Many of these “risk” issues can be minimized (but not entirely eliminated) if the system provider is also the DC system planner/developer/designer. By accepting responsibility for the planning and development of the overall DC operation, the provider “owns” more of the integrated operational aspects of the DC relative to satisfying daily shipping volume requirements. However, this approach typically is based on a design-build negotiated contract instead of the more common bid-to-spec contract.

Final Thoughts

Much of the performance of a typical order fulfillment DC is beyond the control of the MHS provider. System providers can only take performance responsibility for what they provide and even that is limited to the unimpeded rate product moves through the system. Therefore, DC shipping volume is a shared responsibility among the various system equipment, control, and software vendors with the company assuming performance risk relative to satisfying its daily shipping volume expectations.