Client: Large national distributor of industrial and construction supplies.

Distribution Centre Optimization

Client challenge

Our client has seen a significant growth business, and revenue hence the existing processes at their Distribution Center (DC) were under stress. The receiving and put-away process was able to complete processing of only 50% of incoming shipments within the same day. This lack of efficiency of the receiving and put away process had a direct impact on its ability to meet customer demand, delivering to expected efficiency targets and putting an additional burden on assets and people.

FIC Solution

Focused Improvement in collaboration with a cross-functional client team utilized a DMAIC Lean Six Sigma methodology to investigate, develop and implement over 20 improvements. The team utilized a comprehensive set of tools, detailed process analysis, the review of existing workflows and deep-dives into data to better understand the challenges and opportunities. In conjunction with understanding and mapping the current receiving and put-away process, we also mapped the downstream process. Mapping the picking and shipping process helped identify opportunities and define solutions that would positively impact other critical DC operations.

With process analysis through failure modes and effects analysis, supported by data analyses, time-studies of warehouse flows, the team identified opportunities for focused improvement. Through a Kaizen event, which included the core team members along with cross-functional resources, we identified a list of potential solutions which categorized into short, medium and long-term solutions. The team additionally investigated current technology and its capability to define the requirement for future technological enhancements. Finally, a review of all critical inputs was conducted to identify and provide recommendations to upstream processes for improvement opportunities.

Some of the immediate actions included a redesign of the warehouse plan to optimize the flow of product, better racking and management of large and bulky items. The creation of priority put-away lanes and flexible spaces were implemented to support future growth requirements. Mobile desks were utilized to enable faster clearing and significantly reduce footsteps. Process improvements enabled the client to leverage vendor UPC codes for product identification and processing and reduce the requirement for manually re-labeling all products at receiving. Improvements in rack labeling fostered faster put-away. Courier shipments were streamlined and enhanced utilizing rollers to minimize the number of footsteps and enable faster clearing and readiness for outgoing branch shipments. Better receipts bin management was implemented to ensure that the systemic transfer of product was aligned with physical transfer to reduce manual entry errors significantly. As part of enabling the client to manage the process inputs better, a vendor scorecard was implemented to provide actionable information to leadership and vendor partners. The vendor scorecard helped improve upstream processes that impacted the warehouse operations. Procedures related to the introduction of new categories and products which were critical to the client’s growth strategy were strengthened and streamlined to support better downstream planning. Buying patterns were reviewed to manage inventory turns and identify opportunities for further optimization. As part of change management and ongoing controls, warehouse communication boards were implemented to provide a snapshot of critical KPIs, operating trends, action plan updates and company information dissemination.

Results

While in the early stages, the team has already seen gains, with put-away rates improving to 75% within the same day making the product available for picking. Single-touch clearing and put-away of bulky products with appropriate storage and closer staging for outgoing shipments have led to reduced handling and better-mitigated safety concerns. These efficiencies have supported the ability to significantly reduce the out-of-stock instances for the downstream pick process to meet company targets (<.1%). Products being ordered multiple times in a month have reduced to nearly 30% to under 4% without any impact on overall inventory or turns. The change in ordering patterns has reduced the number of product touch-points [pick up and put away] and also improved efficiencies in purchasing and invoicing processes by reducing paperwork.

Tools Used: A short of the process improvement tools used:  DMAIC, A3, stakeholder analysis, communication plan, fishbone, 5Y, SIPOC, process mapping,  statistical analysis, plane reorganization, etc.

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