Emily Atkins, Aaron Lalvani, Ian MacKenzie and Jason Sonnbichler. (Photo: Dorothy Jakovina.)
March 7, 2014
MM&D magazine presented the results of its Hot Topics in Warehousing research survey to a sold-out crowd at the Cargo Logistics Canada conference in Vancouver, BC on January 29.
Editor and publisher Emily Atkins was joined on stage by Aaron Lalvani of Lalvani Group consulting, Ian Mackenzie, former director of logistics for Best Buy Canada, and Jason Sonnbichler, vice-president of business development with Ryder Supply Chain Solutions. Together they discussed the issues occupying DC managers, along with their causes and potential solutions.
The Hot Topics survey was conducted in late 2013 by MM&D. We asked readers to tell us the top three issues—ranked in order of importance—they are facing in 2014 in managing their distribution centres and warehouses. Space constraints and labour issues were very nearly tied, at 17 and 16 percent of responses, respectively.
When we asked what solutions they’d like to apply to these issues, the responses, in order of popularity were: technology, planning, reorganization, staffing, training and acquisition of specific equipment.
By contrast, when we asked what solutions they would apply with an unlimited budget to play with, respondents switched things up. In this case, new equipment ranked first, followed by more space, reorganization and investment in IT.
We also asked whether improving efficiency or controlling costs was more important. As is shown in the pie chart on page 17, improving efficiency is more important by far, with 82 percent selecting that option. A few respondents pointed out that once you improve efficiency, cost control is a natural outcome.
We asked what kind of benchmarks are being used to measure success. A whopping 32 percent said their organization does not use any. For those who do measure against a benchmark, the responses included (in order from most identified to least): Accuracy (on time and correct orders), customer satisfaction and service, inventory turns, profit, and unspecified KPIs.
Faced with these stats and responses from the survey the panelists each offered a different perspective in their remarks.
Aaron Lalvani looked at three of the survey result rankings: Costs which were ranked third, productivity, ranked eighth, and management/leadership, which ranked tenth. He commented that without leadership, cost savings and productivity improvements would be diminished. It takes the entire management team to develop solutions and collaborate with subordinates to execute the business strategy.
Lalvani challenged the audience to consider that warehouse costs are largely influenced by up-stream decisions made by sales, finance, production planning, procurement, etc. By the time the finished goods or WIP (work in progress) hits the warehouse, costs of working capital, waste (scrap), labour, procurement and all other Cost of Sales inputs have been determined. CEOs and management teams are continually seeking cost savings measures to impact their P&L responsibilities. However, there needs to be a strategic approach for the organization to impact costs to drive the bottom line and that is by focusing on the middle line, the cost of goods sold.
When looking at the ranking of the issues in the survey, the number 10 item (management/leadership) should be a top priority, Lalvani said. Without leadership setting the mission and monitoring the deliverables, cost containment and productivity cannot be fully achieved. Warehouse operations have their hands tied in relations to controlling what is put in their space. Those decisions are made in many cases unilaterally, without the input of warehouse operations management. That said, they do need to optimize their operations but rarely can continuous improvement from one department impact the bottom line. It needs to be across the entire organization.
Jason Sonnbichler presented Lean as a solution to the issues being confronted in warehouses across Canada. He focused on labour, since it was the second ranked issue in the study and is also typically one of the largest expenses in DC operations.
According to Sonnbichler, Ryder uses Lean principles to tackle labour costs in its DCs. Using Lean concepts as a foundation for labour management increases productivity and reduces costs. Improvements come from creating new processes, measuring workflow to generate continuous improvement, getting work done right the first time and increasing inventory turns, he explained.
By eliminating waste along entire value streams and continuously improving, Lean creates processes that need less effort, less space, less capital and less time to make products and services at far less costs with fewer defects. Companies are able to respond to changing customer desires with high variety, high quality, low cost, and very fast throughput times, Sonnbichler said.
Ryder has been able to apply lean labour standards to warehouse operations with fewer than 100 employees, making it a much more useful tool in the Canadian environment where smaller DCs are the norm.
The system relies heavily on empowering and rewarding employees at all levels. To succeed, companies need to create a lean culture that fosters and motivates employees to proactively and continuously improve, encourage everyone to challenge the status quo and empower employees to identify and eliminate waste from daily work. Employees are cross-trained and encouraged to solve problems with tools like Kaizens, A3’s, value-stream mapping, fishbone diagrams, root-cause analysis and 5 Why’s. Employees are rewarded for their participation and suggestions.
Ian Mackenzie focused his remarks on the question of benchmarking. Turning to BC labour ministry stats in the context of the survey results showing only 32 percent of organizations using benchmarks, he roughly calculated that there are about $13 million in wages being spent in BC’s lower mainland alone on employees who have no goals.
“Needless to say, morale is through the roof,” he quipped before explaining what happens when staff have no measurable objectives.
“What do you get killed on if you have no goals? Productivity, accuracy, quality and revenue.”
But morale is even a worse problem that leads to high turnover and countless other ills in the warehouse. Mackenzie said there are various solutions, including software, automation and RFID, but capital investment is hard to get.
Instead, he said the place to start is front line leadership (FLL). These are the entry-level leaders in a warehouse. They are the people who are good pickers, they get promoted because they are good at moving boxes, but then they are expected to lead with no tools, no training, and no measurement. So front line leadership becomes your Achilles heel.
The solution, Mackenzie said is to empower, equip and encourage those people. Build a set of benchmarks through observation and gradually get to a position where the data gets tighter. “Really poor benchmarks are better than none at all,” he added. MM&D