August 9, 2011

Supply Chain – Measuring for Success: 1

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This series “Measuring for Success” is taken from a presentation I gave at the SCL Conference in Toronto on 10th May 2011:

Well used and well constructed measures are a feature of successful supply chains, but what does success look like? To answer this question let’s look at who can legitimately call “success” in a supply chain.
Customers can of course and we must take the opportunity to listen to a customer at each link in our supply chain.
To do this we simply measure the effectiveness of our processes whenever one link hands over to the next, all the way through to the final customer.
Each link will typically signify the end of one process and the beginning of another and it is here where supply chains either succeed or require corrective action.
Measures are usually reported from a Customer Perspective and on a day-to-day basis our customers, operators and sales team will want visibility into them particularly with regard to process timeliness and process accuracy.
Other internal stakeholders will be interested in the Customer Perspective too. These stakeholders will also want a wider view of the business and of its people. For example, your CFO will want to know about costs and revenues, your HR team may want to see measures of employee turnover and employee engagement and your employees themselves will want to know about the operations safety record and progess towards incentive payments.
“Success” therefore is defined by all customers and by all organisational stakeholders.
It should be self evident when we look at our KPIs whether we have succeeded or not. The KPIs should tell us how our supply chain is performing against customer and stakeholder expectations by comparing “How am I doing?” with “Customer and stakeholder expectations”.
Our choice of KPIs will give messages to our customers, stakeholders and employees about which aspects of the supply chain we regard as the most important, we must remember to engage with them, to listen and respond to them and involve them as much as is sensible, this will encourage them to have a stake in the success of the supply chain and ultimately work towards common goals.
At this juncture it’s crucial to recognise that part of our responsibility as supply chain professionals is to manage customer and stakeholder expectations, to ensure they are realistically set for the given situation and timeframe. In this context it is vital that all parties agree on a common set of measures and there are commonly agreed expectations.
Third Party Logistics companies (3PLs) often have success strictly defined in contractual agreements with their clients and for them success may mean more than simply achieving the desired supply chain outcomes. The 3PL could be incentivised to attain certain “success” targets and in the future success may well result in the renewal of the contract. For the V.P. Supply Chain who drove the outsourcing, success will combine a vindication of that decision along with a whole bunch of satisfied customers and stakeholders.

Next in this series of articles I’ll continue by looking at how to set up a measurement and reporting system and how to get the most from it so that your customers and stakeholders are happy to declare “success”.

January 17, 2011

Distribution Centre Operations Start-up: 3

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Your conceptual designs will give you: how large a building you need, the materials handling methodologies and equipment you’ll employ, and the size and main features of the site. Now it’s time to turn these conceptual designs into reality.

I’m going to assume you have already successfully presented the business case for your new Distribution Centre (DC) and have obtained business and financial approval to proceed.

In getting project approval you’ll have examined all the potential locations for your facility and using a number of criteria you’ll have chosen the site that best matches your business needs. This choice of site will very likely give you the developer you’ll be working with and perhaps the main building contractor too. You can also develop a proposal and use it to help you differentiate and choose between potential contractors. The partnerships with your developer and main contractor, and your working relationships with them, will go a long way towards defining the success of your project.

Inherent in your choice of site is how to situate the building(s) on the plot of land, the overall site design and the placement of expansion areas.

Your architect will work with the contractor to produce structural, mechanical and electrical drawings which will be used to tender for the construction work and to obtain the permits you’ll need before you can proceed with construction.

Your own team should undertake a detailed review of the drawings before you give your final sign off. As soon as the permits are obtained and the construction partners are chosen the construction work can begin.

Make sure that you’ve given firm guidance on the specifications for items such as column spacing, the warehouse floor, electrical, refrigeration and insulation values, docks and dock equipment, grading, the roof, offices and computer rooms, employee facilities, site and building security, energy management systems, emergency power supply, ceiling heights, fire prevention, heating and ventilation (HVAC) and yard paving.

How long the construction phase lasts will depend on: how much has already been done to load the land and prepare it for construction, the order lead-time for major build components, the season you’re starting to build in, the weather you encounter and other items along the way.

Your project manager should work closely with everyone to ensure that the project is delivered on time, on budget and to the agreed specifications.

If you’ve engaged a company to audit the construction process and specifications your project manager should spend time with them to review the materials they produce. As each construction phase is completed a list of deficiencies will be produced and resolved and payment can be made. As you sign off your acceptance make sure you’ve covered off all the deficiencies and the finished building meets with the approval of your operations groups.

Before operating in the facility you’ll need to obtain the occupancy permit.

While construction is happening you’ll be working in parallel on the many other aspects needed to successfully open and operate your new DC, I’ll tell you more about these in subsequent articles.

December 4, 2010

Distribution Centre Operations Start-up: 2

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Designing and constructing a Distribution Centre is a process that could take you 3 years or more to bring to conclusion.

As supply chain people, when we talk about design we refer to the internal design of the distribution centre, the design of storage and materials handling media and the sizing of the building.

The design will be based on a multitude of factors, all to do with the operations you want to have in the premises. Typically designs are said to be mechanical or non-mechanical.

Mechanical designs include items such as conveyors, sortation systems and automated materials handling while non-mechanical designs are a more manual process involving the use of powered equipment to move product around the DC.

You can expect a mechanical design to cost significantly more to set-up, a complex mech solution can cost many millions of dollars more than a non-mech solution, the investment being justified by lower operating costs over the life-time of the operation.

In addition to your materials handling solution, the size or “footprint” of your distribution centre will also be driven by: how much product storage you require; how accessible you want the product to be; and by how you choose to store your product.

The amount of product stored can be all over the map, I’ve worked with companies who have no more than 1 day of inventory in their DCs to companies at the other end of the spectrum who average 100 days of inventory on hand. These companies had different businesses of course and can’t be compared to each other and judged as “good” or “bad”.

How accessible do you need some of your inventory to be? If you require items to be constantly accessible they will take up more space then items which don’t need to be regularly accessed. Pick locations fall into this category, they contain items which you want your staff to have consistent access to.

How large a footprint these storage and pick locations use depends on how much product you choose to put into each location and whether you put the locations on the floor or make use of the building cube and some of them in the air, in pallet racking and pick towers for example.

There is a further “design” we talk about, that’s the design of the site your DC will sit on, taken together,  your site and building design will tell you how much land you will need to purchase.

Site design elements include space (land) for: site entries and gatehouses; roadways; truck & trailer parking; vehicle maintenance and washing; external storage areas; employee access and parking; and, perhaps, room for future expansion of the building.

The city or municipality will ask you to provide land for items such as storm water drainage and storage, landscaping and berms to reduce noise pollution.

Once you have your outline designs finalised you will be ready to start the process of acquiring land and building your new distribution centre.

November 15, 2010

Distribution Centre Operations Start-up: 1

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Starting up a distribution centre operation is always a challenge, always exciting, having done a few of them in both new and existing buildings I can tell you there’s nothing like experience to get you through those start-up challenges and successfully through your operating ramp-up.

Managing your start-up using project methodology and rigour is time-consuming and can at times be tedious, but it’s a good investment.

To get going, appoint a project manager, form the start-up team and establish a steering committee. The project manager and the team should agree a project charter with your executives and once this is done the team can write a detailed project plan using the charter and their own expertise to guide them. Expect your project manager to establish regular meetings to update and get feedback from the team, the steering committee and other stakeholders.

Recognise that communications and change management must be high on the team’s agenda. These aren’t exclusively for the team to look after though, everyone I’ve already mentioned should play their role.

As the project unwinds there will be a number of distinct project areas for your team to manage and deliver, these will include: distribution centre and site design; fitting out and equipping the operation; financial processes; operations including transportation; human resources; systems and information technology; loss prevention and security.

Decent planning and project management will give you a foundation for success. However, the key to a great start-up is in executing well, taking care of your customer and delivering on time and under budget.

I’ll visit the start-up process again and give you more detail on the things I’ve outlined above, if you need help before I’m able to get to the next article feel free to contact me.