WERC Conference Shares Lessons Learned

Conventional Wisdom

WERC Conference Shares Lessons Learned

by Tom Andel, chief editor

Ever hear the advice, “Don’t sweat the small stuff”? Forget it. Sweat the small stuff. Then the big stuff will take care of itself. That message was repeated in several presentations during the 25th annual conference of the Warehousing Education and Research Council (WERC).

Only through this ability to micromanage your business can you upgrade your capabilities, suggested Mark Sanborn, with Sanborn & Associates, a specialist in personal and professional improvement. That requires more than just automation. “Technology leveraged by ingenuity can’t be beat,” he says. That means being able to deal with change. “Ninety-six percent of the change we deal with is imposed on us,” he added. “The rest we initiate. We must improve how quickly we change, incorporating anticipation, acceptance and action. Be open to new ideas in your organization and be ready to act on them.”

Develop talent

Rick Jackson, senior vice president of logistics operations for Limited Logistics Services (LLS), expanded on that idea of fostering homegrown talent. He noted that at one time 70 percent of his company’s distribution center leadership had no education or professional training beyond high school. That kept their talent from being put to work in upper-management positions. Result?

“We were an organization of firefighters,” he continues. “Our customers liked that [extra effort], but treating symptoms instead of problems becomes a weakness.”

That weakness became noticeable as LLS saw significant shifts in business. Eighteen-month fashion cycles collapsed to 90 days, putting more pressure on distribution centers.

The company decided to face the customer with a new model by realigning the DC’s role in the supply chain. It would develop new DC talent from within. They would separate the A-players from the C-players, reward the former and improve or eliminate the latter. They would institute cross-functional training and recruit talent from the nation’s top supply chain schools. Logistics people now understand the company’s core business and have a chair reserved for them at all major business meetings.

Results: DC productivity (units per hour) improved by five percent, cost per unit decreased one percent, shipping productivity rose 22 percent, supply chain cost as a percent of sales decreased three percent, and orders are delivered as demanded 99 percent of the time. Bottom line: “Don’t lose your focus on talent!”

Nuts to baloney!

Talent needs to focus on operational details. Don’t let them get lost in “mission statement of the month” rhetoric.

“Mission statements don’t tell you what to do,” said Stephen Kaufman, former CEO of distributor Arrow Electronics and a professor at Harvard Business School. “You can have 99.5 percent perfect orders but have 300 disappointed customers every day of the week. Fill rate, same-day ship, cost per item picked, cost of distribution as a percent of total revenue — those are the detailed metrics we have to focus on.”

Kaufman used the story of Budweiser’s purchase of a snack food company several years ago to make his point.

The beer brewer reasoned, “If we get people to eat peanuts, they’ll get thirsty and drink more beer. Let’s get into the peanut business.” Enter the Eagle Snack Co. Budweiser and Eagle would use the same distribution network, same sales force, and serve the same customers, and a slow-growing industry would get hot with the help of a snack food. The venture failed. Nobody bothered to think about the details of execution in peanut distribution.

“Where is beer kept?” Kaufman asked. “In refrigerated warehouses. Are peanuts kept there? No. Beer comes in big containers, and is carried by big strong guys to the back of the store. How do peanuts get distributed? To the front door. They’re put on the shelf by the salespeople. There was a total disparity in distribution, warehousing and order pattern. The beer guys didn’t want to load shelves with peanuts. Eventually they shut down Eagle Snacks, and Frito-Lay bought it for two cents on the dollar.”

The moral: Understand the execution details of your business. Peanuts and beer won’t run perfectly well with the same ERP or WMS.

“Those systems are marketed to do something for everybody the same way,” Kaufman concluded. “Why would you want to run your business the same way all your competitors run their businesses, or run it the way a German software engineer thought was the right way to run it? That’s bizarre. You don’t reconfigure your business to run like the software; you reconfigure the software to run like your business. But make sure you know how your business runs. Then, spend time up front redesigning or fine-tuning the software package so it will work the way you want.”

Pain and gain

Edmund Maguire, special projects manager for Cantisano Foods, learned that lesson the hard way when his company decided to consolidate three DCs into one and use automated storage and retrieval technology.

“We understood what the system could do for us and we understood the financials, but we didn’t understand until we got into it what we had to do to fit the system to our operations,” Maguire explained. “We did not understand what the preventive maintenance was going to be. We knew once it was running it would be relatively simple — much simpler than the lift trucks. Today we have one person who works 40 hours a week. In the first six months we’ve had 15 people working 60 hours a week trying to get it to where it was a manageable system.”

Another problem was that the existing Cantisano warehouse system could not talk to the AS/RS.

“That hole just about scuttled the project,” Maguire explained. “We decided we had to upgrade our current package because we had so much invested in it and the cost of a new package that would do everything we needed in terms of communicating between the two systems would be exorbitant. So we upgraded.”

After adding the time to do that, the company ran into other mismatches. The storage system had trouble handling the various unit load platforms Cantisano used, including rented wood pallets, pool pallets and slip sheets.

“The system was developed around a platform that didn’t exist,” he added. “Luckily, we built in a provisionary lane to handle the return of slave boards to the beginning of the system. Don’t assume that what the platform suppliers are telling you or what you think you know about the loads is accurate. Rigorously test it.”

Despite these glitches, Cantisano now has a 70,000-square-foot plant warehouse doing the work of three, saving the company significant transportation and handling costs. Damage is down and logistics scheduling performance is up.

If such war stories inspired this year’s WERC conference attendees to take more time planning their improvement projects, the benefits should be felt throughout their supply chains.

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