Supply-Chain-Minded Store Delivery

Applying Total System Thinking to consider how all links in the supply chain correlate with store delivery resulted in significant logistics paybacks.

Investing in automation to control costs and get leaner can only pay off if changes made in one part of the system do not increase costs in another. That’s the philosophy behind Total System Thinking (TST), a methodology that takes a holistic approach to supply chain improvements. TST uses a structured process to gain a complete understanding of the impact of any change to every segment of a supply chain before making any change.

TST was used by Swift Water Logistics, a direct store distribution (DSD) supply chain process analysis and improvement firm based in North Carolina, to optimize the delivery segment of the supply chain process. Delivery is a significant operations cost center, especially when labor and total fleet costs are factored in. The process eventually led to the development of a lift-pallet system that reduces delivery time by up to 40 percent.

Total System Thinking Basics

TST is an end-to-end supply chain process improvement methodology that slows down process improvement initiatives to get a thorough understanding of the impact of functional actions throughout the supply chain. Decisions are made based on upstream and downstream results. The ultimate goal is total system optimization, in which the whole system is greater than the sum of the individual parts. Table 1 shows the supply chain network within which TST is typically used.

Table 1 – Supply Chain Network

Procurement

Manufacturing

Transportation (from manufacturing to sales centers)

Order generation

Order assembly/warehouse operations

Route delivery

Merchandising

The TST approach calls for aligning all components of the supply chain processes to achieve optimization.

TST uses a 3-tier approach, which reflects lean principles and involves bringing representatives from each segment of the supply chain together to talk about making a particular change.

Delivery Process Benefits

The delivery component is usually a supply chain process’s highest operational cost center. Delivery and warehousing (the next highest cost center), account for about 70 percent of supply chain process operating costs, when labor and fleet capital costs are factored in.

Swift Water Logistics used the TST approach to implement new delivery strategies that would drive up revenue growth in the face of more SKUs and the need to service accounts appropriately. With the complex SKU world, standard delivery methods were no longer rational. In addition, driver injuries and turnover were issues, and increased product touches were driving costs upward. Table 2 shows the growth in SKUs over the past few years and its effect on delivery routes.

Table 2 – Impact of SKU Growth on Delivery and Warehousing
Side load aggregate build

 

2003

2007

2008

2011

Average # of unique SKUs at distribution center

220

312

337

365

Average # of SKUs on route

105

153

165

212

Average # SKU picks per customer stop

12

14

21

29

Source: Magliner

The goal was to drive costs out of the system without jeopardizing revenue growth, and do so in a safe and sustainable manner. A different delivery model was essential, especially with the need to reduce driver injuries and job turnover. Other goals included reducing the physical stress of delivery jobs and expanding the labor pool. In addition, they wanted to reduce touches to eliminate damage from multiple handling and make check-in easier. Service improvement goals included making delivery more flexible and agile, moving away from specialty equipment, facilitating hybrid routing, and improving merchandising.

Earlier attempts at improving the delivery operations without using the TST approach had included such delivery service options as customer order built Sideload (pocket-load), order fulfillment system (OFS), customer built pallets on rear load trailer, and carts. All provided delivery benefits, but resulted in issues in other parts of the supply chain.

For example, the cart option solved the issue of reducing product touches, but the carts ended up requiring too much room in the warehouse to be practical. Also, any non-pallet delivery system requires a cleaning operation before goods can be transported, adding cost to the total system.

Meeting of Minds

Using the TST 3-tier approach, Swift Water brought together representatives of all areas of the supply chain to discuss how any change in the delivery process would affect the warehouse and other aspects of the supply chain. The human resources department, not usually considered part of the supply chain process, was brought in to make sure effects on staff would be properly considered.

The group looked at where all the handoffs occur so they could understand where all the touches are, and discussed how to improve the handoff so there is a smooth transition when the product moves to other parts of the organization. The team asked such questions as, “If we want to change the delivery system, how does this affect how the sales team takes an order?” In addition, they had previously required SKUs in package quantities. So they now had to ask, “If we change pallet dynamics, how does that affect the sales team on the ordering process?” After getting the answers, they went back and rewrote the delivery process, considering all the changes in the sales dynamics.

One thing the TST team agreed on was that the delivery system had to be pallet-based so it could be used in manufacturing, logistics, and delivery. Then, size came into play when the sales department said the pallet had to be of certain size to meet packaging requirements. The human resources contingent weighed in on the safety component, suggesting that studies have shown that the pallet should be at least 12 inches off the ground to reduce back injuries.

The team held a series of meetings to determine all the effects of a new delivery system on other parts of the supply chain, and list all changes needed prior to implementation.

The factor that tipped the scales in favor of developing a new custom solution was the rise in warehouse automation and the necessity for any system to work with pick systems. With the added SKUs, the warehouse’s normal pick areas were expanding at 500 percent.

Some changes were piloted first at one location to understand how it would operate within the complete system, whereas others went straight into implementation. The implementation was done over a period of time long enough to make sure the group was getting the results expected and to understand any unseen road blocks.

A New Delivery System

The system that evolved from the TST process was a lift-pallet system (the CooLift Delivery System). It combines a maneuverable high capacity hydraulic lifting truck with integrated high density polyethylene half-pallets. Compatible with automated order pick systems, the system allows orders to be built directly onto a special pallet inside the warehouse, and then loaded into trailers using traditional fork lifts with unique pallet adapters. Improved delivery dynamics include easy maneuverability in accounts, with 360 degree turning and 6 wheels for stability. The pallet’s height and stability makes merchandising easier.

The system took many of its basic features from the delivery systems evaluated. It was designed to be tailored to individual customer builds, and to handle complexity. The new design can reduce delivery time up to 40 percent, with up to 30 percent reduction from sideload systems and 20 percent reduction over customer-built rear load options. This is accomplished by reducing the number of times product is handled during the supply chain process.

The system works with a rear load trailer with lift gate, eliminating specialty equipment. Using a pallet and lift mechanism, it facilitates efficient warehouse operations, like mechanical order building, loading and unloading, and warehouse automation.

Using the TST process ensured that any effects on other parts of the supply chain do not take away from the benefits of the delivery improvement. The approach is a useful option for those seeking to make an investment in a change without having to come back in the future to fix another part of the system that is negatively affected.

TAGS: Warehousing
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