| More Metrics This is the third article in a series in which MHM is reporting the results of the annual Census of Distribution research study.
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From the executive suite to the shop floor, the phrase "world-class" has been repeated so many times that the word itself no longer has much meaning. Still, most material handling, distribution and logistics managers will recognize a world-class facility when they see it. Such operations combine technology and equipment with effective processes and skilled people to achieve a superior performance in their sectors.
For the MHM 2005 Census of Distribution we asked survey respondents for a subjective assessment of how close they thought their facilities were to peak performance, whether they had made "no progress," "some progress," "significant progress" or had achieved "world-class" status. Of the 457 responses that we received, 3 out of 10 (29%) said they had made significant progress or were worldclass. This report compares the management practices and performance metrics of these leading facilities to those where managers said they had made no progress or only some progress toward world-class performance.
Facilities that managers rated as world-class were more likely to be part of a public company and not privately owned. Wholesalers were most likely to rate their operations highly, followed by third-party logistics providers and manufacturers, ahead of distributors and retailers. Whether the building was owned or leased made no difference to world-class performance, but the age of the facility did. Surprisingly, because newer facilities tend to have newer technology and equipment, managers of facilities under current ownership for more than 10 years were more likely to rate their operations as world-class.
How does an operation become world-class? If the worldclass facilities responding to the Census of Distribution are any indicator, it's simply a matter of doing more. They are more likely to have continuous improvement programs that utilize Six Sigma and lean material management techniques. They are more likely to share financial information with employees and benchmark regularly against other operations for good ideas they can borrow. Such activities reflect a workforce that is always looking for the next challenge. That requires skilled and talented people. Not surprisingly, those facilities where employees receive 40 hours or more of training per year were much more likely to rate themselves as world-class.
| World-Class Operations Implement | ||||
| No progress | Some progress | Significant progress or world-class | All Facilities | |
| None of these | 37% | 17% | 8% | 19% |
| Total productive maintenance | 8% | 14% | 22% | 15% |
| Six Sigma | 2% | 15% | 25% | 16% |
| Open-book/sharing financials | 11% | 21% | 26% | 19% |
| Energy management | 20% | 14% | 27% | 19% |
| Quality certifications (e.g. ISO) | 11% | 23% | 36% | 25% |
| Lean/lean material management | 19% | 30% | 42% | 31% |
| Benchmarking | 22% | 39% | 48% | 39% |
| Continuous-improvement program | 42% | 61% | 81% | 63% |
Source: MHM 2005 Census of Distribution. Research Conducted in partnership with The MPI Group (Cleveland) and Industry Insights (Columbus, Ohio), two industry and market research firms.
| The Best vs. the Rest: World-Class Performance Defined Facilities where site managers reported that they had made significant progress or had achieved world-class performance reported an average on-time delivery rate of 96.4%. This compares to lower on-time delivery rates at facilities that had made some progress (93.3%) or no progress (88.5%) toward world-class performance. World-class facilities reported superior order-fulfillment metrics in most other categories. The exceptions were storage utilization, order fill rates and inventory turns. Warehousing costs as a percent of shipment value were almost five points lower at world-class operations. | ||
| Mean | ||
| Order cycle time | No progress Some progress Significant progress or world-class | 28.6 |
| Customer delivery lead time (receipt of order to delivery) days: | No progress Some progress Significant progress or world-class | 12.9 13.4 7.1 |
| Order fill rate | No progress Some progress Significant progress or world-class | 94.8 93.6 94.6 |
| Order accuracy | No progress Some progress Significant progress or world-class | 95.8 95.9 97.6 |
| Line accuracy | No progress Some progress Significant progress or world-class | 95.1 95.9 98.0 |
| On-time delivery rate | No progress Some progress Significant progress or world-class | 88.5 93.3 96.4 |
| Perfect order rate | No progress Some progress Significant progress or world-class | 88.2 92.1 95.2 |
| Annual storage utilization (occupied capacity / total storage capacity) %: | No progress Some progress Significant progress or world-class | 78.0 76.8 78.4 |
| Total inventory turn rate (Annual dollar-volume shipments / average on-hand inventory) turns: | No progress Some progress Significant progress or world-class | 14.4 9.4 13.3 |
| Warehousing costs as a percentage of shipment value [(labor + overhead) / shipment dollar volume] | No progress Some progress Significant progress or world-class | 15.6 12.0 10.7 |
Source: MHM 2005 Census of Distribution. Research Conducted in partnership with The MPI Group (Cleveland) and Industry Insights (Columbus, Ohio), two industry and market research firms.
