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CEOs, Hit the Floor

One attentive CEO saved millions of dollars the first year of his company's new material handling system -- just by paying attention.

CEOs, Hit the Floor

CEOs, how well do you really know the business you’re running? Obviously, you can handle numbers — a necessity for dealing with analysts and investors. But do you know why your warehouse and distribution center managers request certain material handling equipment and systems? Why some purchases are needed and what impact they may have on your business?

How many corporate executives have actually gone to the floor, maybe even performed some of the tasks their employees do? On the other hand, how many plant directors, production managers and logistics managers have invited or persuaded their corporate officers to visit?

Unfortunately, it’s the rare CEO who bothers. Dr. John Seffrin, CEO of the American Cancer Society, is one of the rare ones. A recent upgrade of the National Distribution Center in Atlanta cost several million dollars in material handling equipment and software, but saved $8 million in one year’s operation. Not only did he visit the floor, he picked orders. On top of that, he persuaded the Board of Directors of ACS to visit as well. Dr. Seffrin knows why his warehouse managers need specific equipment. He’s seen the reasons.

“It was a great experience. The warehouse is very important to our efforts to save lives, even though it’s behind the scenes. It was the first time to my knowledge that we showed our officers and board some of our operations. I’ve been out a couple of times since, and it’s wonderful to see the impact it has had on our overall business. It’s helped us establish better working relationships with our 17 corporate divisions as well as reduce redundancies throughout the organization.”

Seffrin saw firsthand just how complex it can be to move an item from point A to point B, especially when there are many and varied point Bs. “There’s a tendency to oversimplify material handling logistics,” continued Seffrin. “But when you go out to the warehouse or DC, it doesn’t look simple at all.”

As a non-profit, it would have been easy for the ACS to not spend the necessary money. Instead, they chose to invest in their infrastructure.

Throughout U.S. business, though, many executives are out of touch with what really goes on, and what needs to go on, in their warehouses and DCs. Consequently, some dumb decisions are made. Decisions like not purchasing a new PLC because the 20-year-old one still works. (Yes, it works, but it’s using 20-year-old technology, too. Things have changed a bit since then.) Or decisions like not buying a gravity rack or conveyor because of its cost and impact on this quarter’s numbers.

It’s not just about numbers. It’s not about deals. It’s about satisfying the customer. The numbers can focus and guide. Too often, however, they are used to restrain. Firsthand knowledge trumps numbers every time. That’s why Seffrin promises if CEOs would walk a mile in their warehouses, their companies would be in better shape.

Leslie Langnau

senior technical editor

[email protected]

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