Your Warehouse as a Strategic Weapon eBook (Small)

8/7/2019 Your Warehouse as a Strategic Weapon eBook (Small)

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Intelligent Order Ful llmentSystemsI F

Transform Your WarehouseInto a Strategic Weapon

Contents: Introduction 1 I Having the Right Approach 2I Problem Statement 4I Distribution Center Challenges 7I Solving the Problem 10I Selling the Solution 13I Conclusion 14


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When written in

Chinese, the word crisis

is composed o two

characters. One repre-

sents danger and the

other represents

opportunity.

John Fitzgerald Kennedy

E ecuti e areh use managers t damust de e p a strategic resp nse t meetthe cha enges acing their areh useand distributi n center perati ns. Aut -mati n pr jects ha e de i ered desiredbusiness resu ts thr ugh a discip inedpr cess, care u p anning, research, c m-prehensi e ana sis, and perse erance. Is

it rth hi e? Man industr eaders sa ares unding es.

A 2004 stud und that c mpaniesith e cepti na rder- u ment...are 20%

m re pr tab e and gr t p- ine sa es25% aster.1

In a 2010 AMR/Gartner rep rt ab utthe r ds t p 25 supp chains, Dr. A eE inger and a team c eagues r m theUni ersit A abama and Te as A&M saidthat the eading supp chain per rm-ers are m re nancia success u thantheir c mpetit rs. The same rep rt n teds me c mm n attributes am ng the

r ds t p 25 supp chains:

transformation (supply chain), frombasic c st center t essentia c mpeti-ti e eap n

rise in rate of productivity improve-ment acr ss industries that pr mises tchange the r d ec n m

embedding product and process in-n ati n in supp chain perati ns and

c nsci us managing and shaping de-mand r m a cust mer, pr ducti n and

u ment standp int2

This eB k is intended t er insight andideas t he p u e a uate the strategic

a ue an inn ati e, market- cusedaut mated rder u ment s stem in ur

perati n. F ing these ideas sh u dhe p increase the pr babi it cr ss- unc-ti na c nsensus and, i merited, nanciasupp rt r a areh use aut mati n pr j-ect, especia i it pr mises t reduce c stsand increase re enue.

Introduction

1 Strategic Supp Chain Management, McGra -Hi , 20042

The AMR Supp Chain T p 25 r 2010, AMR Research/Gartner Pub date June 2, 2010, ID N . G00201212

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The rst step is t assess ur areh useperati n t determine i its a iab e can-

didate r aut mati n. The thresh ds rurther c nsiderati n are perati ns that

hand e er 200,000 pa ets and turns in-

ent r m nth . A a uab e t , a ai ab e

at http://www.activ.com/feasibility_calculator,can he p u determine i ur perati nc u d be ing rders m re pr tab and

i assess ari us scenari s such as are-h use c ns idati n r aut mati n n

high- ume, ast-m ing in ent r .

Having the Right Approach[ UNDERSTANDING THE PRoBlEM wITHIN THE CoNTExT oF yoUR CoMPANy ]

y ur rm has de ted mi i ns d arst create and maintain distributi n pera-ti ns that are n t percei ed as ha ing thep tentia t create strategic a ue. In act,its ie ed as just the pp site. Distribu-ti n equa s erhead s mething t betrimmed, managed, reduced and made tbe as ine pensi e and e cient as p ssib e.

Because its easier t measure c st, are-h use aut mati n nancia RoI ana sisinc udes assumpti ns n c st sa ings butn t cust mer a ue attributes that, i pr -

ided, u d dri e higher margin re enuegr th.

Understand the ObstaclesThe er he ming maj rit distribu-ti n center initiati es ha e cused n c streducti n, e en in rms here re enuegr th is the prime bjecti e c rp ratestrateg . This misa ignment is a cha enget areh use managers h are a s be-ing asked t manage m re c mp e rder

u ment, c ntr c sts, and meet c rp -rate s cia resp nsibi it bjecti es.

Getting distributi n pr jects nanced iser di cu t because m st strategic e rts

cus n t p- ine re enue gr th, pr ductde e pment, strategic partnerships, rmergers and acquisiti ns. Pr t is the g a .y u can cut c sts t increase pr ts, but

n s much. U timate , rea pr ts c mer m t p- ine gr th; hence the strategic

cus n head ine initiati es.

The overwhelming

majority o distribution

center initiatives have

ocused on cost

reduction, even in rms

where revenue growth

is the prime objective o

corporate strategy.

2

[ Back to Contents ]
http://www.activ.com/feasibility_calculatorhttp://www.activ.com/feasibility_calculator


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Explore the GapFirst e sh u d quanti the c st pr b-

ems acing distributi n b bridging thegap bet een strategic intent and pera-ti na rea it . That means take the rea it

distributi n, a its perati na issues,and a ign them ith the strategic needs

ur c mpan . on ne hand u ha equicker turns, en ir nmenta impact, in-creased SKUs, increased rder c mp e it

and rising c sts. on the ther hand uha e a c rp rate strateg cused nt p- ine gr th and increased c mpeti-ti e ad antage. when e e p re the gapbet een these t rea ities, s distributi n

c ntributes t c rp rate strateg , e be-gin t s e a ke pr b em that increasesthe ike ih d c rp rate supp rt and

nancing.

Problem Statement[ BEFoRE SolvING A PRoBlEM, wE NEED To UNDERSTAND IT ]

Understanding Leads to Solvingwith ut understanding e can d a t

rk, but the dds i be quite thatpr b ems i be s ed su cient . Thisma s und b i us unti u c nsider hman c mpanies, departments, g ern-

ments and gr ups rk da and night, butcant seem t s e the pr b ems be rethem.

There are man reas ns, but the ack a c mm n understanding ith regard tthe nature the pr b em stands ut. y ucan ha e ts pe p e in an rgani ati n

h think the re rking n a s uti nt gether hen in act, the re a s inga pr b em as the see it, hich ten can

mean the re a s ing di erent pr b-ems. T ha e a g d understanding ur

pr b em be re g ing an urther, e mustde e p a uni ersa pr b em statement.

Create a Universal Problem Statement

The uni ersa pr b em statement is de-ned as a statement the pr b em that

a stakeh ders can agree n. Get theuni ersa pr b em statement right and it

i be much easier t de e p a s uti nthat e er ne agrees is right r the busi-ness. Uni ersa pr b em statements ead tuni ersa s uti ns and uni ersa s uti nscreate strategic ad antages.

Explore the Gap:First we should quanti y

the cost o problems

acing distribution

by bridging the gap

between strategic

intent and operational

reality.

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The n a t create a true uni ersapr b em statement is t ta k t a stake-h ders and p them n their ie thepr b em. let them te u hat the think

n a high e e . G t the nance team and

ask h the ie the c mpan s erastrategic initiati es and c mmitments,di rced r m distributi n. The g a is tde e p a cr ss- uncti na picture thec mpan and issues r m ari us perspec-ti es. This is n t an in itati n t critici e

u r ur department. Rather, its a act-nding missi n t understand their needs

and requirements.Ask ab ut their bjecti es, strategies,

metrics, issues that rustrate them andcha enges the ace. Then ask h dis-tributi n a ects them and impacts theirresp nsibi ities and decisi n-making. whatd the ish it c u d d , change, m di ?Ha e this discussi n ith as man stake-h ders in the rgani ati n as u can, in-c uding sa es, cust mer ser ice, IT, market-ing, engineering, etc.

Whats the Corporate Strategy?It i bec me c ear, as u ta k t stake-h ders, h imp rtant it is t understandc rp rate strateg . y ur c mpan s stra-tegic p an sh u d ut ine rgani ati na

g a s and describe here res urces ha ebeen a cated er the ne t three t e

ears. In a pub ic traded c mpan this in-rmati n is ten part the CEo letter t

Shareh ders in the Annua Rep rt. H -e er, man c mpanies ma keep that in r-mati n restricted r n t d cumented in ap an, but there are mu tip e a s t disc -er strategic initiati es inc uding discussi ns

ith the e ecuti e team. Discussi ns iththe e ecuti e team i a s re ea aria-ti ns in h each ne sees and interpretsthe c mpan strateg . D cumenting thisin a gap ana sis i he p u prepare apr p sa thats m re ike t in unding.Understanding c rp rate strateg i he pde e p s uti ns that meet rgani ati naneeds, a ign departmenta e rts, and de-p res urces m re e cient .

Identi y New Strategic ChallengesA ke step at this time is t identi anne r emerging strategic cha enges.These u d be things that ha e createda cha enge r ur c mpan strategi-

ca and that are n t addressed in urc mpan s p an. F r instance, ma be the

ast si m nths has seen a maj r shi t intechn g usage. or, ma be a c mpeti-t r has c me ut ith a ne capabi it t

ut-fank ur c mpan , a ing it t steaa a acc unts. Make sure u e identi edthese issues. The d nt necessari shup in c rp rate strateg , but u can betthe are high n ur c mpan s ist ur-gent issues t dea ith.

It will become clear, as you talk to stakeholders, how important it is to understand corporate strategy.

Your companys strategic plan should outline organizational goals and describe where resources have been

allocated over the next three to ve years.

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Determine Operational PressuresIn additi n t ne strategic cha engesare perati na pressures. These inc udeissues ike scarcit credit, ss an im-p rtant supp ier, energ c st fuctuati ns,

ab r a ai abi it , r une pected changesin e ecuti e eadership. like ne strategiccha enges, these perati na pressures are

rare addressed in c rp rate strateg , butthe re urgent in nature and demand thec mpan s attenti n. Take these int ac-c unt as u gather in rmati n t ardsbridging the gap bet een perati na re-

a it and strategic intent.

Distribution Center Challenges[ looKING CloSEly AT yoUR CURRENT CHAllENGES ]

Key Distribution-Specifc IssuesThe ne t step is t ut ine issues speci ct distributi n. These are things that uare regu ar tr ing t dea ith that pres-ent cha enges be nd the dai r utine

ading trucks and shipping g ds. Its ike- that ne r a the ing e issues

pushed u t c nsider aut mati n.

Rising CostsA distributi n center managers dea

ith rising c sts. These c sts c me r m anumber p aces, such as ab r, insurance,p er, maintenance, breakage, err rs andd ntime, t ist a e . These c sts are n tstatic and ten are n t c ntr ab e b

u, et the a a s trend up ards.

Environmental Impact An ther area perati na pressure is theimpact ur distributi n center has n theen ir nment. C mpanies a er the r dare increasing being he d m re acc unt-ab e r h the impact the en ir n-ment. This pressure can c me r m insideand utside ur rgani ati n. Interna ,c mpanies are de e ping sustainabi itinitiati es as part their brand messageand as part their equit rmu a. Thereis a desire t sh shareh ders h theirc mpan is taking the ead in de e pingbusiness m de s that are m re sustain-ab e. E terna , ne egis ati n, cust merdemands, industr standards and s cia

Operational pressures

are rarely addressed in

corporate strategy, but

theyre urgent in nature

and demand the

companys attention.

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pressure make it increasing imp rtantthat ur distributi n center is measuringen ir nmenta impact r, at east, energc nsumpti n.

Increased Turns/Velocity An ther pressure n distributi n isincreased e cit . That is the pressurecreated hen cust mer demand r urpr duct spikes. It can happen r a number

reas ns, retai price ars and seas nademand spikes being just t . y u canresp nd in a number a s. y u canign re it and just keep shipping n a regu-

ar schedu e. H e er, retai she es ibe empt , je pardi ing ur re ati nshipse terna and interna due t st re e-nues. y u can di ert res urces set aside r

ther cust mers r start t pu r m urareh used pr duct, i u ha e a st re

set aside. or, u can pump up pr ducti nand g straight r m the manu acturing

ine t distributi n, hich ma be di cu t.S me manu acturers st ckpi e in ent r ,but that c sts m ne in square taget erect, t maintain r ease a aci it , inadded uti it c sts, sta ng, and redundants t are. And, hat ab ut the nanciaimp icati ns re enue being tied-up instatic st cks r the ta imp icati ns thatthe in ent r can represent?

Increased Order Complexity An ther cha enge r distributi n isincreased rder c mp e it . orders aregetting m re and m re c mp e and thusharder and harder t u . Distributi n has

t abs rb this pressure ten ith an e ist-ing s stem that as bui t r simp er r-ders. This puts increasing pressure n dis-tributi n t the p int here it can hamperthe c mpan s abi it t sta c mpetiti edue t distributi ns imitati ns.

Increased SKUsAs an ne in c nsumer g ds kn s,brands are c ntinua adding pr ductsin an e rt t remain c mpetiti e andc ntr she space. These ne pr duct

erings, ine e tensi ns, sub brands andpr duct ariati ns a add up t an increasein the SKUs that distributi n must hand e.This can strain areh use res urces,increase rder pr cessing c sts, de ade i er time and cause accurac issues.

The next step is to

outline issues speci c

to distribution. These

are things that you are

regularly trying to deal

with that present

challenges beyond the

daily routine.

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Solving the Problem[ Now THAT THE PRoBlEM HAS BEEN DEFINED, ITS TIME To DEvEloP A SolUTIoN ]

Innovate to Bridge the Gap

At this p int u sh u d ha e e p red theing: a uni ersa pr b em statement, a

c rp rate strateg , an ne strategic cha -enges, perati na pressures and distribu-

ti n-speci c cha enges. y u n ha e agreat perspecti e the macr g a s andissues acing the c mpan , as e as de-partment-speci c issues. y u ha e de nedthe issues that pertain t distributi n and

u can ie e er thing in the c nte t the c mpan s strategic initiati es. It s ntime t inn ate s uti ns s uti ns thatbridge the gap bet een perati na rea itand strategic intent.

y ur g a here is t get as c se as p s-sib e t s ing a the pr b ems u eidenti ed. Gather a team c ntent e -perts. This pti n is ten er ked r

skipped because the assumpti n is its urj b t gure this ut n ur n. But, thetruth is, its ur j b t manage the pr cess

guring this ut.what d e mean b c ntent e perts?

C ntent e perts can inc ude interna e -perts, ike pr duct managers, engineersand nance pe p e, but it can and sh u dinc ude e terna pe p e, such as c nsu -tants, distributi n e perts, transp rtati ne perts, package engineers and lEEDbui ding e perts. The idea here is t geta ide gr up e pertise represented atthe tab e and t a id a m pic ie . Sure,

ure in distributi n, but h n t ha e anen ir nmenta impact e pert at the tab e?or h n t inc ude ur ca ning e -pert?

once u e gathered ur team e -perts its time t brainst rm s uti ns. we

nt c er the brainst rming r ideati npr cess in this d cument because thereare a t res urces ut there t he p u

ith that. we u d ike t p int ut thatthe inn ati n pr cess is iterati e and -cusing n uncti na it is use u . y u im st ike c me up ith ideas, de e pthem, rede ne them, test them and urtherde e p and re ne them. Its rare t s e apr b em per ect ut the gate. But, busing ur uni ersa pr b em statement as

ur guide and e eraging a team c n-tent e perts, u can arri e at a p er us uti n.

Its now time to innovate solutions solutions that bridge

the gap between operational reality and strategic intent.

10[ Back to Contents ]


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The Problem-Solving Dilemmay u i n t be ab e t s e e er aspect

e er pr b em that stakeh ders ants ed. S , h d u ch se hat t cutand hat t ? This is here understand-

ing the c rp rate strateg c mes in hand .Use it as a ardstick. I a pr b em can bedirect tied t a strategic initiati e, then

u need t it i u can. I its s me-thing that is n t easi tied t de i ering na strategic g a and u cant easi s eit, then its a g d candidate r being e tb the a side. The nice thing ab ut thisappr ach is u can easi de end urch ices. y ure making decisi ns based nthe c mpan s c mmitment t its strategicinitiati es.

Develop Model SolutionsA ter the inn ati n pr cess has run itsc urse u i ha e decided n a s uti nthat u think is best. Its tempting at thatp int t begin t pr m te that s uti nand tr t get supp rt. Resist that urge.

Put ur s uti n t the test b creating am de . M de ing is critica . Current tech-n g makes it accessib e and c st e ec-ti e.

y ure de e ping a s uti n r a er

c mp e pr b em, a pr b em that n t naddresses the needs ur distributi ns stem, but a s enc mpasses nances,engineering, pr duct de e pment, sa esand in rmati n techn gies.

M de ing a s u t take ur au-t mati n s uti n ut r a test spin, see

hat rks and hat d es n t, identip ssib e issues be re u actua runint them and re ne ur s uti n. once

u e m de ed ur s uti n and identi-ed its strengths and eaknesses u can

then make changes and get the s uti nas s und as p ssib e. This i make urnumbers and pr jecti ns as c se t rea asp ssib e.

Modeling allows you to

take your automation

solution out or a test

spin, see what works

and what does not,

identi y possible issues

be ore you actually run

into them and re ne

your solution.

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Selling the Solution[ GETTING yoUR oRGANIzATIoN BEHIND THE SolUTIoN ]

N , its time t gain c nsensus and nan-cia supp rt r ur aut mati n pr ject.we nt c er a step-b -step acc unt h t se ur s uti n, but e ant tgi e u the right rame rk t appr ach

ur e ecuti e team.First, d nt rget strateg . A a s start

there. Dem nstrate that ur e e is n thesame ba as theirs: strategic g a s. Sec nd,share ur pr cess. Make sure the under-stand h u made ur decisi ns andarri ed at ur s uti ns. y ur e ecuti eteam i appreciate s und pr cess ands und thinking. Third, share the uni ersa

pr b em statement. Sh h it ties intthe strategic g a s, as e as the issuesthat each department is dea ing ith. And

na pr ide the s uti n. Present it inre ati n t the c mpan s strategic g a s,uni ersa pr b ems and the issues that u,distributi n, are dea ing ith. Sh h

ur s uti n n t n s es ur pr b-em and reduces c sts, but a s bridges

the gap and sh s h ur s uti n idri e re enue. I u can d that, uha e an appr ed pr ject and perhaps ane c rner ce in the near uture.

I you can sell the

solution, youll have

an approved project

and perhaps a new

corner ofce in the

near uture.

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Conclusion[ THE EFFoRT IS woRTH IT ]

wareh use aut mati n is a c mp e andast t pic. There is n ne techn g r

pr cess that i guarantee success. As un understand, the decisi n t aut matea areh use sh u d be made n a ter acare u and c mprehensi e business pr -cess re ie and e a uati n is c mp eted.This pr cess can take a ng time. But its

rth it. The ptimi ati n areh usingacti ities can ead t drastic reducti ns instructura c sts that can pr pe ur rmsdistributi n center r nt and center as ap tentia ke t rgani ati na success.

There are a t res urces and e pertsthat can he p u th ugh this pr cess. y ush u d seek technica qua i ed, unbiasedsupp rt hen c nsidering aut mated

areh use s uti ns r ur rder u -ment perati ns. Independent s stemintegrat rs, ike Retr tech, Inc., can c -

ab rate ith u in a pr cess t identi

appr priate areh use aut mati n tech-n gies, de e p s uti ns that a ign ithbusiness requirements, and create p ans

r imp ementati n that mitigate risks.Desired perati na and nancia resu ts

can b th be achie ed thr ugh pr perana ses, s stem engineering/integrati n,de i er t requirements, p anning, and

e -e ecuted pr ject management dur-ing insta ati n, testing and training.

Thank u r c nsidering aut mati n.we h pe u und this in rmati n use-

u . whi e n d cument can address e erissue r anticipate e er c ntingenc ,

e trust u are n armed ith a pr -cess and an appr ach that i he p getdistributi n in a ignment ith strategicintent. Thats the rst step t ards argerinitiati es that can be aunched t trans-

rm ur areh use int a c mpetiti eeap n.

Trans orm your

warehouse into a

strategic weapon.

IntelligentOrderFul llmentSystemsI F

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Your Warehouse as a Strategic Weapon eBook (Small)

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