Distribution Center Metrics:
You Can’t Manage What You Don’t Measure

If you’re someone in the Logistics, Distribution or Supply Chain domains then you know the importance of metrics in managing your business. These domains are data rich and include literally thousands of data characteristics from which to measure the movement of products from origination, interim and destination points. It was Albert Einstein who said “not everything that can be counted counts, and not everything that counts can be counted”. The question, therefore, is what are the few critical metrics providing the optimum balance between the time it takes to measure and their impact on operating performance?

A January 2010 survey, conducted by the Warehousing Education and Research Council (WERC), received some 559 responses to various questions regarding Distribution Center related metrics and operating performance impact. The goal of the research was to track those metrics considered most important and the effect on overall performance. A copy of the research is available online at http://www.werc.org/search/?keywords=Velocity+study.

The survey validated the continued focus of “on-time shipments, order picking accuracy and average warehouse capacity” as the top-3 critical measures across the pool of respondents. The top-3 measures showing greatest improvement year over year were “material handling damage, inventory shrinkage as a % of total inventory, and back orders as a % of total orders”. The top-3 measures where performance declined year over year included “lines picked and shipped per hour, orders picked and shipped per hour and dock-to-stock cycle time in hours”.

Given the economic backdrop of this measurement period, it is not surprising to see performance improvement in areas such as material handling damage and inventory shrinkage. Both areas are considered “waste” and as companies look to “lean” their supply chains these measures are often areas of significant focus. After all, waste reduces operating profits and reducing waste is an industry priority, especially in times of economic hardship. The areas showing performance declines were not surprising either, given economic conditions, as companiesreduce ma npower thus contributing negatively on overall time to process orders, lines and receipts. The declines, although noticeable, were not of a catastrophic nature and had only marginal impact on customer dissatisfaction.

If you are responsible for managing your company’s Logistics, Distribution or Supply Chain processes then I invite you to participate in the Warehousing Education and Research Council (WERC). Doing so provides you access to benchmarking information from which you can adjust your processes to align with your customer requirements and industry best practices. By reaching out to professionals such as WERC, for industry benchmarks, or the Supply Chain professionals at ASIL, for operations performance assessments, you will gain information from which to adjust your measurement programs to find the optimum balance of insight, impact and cost.

If you are interested in conducting a metrics and operations performance assessment then I invite you to reach out to the Service Supply Chain experts at ASIL. ASIL Supply Chain professionals have over 100 years experience in various Service and Supply Chain roles. We have a proven track record of pragmatic solutions and welcome the opportunity to serve you and your clients. Call us today and let us help you achieve new areas of profitability and success in this ever changing economic climate.

Contributed by Warren White

Spotlight

Blind Leadership – Getting To The Truth

As leaders, we face many challenges in striving to achieve our business objectives. One would think that getting information from our own organizations would be the least of our concerns. Yet the facts are that most information you receive will be routinely filtered for what is believed to be the right story. The filter gets applied even more the higher up the information flows. It isn’t that people desire to hide the information; rather it is more about keeping the boss happy and not being the bearer of bad news. As some may tell, delivering bad news can be career limiting.

So how do we deal with this information crisis? Start by encouraging open communication. Yes, it is easier said than done, however, the alternative is more of the same. Try the following techniques to remove some of the filters.

• Don’t shoot the messenger – When a tough or negative message is shared the first reaction may not always be favorable. As leaders we control how we react, and if we want to get to the truth we MUST commend the messenger for their willingness to deliver a negative or tough message.
• Skip Level Management – Your direct reports are good people making a difference, but remember they too have interests to protect. Therefore skip level interactions will provide the leader a broader perspective and ability to comprehend the perspectives of others involved.
• MBWA – I will never forget the "Management By Wandering Around" philosophy that existed at HP many years ago. As leaders we can learn much from walking the halls and interacting with our organization at various levels.
• Constructive Debating – Sometimes we find that all parties appear to be on the same page, yet a level of discomfort still exists. Challenge the team by selecting advocates for pro and con debates so that you can explore areas that some may not want to share otherwise.
• Probing the Yes – People will typically tell the leader what they believe they want to hear. Push back on the yes, and what appears to be overly good news. Don’t be a skeptic, rather probe to draw out the messages that may be hidden or lacking clarity.

Being a Leader is hard. So take every opportunity to make your job easier by enabling people to share information more freely without repercussion. As in all aspects of life, Leadership requires focus, commitment, and willingness to keep learning. If you are looking for ways to increase your organization's effectiveness and performance, give the professionals at ASIL a call.

Contributed by Peter Pazmany

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Industry Trends

Understanding the Human Component of Alliances

Alliances by definition can be characterized as a "custom creation designed for the successful union of two or more corporate organizations"(1). "The two organizations become bonded together in a strategic partnership for their mutual gain - a double win"(1).

An alliance is important in any industry because it allows you to break into a new market, develop products, streamline efficiency and ultimately it should enhance your company with complementary strengths from another company. You can do all of this while cutting your risk in half and boosting your resources by creating an alliance that allows for two companies to work in synergy with one another. A combination of strategic strengths would be any organization’s dream, and with so many resources behind the joint project neither side can afford to have it go unsuccessfully.

A serious component of an alliance that can be overlooked is the employees that are intertwined with the company. People are the backbone of any alliance, with good reason; they make the day-to-day operations a reality and deliver on the orders from the higher ups while communicating goals to those working under them. Without dedicated and committed employees; any alliance, or organization for that matter, will not be able to sustain itself and would collapse quickly. When looking at the possibility of an alliance, many preemptive steps can be taken to help stabilize both your employees trust in the future and the company’s faith within you. Below are some thoughts to consider while looking into an alliance that will help you maximize your employees’ effectiveness and understanding of their jobs while providing them with increased autonomy and responsibility.

• People support what they help create. It is imperative to include your employees in your dealings to the greatest extent that you can. They will respect you and volunteer their time and talents to see the alliance through to success.
• Allow different levels of management teams to integrate. Review the decisions to see if it is feasible from their standpoint. Allow the groups to engage in collaboration, problem solving and a realistic look at a vision to achieve success. 
• Allow your employees to provide input. This will help you realize whether or not the alliance will work or at least save countless resources by opting for a smaller pilot project to initiate to gain alignment. Additionally, the alliance could involve specific and useful information from the employees you have never considered that can evolve or change the project for the better.

"The future leader/CEO will be more visionary, spiritual, and adaptive, able to capture opportunity rapidly, respond to changing markets, and inspire a team through a dynamic common vision and shared values rather than through commands and orders"(1).

If you or your company is looking to establish an alliance or is interested in improving an existing alliance, give the professionals at ASIL a call. We have over 100 years of experience and a proven track record in creating and improving corporate alliances.

(1)Source: Business Alliances Guide: The Hidden Competitive Weapon by Robert Porter Lynch

Contributed by Joe Pazmany

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Our Software Products

Click on the links below to view ASIL, Inc.'s MAX Partnering® self paced software demonstrations:

Strategies and Execution - This demo depicts the tools that organizations can utilize to embrace change effectively and implement it successfully.

Partner Selection and Management - This brief demo displays the tools available to define, select, and implement outsourcing and partner selection.

Scorecards and Corrective Action - This vignette provides visibility to measure and manage the performance of your organization, partners and company.

Self Assessment Sample Questionnaire - This demo will enable you to respond to a small sample of self assessment questions focused on change management and create a Heat Map of your responses to see areas that may need attention. The Driving Complex Change® methodology addresses the six areas of Direction, Ability, Incentive, Resources, Structure, and Action that can impact your effectiveness of change management.

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