Case Study:
Order Picking - Distribution

distribution

AT A GLANCE
  • Leading supplier of personal medical care products
  • Production, packaging, and shipping facilities located in a single site service center
Financial Highlights
  • 1.4 M Project Cost
  • 4.5 M 12 month annualized savings
  • 3.2 Return on Investment
Issues Highlights
  • Frontline supervision was relatively new & untrained in key management concepts due to rapid expansion and grow
  • Front line managers lacked employee development skills and clear direction
  • Productivity metrics and goals such as 'order picking standards' were outdated
  • Production goals were not clearly translated from executive levels to floor employees
  • "Good" employees often left the workforce out of frustration due to poor management communication and conflicting leadership
Client Objectives
  • Reduce labor cost by:
    • Eliminating 100% of the contract labor
    • Maintain 96% on-time shipments
    • Reducing overtime to the operational goal of 16%
    • Improving order accuracy to planned 99%
    • Increasing equipment availability to 75%
  • Develop production standards
  • Upgrade the management skill set of all frontline supervisors and managers
Project Approach
  • Facilitate management workshops for all levels of the management team to enable them to understand basic and key management concepts
  • Work with client engineers and managers to develop realistic standards of production
  • Develop and implement comprehensive management operating system that is both repeatable and sustainable
Project Highlights
  • The need for temporary labor in the day to day operation was eliminated by 100%
  • On time shipment of orders was improved to 98.4% by the end of the project
  • Order accuracy was improved to 99.7% by the end of the project
  • Surveyed customer satisfaction was rated at 93% at project end (Newly implemented program)
  • Equipment availability was increased to 91% resulting in the elimination of one shift and further reducing labor cost
  • 98% of the frontline management team successfully completed 18 management training workshops

OVERVIEW

This leading Medical Supply distribution center was a self described company on the verge of a “huge and terrific” breakout. As an industry leader and developer in the technology required in manufacturing their state of the art product, they had a continuous stream of new products scheduled to debut and bring to market. Their aggressive marketing plan promised not only new and exciting products, but also premier service levels that leveraged third party delivery services, new state of the art order sorting, handling and labeling equipment that was recently purchased.

As part of their integrated marketing plan the advertised “same day” and “next day” shipments service was key to both increasing market share and bottom line performance.

distributionOver the previous year rapid expansion of sales, new product configuration, change over to new and upgraded equipment and facilities resulted in a stressed warehouse order handling operation. The challenge for order handling soon became one of keeping pace with already rapid expansion which showed no signs of slowing, as well as, improving shipping and service performance to expected levels. All of this needed to be done, while at the same time, reducing excessive cost to maintain the levels of performance which were insufficient in meeting company demands.

Executives described their concerns as being founded in the lack of the management teams ability to execute the simple “blocking and tackling” of management activities, poor employee morale and a lack of understanding of “good warehouse practices.” All of these seemed to be holding the organization hostage form the explosive growth on the horizon.

The Assessment process began with a partnering of an AMS professional conducting detailed observations of managers, supervisors and a sampling of employees as they conducted their day to day activities. After a thorough review and validation of the data and information, it was determined that frontline supervisors were not properly trained in effective management techniques. Middle level managers did not provide frontline supervisors and managers with a plan that was executable or sufficient to achieve the goals of the Order Handling Operation. Operating problems were going un-addressed and unresolved with no permanent or lasting solutions. Frontline managers lacked the fundamental understanding of how to utilize performance metrics to recognize poor operating trends.

The Analysis process also provided a quantified value of  the lost productivity due to the operating deficiencies identified. The next step was to develop a comprehensive approach that, in the words of the VP of Operations, would “right the ship and allow them to sale to calmer seas.”

The Path Forward

The approach that was developed and offered forward to the Client executives was one that called for interactive workshops for frontline supervisor and managers on basic management techniques. On-the-floor coaching and mentoring of client managers and supervisors with AMS Implementation professionals on a 5 to 1 ratio for a period of 28 weeks. An interactive development of standards and goals in conjunction with client process engineers. The training of Middle level managers in the development of a comprehensive Management Operating System that would drive the proper management behaviors necessary to achieve the desired operating results, as well as, sustain them.

The scope of the project included all of the Order Handling Operations and shifts. Additionally, the project included the process engineers and maintenance personnel that were responsible for supporting the Order Handling Operation over a period of 28 weeks.

Implementation

Implementation began with an official rollout of the project and its related objectives. It was critical that the project objectives seamlessly merge with existing operational objectives. At the same time, the AMS Group professional began building a working relationship with all levels of the client management team. Middle level managers began learning about the importance of having a comprehensive Management Operating System to manage productivity. Additional operational changes focused on:

  • Root cause analysis operating barriers and effective techniques that were put into practice in the current operating environment
  • Development and implementation of communication tools such as floor huddles between supervisors and employees to communicate plans, expectations and exchange information.
  • Supervisors and managers participation in daily accountability meetings that discussed production results, as well as, operating barriers and the required actions or actions taken
  • Newly developed controls to justify, approve and manage the use of temporary labor and overtime to accomplish work.
  • Development of standards for 100% of picking activities and tasks
  • A structured methodology for determining manpower requirements for daily crewing based on a changing order intake based on market offerings
  • A comprehensive process for continuous self evaluation (or self audit) of adherence to the MOS to identify necessary actions to sustain the operating results.
Summary Of Results

By the end of the 28 week installation period, the  culture of the order handling operation had affected a dramatic change in performance. Efficiency goals were now being attained or exceeded.  Service levels had been maintained and were now measured more accurately and timely. Overall, the culture of the facility had changed to one that encouraged performance excellence through employee participation and performance and proactive management practices.

Summary of results:

  • The need for temporary labor in the day to day operation was eliminated by 100%
  • On time shipment of orders was improved to 98.4% by the end of the project.
  • Order accuracy was improved to 99.7% by the end of the project

From the clients view

“I was ready to quit the day you guys got here. But when they announced that you guys would be here, I just took a few days off and figured I’d wait and see what happens. This is a different place. The supervisors actually listen now, … and they make sense too”! – Senior Warehouse Order Picking Clerk

“This process helped me to better plan work for my employees. I wish we had some training before you guys got here”. – Warehouse Picking Supervisors

This was a big help to me. I know what the problems were, but I (We) could never stop the fire fighting to get to work on them”. – First shift Operations Manager

This was one of the hardest things I’ve ever done! I thought I knew how to manage my guess but now I know it’s not just knowing the job. There is a lot more to it than that.” – Machine Room Supervisor

“I can see the change in my management team in this short time you have been here. My people come to me with data and facts. I have a whole new understanding of all of them” – VP of Warehouse Operations

“I actually look forward to our weekly staff meeting with the operations people. The service level numbers are a complete turnaround. Now the pressure is on my guys to pickup the ball and run”. – Senior VP of sales and Marketing