The Problem
The client company, part of a large multinational group, produces and distributes consumer goods with a historical, renowned brand. It’s a leading brand in its industry and it mostly addresses the Italian market.
The company has recorded low levels of performance of the distribution structure; to such a degree that solid, long-term partnerships with clients started to feel threatened. Two changes of warehousing suppliers within three years didn’t bring about any of the results the company hoped for. The choice of products in the catalog is wide (a few thousand codes), orders and deliveries amount to 10,000 per month, customers are many (around 7000) and are scattered throughout Italy, making widespread distribution mandatory and warehouse logistics capable of quickly reaching any location.
The Top Management is aware that it does not have the skills to tackle the problem.
Assessment
Contract Manager s.r.l. selects an experienced manager to carry out a rapid assessment of the situation, at the end of which the company is proposed the appointment of the manager for nine months with the following set of goals:
- A drastic improvement in the condition of customer service, both in terms of punctuality and quality of deliveries.
- Manage the relationship with the supplier of the warehouse and transport logistics service, in order to rebuild a collaborative relationship, overcoming existing tensions and prioritize the management of operations, momentarily setting aside purely contractual discussions.
- Alignment of the operational processes between the client company and the logistics service provider.
- Analysis of the existing contract with the Logistics Service Provider and, should the relationship be irreparably damaged, proposal of possible medium-term solutions and exit strategy.
The Solution
The intervention is complex, and the priority is given to the warehouse, the real bottleneck in the process of shipment, for which an activity plan is drawn up. The plan includes:
- Review of the layout and product allocation according to an ABC logic
- Cycle counting system for the inventory
- Review and improvement of the truck lifts fleet and their recharge stations
- Reorganization of the warehouse staff’s working shifts and verification of the number of workers needed for each shift
- Start of a process of monthly “forecasting” of the requirements, with a weekly update
At the same time, in a logic “If you can’t measure it, you can’t improve it” (W.T. Kelvin), data collection and validation work is carried out for the development of a clear set of Performance Indicators, made available with useful periodicity (daily, weekly, monthly).
Operational Management is divided in seven areas to supervise (from order fulfillment to after-sales), and for each of them the following topics are defined: scope, organizational responsibility, objectives, parties involved (both Company or Supplier), coordination mechanisms, reports and the KPIs for the control and governance of activities, and management methods.
For the Transport Area, an analysis by hub is launched to identify best practices and areas for improvement. Collaborations are started with new correspondents for an even wider distribution network, the most vital processes are redesigned, different delivery methods to crucial customers are designed (e.g. DO/GDO).
Process Analysis detects the need to automate some activities for greater precision and speed of execution. The technical details for the creation of a web APP are also defined, which allows for more effective management of delivery problems, with a consequent increase in the customer service level.
Results
- After the first 3 months, the warehouse made up for the accumulated delays and obtained a value of over 99% in the punctuality in preparing and shipping customer orders, a performance that persisted and proved to be sustainable over the following months (time required to prepare and ship the order, starting from the moment of fulfillment: 24 hours).
- The quality of order preparation and inventory management, in a set-up phase and measured as “Order Correction for Missing items”, went from 2% to 0.37% (percentage of correct orders over a total of fulfilled orders).
- The Punctuality of deliveries has gradually increased over the passing months, first reaching a stable level of 90%, and then going up to 94.5%.
- Delivery errors (missing parts, damaged parts, product swap, failure to comply with instructions, etc.) have dropped below 1%.
- The Average Time for the Resolution of Delivery Mistakes (e.g. delivery of the missing part, replacement of the damaged part, etc.) has been reduced to an average of 3.5 days.