In tough economic times, the emphasis is on optimizing a company's existing assets. Giangrande believes that many companies aren't making the best possible use of their resources. Opportunities for improvement abound, he says, both on a small and large scale.
There's plenty of "low-hanging fruit" to be picked, he says. The first way to address the issue is from a tactical perspective. Within the four walls of a distribution facility, labor accounts for a large percentage of the cost. Companies are out to do more with less. They can benefit from improvements in slotting and order management, to name just two areas. It all starts, says Giangrande, with "some basic block-and-tackling within the distribution center." Managers need to ask a few basic questions: Are they practicing advanced slotting techniques? Is the item master file updated? Is there a regular routine to examine the correlation between the plan and the actual movement of goods within the facility?
Translating those elements into best practices is "extremely critical," says Giangrande. Companies need to undertake detailed operations assessments, lasting between one and four weeks, to determine the efficiency of their processes and labor pools. Performance metrics can be based either on industry and historical standards, or benchmarking against the most efficient organizations. Either way, the exercise can help to uncover bottlenecks that are slowing down the flow of product within the facility and leading to unnecessary costs.
Additional opportunities for improvement exist outside the walls of the distribution center. This perspective involves a shift in approach from tactical to strategic. The biggest external cost drivers in the supply chain include transportation, the number and placement of DCs, overall inventory levels and the manner in which product flows to customers. Companies need to determine the optimum balance between centralizing inventory for lower costs, and spreading it around for higher levels of customer service. The tax consequences of one's DC network must also be factored in, Giangrande says. He offers a number of additional tips on how companies can undertake detailed supply-chain assessments.
