To simplify business as a whole, regardless of industry, there are two ways to make more money for your company; increase revenue or lower costs. As with nearly everything in life – easier said than done. In our previous article, Insider Sales and Growth Tips, we listed a couple of different opportunities to increase revenue. Now it’s time to focus on the other direction of a firm’s cash flows – operations.
It’d be a rarity to find someone in operations that hasn’t heard the quote from Peter Drucker, “You can’t manage what you can’t measure”. Although there are those that enjoy number-crunching and reading large excel spreadsheets of KPIs, we aren’t all blessed with that personality trait. However, in the instance of saving a firm money, it’s time to grin and bear it. This sets up a firm with the opportunity to compare its objective performance with other firms in the industry.
1. Organize Distribution Centers for Full Efficiency
There’s a reason why Industrial Engineers and Process Engineers always seem to be under high demand. Hiring a true professional to re-organize a plant or distribution center’s layout can save tens of thousands to millions (depending on the size) in operations costs. Shaving seconds off of a certain process makes an enormous difference when you’re repeating that process millions of times a year. In addition, defining a discounting or selling process for slow, non-moving, or return inventory will help open up more productive warehouse space.
You may have noticed that over the last few years, Wal-Mart has widened out most of its aisles. There are plenty of rumors for why, but the general consensus is that they were looking to have less inventory in their stores without looking like they have less. The opposite can be true for a firm’s warehouse. Using narrow-aisle fork trucks, aisle size can be reduced with an opportunity to fit more aisles/inventory in.
Cross-training associates allows much more flexibility within an operation as well. When an inventory clerk or a scheduler is able to hop on a forklift and assist in shipping/receiving in the event of being short-staffed, this avoids opportunity-bottlenecks. Not to mention that many employees enthusiastically welcome cross-training as it mixes up their functions and adds to their job scope altogether, which also makes a firm’s employees much stronger candidates for internal promotion when it comes to general management over multiple functions. The firm gets improved operational efficiencies meanwhile increasing employee morale. Whats not to love?
2. Implement the Power of Real-Time WMS Technology
Implementing a warehouse management system that integrates with your enterprise resource planning software will assist with managing your logistics and inventory in real-time in order to maximize throughput and analytical transparency. This will also improve tracking employee performance and lessen the amount of time necessary to onboard/train a new hire on KPIs & SKUs.
3. Develop & Maintain Analytics of Warehouse Order Status, Inventory & Labor
Using technology & software, a firm should look to shorten the amount of time it takes to update a product in its ERP system once the is received in the warehouse. In addition, maintaining these analytics will lower the amount of errors made on order changes, duplicate orders and time management/scheduling for operations & logistics managers.
4. Track Results, Outperform Previous Results
In an industry where continuous improvement, Six Sigma and Kaizen are all second nature, it is a necessity that firms continue to track and improve off of previous results. Big data isn’t just for IT companies anymore. Popular metrics to target for improvement are order fulfillment, inventory management & warehouse performance. In order fulfillment there is a focus on on-time delivery percentage, fill-rate percentages and order accuracy. For warehouse management there is a focus on inventory accuracy and warehouse productivity. By setting standards, employees know where they stand as far as objective performance goes.