bill stankiewicz scope 2010 copy pepsi bottling

Leveraging Metrics for World Class Performance SCOPE East, April 2010

© 2010 TranSystems, All Rights Reserved 1

Leveraging Metrics for World Class Performance

© 2010 TranSystems. All rights reserved. © 2010 Pepsi Beverages Company. All rights reserved.

John M. Hill

BEFORE WE BEGIN - - -

Samuel Johnson 1709 – 1784

People need to be reminded

more often than they need to be

instructed.



Achieving warehousing excellence is not so much

technology constrained as it is stymied by the inability of many organizations to logically select and cost-effectively integrate the

technology available.

OUR PREMISE TODAY - - -

"Would you tell me please, which way I ought to go

from here?" "That depends a good deal on where you

want to get to," said the cat. "I don't much care

where," said Alice. "Then it doesn't matter which way

you go," said the cat.

HOW DO YOU GET THERE?

Lewis Carroll



ROADMAP TO EXCELLENCE

!  Establish Target Performance Metrics !  Profile & Measure Current Performance

!  Map Processes, Material & Data Flows !  Define Trading Partner Needs

!   Identify Gaps & Opportunities

!  Launch Initiative !  Prepare Roadmap & Action Plan !  Match Likely Costs & Benefits !  Put a Value on Potential Incremental Gains

!  Define Structural & Functional Needs !  Examine Alternatives to Close the Gaps

PROFILING



ACTIVITIES

RECEIPTS / HOUR / DAY !   Trucks/Railcar/Other !   Orders/Lines/Items !   Pallets/Cartons/Rolls/Other

PICKS / HOUR / DAY !   Orders/Lines/Items !   Cartons/Pallets/Other

SHIPMENTS !   Trucks/Rail/Courier/Other

RESOURCES !   Supervisory !  Receiving Operators !  Order Pickers / Packers /

Checkers !  Replenishment Operators !   Shipping Personnel !   Inventory Control !   Expeditors !  Data Entry / Indirect !  Other

PROFILING

SKU ACTIVITY ANALYSIS



ABC Analysis Summary, based on Total Pieces May 2009 - April 2010

% of SKU's

% Pieces

% Pieces Shipped

# of SKU's

Total Pieces

A+ 0.9% 10.1% 10.1% A+ 36 58,665 A 20.7% 68.8% 68.8% A 822 397,758 B 21.8% 13.9% 13.9% B 867 80,594 C 21.9% 5.5% 5.5% C 869 31,973 D 34.7% 1.6% 1.6% D 1,381 9,021

Total 100.0% 100.0% 100.0% Total 3,975 578,011

B 14%

C 6%

D 2%

A+ 10%

A 68% C

22%

D 34%

A+ 1%

A 21%

B 22%

Pieces (%) SKU's (%)

Cat. Cat.

Velocity Curve - Total Pieces

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

100%

0% 5% 11% 16% 21% 27% 32% 37% 43% 48% 53% 59% 64% 69% 75% 80% 85% 91% 96% % of SKU's

% o

f Pie

ces

– Cum % Pieces 90% of Picking / 37% of SKUs

80% of Picking Activity / 22% of SKUs



10

20

30

40

50

60

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

Labor Orders

Lines/Person Lines

Order Picking Productivity

January Through November

ACTIVITY PROFILING

WHO PLAYS GOLF WITHOUT A SCORECARD?



ESTABLISH KPI'S! !   Order Fill Rates !   Order Cycle Times !   Lines & Orders/Person/Hour !   Errors !   Damage !   Inventory Accuracy !   Days on Hand !   Cost / Order !   Cost as % of Sales

ESTABLISH KPI'S! •  Perfect Orders •  On-Time Deliveries •  Inventory Accuracy •  Inventory Carrying Cost •  Inventory Turns •  Order Cycle Time •  Order Entry Accuracy •  Workforce Utilization •  Shipping Accuracy •  Order Fill Rate •  Customer Satisfaction

INTERNAL KPI's •  Profitability •  Sales Volume •  Growth Potential •  Credit / Payment History •  Shared Strategic Vision •  Return Rate •  Customer Viability •  Order Frequency •  Loyalty •  Cost to Serve •  Competitive Pressure •  Hassle to Serve

CUSTOMER KPI's •  Inbound Cost/Order Value •  Proximity •  On-Time Deliveries •  Lead Time •  Fill Rate •  IT / Technology Resources •  Service Flexibility •  Attitude •  Returns Policy •  Value Added Services •  VMI Capabilities •  Ease of Doing Business •  Ethics / Compliance

SUPPLIER KPI's



THE HOLY GRAIL

THE PERFECT ORDER INDEX (POI)

On Time X Complete X Damage Free X Correct

Docs = POI

95 95 95 95 81.4%

The Perfect Order: On-time, complete, damage free & correctly documented.

On Time Complete Damage Free Correct Docs POI 51.1% 59.9% NA 88.8% 27.2% 9.0%+ 17.8%+ NA 9.3%+ 40.0%+

2008 Vendor Compliance Federation Report* on retail supplier performance improvement from 2005 through 2007

* c. 5000 companies surveyed

IMPERFECT ORDERS PROBLEM FOOD/BEV CPG

Stock Out 23.3 6.5 Late Shipment 2.6 1.7 In-Transit Delay 4.5 4.3 Late Delivery 24.0 20.0 Shipping Errors 0.1 1.4 Damage 0.9 0.5

PERFECT ORDERS 73.0% 77.4%

Time to start focusing on root causes!



The Extended Warehouse Benchmark Report www.aberdeen.com

www.apqc.org/OSBCdatabase Process Classification FrameworkSM & Open Standards Benchmarking CollaborativeSM

www2.isye.gatech.edu/ideas/ System-Based Self-Assessment of Warehouse Operations

BENCHMARKING RESOURCES

Multiple Process Standards & Metrics Reports, Annual State of Logistics Report

www.cscmp.org

www.establishinc.com Cost, Service, Transportation Rate & 3PL Benchmarks

www.supplychainmetric.com

www.supplychainconsortium.com Benchmarking Services for Manufacturers, Distributors & Retailers

Supply-Chain Benchmarking with SCOR and SCORmark

www.supply-chain.org

www.werc.org Multiple Reports, Publications & Tools including Warehouse Manager’s Guide to Benchmarking

Improving Order Execution Performance: A Holistic View of Metrics Across Plant & Warehouse

www.mhia.org/search/Holistic+Metrics

A Comprehensive Look at Performance Metrics, Definitions & Calculations

Supply Chain Metric

BENCHMARKING RESOURCES



ORDER FULFILLMENT

On-Time Delivery Orders On-Time Total Orders Shipped % % $

Orders Filled Complete Total Orders Shipped Order Fill Rate % % $

Error-Free Orders Total Orders Shipped Order Accuracy % % $

Error-Free Lines Total Lines Shipped Line Accuracy % % $

Actual Ship Date Minus Customer Order Date Order Cycle Time Hrs Hrs $

Perfect Deliveries Total Orders Shipped

Perfect Order Completion % % $

MEASURE CALCULATION TODAY FUTURE VALUE

Inventory Accuracy Actual Qty per SKU System Reported Qty % % $

Total Damage $$$ Inventory Value (Cost) Damaged Inventory % % $

Avg. Occupied Sq. Ft. Total Storage Capacity Storage Utilization % % $

Total Dock to Stock Hrs Total Receipts Dock to Stock Time Hrs Hrs $

Receipt Entry Time - Physical Receipt Time Inventory Visibility Hrs Hrs $

Avg. Month Inventory $ Avg. Daily Sales/Month Days On Hand Days Days $


INVENTORY MANAGEMENT



Orders per Hour Orders Picked/Packed Total Whse Labor Hrs

Total Warehouse Cost Total Orders Shipped

Lines per Hour

Items per Hour

Cost per Order

Cost as % of Sales

Ord/Hr

$/Order

% %

$

$

$

$

$

Ord/Hr

Lines/Hr

Items/Hr Items/Hr

Lines/Hr Lines Picked/Packed Total Whse Labor Hrs

Items Picked/Packed Total Whse Labor Hrs

Total Warehouse Cost Total Orders Shipped

$/Order


WAREHOUSE PERFORMANCE

METRIC / IMPACT

Orders /Hour

On Time Delivery

Order Cycle Time

Order Accuracy Damage

Orders / Hour

On Time Delivery

Order Cycle Time

Order Accuracy

Damage

KEEPING METRICS IN PERSPECTIVE



THE BEST SUPPLY CHAIN TECHNOLOGY INSTALLED IN OPERATIONS WITH ILL-

CONCEIVED MATERIAL FLOWS & PROCESSES

WILL ONLY ENABLE USERS TO DO THINGS

BADLY - - - FASTER!

MAP WAREHOUSE OPERATIONS



MAP DATA FLOW

MATERIAL

DATA



Receiving Flow

Cycle Counting Flow



REFINE INFRASTRUCTURE !   Storage zoning, space & equipment needs

!   Dock, QC, quarantine, returns, value-added processing, packing & staging space needs

!   Pick area zoning & space requirements

!   Material placement / slotting  Product storage mode assignments; e.g. reserve vs.

forward pick  Pick face sizing, sequencing & replenishment impact

!   Transport options: lift trucks, conveyors, etc.

!   Improve Space Utilization !   Reduce Travel Times !   Increase Pick Rates & Throughput !   Optimize Replenishment Activity !   Reduce Damage !   Improve Safety !   Simplify Retail Restocking

Use order & SKU activity profiles to deploy or ‘slot’ inventory based upon

historical & anticipated volume.

01 04 02 03 01 04 02 03

{Golden Zone

REFINE INFRASTRUCTURE



SOLUTIONS ~ Bring location to operator ~ Use WMS, lights, RFID or voice ~ Sequence via WMS ~ Assess alternate storage modes ~ Bar code, voice or RFID ~ Prepackage or weigh ~ Dynamic via WMS ~ Spread fast movers ~ WMS task management

ISSUE !   Travel between locations !   Location searching !   Pick tour set-up !   Case & item picking !   Checking & verifying !   Counting !   Replenishment !   Congestion !   Operator idle time

BEST PRACTICES

NEW FACILITY LAYOUT Bin Picking Pallet Picking Flowrack Picking

Pallet Picking Flowrack Picking

Private Label Products Picking Area

ABC Products Picking Area

Packing & Shipping

Labeling Area

Office Area



Short Shipments

Inadequate inventory

management

Fine-tune layout, zoning, material flow & operating disciplines. Implement

location management & define receiving, storage, consolidation,

replenishment & picking procedures. Evaluate AIDC/WMS alternatives.

Lost stock, warehouse

location management

Drive inventory deployment by transaction volume & handling

requirements. Profile SKU activity to determine types, number & sizing of storage locations. Define locations by capacity, constraints, etc. Size

storage & forward pick slots to facilitate picking.

Picking, packing & staging errors

Given a solid layout and the proper equipment, error reduction is a

function of operator training and discipline. Using AIDC & a WMS to assign tasks & monitor execution

can play a major role.

Shipping Errors

Loading and carrier errors

Errors can be minimized or eliminated with the discipline provided by AIDC & a WMS.

Carrier errors should be recorded & archived by the

WMS as they occur to be used for performance reporting &

contract negotiations.

Product/package identification

Outbound shipments should be bar coded or RFID-tagged to facilitate internal and external

tracking.

Operator Productivity

Flawed layouts, flows, processes,

systems & training

All of the above.



Late Deliveries

Weak scheduling, carrier selection

& discipline

Parcel shipping systems facilitate shipment preparation, rating & tracking. For LTL & full truck

shipments, a TMS simplifies mode & carrier selection, appointment scheduling & in-transit tracking.

Tracking Data

Integrity

Disconnect between shipper

& carrier information

systems

AIDC technology for shipment tagging & tightly integrated TMS & carrier systems will

enable tracking from source to destination.

Customer Service

Performance

Link between call center &

fulfillment system

The integration of fulfillment systems and customer service

systems can enhance performance.

Costs

Facility & Equipment

Facility design & equipment selection should focus upon

functionality, flexibility & scalability. The objective: an engine that meets throughput

requirements at a cost that can be justified.

Labor Assess trade-offs between

layout, equipment, systems & labor.

Shipping

Strategically located facilities & solid TMS can reduce costs.

Conversely, a given location may offer lower building, operating and labor costs. Use Network Optimization Tools to analyze

these variables before developing recommendations.



INFORMATION SYSTEMS REFINE INFRASTRUCTURE

SYNCHRONIZE MATERIAL & DATA FLOW

WE’VE GOT THE TOOLS!

Bar Code

SC Execution Systems Pick & Put-To-Light

RFID Voice Data Entry



INFORMATION SYSTEMS REFINE INFRASTRUCTURE

!  Material & Data Flow Comparison !  Disparity Analysis !  Product Identification Needs !  Data Collection Alternatives !  SCES Functional Requirements !   Interfaces to Other Systems

BUILDING YOUR ROI

“RANDOM INFUSIONS OF TECHNOLOGY WILL MERELY LEAVE THE

ENTERPRISE IN GREATER DISARRAY.”

James Borck, InfoWorld, July, 2001



BUILDING YOUR ROI ASSESS THE POTENTIAL

CONTRIBUTION OF TECHNOLOGY & SYSTEM

ENABLERS TO KPI TARGET ACHIEVEMENT

Enabling Technology & Systems

RFID?

AOM AIDC MH W/LMS TMS

COST % OF SALES

COST PER ORDER

LINES PER HOUR

ORDERS / HOUR

VISIBILITY

DOCK-TO-STOCK

STORAGE USAGE

DAYS ON HAND

DAMAGE

ORD. CYCLE TIME

LINE ACCURACY

ORDER ACCURACY

ORDER FILL RATE

ON-TIME DELIVERY

SCV F/C & Plan



On-Time Delivery Total Orders On Time / Total Orders Shipped 87% 95% $250,000

Order Accuracy Errorless Orders / Total Orders Shipped 92% 98% See above

Order Cycle Time Actual Ship Date - Customer Order Date 12 Hrs 8 Hrs $100,000

Inventory Accuracy Actual Qty. by SKU / Reported Qty. by SKU 96% 99% See above

Damaged Inventory Total Damage $$$ / Total Inventory Value .75% .50% $100,000

Days on Hand Avg. Inventory Value ($) / Average Daily Sales $ 50 Days 42 Days $1 Million

Storage Utilization Avg. Inventory Sq. Ft. / Storage Capacity Sq. Ft. 78% 85% $100,000

Orders per Hour Orders Picked & Packed / Total Whse. Labor Hrs 15/Hr 20/Hr $864,000

Lines per Hour Total Lines Picked / Total Whse. Labor Hrs 40/Hr 54/Hr See above

Cost per Order Total Warehouse Costs / Total Orders 4.26 $3.62 See above

Cost % of Sales Total Warehouse Costs / Total Revenue 3.1% 2.7% See above

USE KPI’S TO DEVELOP YOUR ROI

Return on Assets

+45%

Sales

COGS

Variable Expense

Fixed Expense

Inventory

Receivables

Other

Gross Margin

Expenses

Taxes

Current Assets

Fixed Assets

Net Profit /

Sales

Sales /

Total Assets

Asset Turnover

Net Profit Margin

X!

Improved fill, increased sales

10% cut in transportation & outside warehousing costs

7% Inventory reduction

‘RETURN ON ASSETS’ IMPACT



!   Evaluate current performance !   Establish KPI targets !   Compare material & data flow !   Fix flawed processes !   Clean up infrastructure !   Engage your employees !   Identify opportunities !   Find the right solutions !   Build the business case & ROI !   Procure & deploy solutions !   Continually audit results

Metrics must be “in harmony with a company's overall business strategy. Timely delivery & order status (updates) are part & parcel of

Amazon's brand identity. If Amazon drove its logistics activities with measures focused solely on reducing delivery costs, it would cripple its

ability to serve customers. (Smart managers) are fusing their logistics plan(s) with their business

strategies, ensuring that what is measured in the field is valued at the top of the organization”.

KEEP METRICS IN PERSPECTIVE

From Keeping Score: Measuring the Business Value of Logistics in the Supply Chain, CSCMP

bill stankiewicz scope 2010 copy pepsi bottling

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