Bill Stankiewicz Scope 2010 Copy Pepsi Bottling

Leveraging Metrics for World Class Performance SCOPE East, April 2010

Leveraging Metrics for
World Class Performance
John M. Hill

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

BEFORE WE BEGIN - - -

People need to
be reminded
more often than
Samuel Johnson
they need to be
instructed.
1709 – 1784

© 2010 TranSystems, All Rights Reserved 1


OUR PREMISE TODAY - - -
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.

HOW DO YOU GET THERE?
"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
Lewis Carroll
you go," said the cat.



ROADMAP TO EXCELLENCE
!   Profile & Measure Current Performance
!   Establish Target Performance Metrics
!   Define Trading Partner Needs
!   Map Processes, Material & Data Flows
!   Identify Gaps & Opportunities
!   Define Structural & Functional Needs
!   Examine Alternatives to Close the Gaps
!   Put a Value on Potential Incremental Gains
!   Match Likely Costs & Benefits
!   Prepare Roadmap & Action Plan
!   Launch Initiative

PROFILING



PROFILING
ACTIVITIES RESOURCES
RECEIPTS / HOUR / DAY !   Supervisory
!   Trucks/Railcar/Other !   Receiving Operators
!   Orders/Lines/Items !   Order Pickers / Packers /
!   Pallets/Cartons/Rolls/Other Checkers
!   Replenishment Operators
PICKS / HOUR / DAY
!   Orders/Lines/Items !   Shipping Personnel
!   Cartons/Pallets/Other !   Inventory Control
SHIPMENTS !   Expeditors
!   Data Entry / Indirect
!   Trucks/Rail/Courier/Other
!   Other

SKU
ACTIVITY
ANALYSIS



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

% of % % Pieces # of Total
Cat. Cat.
SKU's Pieces Shipped SKU's 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

SKU's (%) Pieces (%)
B A
22% C 68%
22%

A A+
21%
10%
A+ D
D 2% C B
1% 34% 6% 14%

Velocity Curve - Total Pieces
100%
– Cum % Pieces
90%
90% of Picking / 37% of SKUs
80%
80% of Picking Activity / 22% of SKUs
70%
% of Pieces

60%
50%
40%
30%
20%
10%
0%
0% 5% 11% 16%21%27%32%37%43%48%53%59%64%69%75%80%85%91%96%
% of SKU's



ACTIVITY PROFILING
Order Picking Productivity
8,000
60
7,000
50
6,000

40
5,000

30 4,000

3,000
20
Labor
2,000
Orders
10
1,000
Lines/Person
Lines

January Through November

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!
INTERNAL KPI's SUPPLIER KPI's CUSTOMER KPI's
•  Perfect Orders •  Inbound Cost/Order Value •  Profitability
•  On-Time Deliveries •  Proximity •  Sales Volume
•  Inventory Accuracy •  On-Time Deliveries •  Growth Potential
•  Inventory Carrying Cost •  Lead Time •  Credit / Payment History
•  Inventory Turns •  Fill Rate •  Shared Strategic Vision
•  Order Cycle Time •  IT / Technology Resources •  Return Rate
•  Order Entry Accuracy •  Service Flexibility •  Customer Viability
•  Workforce Utilization •  Attitude •  Order Frequency
•  Shipping Accuracy •  Returns Policy •  Loyalty
•  Order Fill Rate •  Value Added Services •  Cost to Serve
•  Customer Satisfaction

•  VMI Capabilities •  Competitive Pressure
•  Ease of Doing Business •  Hassle to Serve

•  Ethics / Compliance



THE HOLY GRAIL
The Perfect Order: On-time, complete,
damage free & correctly documented.
THE PERFECT ORDER INDEX (POI)
Damage Correct
On Time X Complete X X = POI
Free Docs
95 95 95 95 81.4%
2008 Vendor Compliance Federation Report* on retail
supplier performance improvement from 2005 through 2007
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%+
* 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!



BENCHMARKING RESOURCES
www.aberdeen.com
The Extended Warehouse Benchmark Report

www.apqc.org/OSBCdatabase
Process Classification FrameworkSM & Open
Standards Benchmarking CollaborativeSM
www.cscmp.org
Multiple Process Standards & Metrics Reports, Annual
State of Logistics Report
www.establishinc.com
Cost, Service, Transportation Rate & 3PL
Benchmarks

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

BENCHMARKING RESOURCES
www.mhia.org/search/Holistic+Metrics
Improving Order Execution Performance: A Holistic
View of Metrics Across Plant & Warehouse
www.supplychainmetric.com
Supply Chain Metric A Comprehensive Look at Performance Metrics,
Definitions & Calculations
www.supplychainconsortium.com
Benchmarking Services for Manufacturers,
Distributors & Retailers
www.supply-chain.org
Supply-Chain Benchmarking with SCOR
and SCORmark
www.werc.org
Multiple Reports, Publications & Tools including
Warehouse Manager’s Guide to Benchmarking



ORDER FULFILLMENT
MEASURE CALCULATION TODAY FUTURE VALUE
Orders On-Time
On-Time Delivery Total Orders Shipped
% % $

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

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

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

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

Perfect Order Perfect Deliveries
% % $
Completion Total Orders Shipped

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

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

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

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

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

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



WAREHOUSE PERFORMANCE

Orders Picked/Packed
Orders per Hour Total Whse Labor Hrs
Ord/Hr Ord/Hr $

Lines Picked/Packed
Lines per Hour Total Whse Labor Hrs
Lines/Hr Lines/Hr $

Items Picked/Packed
Items per Hour Total Whse Labor Hrs
Items/Hr Items/Hr $

Total Warehouse Cost
Cost per Order Total Orders Shipped
$/Order $/Order $

Total Warehouse Cost
Cost as % of Sales Total Orders Shipped
% % $

KEEPING METRICS IN PERSPECTIVE
Order
METRIC / Orders / On Time Order
Cycle Damage
IMPACT Hour Delivery Accuracy
Time
Orders /
Hour
On Time
Delivery
Order Cycle
Time
Order
Accuracy

Damage



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.

Use order & SKU activity profiles to
deploy or ‘slot’ inventory based upon
historical & anticipated volume.
!   Improve Space Utilization
!   Reduce Travel Times
Golden
Zone {
!   Increase Pick Rates & Throughput
!   Optimize Replenishment Activity
!   Reduce Damage
!   Improve Safety
!   Simplify Retail Restocking
01 02 03 04



BEST PRACTICES
ISSUE SOLUTIONS
!   Travel between locations ~ Bring location to operator
!   Location searching ~ Use WMS, lights, RFID or voice
!   Pick tour set-up ~ Sequence via WMS
!   Case & item picking ~ Assess alternate storage modes
!   Checking & verifying ~ Bar code, voice or RFID
!   Counting ~ Prepackage or weigh
!   Replenishment ~ Dynamic via WMS
!   Congestion ~ Spread fast movers
!   Operator idle time ~ WMS task management

NEW FACILITY LAYOUT
Private Label Products Picking Area
Bin Picking Pallet Picking Flowrack Picking
Packing &
Shipping

Labeling Area

Office Area

Pallet Picking Flowrack Picking

ABC Products Picking Area



Fine-tune layout, zoning, material flow
Inadequate & operating disciplines. Implement
location management & define
inventory receiving, storage, consolidation,
management replenishment & picking procedures.
Evaluate AIDC/WMS alternatives.

Drive inventory deployment by
transaction volume & handling
Lost stock,
Short warehouse
requirements. Profile SKU activity to
determine types, number & sizing of
Shipments location storage locations. Define locations
by capacity, constraints, etc. Size
management storage & forward pick slots to
facilitate picking.
Given a solid layout and the proper
equipment, error reduction is a
Picking, packing function of operator training and
& staging errors discipline. Using AIDC & a WMS to
assign tasks & monitor execution
can play a major role.

Errors can be minimized or
eliminated with the discipline
provided by AIDC & a WMS.
Loading and Carrier errors should be
Shipping carrier errors recorded & archived by the
WMS as they occur to be used
Errors for performance reporting &
contract negotiations.
Outbound shipments should be
Product/package bar coded or RFID-tagged to
identification facilitate internal and external
tracking.

Flawed layouts,
Operator flows, processes, All of the above.
Productivity systems &
training



Parcel shipping systems facilitate
Weak scheduling, shipment preparation, rating &
Late tracking. For LTL & full truck
carrier selection shipments, a TMS simplifies mode
Deliveries & discipline & carrier selection, appointment
scheduling & in-transit tracking.

Disconnect AIDC technology for shipment
Tracking between shipper tagging & tightly integrated
Data & carrier TMS & carrier systems will
information enable tracking from source to
Integrity destination.
systems

Customer Link between call The integration of fulfillment
center & systems and customer service
Service fulfillment systems can enhance
Performance system performance.

Facility design & equipment
selection should focus upon
functionality, flexibility &
Facility &
scalability. The objective: an
Equipment engine that meets throughput
requirements at a cost that can
be justified.
Assess trade-offs between
Labor layout, equipment, systems &
Costs labor.
Strategically located facilities &
solid TMS can reduce costs.
Conversely, a given location may
offer lower building, operating
Shipping and labor costs. Use Network
Optimization Tools to analyze
these variables before
developing recommendations.



INFORMATION SYSTEMS

SYNCHRONIZE MATERIAL & DATA FLOW

WE’VE GOT THE TOOLS!
Bar Code
RFID
Voice Data Entry
Pick & Put-To-Light
SC Execution Systems



INFORMATION SYSTEMS
!   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
F/C & Plan AOM AIDC MH W/LMS TMS SCV

ON-TIME DELIVERY       

ORDER FILL RATE    

ORDER ACCURACY   

LINE ACCURACY   

ORD. CYCLE TIME       

DAMAGE RFID?   

DAYS ON HAND  

STORAGE USAGE  

DOCK-TO-STOCK   

VISIBILITY    

ORDERS / HOUR   

LINES PER HOUR   

COST PER ORDER       

COST % OF SALES       



USE KPI’S TO DEVELOP YOUR ROI
Total Orders On Time /
On-Time Delivery Total Orders Shipped 87% 95% $250,000
Errorless Orders /
Order Accuracy Total Orders Shipped 92% 98% See above
Actual Ship Date -
Order Cycle Time Customer Order Date 12 Hrs 8 Hrs $100,000
Actual Qty. by SKU /
Inventory Accuracy Reported Qty. by SKU 96% 99% See above
Total Damage $$$ /
Damaged Inventory Total Inventory Value .75% .50% $100,000
Avg. Inventory Value ($) /
Days on Hand Average Daily Sales $ 50 Days 42 Days $1 Million
Avg. Inventory Sq. Ft. /
Storage Utilization Storage Capacity Sq. Ft. 78% 85% $100,000
Orders Picked & Packed /
Orders per Hour Total Whse. Labor Hrs 15/Hr 20/Hr $864,000
Total Lines Picked /
Lines per Hour Total Whse. Labor Hrs 40/Hr 54/Hr See above
Total Warehouse Costs /
Cost per Order Total Orders 4.26 $3.62 See above
Total Warehouse Costs /
Cost % of Sales Total Revenue 3.1% 2.7% See above

‘RETURN ON ASSETS’ IMPACT
Improved fill, increased sales
Sales 10% cut in transportation &
outside warehousing costs
Gross Margin
COGS
Net Profit /
Net Profit +45%
Variable Expense Margin
Expenses Sales
Return on
Fixed Expense X! Assets
Taxes
Sales /
Inventory
Asset
Current Assets Turnover
Receivables Total Assets

Other Fixed Assets 7% Inventory reduction



!  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

KEEP METRICS IN PERSPECTIVE
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”.
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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