Business Process Reengineering: Reducing Shipping Errors in Order Fulfillment
Distributor of Consumer Goods $170mm Sales Revenue
A wholesaler of domestic and imported wines and liquors
sells to restaurants, liquor stores, taverns, and hotels. Annual sales exceed
$170 million. The company was
incurring delivery variances in the form of shortages and overages. We were asked to audit the warehouse
operation, and recommend measures to take to decrease the error rates. The objectives of the effort were to:
(2) Review operations for inconsistencies to policies and procedures, and
(3) Develop solutions.
We reviewed and rationalized warehouse operations. During this review,
the concentration of time was spent in understanding how the warehouse
operation worked, and what was causing the overages and shortages on
deliveries. Our findings revealed that
the main causes of delivery variances were a string of events that included:
- Not having a full complement of inventory at primary picking locations
- Picking errors
- Total reliance on human judgment for picking accuracy by pickers/console operators
- A 5 hour delay in posting purchasing receipts to the ERP system.
- One-half of the night shift workforce had less than 6 months experience
- Low inventory balance accuracies, estimated at 53%, that exacerbated
picking errors
- Lack of sustainability with formal policies, procedures, job instructions and job descriptions
Based on our findings, we recommended the following:
- Replenish all inventories at picking locations at the end of every night shift.
- Use continual off-line replenishment of picking location stock throughout the night.
- Implement "inventory-by-location" at receiving, warehouse and shipping operations
- Move transactional processing and posting receipts, issues, and inventory balance updates from the office to the functional locations at receiving, warehouse, and shipping.
- Implement bar coding applications within receiving, warehouse, and shipping.
- Begin cycle counting during downtime
to increase balance accuracy to 98%
- Develop written operating policies, procedures, job instructions, and job descriptions for warehouse operations to stabilize operations, provide sustainability, and to be used to train workers.
- Convert the job of the person in the office posting transactions to a full time inventory auditor
- Use a separate audit team during monthly physical inventories checking 10% of counts, and requiring a recount when physical count discrepancies are found
- Program the current system to automatically produce shipping/delivery invoices
- Program the current system to include manual transactions such as pick-up and reship memos, and to sort them with picking lists.
- Productivity improvements of 20-30% in warehouse receiving, picking, and shipping operations
- Annual operational savings due to increases in productivity $250,000- $300,000.