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Mistakes to Avoid in
Distribution Center Planning
From Our Free "Best
Practices" Booklet
Operations Associates has executed nearly
one-thousand projects. We have documented key mistakes
that are typically made by less experienced project
teams. Our goal is to share this critical information
with you so
you can avoid these mistakes. We hope this helps your
project team successfully plan and design your DC
improvement project.
We would like to share “Mistake #2" with you. Please
contact us for a free pamphlet to view all 10 of the
lessons. In subsequent newsletters, we will focus on
each of the 10 Mistakes to Avoid in Distribution
Center Planning.
Mistake #2
Lack of Financial Objectives
Can you imagine telling your engineering people to
design the best new and improved product they can with
no direction? Imagine telling them that when they’re
done we’ll add up the material and labor costs, slap on
overhead, and add our target profit margin. Then, we’ll
send it to sales and marketing to push the product
because obviously the customer will pay the price. Those
customers have to because that’s what it costs!
Unless you have a unique product, every company must
design its products to a price point determined by the
market. Yet too often, companies ask us to begin
planning a new DC without any investment target. The
reason they usually state is that they don’t want to
bias the consulting team. They say, “We truly want 'best
practices.' ” This approach rarely works because every
solution is only worth so much. In these situations, we
provide low, medium, and high investment alternatives.
90% of the time, the client chooses the low cost
alternative even when the high investment option has a
greater ROI. Why? Just like products, every project has
constraints. The market (management) will only pay so
much for the solution regardless of the product’s
technical superiority. Each project is competing with
other projects for limited capital.
The financial objectives and constraints of the
project drive DC plans.
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Ten Mistakes To
Avoid In
Distribution Center Planning
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Just Getting On With
It
By: Mike Rigg, P.E.
Many companies today have adopted continuous
improvement methodologies and tools. Formally and
informally, those companies are working hard to ensure
that they stay ahead of their competition. One of the
more popular tools in the past eight years has been Six
Sigma. Six Sigma has a well-defined, formal, analytical
methodology to study and improve work processes. This
methodology is called “DMAIC.” This stands for “Define,
Measure, Analyze, Improve, and Control.”
The methodology is a good one, even if it isn't
rocket science. It introduces a disciplined approach
toward problem analysis and resolution. This helps
correct a problem that befalls many non-Six Sigma
companies. They jump to “the” solution without doing a
good job analyzing. In our newsletter previously we
reported on the importance of running your operation
with quantitative data. The best companies we run across
have good qualitative and analytical skills by which to
make the best decisions. This is true regardless of
whether they use Six Sigma, some other improvement
process, or none at all.
Still there are some problems that can befall any
company pursuing continuous improvement. One of the most
insidious and difficult to rectify is “creeping quality
bureaucracy.” This is a problem that befalls many
companies who are pursuing continuous improvement. A
company succumbing to this finds itself spending more
money on its continuous improvement effort than what it
reaps in savings from the results. In part this might
occur because the Six Sigma projects take too long, or
the company becomes too bureaucratic its application of
continuous improvement.
One of the best examples of this was Florida Power
and Light, which in the mid-1990s disassembled its large
continuous improvement effort and associated staff. This
company previously had won the Deming Prize, one of only
a handful of companies outside of Japan to ever do so.
Now just a few years later, it determined that it was
better off without the entrenched quality staff.
Nor is Florida Power and Light unique. We frequently
run across companies and projects whose leaders find it
easier to over-analyze than to take action. Most experts
counsel that a Six Sigma project typically will run
several months. For complex projects that may be true,
but we'd challenge the conventional wisdom here. For
most continuous improvement projects we feel that
companies miss significant benefits by not constraining
these efforts to a period of weeks or days. Increased
“cycles of learning” coming from these short-cycle
continuous improvement projects is a huge benefit. The
company that can run six or eight improvement projects
in a year is far ahead of the company that can only run
four.
From our work with many of the best Asian companies
in the world, we see that they have much faster
continuous improvement cycles than do most Western
companies. So how’s your company doing on this important
measure? Are you achieving rapid results or getting
bogged down in “analysis paralysis?”
For more information
contact:
Alan Nager, Principal
AlanNager@oallp.com
Mike Rigg, Principal
MikeRigg@oallp.com
Christi Suchyna, Marketing Manager
ChristiSuchyna@oallp.com
800-860-4902 |
