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Situation
When AMG first began analyzing the warehousing and distribution infrastructure
of this large appliance manufacturer, several challenges and opportunities were
identified:
- Increasingly smaller,
more frequent shipments
- Opportunity to greatly improve inventory
management & accuracy through improved inventory management systems and processes
- Facility in need of maintenance and
redesign
- Opportunity to benefit from rapidly
changing technological applications (ASN, EDI, etc.)
- Opportunity to benefit from improved
internal logistics skills
- Opportunity to decrease freight
expenditure through improved load planning
- The client recognized that exceptional
logistics could become a key customer service strategy
The smaller, more frequent shipments were
resulting in: (1) Higher distribution costs and (2) Increased demands on operations. These
increased demands, in turn, were increasing manufacturing costs, decreasing product quality
and bringing operational integrity into question.
Solution
In order to address the above identified opportunities and
challenges, a number of initiatives have been taken since January 1998:
Order Management
System: An order
management system has been installed to improve operational data collection, integrity and
timeliness. The system tracks, for example, the 'percentage to completion' of each order, to
ensure that orders which have reached a specified percentage of completion
are shipped without further delay. Transaction System and Logistics
Decision Support System: These systems are currently being developed. The systems will
automate the freight bill and audit process and provide analytical data. Such data is then
used to identify freight control opportunities, negotiate carrier rates, monitor carrier
performance and report to the client. Logistics
Expertise: Two of AMG's
logistics professionals are now located at the client's facility (with daily support from
AMG's professional logistics staff offsite). The addition of these 2 team members has enhanced
our ability to transfer logistics-specific knowledge as well as to share process reengineering
strategies and quality improvement processes/measurement techniques. Warehouse
Reconfiguration: The
client's warehouse was reconfigured to optimize use of space, improve product accessibility
and optimize efficiency in receiving/shipping labour.
Results
Since January 1998:
The client's fill rate has increased from 65% to 85% The client has gained valuable insight
into the various reasons for fill rate misses. For example, the client is now aware of the
percentage missed due to shipping issues as opposed to manufacturing shortfalls. Damages (in warehouse) are on target to
decrease by 40 % within the first year The client's business decisions are now
supported by reliable logistics data. As an increasing amount of reliable data is archived,
trend analysis will further improve management insight and ability to make informed decisions. The client is able to use its superior
logistics as a competitive differentiator when pursuing/retaining business Productivity is 15% higher
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