warehousing - Blog - Global Risk Community2024-03-29T07:16:26Zhttps://globalriskcommunity.com/profiles/blogs/feed/tag/warehousingWarehouse Cost Reduction in Supply Chain Management: 6 Building Blockshttps://globalriskcommunity.com/profiles/blogs/warehouse-cost-reduction-in-supply-chain-management-6-building-bl2021-02-24T10:26:19.000Z2021-02-24T10:26:19.000ZMark Bridgeshttps://globalriskcommunity.com/members/MarkBridges<div><div class="entry"><p><a href="{{#staticFileLink}}8591481276,original{{/staticFileLink}}"><img class="align-right" src="{{#staticFileLink}}8591481276,RESIZE_400x{{/staticFileLink}}" alt="8591481276?profile=RESIZE_400x" width="318" height="212" /></a>Cut-throat competition in industries has driven companies to find ways to reduce costs while increasing efficiency. To accomplish this, most companies have skillfully endeavored to streamline Sales, Operations Planning, Forecasting, Inventory Management, and Logistics.</p><p>One area that has still not grabbed industry’s attention is out-bound Supply Chain Managemen–from packaging to final delivery. Companies generally neglect Supply Chain simply because they do not consider it their core competency.</p><p>Significant Cost Reduction in the Supply Chain can be achieved by focusing on 2 main cost categories:</p><ol><li><span style="font-size:14pt;">Warehousing Costs</span></li><li><span style="font-size:14pt;">Transportation Costs</span></li></ol><p>Warehousing and Transportation represent a significant portion of the total Logistics costs. Implementing improvement programs, without any significant capital investments, can enable 20-50% cost saving in Warehousing, 40% in Transportation costs, flexibility, and better service.</p><p>Supply Chain Cost Reduction in Transportation and Warehousing has vast potential, not only in terms of costs, but also Process Improvement using Lean Six Sigma (LSS) techniques.</p><p>The approach to Supply Chain Cost Reduction in Warehousing encompasses 3 phases:</p><ol><li><span style="font-size:14pt;">Set the Baseline</span></li><li><span style="font-size:14pt;">Determine the Gap</span></li><li><span style="font-size:14pt;">Implement Lean Six Sigma (LSS) </span></li></ol><p>Meticulous and persistent application of Lean Management and Six Sigma techniques is at the core of reshaping Warehousing Operations and eradicating sources of waste, variability, and inflexibility. This article is an overview of the 6 building blocks used in Implementing Lean Six Sigma (LSS)—the 3<sup>rd</sup> phase of the approach to Supply Chain Cost Reduction in Warehousing:</p><ol><li><span style="font-size:14pt;">Business Processes</span></li><li><span style="font-size:14pt;">People</span></li><li><span style="font-size:14pt;">Performance Management</span></li><li><span style="font-size:14pt;">Third Party Interactions</span></li><li><span style="font-size:14pt;">Layout</span></li><li><span style="font-size:14pt;">Ownership</span></li></ol><p><a href="https://flevy.com/browse/flevypro/supply-chain-cost-reduction-warehousing-5475"><img class="aligncenter size-full wp-image-8607" src="https://flevy.com/blog/wp-content/uploads/2021/02/Slide-Deck-image-Supply-Chain-Cost-Red-Warehousing.png" alt="" width="735" height="552" /></a></p><p>Let us dive a little deeper into some of the building blocks.</p><h3><span style="font-size:14pt;"><strong>Business Processes</strong></span></h3><p>Business Processes present a huge opportunity for improvement by eliminating redundancies and sources of waste in Warehouse operations (e.g., unnecessary motion or double-handling in Manufacturing). Each source of waste represents extra costs and inflexibility that can be reduced or eliminated.</p><p><strong> </strong>Business Process Improvement can help reduce:</p><ul><li><span style="font-size:14pt;">Handling steps</span></li><li><span style="font-size:14pt;">Motion</span></li><li><span style="font-size:14pt;">Transportation</span></li><li><span style="font-size:14pt;">Space requirements</span></li><li><span style="font-size:14pt;">Effort</span></li><li><span style="font-size:14pt;">Time spent</span></li></ul><h3><span style="font-size:14pt;"><strong>People</strong></span></h3><p>This building block of Implementing Lean Six Sigma aims at avoiding overstaffing of full-time employees and at the same time maintaining a well-trained, efficient workforce.</p><p>Streamlining this building block leverages the following benefits to organizations:</p><ul><li><span style="font-size:14pt;">Refined Recruitment process reduces Employee Turnover.</span></li><li><span style="font-size:14pt;">Facilities can more closely match on-site staffing to demand by reducing notice periods.</span></li><li><span style="font-size:14pt;">Efficiency can be raised by about 15% through regular training.</span></li><li><span style="font-size:14pt;">Overstaffing of full-time employees can be avoided.</span></li><li><span style="font-size:14pt;">Productivity can be improved by 5-10% by focusing on appropriate facets of Performance during training.</span></li></ul><h3><span style="font-size:14pt;"><strong>Performance Management</strong></span></h3><p>This building block aims at using existing Performance Management levers to improve Employee Performance through morale boosting and awareness exercises. A laser-focus on the performance element helps the leadership achieve the following benefits:<strong> </strong></p><ul><li><span style="font-size:14pt;">Constant reminders and display of current performance give employees a sense of competition and drive.</span></li><li><span style="font-size:14pt;">Quick daily discussions highlight the significance of good performance and helps employees focus on essential aspects of their work.</span></li><li><span style="font-size:14pt;">Productivity is improved up to 20% by linking pay to performance.</span></li><li><span style="font-size:14pt;">Real-time feedback supports pay-related performance.</span></li><li><span style="font-size:14pt;">Measuring and rewarding the “softer” elements has long-term benefits.</span></li><li><span style="font-size:14pt;">Recognizing employee of the month can increase staff satisfaction.</span></li></ul><p>Given the existing industry cost and performance demands, wasteful or unpredictable Warehouse operations lose more than money. This can do rapid and permanent harm to a company’s reputation with customers since distribution is the logistical interface with the customer.</p><p>Improving Warehouse Operations is a significant area not only for Cost Reduction, but also a source of refining Customer Value Proposition.</p><p>Interested in learning more about <a href="https://flevy.com/browse/flevypro/supply-chain-cost-reduction-warehousing-5475">Supply Chain Cost Reduction in Warehousing</a> and Lean Six Sigma? You can download <a href="https://flevy.com/browse/flevypro/supply-chain-cost-reduction-warehousing-5475">an editable PowerPoint on <strong>Supply Chain Cost Reduction: Warehousing</strong> here </a>on the <a href="https://flevy.com/browse">Flevy documents marketplace</a>.</p><h3><span style="font-size:14pt;"><strong>Want to Achieve Excellence in Supply Chain Management (SCM)?</strong></span></h3><p>Gain the knowledge and develop the expertise to become an expert in Supply Chain Management (SCM). Our frameworks are based on the thought leadership of leading consulting firms, academics, and recognized subject matter experts. <a href="https://flevy.com/browse/stream/supply-chain">Click here for full details.</a></p><p>Supply Chain Management (SCM) is the design, planning, execution, control, and monitoring of Supply Chain activities. It also captures the management of the flow of goods and services. </p><p>In February of 2020, COVID-19 disrupted—and in many cases halted—global Supply Chains, revealing just how fragile they have become. By April, many countries experienced declines of over 40% in domestic and international trade. </p><p>COVID-19 has likewise changed how Supply Chain Executives approach and think about SCM. In the pre-COVID-19 era of globalization, the objective was to be Lean and Cost-effective. In the post-COVID-19 world, companies must now focus on making their Supply Chains Resilient, Agile, and Smart. Additional trends include Digitization, Sustainability, and Manufacturing Reshoring.</p><p><a href="https://flevy.com/browse/stream/supply-chain">Learn about our <strong>Supply Chain Management (SCM) Best Practice Frameworks</strong> here.</a></p><h3><span style="font-size:14pt;"><strong>Do You Find Value in This Framework?</strong></span></h3><p>You can download in-depth presentations on this and hundreds of similar business frameworks from the <a href="https://flevy.com/pro/library">FlevyPro Library</a>. <a href="https://flevy.com/pro">FlevyPro</a> is trusted and utilized by 1000s of management consultants and corporate executives. Here’s what some have to say:</p><blockquote><p>“My FlevyPro subscription provides me with the most popular frameworks and decks in demand in today’s market. They not only augment my existing consulting and coaching offerings and delivery, but also keep me abreast of the latest trends, inspire new products and service offerings for my practice, and educate me in a fraction of the time and money of other solutions. I strongly recommend FlevyPro to any consultant serious about success.”</p><p>– Bill Branson, Founder at Strategic Business Architects</p></blockquote><blockquote><p>“As a niche strategic consulting firm, Flevy and FlevyPro frameworks and documents are an on-going reference to help us structure our findings and recommendations to our clients as well as improve their clarity, strength, and visual power. For us, it is an invaluable resource to increase our impact and value.”</p><p>– David Coloma, Consulting Area Manager at Cynertia Consulting</p></blockquote><blockquote><p>“FlevyPro has been a brilliant resource for me, as an independent growth consultant, to access a vast knowledge bank of presentations to support my work with clients. In terms of RoI, the value I received from the very first presentation I downloaded paid for my subscription many times over! The quality of the decks available allows me to punch way above my weight – it’s like having the resources of a Big 4 consultancy at your fingertips at a microscopic fraction of the overhead.”</p><p>– Roderick Cameron, Founding Partner at SGFE Ltd</p></blockquote></div></div>How to Perform Warehouse Costing Using Cleansheet Analysis?https://globalriskcommunity.com/profiles/blogs/how-to-perform-warehouse-costing-using-cleansheet-analysis2021-02-23T08:49:57.000Z2021-02-23T08:49:57.000ZMark Bridgeshttps://globalriskcommunity.com/members/MarkBridges<div><p><a href="{{#staticFileLink}}8588246254,original{{/staticFileLink}}"><img class="align-right" src="{{#staticFileLink}}8588246254,RESIZE_400x{{/staticFileLink}}" alt="8588246254?profile=RESIZE_400x" width="350" /></a>Warehousing costs at most firms are extraordinarily higher than they ought to be. Across the world, organizations spend around €300 billion annually on Warehouse Management. With the boom in online retail stores and the increasing complexity of <a href="https://flevy.com/browse/stream/supply-chain">Supply Chain Management</a>, this spending is going to surge further.</p><p>The leadership at these organizations understands that they should spend less on Warehousing operations, but is not aware of the real costs associated with it. Most leaders are unable to tell how much is their human resources cost per facility.</p><p>Lack of appreciation of true Warehousing operations costs is one of the main reasons for failure of most <a href="https://flevy.com/browse/stream/transformation">Business </a><a href="https://flevy.com/browse/stream/transformation">Transformation</a> programs. Without this knowledge, the leadership is unable to comprehend where the improvement areas lie and how much <a href="https://flevy.com/browse/stream/value-creation">value creation</a> can be achieved from those.</p><p>Ascertaining these costs warrants a clear approach, which many organizations lack. Most firms inquire about their operational costs from 3<sup>rd</sup> party Logistics (3PL) providers—by soliciting requests for quotations (RFQs). However, this does not give an idea of what these principal activities really cost. The most common approaches to Warehouse costing include:</p><ul><li><strong>Benchmarking</strong></li><li><a href="https://flevy.com/browse/flevypro/warehouse-costing-cleansheet-analysis-5509"><strong>Cleansheet Analysis</strong></a></li></ul><h3><strong>Benchmarking</strong></h3><p>The Benchmarking method uses a top-down approach to analyze costs based on industry benchmarks. However, accessibility of benchmarks at lower levels is hard to access, since benchmarks available for comparison are predominantly at high levels—e.g., Total Warehouse Cost as a proportion of Cost of Goods Sold. Industry Benchmarking fails to take into consideration distinct product or service offerings.</p><h3><strong>Cleansheet Analysis</strong></h3><p>Cleansheet (or a Bottom-up Analysis) is a more comprehensive method to estimate Warehousing costs. It is a numerical approach to ascertain precise costs of critical components of Warehousing operations, including facility spread out, workforce, and equipment. This method facilitates in understanding where the cost exceeds and how it can be eliminated.</p><p>The focus of the Cleansheet Analysis is on determining the lowest possible cost of each major element, and comparing it with the actual cost being paid. Identifying the lowest costs of major elements allows the organization to determine the most problematic areas and confront major cost inconsistencies.</p><p>The Cleansheet Analysis comprises of 3 main steps:</p><ol><li><strong>Ascertain Critical Parameters</strong></li><li><strong>Perform Bottom-up Calculations</strong></li><li><strong>Determine Ideal Throughput Metrics</strong></li></ol><p><a href="https://flevy.com/browse/flevypro/warehouse-costing-cleansheet-analysis-5509"><img src="https://flevy.com/blog/wp-content/uploads/2021/02/Cleansheet-Analysis.png" alt="" width="595" height="450" /></a></p><p>Let’s dig a bit deeper into the initial step.</p><h3><strong>Ascertain Critical Parameters</strong></h3><p>The first step of the Cleansheet Analysis entails scoping the Warehousing facility’s configuration, work, team, volumes, and orders. Specifically, this includes evaluating:</p><ul><li>The workforce, accountability distribution, workloads.</li><li>The actual warehouse activity levels.</li><li>The volumes.</li><li>The volume drivers—number of SKUs, order patterns, order lines.</li></ul><p>Interested in learning more about the steps to using a <a href="https://flevy.com/browse/flevypro/warehouse-costing-cleansheet-analysis-5509">Cleansheet Analysis</a>? You can download <a href="https://flevy.com/browse/flevypro/warehouse-costing-cleansheet-analysis-5509">an editable PowerPoint presentation on <strong>Warehouse Costing: Cleansheet Analysis</strong> here</a><span style="text-decoration:underline;"> </span>on the <a href="https://flevy.com/browse">Flevy documents marketplace</a>.</p><h3>Do You Find Value in This Framework?</h3><p>You can download in-depth presentations on this and hundreds of similar business frameworks from the <a href="https://flevy.com/pro/library">FlevyPro Library</a>. <a href="https://flevy.com/pro">FlevyPro</a> is trusted and utilized by 1000s of management consultants and corporate executives. Here’s what some have to say:</p><blockquote><p>“My FlevyPro subscription provides me with the most popular frameworks and decks in demand in today’s market. They not only augment my existing consulting and coaching offerings and delivery, but also keep me abreast of the latest trends, inspire new products and service offerings for my practice, and educate me in a fraction of the time and money of other solutions. I strongly recommend FlevyPro to any consultant serious about success.”</p></blockquote><p>– Bill Branson, Founder at Strategic Business Architects</p><blockquote><p>“As a niche strategic consulting firm, Flevy and FlevyPro frameworks and documents are an on-going reference to help us structure our findings and recommendations to our clients as well as improve their clarity, strength, and visual power. For us, it is an invaluable resource to increase our impact and value.”</p></blockquote><p>– David Coloma, Consulting Area Manager at Cynertia Consulting</p><blockquote><p>“As a small business owner, the resource material available from FlevyPro has proven to be invaluable. The ability to search for material on demand based our project events and client requirements was great for me and proved very beneficial to my clients. Importantly, being able to easily edit and tailor the material for specific purposes helped us to make presentations, knowledge sharing, and toolkit development, which formed part of the overall program collateral. While FlevyPro contains resource material that any consultancy, project or delivery firm must have, it is an essential part of a small firm or independent consultant’s toolbox.”</p></blockquote><p>– Michael Duff, Managing Director at Change Strategy (UK)</p></div>Transportation Cost Reduction in Supply Chain Managementhttps://globalriskcommunity.com/profiles/blogs/transportation-cost-reduction-in-supply-chain-management2021-02-09T10:16:14.000Z2021-02-09T10:16:14.000ZMark Bridgeshttps://globalriskcommunity.com/members/MarkBridges<div><div class="entry"><p><a href="{{#staticFileLink}}8534714694,original{{/staticFileLink}}"><img class="align-right" src="{{#staticFileLink}}8534714694,RESIZE_400x{{/staticFileLink}}" alt="8534714694?profile=RESIZE_400x" width="323" height="215" /></a>Companies looking to improve efficiency and reduce costs can gain significant ground in the Supply Chain Management function by incorporating Lean Management and Six Sigma techniques.</p><p>Reason this area has gone under the radar is that companies do not consider Supply Chain to be their core competency.</p><p>Not only Warehousing but Transportation also has almost the same potential in terms of opportunities for <a href="https://flevy.com/business-toolkit/cost-reduction">Cost Reduction</a> and Process Improvement. The approach to Transportation Costs Reduction, though, is different to that of Supply Chain Cost Reduction in Warehousing. This is in part due to the complexity in Transportation Costs, as the costs come from numerous widely distributed individual operations every year.</p><p>The approach to Supply Chain Cost Reduction in Transportation encompasses 2 phases:</p><ol><li><span style="font-size:14pt;"><strong>Understand the Baseline</strong></span></li><li><span style="font-size:14pt;"><strong>Identify and Implement Opportunities</strong></span></li></ol><p><strong><a href="https://flevy.com/browse/flevypro/supply-chain-cost-reduction-transportation-5482"><img class="aligncenter size-full wp-image-8579" src="https://flevy.com/blog/wp-content/uploads/2021/02/Slide-Deck-image-Supply-Chain-Cost-Red-Transportation.png" alt="" width="753" height="564" /></a> </strong></p><p>Let us delve a little deeper into the 2 phases.</p><h3><span style="font-size:14pt;"><strong>1. </strong><strong>Understand the Baseline</strong></span></h3><p>Improvement in Transportation operations is hindered, in most cases, by enormous variability in operations, diverse service levels being demanded by various customers, and a multitude of transport providers delivering services in a variety of ways.</p><p>Transportation Costs of between 20-30% can be saved by compiling a complete perspective of the overall Transportation operations of an organization. The evaluation will also reveal essential service categories that have a skewed effect on Cost.</p><h3><span style="font-size:14pt;"><strong>2. Identify and Implement Opportunities</strong></span></h3><p>Identification of the Cost Drivers is imperative for the companies to develop a systematic approach to Transportation Cost Reduction. This systematic approach involves observing 4 main levers of <a href="https://flevy.com/business-toolkit/cost-optimization">Cost Optimization</a> opportunities:</p><ol><li><span style="font-size:12pt;">Compliance with Contracted Price</span></li><li><span style="font-size:12pt;">Negotiated Price</span></li><li><span style="font-size:12pt;">Contract Terms</span></li><li><span style="font-size:12pt;">Customer Breakpoints and Behavioral Changes</span></li></ol><p>The 4 levers of Cost Reductions help in countering the issues impacting Transportation Costs and enabling significant savings.</p><p>Significant Cost Reductions can be gained by identifying mutual benefits and risks for both companies and suppliers in addition to understanding customer breakpoints that enable Customer Centric Design.</p><p>Let us consider a few instances where Cost Reduction can have a quick impact.</p><ul><li><span style="font-size:12pt;">Companies, often, have to pay substantial fuel surcharges for waiting time or late payments—caused by variance in actual delivery patterns and the delivery pattern specified in the contract.</span></li><li><span style="font-size:12pt;">Suppliers usually charge a higher rate to compensate for inefficiencies in their operational structure. Understanding those inefficiencies helps identify significant savings potential.</span></li><li><span style="font-size:12pt;">Logistics Service Providers either increase their rates or add fuel surcharges in order to protect themselves from the effect of fluctuating fuel prices. A fixed rate benefits the customer when fuel prices go up, but creates needless high fuel bills when prices are down.</span></li><li><span style="font-size:12pt;">Ordering habits of certain customers add to the Transportation Costs. For example, unknowingly ordering early next-day deliveries, without an absolute necessity for it, causes significant (20% in some cases) extra cost than a delivery at noon. A 24-hour delivery time costs even less than the noon delivery.</span></li></ul><p>Interested in learning more about the phases and cost drivers of <a href="https://flevy.com/browse/flevypro/supply-chain-cost-reduction-transportation-5482">Supply Chain Cost Reduction in Transportation</a>? You can download an editable PowerPoint on <a href="https://flevy.com/browse/flevypro/supply-chain-cost-reduction-transportation-5482"><strong>Supply Chain Cost Reduction: Transportation</strong> here</a> on the Flevy documents marketplace.</p></div><div class="entry"><h3><span style="font-size:14pt;"><strong>Want to Achieve Excellence in Supply Chain Management (SCM)?</strong></span></h3><p>Gain the knowledge and develop the expertise to become an expert in Supply Chain Management (SCM). Our frameworks are based on the thought leadership of leading consulting firms, academics, and recognized subject matter experts. <a href="https://flevy.com/browse/stream/supply-chain">Click here for full details.</a></p><p>Supply Chain Management (SCM) is the design, planning, execution, control, and monitoring of Supply Chain activities. It also captures the management of the flow of goods and services.</p><p>In February of 2020, COVID-19 disrupted—and in many cases halted—global Supply Chains, revealing just how fragile they have become. By April, many countries experienced declines of over 40% in domestic and international trade.</p><p>COVID-19 has likewise changed how Supply Chain Executives approach and think about SCM. In the pre-COVID-19 era of globalization, the objective was to be Lean and Cost-effective. In the post-COVID-19 world, companies must now focus on making their Supply Chains Resilient, Agile, and Smart. Additional trends include Digitization, Sustainability, and Manufacturing Reshoring.</p><p><a href="https://flevy.com/browse/stream/supply-chain">Learn about our <strong>Supply Chain Management (SCM) Best Practice Frameworks</strong> here.</a></p><h3><span style="font-size:14pt;"><strong>Do You Find Value in This Framework?</strong></span></h3><p>You can download in-depth presentations on this and hundreds of similar business frameworks from the <a href="https://flevy.com/pro/library">FlevyPro Library</a>. <a href="https://flevy.com/pro">FlevyPro</a> is trusted and utilized by 1000s of management consultants and corporate executives. Here’s what some have to say:</p><blockquote><p>“My FlevyPro subscription provides me with the most popular frameworks and decks in demand in today’s market. They not only augment my existing consulting and coaching offerings and delivery, but also keep me abreast of the latest trends, inspire new products and service offerings for my practice, and educate me in a fraction of the time and money of other solutions. I strongly recommend FlevyPro to any consultant serious about success.”</p><p>– Bill Branson, Founder at Strategic Business Architects</p></blockquote><blockquote><p>“As a niche strategic consulting firm, Flevy and FlevyPro frameworks and documents are an on-going reference to help us structure our findings and recommendations to our clients as well as improve their clarity, strength, and visual power. For us, it is an invaluable resource to increase our impact and value.”</p><p>– David Coloma, Consulting Area Manager at Cynertia Consulting</p></blockquote><blockquote><p>“FlevyPro has been a brilliant resource for me, as an independent growth consultant, to access a vast knowledge bank of presentations to support my work with clients. In terms of RoI, the value I received from the very first presentation I downloaded paid for my subscription many times over! The quality of the decks available allows me to punch way above my weight – it’s like having the resources of a Big 4 consultancy at your fingertips at a microscopic fraction of the overhead.”</p><p>– Roderick Cameron, Founding Partner at SGFE Ltd</p></blockquote></div></div>