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Inefficient processes costing distribution dearly

28 March, 2013

Research reveals the true cost of inefficient processes and the challenges facing distribution centres today.

The warehouse and distribution centre is under increasing pressure to reduce cost and increase margins. Recent Intermec research reveals that in the last six months alone, nearly eight out of ten warehouse managers have been tasked with finding an average 19 per cent cost saving from existing operations.

Despite this mounting pressure to cut costs and the need to find efficiency gains in every process, managers admit to losing time and money through known inefficient workflows.

The survey base of 250 supply chain, warehouse and distribution managers in the US stated that over an eight-hour shift, each worker loses an average of 15 minutes of productivity in an inefficient process. For a small- to medium-sized warehouse with 50 workers, this quickly adds up to nearly 3000 hours a year, and could be a significantly higher number in larger organisations.

Although most managers have been tasked with finding cost savings, close to one in three (30 per cent) have not conducted a review of workflow processes in their distribution centre within the past year. This is the first step in identifying areas for improvement.

Inefficient workflows

The majority of managers questioned believe the most inefficient workflow in an eight-hour shift to be packing and loading (20 per cent), closely followed by picking and inventory control (both 18 per cent).

This belief is born from the data produced by companies that have recently conducted a workflow process review, who say that inventory control (53 per cent) and picking (47 per cent) are the two areas where cost savings could most easily be achieved.

Strong resistance to change

Perhaps surprising, the research shows that in companies that are yet to take action to improve workflow productivity, there are high levels of resistance to the idea of carrying out a full review.

Managers who have not held a review in the past year say that only compliance (28 per cent) or poor performance (27 per cent) would prompt them to do so today.

The latter point is in stark contrast to those companies that have recently conducted a review, and implemented process improvements as a result, who say that they are mostly motivated by compliance issues (26 per cent) or continuous improvement programs (22 per cent) and rate poor performance as a very low (9 per cent) driver for their action.

Most shocking of all in a world in which every customer's business is hard won, and even harder kept, are the nearly one in five companies (16 per cent) who say they will not review their workflow processes until after a customer complaint has been received.

Meeting cost targets: Every second counts

Whether they are prepared to conduct a review or not, the survey carried out by research firm Vanson Bourne identifies the very clear pressures that warehouse and distribution centre managers are under.

Nearly all respondents appear to agree on the key to achieving this goal. When asked how to improve performance across the warehouse and distribution centre, the overwhelming majority of managers (89 per cent) said they believed investment in new technology would enable them to claw back their lost time and ensure greater worker productivity.

There is also increased awareness of the value that shaving just seconds off workflow processes can bring. Nearly two-thirds (60 per cent) agree that: "Large time and cost savings opportunities can be found in gaining back mere seconds in operations workflows".

Examples of how to achieve this include having workers take fewer steps, investing in faster label printing and quicker barcode label scanning and eliminating battery changes mid-shift.

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