All companies discuss how to improve visibility of the inventory that they directly manage within their own warehouse or distribution centers, as well as the inventory that they indirectly manage thru cross-dock centers, public warehouse locations, third-party managed facilities, or customer locations. Several supply chain industry organizations, including the Warehouse Education and Research Counsel (WERC) and the Council for Supply Chain Management Professionals (CSCMP), have identified that inventory visibility is one of the top three issues that keep leading company executives “awake at night” searching for the complete solution.

Most companies understand that in order to improve your direct inventory visibility and management, they can implement one of several leading inventory management or warehouse management applications. These systems are designed to support aggregate level inventory visibility (i.e. how much total quantity of a specific item do we have available for sale?) as well as discrete inventory accountability within a specific warehouse location (i.e. where is a specific pallet or carton of an item within our warehouse that is available for sale?) As an organization, enVista performs 6-10 software selections/evaluations annually for customers across a variety of industry segments and vertical markets. In 2010, over half of the companies that we executed a software evaluation for had both direct inventory management requirements as well as indirect inventory management requirements and none found a single application to appropriately support both inventory requirements. In fact, most of the companies we worked with decided to focus first on their direct inventory needs due to the immediate benefit and payback associated with addressing these challenges; the indirect inventory needs were relegated to a later phase of the project. No one can argue that the more immediate needs offering the largest opportunity for payback in the shortest time should be a focus for any organization; however, by postponing the more challenging and least tangible inventory management issue, these company executives are still prone to restless nights.

Although more challenging to address due to having to engage outside business partners in a partnership of trust, managing indirect movement can have an impact in the following areas of a company’s overall business:

• Inbound Product Condition and Timeliness
If your organization utilizes an intermediate site to house inventory before it reaches your warehouse or distribution center, this product can be prone to damage or mis-shipment due to the nature of it being handled or touched incrementally. By being able to track inbound and outbound movement of these items, as well as the condition of the product when it is received and shipped thru these intermediate locations (typically hub or pool points), companies can proactively track their inventory, address potentially loss product that has been received, but not shipped for an extended period of time, as well as address damaged product before it reaches the final destination.

• Regional Inventory Deployment
If your organization attempts to deploy inventory regionally in order to more quickly service your geographic customers, simply “pushing” inventory out to these locations blindly can lead to unnecessary inventory build-up, especially if the inventory is not being sold or turned in a reciprocating manner. By being able to verify current inventory positions at these remote locations, compared to customer commitments and planned replenishment shipments, your organization can adjust forecasted or ordered inventory to help insure the right product is in the right place in the proper quantities.

• Forecast accuracy
Companies that truly engage in value-add forecasting will get data points from their customer base as to their expected consumption of items and quantity over a specific planning horizon. Similar to the challenges under Regional Inventory Deployment, understanding how your inventory is being sold or turning at you customer locations will allow you to deploy the proper inventory and quantities, thus avoiding the headaches or reverse logistics or returns management. In addition, this customer performance information will also help you understand and model customer location performance with your items as well as competitive information sold by the same customer.

• Manufacturing Production Schedules
Companies that not only distribute product, but also manufacture their finished good items have to balance raw material inventory availability combined with manufacturing production schedules as pre-cursors to deciding how much and to whom finished goods inventory should be deployed. Understanding not only your organizations’ days-on-hand inventory levels, but also downstream inventory levels can help your organization become more lean during product manufacturing and rely less upon stock-piling inventory in the hopes that orders will consume it.

• Returns Management
Returns management (or reverse logistics management) is a taboo phrase that most distribution organizations do not want to address or becomes overshadowed by customer sales and outbound inventory movement. While distributors cannot completely eliminate returns management with their customer base, they can mitigate it through improved visibility to downstream inventory levels as well as customer inventory movement and turns patterns. By being proactive and calculated with your initial distribution approach, companies can minimize returns management and improve operational profitability.

• Product Freshness and Date Sensitivity
For customers that distribute product that has a defined shelf-live or expiration date, understanding not only the inventory levels of your product in downstream locations is important, but even more paramount is the freshness and viability of the product outside of your own distribution network. Again, by having better visibility into your supply chain partner’s inventory levels, including product expiration dating, your organization can better understand the quality of the product you are pushing into the market, as this ultimately becomes a reflection on your organization, regardless if you are the final point of distribution. Are your downstream intermediate sites always shipping the oldest product out of their location in order to maintain proper inventory turns and inventory freshness? If not, this could be an opportunity to educate your supply chain partners on how to manage your product while improving customer service and eliminating product destruction or waste management.

• Order Fulfillment Accuracy and Flexibility
Companies that have a discrete and accurate picture or their entire inventory snapshot are in the best position to be able to react to customer requests for orders that may fall outside the forecasted movement, but make ideal business sense to execute upon. Imagine being able to provide your customers with fulfillment options to handle their last-minute or outlier requests that could include:

o Order fulfillment from a non-standard warehouse location
o Multiple shipments from different locations required to fulfill a request
o A local pick-up or shipment option to your customer that may also present an option for them to purchase more product from a retail location, for example.

• Customer Service
First or second on the same industry survey or top issues of leading executives is improving or maintaining your current customer service levels. The cliché “”information is power” couldn’t be more appropriate for these companies, especially as it related to inventory management and positioning across your extended supply chain. Companies are eager to use this information for decision making differentiation, but rarely understand or are willing to undertake the difficult challenge of mining the required information in order to make a timely decision; emphasis on the word timely. We work with a lot of organizations that believe they have this information available to them, but by the time it take to manually extract, cleanse, and format this information it may be obsolete and only applicable for historical measurement, not forward-thinking execution.

For more information regarding how inventory management and inventory visibility can be impacted within your organization, contact enVista at inforequest@envistacorp.com or Ken Mullen directly at kmullen@envistacorp.com.

Starting in 2009, the national economic downturn forced many retail organizations to restructure thru Chapter 11 filings or close completely. Companies like Ritz Camera, S&K Menswear, Sportsman’s Warehouse, Big 10 Tire, Filene’s Basement, and Eddie Bauer all filed Chapter 11 in 2009. Even today companies like Border’s Bookstore and Blockbuster Video are aggressively realigning their retail store presence in an effort to avoid continued revenue losses.

Accordingly, consulting and technology companies focused on the retail market are turning their attention and solutions to where retailers employ their largest labor pool and invest their largest fixed asset costs: the stores. Traditionally, a retailer’s warehouse locations were the focus of consulting and technology company’s attention and solutions, including warehouse management, data collection, transportation execution, labor management, and value-added services support. The warehouse distribution center for retail companies has evolved into a support structure for the retail store, which in turn is evolving into a hub from which retailers are support multi-channel sales and value-added services. Retailers are learning that in order to make their merchandize “store-ready” faster, the operation at the warehouse to fulfill store orders may actually have to become less optimal…that’s right, less optimal.

Case in point, enVista recently worked with a retailer who supported four distinct product lines (i.e. specific sections of their stores) and previously picked and packed store orders across all four product lines into the same totes and outbound cartons; the retailer had analyzed which items, regardless of product category, were common with each store order and located these items together within the warehouse in order to save picking time and non-value added travel time. Consequently, the store would have to spend significant store associate labor unpacking and sorting their merchandize according to the store’s layout and product segmentation, thus increasing the merchandise’s “dock-to-stock” metric and taking store associates away from the floor where they can influence sales and customer service.

As another point of reference for retailers, look no further than the recent investments and focus of the two largest supply chain execution best of breed software providers: Manhattan Associates and Red Prairie. At a briefing held last month for strategic partners, Manhattan announced its intent to continue to bolster its software product line in order to enable multi-channel support at the retail store. This support includes providing on-line order fulfillment at the store from either the company’s distribution center or another store location by measuring product movement, inventory stocking levels, and transportation costs. By extending this integrated solution offering into a rich retail customer base, Manhattan plans a strategy that will allow them to offer organic solution efficiency at the store level, where they traditionally have not had a presence.
Likewise, Red Prairie is also adding a focus at the retail store level thru acquisitions in order to make their mark in this industry space, which traditionally they have struggled to support at the warehouse level. As a compliment to the Blue Cube acquisition several years ago which supplied Red Prairie with retail store labor management and kiosk-enabled applications, Red Prairie announced earlier this month the acquisition of Escalate Retail. Escalate supports multi-channel retail solutions thru store-level order capture, Point-of-Sale solutions, in-store kiosks and call-center operations. Earlier this year, Red Prairie also announced the acquisition of SofTechnics retail solution, whose portfolio includes mobility-enabled Store Inventory and Price Management, Intelligent Store Ordering, Direct-Store Delivery and Master Data Management. Finally, Red Prairie has also announced new functionality within the 2012 version of its existing Warehouse Management suite to more effectively allow customers to apportion inventory to store locations thru a wide-range of configurable rules.

I will post additional follow-up and support of the retail movement initiative stemming from next week’s Retail Industry Leadership Association (RILA) conference in Orlando (February 20 – February 22). For more information reference the following link: http://www.rila.org/events/conferences/logistics/Pages/default.aspx

Your organization has gone through the process of investing in new supply chain execution technology to optimize inventory management and material flow across a multiple-warehouse network.  As you evaluated opportunities for quantifiable return on investment for this project, receiving efficiency most likely factored into your savings calculation.  Most companies measure improvement in receiving processes in the time it takes to get received product off of an inbound truck. checked-in, and put-away into available inventory; this is often referred to as “dock to stock time”.  Best practices define benchmark “dock to stock” timing as less than twenty-four (24) hours with the opportunity for reductions at less than eight (8) hours for companies who invest in warehouse solutions with directed-put-away functionality. 

For companies who want to significantly impact the actual product receiving time, they must include process changes with their key suppliers.  Distributors who are able to partner with their suppliers to discretely identify the purchase order, item number, quantity, and item characteristics like lot number, serial number, or catch-weight at the pallet level can expect immediate dock-to-stock timing.  Unfortunately, most distributors never take advantage of these benefits, nor tighter collaboration with their suppliers because they are mislead that the most common forms of supplier collaboration, advanced shipping notices, are expensive and require a significant information technology investment for the supplier.

A common function offered by most leading supply execution software vendors is a web-based “portal” application that allows both internal and external partners a cost effective option to significantly impact the dock-to-stock time.  Most of these “vendor-portal” applications require vendor partners to provide internet access and an optional label-printer in order to support using this application; an investment of less than $2,000 in most cases.  In return, the distributor’s supplier can enter advanced shipping notice information directly into the distributor’s warehouse management system automatically formatted and compliant for immediate use by the distributor.

In addition to the supplier-to-distributor information sharing process described above, supplier-portals have been successfully deployed to support the following additional internal and external partner collaboration:

• Warehouse-to-Warehouse Information Sharing – If your organization has multiple warehouse locations, supplier-portals can be used as an interim solution to providing warehouse-to-warehouse transfer information.  A shipping warehouse, not using the warehouse management application, can communicate with the receiving warehouse, already supported with a warehouse management system, thru a portal application; thus helping reduce the dock-to-stock time for the receiving warehouse.
  
  
• Cross-Dock Location Information Sharing – Within your supply chain, if you use interim locations (cross-dock locations, transfer centers, third-party warehouses) to move product inbound or outbound, portal technology can provide essential inventory visibility and tracking at remote locations.  This information can provide a distributor real-time status on product coming inbound while it exchanges carriers as well as providing customers real-time updates on the status of their orders.
  
  
• Customer Store Inventory Management - Distributors that support replenishment order fulfillment with their customers (e.g. store level inventory) but who have not integrated with point-of-sale technology to understand real=time buying can use a portal application to manually record order requirements.  Likewise, customer stores can record inventory received at their store directly into a portal application configured to support each store as a logical warehouse or location entity.

In summary, web-based portal applications provided by supply chain execution software vendors can support cost savings opportunities for the distributor by allowing internal and external trading partners a cost-effective method to record advanced shipping notice transactions.  Likewise, these same portal applications can provide real-time information to a distributor’s supply chain even when product is physically handled and tracked at remote locations.

Our company recently was contracted by a customer to execute an upgrade of their Tier-1 transportation planning system that they originally implemented back in 2006. As part of the initial project planning and justification, we collaborated on which pieces of functionality the customer would ideally take advantage of within the latest version of the software; these included:
• Hub and Pool Point Route Optimization
• Web-based Carrier Tender and Accept
• Continuous Move Route Optimization
• Freight Audit Payment and Claims

Ironically, the functionality needs in the latest version were on the customer’s original functionality list back in 2006, yet were not implemented for a variety of reasons:
• Functionality could never be configured to work as documented by the vendor, even with the vendor’s participation.
• Functionality was rigidly programmed by the vendor and did not allow for flexible use by the customer
• Advanced functionality not able to be implemented because pre-requisite functionality did not work.

Given the challenges of the initial implementation, our team recommended that we execute a proof of concept on the latest version of the software as a milestone step in the upgrade process; this would take approximately three weeks to setup and execute. If the proof of concept did not show the required functionality the project could be stopped. The client also collaborated with the vendor on the proper version of their software that would support their required functionality.

Fast forward two months and the proof of concept never occurred. The functionality required by the customer and verified with the vendor that is operational still did not work. A Tier-1 software vendor that boasts investing $20M in R&D on their existing products now has not had working functionality documented as being supported by their software in over five years. Two of the four critical pieces of functionality communicated by the customer had known bugs and had never been implemented by a client. The software vendor even submitted billable hour invoices to the customer for their role in the project.

Lesson learned: as a customer, you are well within your right to take your software vendor to task on documented functionality. Reference the verdict handed down this week by a jury in the state of Texas awarding approximately $248 M in damages to Dillard’s against software vendor JDA because the vendor “…failed to meet obligations to Dillard’s regarding two products the customer has been using for over ten years under a software license agreement and services agreement for which the customer had paid the vendor $8 M.”
You can read more about the JDA lawsuit at the following link: http://www.jda.com/company/press-release-details.html?ID=1962

I worked recently with a customer focused on improving worker performance and productivity. This customer had implemented a variety of compensation plans with their current work force and wanted to benchmark their current productivity against best-in-class LEAN operational processes. During our observation of the customer’s current inbound unloading and receipt staging process, enVista’s team noted that our customer had implemented a very successful team-oriented approach aimed at maximizing productivity thru cooperative accountability. The name of this type of cooperative compensation and work force alignment is “pool pay”.

The idea of “pool pay” for this company’s inbound freight handling process consists of a group of workers, typically eight on a shift, who are incented to properly unload and receive as many trailers in a given shift as possible. The incentive is driven because the group will earn a specific flat amount into their “pool” for each trailer unloaded; each member of the group receives an equal share of the pool pay amount. The on-site group supervisor does have the ability to alter the percentage a specific team member receives which helps guard against a group member purposely slacking off compared to other group members; a change to the pool amount must be thoroughly documented and have the signed consensus of the other group members.
enVIsta’s team observed the “pool pay” concept consistently over a three day period across multiple shifts and consistently found the following results:

• There was a consistent level of pro-active collaboration across active loads from all team members. The on-site supervisor would originally assign one or more group members to a specific load to begin the process, but when one load experienced a delay (ex. waiting for a specific piece of material handling equipment) the group members assigned to the load instinctively went to another load to assist without having to be told to do so. By comparison, enVista has observed organizations that pay individuals or teams by a specific load; in these environments there is ownership by the group to the load, but only that load since these workers are not financially incented to assist another load.

• The role each worker has during unloading and receiving process rotated by day, as decided upon by the group members. When asked to describe the value of this rotating assignment each team member consistently responded that this helped each member better appreciate the holistic task required by the team to complete a successful trailer unload and receipt. The team members also said that working the same role day in and day out would be monotonous while rotating provided them opportunities to work with different equipment (e.g. forklifts, pallet jacks) as well as technology (e.g. data collection devices, bar-code scanning). Our team also observed new roles that had evolved thru trial and error, green-light thinking, and open group member suggestions, all in an effort to expedite and improve the quality of their process. In one example, a new position had been created for specific loads where the received pallet quantity had to be broken-down into dynamic permutations assigned that day; the worker would mark each received pallet with a specific separation line thus facilitating a fluid process from unload to final stacking.

• The team functioned consistently with LEAN processes that minimize non-valued added product handling and touches. At the time of this writing, every team in the unloading and receiving process, across all shifts had gone fifty-five weeks without an incident or accident. What is even more amazing is that over 80% of the work-force had less than one year with the organization as this was a new site operation for the company.

In summary, consider the above-mentioned points when determining how to staff your new operation, as well as an option to consider in your existing operation to generate better productivity, a consistent awareness of dependent upstream and downstream processes to your current job, and implement LEAN best practices that are safe and efficient.