Improve Efficiency Essay

A very high percentage of the items selected (picked) in the dissemination centers and re- stocked in the stores were in quantities of 1 role. This comp some(prenominal)s roots were as a high volume, peculiar(a) assortment seller and distributor. Over judgment of conviction the traffic had shifted every(prenominal)owing the stores to re wholeege a higher concoction of items at lower volumes. disposed(p) the companies market position as a low-price leader, this reduced pro accommodate margins. The 2 root causes of this shift were identified as 1. Stock-keeping-unit (SKU) count growth out(p)pacing gross sales growth, and 2.Allowing token(prenominal) magnitude quantities from the stores to the statistical distribution centers to drop to a meter of unitary This white paper will study how this company quantified the impact of allowing its stores to influence in one side criterion and then recalculated lower limit ordain quantities for higher volume items. (For details of how SKUs were reduced see White make-up SKU drop-off Biggest SKLUsers) A affix Velocity Consultant led a team of employees through this 5 week lying-in. The Supply Velocity adviser facilitated, but the employees did most of the analysis and at that placefore owned the emendments. nfosupplyvelocity. com right of first publication Supply Velocity, Inc. 2 Project Outline ? Evaluated all SKUs and the case criterion they atomic number 18 most frequently vagabonded at, to establish baseline data for how stores argon decreeing ? conviction studied retail store ledge restocking and distribution center order selection persistence to determine the negative hollow productiveness impact of the current ordering policy o Graphed the results in a trend chart o Determined that the greatest labor productivity improvement happens when the order quantity ontogenys from just 1 to 2 cases ?Recalculated marginal order quantity for all items development Multi-Variable Pareto analysis establish on o Item unit movement o Pack-out (number of units that fit on the shelf musculus quadriceps femoris allocated in stores) o Shelf bearing ? About 20% of all SKUs had a re-calculated marginal order quantity greater than 1 case o The most bourgeois methods were use to ensure this project didnt just push inventory out to stores, resulting in fall (throwing away items that go beyond their shelf- lifemagazine limit or are damaged) ?Communicated all items on the minimum order quantity to all stores through a comprehensive communication broadcast o dialogue plan include data to show stores how increasing minimum order quantity on select items would improve their labor productivity ? Created a control plan to ensure new items, SKU reduction and sales report will be utilize to update the minimum order quantity on a twice per year basis selective informationsupplyvelocity. com Copyright Supply Velocity, Inc. 3 beat Study Analysis To quantify the problem, we sentence st udied order selection in the distribution centers and shelf restocking in retail stores. We conducted a few snapshot analyses of different distribution centers to generalize the current state of order quantities. The graph below shows that out of the almost 2800 items, a majority are ordered in quantities of 1 case. The time study data also showed that the second case selected or stocked is essentially free and the same movement is used for two cases as for one case.At the outset of this project the team was worried that any increase in minimum order quantity would be viewed by store managers as an attempt to push inventory out from the distribution centers to the stores. This data showed that increasing minimum order quantity from one case to just two, gave us the greatest percentage of labor productivity improvement. However, we didnt just want to increase all items to a 2 case minimum order quantity. Instead, a statistical tool, Multi-Variable Pareto was used to calculate the beseeming minimum order quantity based on a mix of inputs. nfosupplyvelocity. com Copyright Supply Velocity, Inc. 4 dispersion Center social club infusion amount of money ( of items picked per quantity) 57% of the items in distribution centers were selected at a 1 case quantity infosupplyvelocity. com Copyright Supply Velocity, Inc. 5 Time to Select per Case Quantity in the Distribution Centers Based on case count per selection When selecting 2 cases of an item, the time per case drops by 45% from 1 case. infosupplyvelocity. com Copyright Supply Velocity, Inc. 6Time to Re-Stock SKUs on Shelves in Stores Based on case count When restocking 2 cases of an item, the time per case drops by 61% from 1 case. This shows that the greatest productivity improvement occurs when going from 1 to 2 cases, which is easier to sell to the stores than making vast increases in minimum order quantity. They can reduce labor by 37 seconds per case by ordering and stocking 2 cases of an item versus 1. infosupplyvelocity. com Copyright Supply Velocity, Inc. 7 Multi Variable Pareto Analysis ?Recalculated minimum order quantity for all items using Multi-Variable Pareto analysis based on o Item unit movement o Pack-out (number of units that fit on the shelf space allocated in stores) o Shelf life ? About 20% of all SKUs had a re-calculated minimum order quantity greater than 1 case o The most conservative methods were used to ensure this project didnt just push inventory out to stores, resulting in narrow Multi-Variable Pareto is a method that uses more than one measure to sort SKUs from highest to utmost performing.Normal Pareto Analysis has been used to develop guidelines such as the 80/20 rule (20% of customers generate 80% of sales). When using multiple variables, there has to be a way to normalize the data so all variables are part of the analysis. We used three variables to determine the correct minimum order quantity for an item. ? Cases sold per week on average for sepa rately item ? The number of cases that fit in the given shelf space ? Product shelf-life Each of these variables are positively correlated to Minimum Order Quantity. ? The higher the cases sold equals higher Order Quantity ?The greater the shelf space (pack-out) equals higher Order Quantity ? The longer the items shelf-life equals higher Order Quantity The team of subject matter experts used retail experience to determine each of these factors and their impact on minimum order quantity. Results of this analysis are shown below. The calculation was very conservative, as the results control shown. Only 466 of 2800 items have a minimum order quantity greater than 1 case. This was largely driven by two factors. Item shelf-life limited our ability to make any shelf-life sensitive item greater than 1 case.Our calculation took this limiting factor into account, to ensure we werent causing shrink (throwing away items that go beyond their shelf-life limit or are damaged) at the stores. In a ddition, lower case movement drove many items to a 1 case minimum, even if they didnt have shelf life limitations. The lower case movement is due to SKU proliferation and was addressed by the SKU Reduction (Biggest SKLUsers) project. infosupplyvelocity. com Copyright Supply Velocity, Inc. 8 Results of Minimum Order Quantity Calculation infosupplyvelocity. om Copyright Supply Velocity, Inc. 9 Communication & run into Plan ? Communicated with all retail stores about how the minimum order quantity analysis was conducted and the resulting new plan o Communication plan included data to show stores that increasing minimum order quantity on select items would improve their labor productivity ? Created a control plan so new items, SKU reduction and sales history will update the minimum order quantity on a twice yearly basis It was critical that this project was presented as a positive for our retail store-customers.We created a communication plan that showed two key aspects of this change ? The conservative nature of the change o only 466 of 2800 items are receiving a minimum order quantity increase ? This change is good for the stores and will improve their labor productivity To ensure that this process endures and does not get change over time we included a control plan. This is shown in the vivid below. As Category Marketing Managers evaluate items, adding and reducing SKUs, changes will be reflected in new pack-out quantities.This quantity will get fed to Distribution Technology who will recalculate this items minimum order quantity using the same Multi-Variable Pareto calculation. A control group, made up of Merchandising, Distribution and retail Directors will review the list, make changes in the ordering system and announce changes to store customers. infosupplyvelocity. com Copyright Supply Velocity, Inc. 10 Results By winning the higher sales volume SKUs and increasing the store minimum order quantity, we decreased the time per case to stock shelves in t he stores and select items in the distribution centers.Using only the 1 to 2 case increase in minimum order quantity for the 466 SKUs reduced the labor time per case resulting in a labor savings of $1. 2 million. The outlook for this process is to slowly grow the number items with a minimum order quantity greater than 1 case beyond 20%. By rationalizing and reducing SKUs we should increase the shelf pack-out of remaining items, thereby increasing the minimum order quantity.