Flats, Tenn.; and Fontana, Calif. The DCs, which combined
total more than 1 million square feet of space, are overseen
by the no-nonsense Monti.
Monti is only as demanding as the environment he works
in. HSN guarantees deliveries within 10 calendar days of a
customer’s order, but nearly 70 percent of its deliveries are
made within six calendar days. At the same time, HSN, like
its rivals, has been aggressively pushing such customer promotions as free or reduced-cost shipping and handling
(S&H) to boost its value proposition. While this has pleased
HSN’s customers, it puts pressure on Monti and his staff to
continue to drive out costs while improving the operation’s
fulfillment and delivery standards.
Because HSN’s top brass plans to expand its shipping and
handling promotional efforts—and given that S&H
accounts for two-thirds of his operation’s expenses—Monti
doesn’t expect his job to get any easier.
A PUSH TO SLASH LABOR COSTS
With the pressure to contain costs mounting, in mid-2008,
Monti and his chief assistant, Caroline Dreyer, vice president
of fulfillment operations, decided it was time to act. They
began exploring ways to improve efficiencies in HSN’s
three DCs to reduce operating costs and free up cash flow
so HSN could fund more delivery-related promotions.
They focused on a plan to improve DC worker productivity and slash what Monti calls “variable labor spend.”
The goal was an 18-percent improvement in productivity
and a 10-percent reduction in operating expenses.
Given the fulfillment-heavy nature of HSN’s work,
Monti and Dreyer believed the company was further along
than most in understanding the nuances of DC work-force
issues. However, because they didn’t have automated productivity tools or sophisticated engineered labor standards
to measure workplace output, they were forced to measure
present and future results by past performance metrics.
While this yielded reasonably accurate data, Monti felt it
didn’t give HSN the maximum visibility needed to unearth
even greater efficiencies and cost-savings.
Monti proposed to engage TZA, a Long Grove, Ill.-based consultancy specializing in the design and implementation of labor management software and supporting
it with a deep knowledge of best practices and engineered
standards. But consummating the marriage wasn’t easy.
HSN’s executive suite, in hunkered-down mode as the
financial crisis and recession took hold, twice rejected the
proposal. On the third try, in January 2009 with the downturn in full fury, it was green-lighted.
A 20-PERCENT BOOST IN PRODUCTIVITY
The project took two years to complete and required a
major change in how the DCs and their workers functioned. But when the dust settled, the results surprised even
the hard-to-impress Monti. The operation met its savings
goals, and worker productivity rose by more than 20 percent, exceeding HSN’s original objectives. HSN recouped its
entire investment in less than 15 months, according to
Monti.
Meanwhile, the savings enabled Monti’s unit to help HSN
defray the rising cost of the shipping & handling-related promotions it considered so critical to building customer loyalty.
As part of the project, HSN installed TZA’s labor management software, a program that runs on a stand-alone
basis but functions in close concert with the company’s
warehouse management system. For the first time, HSN
had the visibility to track DC performance at the individual
employee level and to reward workers—as well as hold
them accountable—for meeting the engineered standards.
In addition, the program helped HSN determine best practices for each of the operation’s functional areas. Through
it, the company was able to eliminate steps impacting its
