DC Velocity - IdeaBook 2017

es. We therefore quantified the value that reducing cycle time would generate and demonstrated how overall lead time and its variability affected cash flow. Once that had been established, both the managers’ and their teams’ performance against specified goals became a stated component of their compensation.

Detailed solution design and implementation: The analysis determined that four actions, ranging from order creation to process accountability, were necessary to achieve comprehensive performance improvements. They included:

1. Order generation. The first action was to switch to a weekly ordering pattern. For both sites, establishing a weekly cadence leveled the flow of containers and enabled the DCs to plan their work-forces appropriately. Smaller, more frequent orders reduced the number of containers per conveyance. In turn, bottlenecks at the European DC’s receiving dock were reduced.

2. Container and carrier prioritization. To reduce the DC-to-loading-port lead time and improve reliability, Team X created a new policy for selecting which full containers of product to ship next. The decision was now based on two criteria: the carrier’s sailing schedule and a container’s first in, first out (FIFO) status in the pool. By following the new FIFO procedures, Team X ensured that full containers were no longer sitting unmonitored at the container freight station in the U.S. The new FIFO procedures ensured that containers sailed according to order precedence. This all but eliminated demurrage charges (assessed by the carrier on containers held beyond a specified number of days) in the United States.

3. New metrics. The project team also implemented new metrics that measured the end-to-end cycle time. These metrics were used to measure performance and determine compensation at each DC. They also allowed Team X to engage in benchmarking, trend analysis, and continuous process improvement.

4. Ownership of process improvements. Individuals at each DC were assigned responsibility for process performance. This ensured that the end-to-end process remained under control, and if diversions did occur, they could be efficiently corrected. More importantly, with clear responsibilities and goals, individual and team performance could be rewarded.

Institutionalize and close: The client’s instincts were correct. Excessive variability in the export process unnecessarily added an extra 24 days to the order-to-delivery lead time. By cutting out these excess days, more than US$1.9 million in carrying costs were eliminated annually, demurrage charges disappeared, and personnel were freed up to focus on other tasks. The benefits of a more efficient and reliable supply chain also included reductions in safety stock at each node.

Note that in this case, the client’s investment in the four actions did not require capital outlays or incremental expenses. All the workflow and policy changes were institutionalized within standard operating procedures and processes to promote adherence.

EVERYONE CAN BENEFIT

The experienced project manager who reads this article may be thinking, “Thanks, I knew all this already.” That’s entirely understandable. But this article is not for you! It is for the legions of supply chain management professionals who are toiling on projects and are seeking a method for improving their project outcomes today. (If that sounds like you, then be sure to read the accompanying sidebar on six project pitfalls to avoid.)

As research has verified—and as we have repeatedly observed throughout our own years of experience—using a project management methodology definitely improves outcomes. If you are not already using a formal methodology, applying even a simple, straightforward system like the Supply Chain Project Management Lifecycle will help you solve problems and unlock your organization’s full potential. c

Notes:

1. PricewaterhouseCoopers, Insights and Trends: Current Programme and Project Management Practices, (2007), http://www.pwc.com/us/en/ people-management/publications/current-pro-gram-and-project-mgmt-practices.html.