ROFDA Benchmarking Results - How do u rate?

Supply Chain Consultants

Common factors that effect DC performance

Spring, 2009
Presented by Keith Swiednicki Senior Partner KOM International Keith_swiednicki@komintl.com www.komintl.com 1

IQ-The Cognitive Reflection Test (CRT)

90 second test was developed by Shane Frederick, an assistant professor at MIT to predict whether a person would be good at managing money.

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90 Second Quiz to Managing Money

 (1) A bat and a ball cost $1.10 in total. The bat costs $1.00 more than the ball. How much does the ball cost? _____ cents  (2) If it takes 5 machines 5 minutes to make 5 widgets, how long would it take 100 machines to make 100 widgets? _____ minutes  (3) In a lake, there is a patch of lily pads. Every day, the patch doubles in size.If it takes 48 days for the patch to cover the entire lake, how long would it take for the patch to cover half of the lake? _____ days
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Answers
 Correct Answers  (1) 5 cents  (2) 5 Minutes  (3) 47 Days So – How do you do managing risk and money?
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Cognitive Results
 The CRT was administered to 3,428 respondents in 35 separate studies over a 26-month period. Respondents' ages range from 15-63 with the mean age of 24.  Overall mean CRT score = 1.24  Low(0 correct) = 33%  (1 correct) = 28%  (2 correct) = 23%  High (3 correct) = 17%

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Agenda  Objective .ROFDA Ops Committee  Summary of DC Productivity Survey Results – List of Participants – Profile of Participants – ROFDA Comparisons – ‘08 vs’09 – Best of Breed Results (Top 3 Wholesalers)  The Productivity “Drivers”  Opportunities to Lower Operating Costs  Bottom Line Potential  DoMoreWithLess  Case Study – Automating Slow Movers  Questions? 6 .

 Provide accurate benchmarks for participating ROFDA members to use when analyzing company DC operations.  Offer explanations for opportunities and issues challenging the industry and members. 7  Identify and quantify the key costs of operating a food DC.  Provide executive management with a summary of the most important points.  Offer suggestions of how to improve operations through development of best practices.Objective  Measure and report productivity facts. .

Associated Food Stores Associated Grocers of New England 7. Associated Grocers of Maine 8. White Rose Foods 9.List of Participants – 11 Companies 1. 4. Associated Grocers of the South Associated Grocers Inc. Affiliated Foods Inc. 3. 2. 11. Associated Wholesalers Inc. URM Stores Supply Chain Consultants 8 8 “10 ROFDA Members included in this report” . 6. Olean Wholesale Grocers 10. 5. Merchants Distributors Inc.

Participant Profile Characteristics Union Engineered Standards Incentives Computer Directed Putaway w/wo RF Voice Technology Characteristics Order Relationship Characteristics Selection Method Yes 73% 0% 45% 91% 82% Discreet 55% Z Pick 82% No 27% 100% 55% 9% 18% Zone 45% Street Add. 18% 9 .

Participant Profile Characteristic Average Average Fill Rate Average Warehouse Scratches Average Labor issues Average Volume with Lumping services Average Typical Order Turnaround Time: No Touch Receiving Yes 97% 2% 19% 74% 1.1 No 9% 91% 10 .

535   2009 332.453 49 138 201 9.305   104.323 44 135 165 9.550 11 242.677 .971 122.Participant Profile Cont’d Departmental Comparison Departmen Averages t Dry Cases Shipped Total Throughput Selection (Cases/Hour) Order Size Item Variety   Freezer   Cases Shipped Total Throughput Selection (Cases/Hour) Order Size Item Variety     PerishablesCases Shipped 2008 319.787 50 130 73 3.031 59 140 92 2.

606 10.998 9.185 162 49 408 320 178 191 47 432 206 563 2.555 2.462 6.059 549.893 1.056 6.377 761 138 3.206 375.453 698.099 3.642 746 4.078 2.499 2.794 2.942 126 N/A N/A 4.047.812 757 1.137 2.877 6.648 2.696 Paid Hours 689 1.026 187 203 2.297 1.766 70 6.219 1.112 Paid Hours 510 289 358 311 115 1.966 Paid Hours Cases / Hour 628 1.473 61 366.367 2.519 1.146 4.345 8.403 656 3.081 162 506 861 578 109 3.513 332.295 79 Paid Hours Cases / Hour Paid Hours Cases / Hour 406 229 256 177 49 439 219 281 2.110 Cases / Hour 1.641 1.413 883 212 58 Managers Clerks Inbound Checking Inventory Control Outbound Checking Housekeeping Maintenance Other Subtotal Indirect GRAND TOTAL 12 .039 17 6.ROFDA Dry Comparison Dry Grocery Cases/Man-Hour Function 2008 ROFDA Average Volume 2009 ROFDA Average Volume Top 3 Average (Total Throughput) Volume Receiving Shipping Total Direct Labour 389.759 125 41 Cases / Hour 565 559 130 328 93 22.152 2.822 819 1.687 1.640 1.491 764.407 497.048 Paid Hours Cases / Hour Receiving Moving Stock Selection Loading Shipping Other Subtotal Direct Indirect Labour 583 976 563 648 1.450 1.

129 176.154 4.929 223 59 Paid Hours 116 91 62 82 38 122 74 80 665 2.ROFDA Freezer Comparison Freezer Cases/Man-Hour Function 2008 ROFDA Average Volume 2009 ROFDA Average Volume 129.001 1.848 2.489 Paid Hours Cases / Hour Top 3 Average (Total Throughput) Volume 178.674 1.801 2.453 2.512 Paid Hours 910 728 140 813 119 81 Cases / Hour Paid Hours 220 360 1.156 5.212 266 72 13 .409 2.458 122.936 2.025 1.230 1.530 1.225 1.401 2.935 355.031 251.470 Cases / Hour 1.009 217 1.806 Cases / Hour 809 986 175 817 144 98 Managers Clerks Inbound Checking Inventory Control Outbound Checking Housekeeping Maintenance Other Subtotal Indirect GRAND TOTAL 125 87 44 57 24 99 81 31 547 2.060 975 1.511 3.064 Receiving Shipping Total Direct Labour Paid Hours Cases / Hour Receiving Moving Stock Selection Loading Shipping Other Subtotal Direct Indirect Labour Paid Hours Cases / Hour 142 345 875 150 1.

864 Cases / Hour 584 796 150 1.091 50 3.491 Top 3 Average (Total Throughput) Volume 184.124 973 192 2.131 186.696 202 .089 1.875 Paid Hours 223 138 116 120 35 236 1.094 Receiving Shipping Total Direct Labour Paid Hours Cases / Hour Receiving Moving Stock Selection Loading Shipping Other Subtotal Direct Indirect Labour Paid Hours Cases / Hour Paid Hours 407 603 1.018 7.629 115 Managers Clerks Inbound Checking Inventory Control Outbound Checking Housekeeping 1.677 480.011 2.705 99 1.893 10 14 18.005 130 84 Cases / Hour Paid Hours 269 387 Cases / Hour 684 958 885 211 88 2.756 2.ROFDA Perishables Comparison Perishables Cases/Man-Hour Function 2008 ROFDA Average Volume 2009 ROFDA Average Volume 237.623 242 1.963 371.814 242.032 1.086 2.026 Paid Hours 185 89 Cases / Hour 1.

Warehouse Labor – ROFDA Members .

ROFDA Results Total Direct Paid Hours – represents 70% of labor expense Average Order picking is costly and accounts for large % of warehouse labor expense “Focus on Selection travel and walk time” 16 .

Variety .Design Considerations: Travel Pick Line Length vs.

Mom and Apple Pie .

represents 30% of total Average  Top 3 spend more time on Inventory control & clerical and less time on maintenance and inbound checking than the ROFDA average “ A Clean Warehouse is a Productive Warehouse” 19 .ROFDA Results Total Indirect Paid Hours .

We are proud to take people on tours of our facility because it is immaculate. Our facility is reasonably clean but it is by no means spotless.The Basics – Facility cleanliness Question For You Our facility appears dirty. Opportunity Clean facilities have higher morale and better productivity . Our associates take pride in the cleanliness of the building. we have allot of product damage. housecleaning is not our strong card.

” .Facility Cleanliness September 24. 2004 “A clean facility is a productive facility.” “A dirty facility is one of the most telling signs of weak operations management.

knees and ankles .The Basics . elbow. Our heaviest products > 30 lbs are always positioned at groundlevel. neck. shoulder.Ergonomics Question Our associates pick products that are heavier than 30 lbs from locations above ground-level. wrists. Opportunity Good ergonomics will reduce worker injuries in the back. We have ergonomic pick locations to facilitate the way in which associates lift heavy products.

and improve labor productivity. ” . accuracy and morale.The Basics – Facility Lighting “The dock is where the success or failure of distribution operations will be “Proper lighting determined” technology will reduce energy costs.

2004 .” September 24.Ergonomics “Reduce worker picking injuries by keeping heavy products at ground-level. or by bringing the picker to the product.

3. Volume Order size Pick Line length Hit Rate/Density Opportunities to lower costs:              Engineered Standards Incentives Computer Directed Putaway Voice Technology Order Turnaround Order Relationship Selection Method Selection Accuracy Fill Rate Scratches Labor Turnover Lumping % No Touch Receiving 25 .Productivity Drivers – effect on performance Top Common Factors: 1. 2. 4.

247 119 65 “Direct Correlation between Volume and Productivity” 26 50% of variation in logistics cost can be explained by volume alone .000 Volume <320.000 573.901 145 71 131.“The Drivers” What is the Impact of Average Movement  Weekly Cases Shipped   Cases Shipped/Week Selection (Cases/Hour) Direct Labor Throughput Rate Volume >320.

Cases/Man Hour Order Size >244 483.637 133 67 146 46 Order Size <244 206.467 150 76 206 55 “ Order Size impacts selection rate” 27 .“The Drivers” What is the Impact of Order Size   Cases Shipped/Week Selection (Cases/Hour) Direct Labor Throughput Rate Indirect Throughput Rate Total DC Throughput .

Cases/Man Hour Sku’s >10.000 195.224 131 64 172 47 “ More Variety less efficient” 28 .811 141 72 158 50 Sku’s<10.“The Drivers” What is the Impact of Item Variety  Unique Sku’s Stored in Facility   Cases Shipped/Week Selection (Cases/Hour) Direct Labor Throughput Rate Indirect Throughput Rate Total DC Throughput .000 446.

facility cleanliness. ergonomics and safety Measuring and improving labor productivity – standards and incentives Warehouse Software and Equipment Technologies Improving picking operations and strategic handling of small orders Measuring product velocity and cube information Layout development and fast / slow concepts Optimized pick location management / slotting Budgeting and accounting of distribution operations with ABC Costing .Opportunities to Lower Operating Costs 1) 2) 3) 4) 5) 6) 7) Aside from the basics . lighting.

“The Drivers” What is the Impact of Standards & Incentive Programs (1)Operators with incentives are more productive than those W/O   Cases Shipped/Week Selection (Cases/Hour) Direct Labor Throughput Rate Indirect Throughput Rate Total DC Throughput .350 137 71 161 49 2/1000 No Incentives 181.Cases/Man Hour Errors Incentives 458.377 144 66 164 47 4/1000 “ Incentives providing benefits?” All participants have Standards 30 .

Standards & Incentives Question We do not measure labor productivity in our warehouse. standards in place for some of standards our job functions. militant We have engineered labor unions. Opportunity For distribution operations We measure labor hours by with high function mainly for labor wage labor planning and budgeting expense or purposes. can reduce 515% labor We have labor incentives expense developed against standards . We regularly and inform associates of their incentives productivity performance.

Standards and Incentives  One of the most significant productivity gains in a high volume distribution operation will be derived by: – Implementing and maintaining labor standards • E.g. Tom Zosel. Red Prairie. In-House – Implementing an incentive system .

salvage… – Incentives should include penalties for errors. preferably by zone or aisle – Incentives only paid if no absenteeism for the period – Incentives should allow an operator to increase wages by a measurable amount (e. lose incentive if errors are encountered) – Incentives should be based on industrial engineered labor standards.Incentive Systems  Things we have learned: – Paying for employee meals is a form of incentive that works well to reduce turnover – Pay out incentives frequently (e. returns. shorts and unsafe behavior (e.g.g. with pay checks) – Base incentives on individual performance except for receiving. 20% or more) .g.

Slotting Methodology Question Our picking is random from all vertical levels of storage. Our primary fixed pick locations are not Optimized setup always at ground-level but we try to keep of a pick line will slow movers in locations that are not often reduce accessed from ground level order picking hours upwards of Our pick locations are all at ground level. 15% Our pick locations are assigned to products by slotting software to maximize picking efficiency. Opportunity .

g.X-Pick Location Numbering Systems U-Pick Z-Pick FREQUENT STOP POINT FREQUENT STOP POINT (FAST MOVERS) (FAST MOVERS) FREQUENT STOP POINT FREQUENT STOP POINT (FAST MOVERS) (FAST MOVERS) FREQUENT STOP POINT FREQUENT STOP POINT (FAST MOVERS) (FAST MOVERS) A = FASTEST ITEMS A = FASTEST ITEMS B = FAST ITEMS B = FAST ITEMS C = SLOW ITEMS C = SLOW ITEMS D = SLOWEST ITEMS D = SLOWEST ITEMS A = FASTEST ITEMS A = FASTEST ITEMS H = SLOWEST ITEMS H = SLOWEST ITEMS A = FASTEST ITEMS A = FASTEST ITEMS B = FAST ITEMS B = FAST ITEMS C = SLOW ITEMS C = SLOW ITEMS D = SLOWEST ITEMS D = SLOWEST ITEMS Location address systems should be intuitive e. AA-RR-LP (aisle-rack-level-position) .

098 2.000 250.000 Hours 439 1.000 $2.000 $ 1.000 500.205.195 Staff* 13 31 63 @ $35k $ 455.Bottom Line: Total Labor Savings Potential Savings realized by Wholesale Best of Breed • Total throughput savings of 9 cases/man-hour compared to ROFDA Cases Shipped 100.085.000 36 * at a rate of 35 hours per week .

019 190 1.029.Results – Payback 1yr Improved Productivity Projections Labor Rate by Function (Cases per Paid Hour) Moving Stock Selection Loading Other Total Direct Labor Rate Total Indirect Labor Rate Total Throughput Benchmark (Kom Klinic) 653 144 482 N/A 76 287 60 Alternative A 847 179 482 N/A 89 287 68 Alternative B 791 182 482 N/A 89 287 68 Alternative C 741 169 482 N/A 85 287 65 Kom Klinic Average 1.020 770 95 227 67 Top 3 Kom Klinic 1.310) $ 680.202 1.933 135 297 93 Cost/Savings Comparison Alternative Total Capital One-Time Costs On-Going Savings Lifetime (years) A $ (717.955 .000) $ (172.0 37 .127 257 1.208 2.0 C $ (126.0 B $ (143.080.8 to 1.310) $ 1.810) $ 1.200) $ (321.5 to 2.500) $ (167.456 1.

have you looked into add-on capabilities? Use challenging economic times as an opportunity to scrutinize operational efficiency to help weather the storm and reap benefits when the market turns 38 . and improve space allocation? .what else can your system do? . improve inventory management.can your WMS do more to reduce labor costs. attain more accurate shipments.DoMoreWithLess  Milk your WMS for More .

DoMoreWithLess  Attack Freight Costs . innovative or well integrated with other functions  Cash in on ergonomics . procurement and shipping revise or eliminate all those not ideal.use analytical tools to identify how. when and where your costs are incurred.do you have lift trucks or racks with ergonomic features? … are you running regular programs to promote ergonomics and safety? … inform your insurance provider … you could see your premiums drop 39 . why. Procure and Manage Freight . Manage freight more efficiently and gain net savings of 3-20%  Make use of Best Practices to Plan.scrutinize processes in planning.

4x is costly  C-Dock/RLP/FT to Cut handling and Inventory Carrying Costs . reduced to 3 year ROI… may be worth having in place for when the recovery hits 40 .select items to …  To-Automate-or-not-to most easily bypass the storage racks . productivity gains. 18 month smaller footprint.DoMoreWithLess  Stop Doing Things . 3x. handling or warehousing anything unnecessarily… doing things 2x.and thereby increase efficiency labor requirement.get end-to-end visibility on your operation and stop shipping.

inexpensive and ways to We use ABC Costing to understand understand the cost of costs transactions and logistics events.Accounting/ABC Costing Question Our financial accounting of logistics expenses is weak. budgeting and ABC costing are Our financial Accounting and simple and Budgets are strong. . It is difficult to understand our cost structure and how the money is being spent. Opportunity Strong accounting.

93 $14.913.97 $14.135 $44.276 $18.310 $7.15 28.496 56.816 102.7 125.ABC Costing Warehouse Productivity Scorecard Direct Labor Function Measurement Average Average Total Total Wage Rate Throughput Transactions Paid Criteria /week Hours/ Including Rate/hour week Fringe Benefits Total Labor Cost per Cost/week Transaction Receiving Putaway Pallets Received Pallets Putaway $17.138 $1.9 586.607 $10.857.0 12.669 $3.0238 $0.5 138.86 $13.717 $4.32 $13.161 1.3 107.520 3.904 55.62 $1.170 527 742 516 234 1.814 $0. Pieces Indirect Labor 2004 Shipped Total Pieces Shipped .167 Stocking/Stuffin Cases Cut & g Stocked Split Case Picking Pieces Picked Full Case Cases Picked Picking Replenishment Pallets Replenished Packing/Checkin Cases Packed & g Checked Loading Pallets Loaded September 24.820 $123.297 $7.73 $17.139 $1545 $0.37 $22.0 107.177 $0.929 1.913.019 $0.884 $13.81 $16.433 6.375 1.767 $0.93 $0.768 $13.97 $20.44 $22.001 7.6 5.0 9.929 208 458 813 3.5 249.816 5.7 13.

0506 $0.2776 $0.0203 $0.0158 $0.2776 $0.5413 .ABC Labor Costing by Process Function Carousel 4 pods Carousel 2 pods Case Flow Rack Pick to light DIRECT LABOR Receiving Putaway Replenishment .2776 $0.4732 $0.0714 $0.Pick to Light Selection – Split Case Conventional Selection – Full Case Conventional Loading Subtotal Direct Labor $0.3822 $0.0051 $0.0051 $0.0158 Cost / Sales Order Line Split Case Conventional Full Case Conventional $0.0506 $0.1291 $0.4155 $0.0158 $0.0158 $0.0158 $0.3272 $0.0051 $0.2776 $0.0506 $0.Full Case Replenishment – PTL / Carousel Replenishment Selection – Carousel 4 pods Selection – Carousel 2 pods Selection .0051 $0.2776 $0.0382 $0.6409 $0.2276 $0.0203 $0.0051 $0.

Ambient Activity Profile SKUs % cases % Cube % lines Conventional Floor VNA Mechanized Floor Active: Mini-Load Active: 2457 79 1283/52% 8300 21 3635/44% 88 73 4300 6457 93 7 95 5 90 10 12 27 Dynamic Pick Line: Slot only for one shift .

ASRS: Dynamic Pick Line  Unit Load/Mini-Load drop required pallets to tunnel drop required trays to pick face based on shift or batch orders restock above: based on history maintain weight/stackability  Considerations set-up lead time load stability available slots and location .

Dynamic Slotting: Benefits  Picking – Reduced labor. eliminating merge and travel time  Replenishment – – – – Reduced labor requirements Dynamic replenishment dependant upon daily SKU requirements Increased accuracy Reduce inventory  SKU Density – Higher than conventional racking solutions  Flexibility – Order driven system – Dynamic slots • Recycle slot after pick • Can assign multiple slots to SKU  Modularity – Easily expandable .

Mini-Load Module Slow Movers: 77% SKUs. 35’ high . pallet jack merge Order picker truck backup. 21% Cases. 12% Cube. 27% Lines 12’ aisle.

Mini-Load Input “Decanting” Pay me now or pay me later .

Ergonomic Decanting Mezzanined Station Pallet Lift to Slider Table .

Mini-Load: Pick Path Mezzanined infeed optional .

Mini Load Pick Profile Multiple Tray Sizes System Controlled Slotting .

500.000 $8.000 $85.000.000.000.000 $4.Cost Comparison Conventional Building $61.000 ASRS unit load na mini-load ASRS $46.000.5 years Not Exactly a Slam-Dunk….000.000 Other MH Capital Labor na $8.000.000.000 $9.000 $69.300.000 $27.but .000 Payback: 8.000 $12.000.

5: Embedded Mini Load Integrate modules within conventional layout 4 in Ambient.Option 2. 3 in Frozen respect weight range/crushability group national /program accounts             $8mm investment enhanced ergonomics facilitates variety increase streamlined receiving picker merges all product reduced pick errors reduced dock delays reduced truck driver sort order-picker backup experience with automation best of both worlds can retro-fit other facilities Other? Just Ask DICK .

Supply Chain Labour Transportation Stores/Manufacturing Vechicles 20% Labour 39% Fuel 24% Operating 1 7% Labour 75% Other 25% Warehouse Returns Rent 25% Other 35% Labour 55% Utilities 5% Computer 2% Supplies 1 3% Labour 65% 54 .

“The Drivers” What is the Impact of Union versus Non-Union   Cases Shipped/Week Selection (Cases/Hour) Direct Labor Throughput Rate Indirect Throughput Rate Total DC Throughput .206 125 63 141 44 Non Union 562.445 158 80 195 57 “ Non – Union operators are more productive” 55 .Cases/Man Hour Union 246.

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