1. Best Practices Consortium
Supply Chain
Best Practices Consortium
Distribution Operations Practices
Executive Seminar
Track 2, Session B
September, 2006

2. Scope
This session covers strategies for designing distribution centers (DCs) to meet changing customer demands, product line expansion, and seasonal volatility, as well as to minimize costs.
Inbound Operations: How are operations set up for inbound receiving, what methods are being used, and what are the priorities?
Order Picking Operations: What methods, systems and equipment are being leveraged?
Outbound Operations: How are trailers being loaded, orders packed and docks managed?

3. How Are We Doing on DC Operations?
The typical DC operates an average of 20 hours per day Monday through Friday and 10 hours per day on the weekend, with many working 24 hours per day, 7 days per week.
Product movement follows a traditional Pareto curve, with 20% of product accounting for 80% of volume and the bottom 40% to 50% of product defined as slow movers.
The majority of operations are slotting in pick areas, but only 18% are using a slotting tool, with most using spreadsheets and operational experience.

4. How Are We Doing on DC Operations?
For inventory accuracy, 100% of respondents are using some type of cycle counting program, while 61% still conduct physical inventories for financial reporting purposes.

5. Inbound Operations?
75 percent of operations still report checking in product using manual piece/case counts.
61% of all product is sorted prior to put away.

6. Inbound Operations?
45% of all inbound loads do not have an associated ASN, but this is a high priority to change.

7. Improving Inbound Operations?
Improving vendor compliance, particularly in vendor labeling, is the top priority for improving inbound operations.

8. Order Picking Operations
Most operations are using multiple pick methods across their operations.

9. Order Picking Operations
63 percent of operations have technology versus paper guiding pickers including RF, Voice and Pick-to-light.

10. Order Picking Operations
Industry in general picks more pallets, but piece picking is growing with direct to consumer.

11. Order Picking Operations
Greater automation in retail operations is evident by the higher picking volumes from pick modules versus from stock.

12. Outbound Operations
Nearly half of all outbound shipments are still staged prior to loading.

13. Outbound Operations
Airbags and paper dunnage have well surpassed peanuts as the packing material of choice.

14. Your Expectations for this Session
What would you like to discuss? What would you like to learn from this session?
How can I streamline operations? What are others finding successful?
How are others getting vendors to comply on labeling, ASNs, other areas? At what cost?
What methods can be implemented to improve pick rates and accuracy?
What picking technology is best? Voice, RF, PTL, Pick-to-label, other? With what equipment?
How can I better manage dock space overall?
Others?

15. Potential Discussion Points
What can you do to increase cross docking volumes? Should you?
Is batch picking the right answer, or is it better wave management of orders?
Do you have the right equipment to handle volumes and order mix today?
Do you need a sorter for your operations? Where? Can you better leverage the one you have by upgrading controls?
Is product being put away the most efficiently? Should this be system or operator driven?

16. Potential Discussion Points (continued)
Do your existing operations have up-to-date systems to support increased supply chain information requirements?
Is adding labor always the wrong answer to handle increased volume? How does technology support this?
How can you reduce the number of product touches as it passes through the DC?
What customer complaints about shipments and order fulfillment cycle times are you struggling with now?
How often should your operations be evaluated for performance improvement opportunities?

17. Potential Discussion Points (continued)
When is the best time to cycle count? How is this best accomplished?
How frequently should you re-slot your picking areas? Your reserve storage zones?
Are returnable pallets or totes right for your operation? How can you know? How much does wood and corrugate cost a year?
Do you have the right operations performed at the DC or should you outsource to improve efficiency?
What is the real goal of operation — Servicing stores or customers for a competitive advantage, being the most efficient and cost effective, or simply moving product?

18. Important Takeaways
While there are many challenges and opportunities with Benchmarking & Best Practices in all distribution operations, some of the most common and critical include:
Consumer direct is expanding sales channels for all — With the ever increasing direct-to-consumer sales channel, getting products from the DC directly to the consumer adds both a space and processing capacity complexity to retail and supplier operations in the form of direct ships to customers, to stores for customer pick-up and drop ships to customers for others.
Information is the key to success —Visibility and accuracy of information, the ability to see what is coming, to have it pre-labeled for processing, and to plan operations to handle the incoming product are critical for streamlining the supply chain, particularly on the DC level, but 100% compliance is still a long climb.

19. Important Takeaways (continued)
Product should move instead of occupying space — More operations are evolving into processing centers, where product is received and immediately redistributed as outbound orders instead of being stocked. Inventory is built when supply is unreliable, not to fill space.
Think lean and eliminate product touches — Thinking lean is simply focusing on eliminating touches, steps, and key strokes in distribution. The best operations have incorporated automated material handling equipment, WMS and automated data collection and implemented operational best practices to achieve lean.
Completing orders means shipping safely — Picking the right product in the right quantity to the right shipping container and packing it for safe shipment must all be done. If the order is not perfect when it arrives, then it is unacceptable regardless of the reason and is costing you money.

20. Questions?

21. Benchmarking & Best Practices References
Information on DC operations and practices can be found in the following references:
Reports and Analysis
Analytical Reports
DC configuration and Basic Operations
DC Operations Overview
Warehouse Management Systems
Executive Seminar Presentations
Distribution Center Configurations and Trends
Distribution Center Operations Practices
Distribution Center Slot Management Practices
Distribution Center Labor Management
Distribution Center Costs and Performance Metrics
Warehouse Management Systems - Current Practice and Trends
Outsourced Distribution Center Operations and Value Added Services
Note: Available for downloading at