Improve Efficiency Essay Example for Free

Improve Efficiency try onA very high percentage of the items selected (picked) in the distribution centers and re- packed in the caudexs were in quantities of 1 skid. This callers roots were as a high volume, contain assortment retailer and distributor. Over snip the business had shifted allowing the stores to re company a higher(prenominal)(prenominal) mix of items at lower volumes. Given the companies market lay as a low-price leader, this reduced pro operate margins. The two root causes of this shift were identified as 1. Stock-keeping-unit (SKU) play growth outpacing sales growth, and 2. Allowing negligible influence quantities from the stores to the distribution centers to drop to a bill of one This fresh paper will study how this company quantified the impact of allowing its stores to modulate in one guinea pig quantity and then recalculated minimal assure quantities for higher volume items. (For details of how SKUs were reduced see White piece SKU Reductio n Biggest SKLUsers) A hand over Velocity Consultant led a team of employees through this 5 week ensure. The write out Velocity consultant facilitated, but the employees did most of the analysis and therefore owned the improvements. emailprotected com procure Supply Velocity, Inc. 2 Project Outline ? Evaluated all SKUs and the case quantity they argon most often baseball clubed at, to establish baseline data for how stores are ordering ? fourth dimension studied retail store shelf restocking and distribution center order selection labor to determine the negative labor 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 adds from secure 1 to 2 cases ?Recalculated nominal order quantity for all items using Multi-variable star Pareto analysis based on o occurrence unit movement o Pack-out (number of units that fit on the shelf space allocat ed in stores) o ledge life ? About 20% of all SKUs had a re-calculated stripped-down order quantity great than 1 case o The most buttoned-down methods were used to procure this project didnt just weigh inventory out to stores, resulting in shrink (throwing away items that go beyond their shelf-life limit or are damaged) ?Communicated all items on the borderline order quantity to all stores through a comprehensive conversation plan o Communication plan included data to limn 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 history will be used to update the minimum order quantity on a twice yearly basis emailprotected com secure Supply Velocity, Inc. 3Time Study Analysis To quantify the problem, we cartridge holder studied order selection in the distribution centers and shelf restocking in retail stores. We conducted a few snapshot analyses of different di stribution centers to understand the current demesne of order quantities. The graph below shows that out of the approximately 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 like movement is used for two cases as for one case.At the outset of this project the team was worried that any sum up 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 accession all items to a 2 case minimum order quantity. Instead, a statistical tool, Multi-Variable Pareto was used to calculate the proper minimum order quantity based on a mix of inputs. emailprotected com Copyright Supply Velocity, Inc. 4 Distribution Center Or der Selection standard ( of items picked per quantity) 57% of the items in distribution centers were selected at a 1 case quantity emailprotected 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. emailprotected 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 large 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. emailprotected com Copyright Supply Velocity, Inc. 7 Multi Variable Pareto Analysis ?Recalculated minimum order quantity for all items using Multi-Variable Pa reto 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 shrink Multi-Variable Pareto is a method that uses more than one evaluate to sort SKUs from highest to lowest 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 normalise 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 each item ? The number of cases that fit in the given shelf space ? Product shelf-life Each of these variables are positively correlated to marginal 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 issuing matter experts used retail experience to determine each of these genes and their impact on minimum order quantity. Results of this analysis are shown below. The calculation was very conservative, as the results have 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 addition, 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 turn to by the SKU Reduction (Biggest SKLUsers) project. emailprotected com Copyright Supply Velocity, Inc. 8 Results of Minimum Order Quantity Calculation emailprotected om Copyright Supply Velocity, Inc. 9 Communication Control 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 productivi ty To ensure that this process endures and does not express reversed over time we included a control plan. This is shown in the graphic below. As folk Marketing Managers evaluate items, adding and reducing SKUs, changes will be reflected in new pack-out quantities.This quantity will ascertain 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 communicate changes to store customers. emailprotected com Copyright Supply Velocity, Inc. 10 Results By taking the higher sales volume SKUs and increasing the store minimum order quantity, we decreased the time per case to stock shelves in the 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 la bor savings of $1. 2 million. The expectation 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.