Companies are continually finding new ways to get the right goods to the right customers at the right time, and have developed many metrics to measure their performance in these areas. From 2007 to 2008, companies reduced their average days on hand of finished goods inventory from 35 days to 28, reduced dock-to-dock cycle time by 2.5hrs, and reduced days of sales outstanding from 40 days to 35, all while maintaining 98 percent fill rates, according to the Annual Warehouse Benchmarking studies conducted by the Warehouse Education and Research Council (WERC) and DC Velocity. Customers demand continuous improvement, and markets reward it. In 2007 the 25 companies with the best supply chains (as measured by AMR Research) greatly outperformed the S&P 500, producing an average total return of 17.9 percent, compared to 3.5 percent for the S&P. Companies with perfect order rates (a popular metric that measures customer orders that arrive complete, on time, undamaged, and with an accurate invoice) of 80 percent or higher are three times more profitable than companies with perfect order rates of 60 percent, a separate AMR Research study found.
This article explains how each aspect of perfect order performance can be improved through enhancements to data collection processes and technologies. It doesn’t focus on basic bar code-based shipping, receiving and inventory management applications, nor on warehouse management systems (WMS) or wireless-directed picking and putaway. Such systems are foundational to efficient distribution operations. Instead, this article focuses on other technologies which will provide better execution and productivity to create a greater competitive advantage.
Even if a company’s fill rates, on-time delivery, damage-free shipment and accurate invoicing success rates are all very good, its chances of providing a perfect order are not. A 95 percent success rate for each of the four perfect order components give companies only about a four out of five chance to complete a perfect order, as the following perfect order metric calculation developed by WERC shows: 95 percent fill rate (0.95) x 95 percent on-time deliveries x 95 percent damage-free shipments x 95 percent accurate invoices = 81.4 percent (which can be expressed as 0.954 = 81.4).
INVENTORY ACCURACY
Many companies have used a combination of automated material handling equipment, mobile and wireless computers, and automatic identification and data collection (AIDC) systems to improve their inventory accuracy rates to more than 95 percent. Today these accuracy and productivity levels often aren’t enough to meet perfect order goals, or to provide competitive differentiation. Consider the finding from Aberdeen Consulting Group: “Increasingly, bar code scanning, which was for years the gold standard for pick accuracy, has a much less compelling correlation to Best in Class accuracy of 99 percent and above….Bar coding still correlates to success in all three categories [pallet, case and piece picking]. However, it is no longer a key differentiating technology that is only used by Best in Class companies.”
Bar-coding is now the industry norm, rather than technology that can give a company an “edge” over the competition. Getting an edge doesn’t have to involve major changes to systems. Some simple enhancements to legacy data collection systems can provide the improvement needed to consistently hit perfect order metric goals. Using bar code with other mobile and AIDC technologies has tremendous potential to improve order accuracy and on-time fulfillment, and can also play a surprising role in improving invoice accuracy and reducing problems from damaged shipments.
Improving perfect order rates requires improving processes that occur before items are aggregated into the order for shipment to the customer. Businesses can look as far back as their receiving operations to make changes that will improve perfect order performance. Distribution centers are already so efficient that some of the best opportunities to increase perfect order shipment are closer to the receiving dock than the shipping dock. Specifically, one of the most promising ways to reduce shipping errors is to attack underlying inventory accuracy problems. The following sections illustrate how each element of perfect order performance can be improved through changes to supporting processes and technologies.
ON-TIME DELIVERY
On-time delivery is the most widely used measure of distribution performance. It is also one of the easiest metrics to improve, because raising productivity in virtually any warehouse process will help get shipments out faster.
Systems developed to streamline warehouse receiving and inventory management operations can be leveraged to improve operations at the dock door. For example, shipment verification applications can be set up to automatically generate the documentation needed to release the shipment. One way is to use the data captured automatically to validate items in the shipment to build bills of lading and to provide input for appropriate EDI messages. Another way to streamline loading and shipping operations is to upgrade the mobile computers used there to wireless models that support unified communication, which gives users walkie-talkie or push-to-talk capabilities. Real-time connectivity helps personnel quickly resolve issues that can cause shipping delays.
COMPLETE ORDERS
Complete orders depend heavily on having items in stock, then storing, recording and picking them accurately. One way to improve accuracy is to reduce the amount of inbound materials that must be recorded and processed manually. Fortunately, most goods usually arrive at warehouses already labeled with a bar code, but the codes aren’t always readable, leading to error-prone manual data entry. A simple upgrade in bar code scanning technology can reduce non-reads and misreads, and simultaneously improve accuracy and productivity. Options for upgrading scanning capability include imagers and next-generation laser scanners. Another tactic that’s been successful for improving receiving and putaway accuracy is to use mobile printers to generate bar code ID labels for incoming materials right at the receiving area.
Combining bar code data entry with speech input can raise accuracy levels even more significantly, especially for picking operations. Speech systems let workers keep their hands and eyes on the task at hand, rather than having to repeatedly switch from handling product to inputting data. Speech systems have long been known for their accuracy and efficiency, but adoption has been somewhat limited because they have not always been easy to implement. That is changing with the emergence of open speech systems developed to integrate with legacy mobile computing and bar code systems. One example is terminal emulation (TE)-based speech recognition technology, which eliminates the need for a separate speech server and a proprietary interface between the speech system and the application software.
Once item receiving, identification and picking are all accurate, the final step for preparing complete orders is to ensure all the right items are included in the shipment. One simple way is to scan individual bar code labels as items are packed, and integrating the operation so the order management system or WMS generates an alert if there are missing items or excess quantities. By using serialized global trade identification numbers (SGTINs), errors can be detected and prevented because each specific case can be recognized with its own unique serial number.
ACCURATE INVOICING & DOCUMENTATION
Most of the processes and systems described so far also support accurate invoicing. When organizations scan each item in a shipment to ensure a complete order, it’s relatively easy to use the data to generate accurate invoice for only charging for items shipped. Scan data can also be used to automatically create advance shipment notices (ASNs), bills of lading, and other documentation.
As the need to improve perfect orders rises, so does the need to upgrade legacy processes and systems. Common real-time bar code systems are often no longer enough to provide the accuracy and efficiency to reach target metrics. Blending legacy systems with complementary technologies such as enhanced scanning, digital imaging, mobile printing, speech input and RFID enables new processes that will help companies meet their perfect order goals.
Courtesy: Intermec Technologies Corp.
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