Reduce, reuse and recycle - the mantra of the eco-friendly movement, these three little words are more than an edict. They've grown, evolved and become a tagline for the "green" revolution, and they're ripe for the plucking by savvy business decision-makers.
Measurements — determining them, changing them, inferring from them — are a backbone of every industry. Whether the measure of success is something as simple as profit, or as complex as reducing the amount of time a product spends during its travels in the supply chain, having the right "ruler" is absolutely crucial. If you're using the wrong logistics KPIs, or endlessly tracking them for a future purpose that never manifests, you're not only wasting company resources — you're paying out an opportunity cost that could actually make a difference in your goal progression. In only three steps, you can clean up your approach to KPIs and maximize the value obtained from each one.
The flowchart is a time-honored tool of decision making, a simplified blueprint for what to do if a situation matches certain parameters. It's also a vastly underutilized technique in logistics and supply chain performance decisions, likely due to the complexities of the chain falling short of the simplicity needed for such a chart. The quick decisions and experience-fueled moves that run a fulfillment center can't be codified as A or B choices — or can they?
Think, for a moment, of your supply chain as you would a balanced diet. Even if you’re carefully measuring your caloric intake, it doesn't necessarily mean that you’re eating well! The same can be said for operational measurement and supply chain analytics. They're helpful, but only as part of a broader approach that considers every angle, not just those derived from data. With much industry emphasis placed on supply chain KPIs, it's easy to hone in on them and miss the supply chain forest for the trees.
When outsourcing a vital operational task like fulfillment, the hiring company should always provide clear guidelines and KPIs to ensure things run smoothly even without direct, real-time supervision. Typically, 3PF and 3PL partnerships are initially created due to constraints — desired results that the original business lacks the time, effort or intrinsic resources to provide — which means that relative autonomy is an important facet. If service providers need to constantly stay in contact to verify and course-correct, any resource savings are whittled away. KPIs act as silent sentinels, giving outsourced teams an "instruction manual" in the form of concrete supply chain metrics and goals.
So, what should you include in these crucial guidelines? Start with these.
Is your supply chain risk management strategy end-goal focused, or is it centered on performance in the moment? It can be tempting to set a static goal and measure each day's progress against it, but in a business climate that can change direction in a moment, it's a quick path outdated practices. KPIs are the best tools you can have to guide actionable measures in the fulfillment center, as they reflect the state of your efficiency on multiple, living levels.
Not sure you have the best supply chain KPIs for the job? Start with these practices to drive success in real time.
A solid strategy may be the roadmap to success, but unless those roads are well-defined, you're heading nowhere in a hurry. If your supply chain performance hinges on following a set strategy, logistics analytics are a non-negotiable part of reaching your goals. Not only do they help inform your plan as it's being created, the corresponding performance metrics produced throughout various phases are the only true method for accurate course-correction and maximizing benefits. Trusting one's "gut" and the historical performance of past initiatives — yours or a rival's — is helpful, but the uncertainty of these methods is simply too high for comfortable risk-reward ratios.
Businesses grow. Brands grow. Workforces grow. What about fulfillment centers? With the day-to-day focus resting heavily on supply chain performance metrics, sometimes growth isn't even on the radar for management teams — who often pour all of their effort into maintaining the status quo. However, just like the non-fulfillment aspects of business, the greater goal should always be expansion. For some companies, that means geography, for others, sku volume. However your fulfillment center defines growth, you'll need a strategy to hit your milestones, and it needs to incorporate three strong pillars for the best results: visibility, agility and connections — both internal and external to your company.
As the most nimble of moving targets in the warehouse, your supply chain performance measurements may fundamentally differ from day to day, depending on which facets need work. Factors — both inside and outside — the warehouse walls play a professional tug of war with your goals and intentions, requiring constant adjustment just to maintain the status quo. Few logistics professionals have time — from scratch, anyway — for that constant recalibration, which is why KPIs are so important.
Imagine if every decision that needed to be made at a fulfillment center had a barometer: if the number was too high, one action was taken; if it was too low, another action was called for. Can complex business drivers really be simplified to chart-checking like this? If you're following the right KPIs, they absolutely can. Beyond the numbers, however, the attitudes and practices in your workplace determine how useful those KPIs can be.
There are a few techniques you and your team should be actively employing.
The origin of the term "benchmarking" comes from surveying practices. It refers to a mark made on a stone wall that helped surveyors reposition measurement equipment in the same place from visit to visit. When applied to supply chain metrics, proper benchmark measurements help fulfillment center professionals gauge their growth or the scope of a problem and precisely determine the efforts and resources required for problem-solving applications. In a busy company, however, the process of determining and adhering to benchmark standards can be tricky as they require true-to-life and in-the-moment glances at a stream of industry that doesn't always have the luxury of pausing. Where, then, should a fulfillment center team start?
We live in an always-on, digital world where people have come to expect instant satisfaction. As a result, operations directors face increasing pressure to streamline processes to keep their warehouses functioning at the highest level of efficiency. But it’s not always about working faster or harder. After all, if an airline pilot gets on the intercom and says, “We’re lost, but we’re making good time,” you wouldn’t be impressed with his efficiency. So, how can you develop the warehousing processes that will lead to true efficiency?
The management of warehousing expenses has always been tricky for COOs and supply chain managers to deal with. Space doesn't come cheap, and it can't easily be expanded in small increments. When a company builds new warehouse space, it typically has to build more than it presently needs. In the near-term, much of that expensive new capacity will probably sit empty. On the other hand, if space limitations have begun to cap off your company's potential revenue, or if they are creating safety issues for your associates, something must be done.
Think about your most popular product. How many pairs of hands are involved in manifesting it on your fulfillment center shelves? 100? 1000? More? When a supply chain is running smoothly, it's surprisingly easy to hand the credit off to flashy tech and algorithms, but people are what's truly at the core. While upgrading technology may be as simple as a download, optimizing the human component of your supply chain is quite a bit trickier, but certainly not impossible—with the right approach. Consider three important reasons to invest in the people that move your supply chain.
Great minds have scoured trade journals, articles and business books looking for the golden ratio of accuracy and efficiency within the fulfillment center, only to come up empty handed. The reason? No two warehouses are alike, which means that no one solution can possibly stretch to cover all the bases. Like many of the best ideas in business optimization, it takes a dedicated supply chain professional, a simple template and a lot of adjusting to find the right fit for your business. If you're willing to be the hand on that helm, take a look at three not-so-secret secrets to kicking your fulfillment processes into high gear.
There was a time when being accused of "being transparent" was a cause for concern, not business pride, and reactive supply chain moves often sufficed when there were pockets of lead time throughout the whole order process—lag between order placement and acknowledgement and pauses between picking and shipping. Now, however, orders are placed and sourced at lightning speed, and your supply chain strategy has had to adjust accordingly. If you're still operating as if these lead time pockets are plentiful, it's time to get up to speed, literally, by rethinking the way you respond to concerns in the fulfillment process.
Your fulfillment partners are an integral part of doing business, but to consider them a real part of your value chain initiative or support, you need to know what else they can do for your company. In short, their benefits should, whenever possible, become benefits to you as well—whether that be opening proverbial doors, banding together with your buyers for better pricing, or proactively researching and suggesting ways to tighten up your current fulfillment processes. Even in a situation where vendor A offers a better price per unit or service event than vendor B, that "smart bet" on A quickly becomes worthy of scrutiny if B can provide more opportunities to save money or boost efficiency.
Even if your fulfillment center doesn't quite have Santa's globe-hopping workload to contend with, they'll still have to work a little holiday magic to keep the upcoming influx of holiday orders running smoothly. As customers travel and gift-giving timelines become non-negotiable, your supply chain needs to be backed by a strategy that holds up to scrutiny and stress to remain viable. As with most supply chain planning, it's in your best interests to be proactive, not reactive, so here are a few last to-do list items to cross off before ecommerce marches into the busiest weeks of the year.
It's a hard comfort to step away from the belief that supply chains flow one way, and do so without requiring input beyond basic ordering or invoicing. But supply chains cannot afford to be closed loops in the face of modern logistics. The supply chain is part of an incredibly intricate network, carefully balanced with success in mind. The emergence of the value chain concept, which highlights smart supply chain strategy as a source for operational cost savings, is directly tied to (relatively new) versatility and transparency efforts. Implementation, much like the goods within that versatile, new supply chain, draws operational inspiration and planning opportunities from an unusual source: customers.
Getting the most value from a product is the primary focus of a company as a whole. This is typically achieved through a combination of sales profit, customer retention and low production and fulfillment costs. Your supply chain may work just fine, but it could be bringing you much more value. When you transform your supply chain into a value chain, you shift the paradigm into something more than a series of data points—a complex yet integral step in developing the scope and efficiency of your company's offerings. You may be ready to for a new supply chain strategy, but how do you take the first steps of transforming basic function networks into extended value for your company?
It's coming. The flood of sales. The frantic pace on the fulfillment center floor. The fever pitch of customer demands as the holidays draw closer. Are you staring down the storm with an assured grin or biting your nails with worry over possible problems? The difference between hitting the zone and striking out is slim, but if you keep a reference checklist, you'll be considerably closer to hitting that home run this holiday season.