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Some consultants may tell you that process improvement is about re-engineering or “simplifying” a business process. Replacing one business process with four is therefore a process complication and a step backwards, isn’t it? Actually, no.
This case study demonstrates how replacing one existing business process with four enabled lead times to fall 83%, storage capacity to increase 20% and parts availability to rise 5% for this particular company.
The Situation
When a logistics service provider was having problems with its inbound goods receiving process and had run out of ideas, it was time to call in an expert.
The company was failing to process and put away receipts within its target of 6 days. Parts availability was falling as a result.
The receiving area was full to capacity with receipts awaiting outstanding queries. This was overflowing into despatch areas and causing outbound problems.
Unprocessed receipts were sat in the yard, under the temporary canopy, waiting to be booked in for several days. The company had no record of these receipts on the system yet. These failures were not being counted in the management reports (making the statistics look better than the truth). Expeditors were still chasing suppliers for goods they had already delivered. Credibility issues resulted.
The “hot bay” designed to fast track urgent receipts to satisfy customer backorders and/or emergency orders was taking up to 5 days to process receipts instead of the target 24 hours. The warehouse manager suggested that a “hot hot bay” was now required to achieve this! But how and why would this operate any better?
The Problem
The company was operating a single business process ‘track’ down which all receipts flowed. However, not all receipts were the same.
Approximately 70% of the receipts could be classed as normal i.e. deliveries from suppliers in a form that could be verified, counted and put away to stock.
The remaining 30% needed to be packed prior to receipt at the main warehouse and were being routed to the nearby packer.
Of the total, approximately 1% of receipts would be ‘intercepted’ and routed via inspection to confirm the quality standard of the items prior to put away. This activity was utilised for new suppliers or known problem items undergoing resolution.
Finally, an unknown percentage of the total receipts would have a ‘query’ at the point of booking in, due to an incorrect part number, purchase order number and/or quantity received.
The start of the solution was to recognise that the processing needs of the four types of receipt were not all the same.
The Solution
Normal receipts with all their advice paperwork intact needed to be booked in and put away immediately. This was to be done the same day thus avoiding the need for an external canopy, a hot bay or even a ‘hot hot bay’. Once under control, this would later move to a target of same shift and then half shift, etc. Good suppliers sending quality advice would be recognised as such on the system and pre-advice requested from suppliers at the same time as pre-booking a delivery slot, a new addition to the process.
Receipts for packing would continue to be routed to the packer and booked in on the company system as before. However, when delivered to the main warehouse, they would be routed straight to put away, bypassing the normal receiving lanes.
Inspection items were routed straight to inspection where they were booked in and inspected. Any quality problems for inspected items could then be dealt with in the inspection area, thus keeping them away from the normal and packed receipt tracks. A proper storage area, with racking, was created in the inspection area for this purpose.
Query items were placed in appropriate racking in a designated query storage area until the query could be resolved. This process was improved by locating an expeditor from the procurement department within the warehouse. Once resolved, the receipt would be released into the appropriate receiving track. Queries were not only resolved quicker, but could now be reported and managed appropriately without crowding out the good receipts.
Benefits
Most normal receipts were now processed in less than 1 day, not 6, a reduction of more than 83%;
Parts availability increased by 5 percentage points due to reduced backorders;
Storage space in surrounding areas increased by 20% as material was put away much quicker;
Credibility with suppliers improved as receipts were booked in on the same day as delivery thus recording the correct date and avoiding erroneous chasing;
Management information now displayed the ‘correct version of the truth’ enabling control and affording the opportunity to make further improvements and changes with the measures in place to analyse what works and what does not.
Learning
Process improvement does not imply simplification. Your situation may require process specialisation instead. Like simplification and standardisation, specialisation is another method for controlling variety within operations that can be extremely powerful.
If you have a business process that you think may require simplification, standardisation or specialisation then Servispart Consulting may be able to help. Contact us... now for a confidential, no-obligation discussion regarding your business situation and how we might support you.
Keywords
logistics service provider inbound goods receiving process bottlenecks inspection process improvement process simplification process specialisation process standardisation root cause analysis lead time reduction parts availability storage capacity increase
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