Getting to the Root Cause of Poor Performance

You are the crew chief of a Formula 1 race car. You haven’t been winning races, and you realize this could be career limiting. There are lots of things you could do to improve the performance of that car, and money is no object. Where do you start?  

• Lighter wheels?
• A redesign of the steering?
• Fire the driver?
• A better supercharger?
• Different gearing?

What if you learned the engine is not performing? This would certainly change your focus. Where would you go looking:

• Electrical issues?
• Engine compression?
• Fuel injection?
• Engine timing?

What if you realized that the fuel you were putting in the engine was bad, really bad? Would you continue to work on the other changes listed above with the hope that you could figure out how to get this engine to perform good enough to start winning races again?

You may think this line of questioning is absurd. All said, there are many warehouse leaders out there that just receive whatever, however it comes to them, all the while looking for other places to make up for the inefficiencies and inaccuracies created by the products coming into their warehouse. This is the equivalent of putting unclean fuel into your warehouse and then wondering why operations aren’t running well.  

Fire the driver (your receiving clerk, your inventory manager)!  That will fix it, right?  Wrong! This isn’t a people problem; this is a process problem.  You may think I have a dark sense of humor, but I bring it up because more than once in my career it has been the proposed remedy.

When you don’t have standards for the way product comes in, it is like pouring dirty fuel into your warehouse engine.  The standards we are talking about here, include things like:

• Product Labels Guidelines
• Carton Label Guidelines
• Palletization Guidelines
• ASN and PO Guidelines
• Packing Slip Guidelines
• Packaging Guidelines

Product that arrives marked in a standardized way ensures that your team can move it through the warehouse faster and with greater accuracy. 

Why We Don’t Have Clean Fuel

Don’t quit reading yet! While the Formula 1 race car and clean fuel analogy may cause you to balk or leave you saying, “It’s not quite that simple—our situation is unique,” I challenge you to press forward with me to the end of this article. What is being shared can have a significant impact on your operations and is the type thing that will help you scale your business more efficiently and with greater ease. 

There are several reasons organizations don’t have good receiving product guidelines, including:

• Lack of experience with product development and supply chain integration
• Lack of knowledge of what can be expected from manufacturers
• Fear of rejection from the manufacturer (hesitation of brands)
• Fear of rejection from the brand and not being seen as a good partner (hesitation of 3PLs)
• Lack of knowledge about how to document product receiving guidelines
• Lack of discipline to document guidelines (documenting the process is work)
• Lack of follow through in managing to and enforcing the guidelines once they have been created
• Believing that if we don’t have standards, that it is just simpler for all parties
• Not understanding the operational impact when products don’t meet specific receiving guidelines

If you identify with one or more of the above ideas as a reason you don’t have receiving product guidelines, then stay with me as there is a counter to all these reasons. My elevator pitch to counter the above challenges is as follows:

Documenting processes is always extra work upfront, but it is worth it in the long run. Be patient but firm and persistent in the implementation of your standards. It will take time (1-3 years), but the payoff will be a productivity gain that touches every associate in your warehouse.  Having product guidelines doesn’t stifle, it resolves ambiguity and provides clarity. If you have brands that don’t want to partner with you to create a supply chain superhighway, they are shortsighted and may not be the right partner. Lastly, manufacturers and suppliers can meet your needs once they know what they are and have time to implement them. If they can produce a product with a specific lid tolerance, exact pocket placement, thread count, or reliable mechanical function, they can surely get a barcode and label on your box to your specification.  

Create an Inbound Routing Guide

I may be jumping ahead, but it is important for you to understand that the way you capture your receiving product guidelines is in the creation of an inbound routing guide. Your inbound routing guide details rules of engagement for receiving products into your warehouse. The purpose of the routing guide is to help facilitate a quick inbound receipt that minimizes cost, confusion, and time when a vendor's shipment is delivered to a shipper's inbound receiving dock. It is this document that provides the specifications for the optimal fuel that your Formula 1 warehouse runs best on. 

We won’t cover the specifics of creation or implementation in this article; that said, there are consulting resources at Extensiv that can support you if you are feeling stuck.

Product Compliance, Cause and Effect

So how can inbound product compliance (or the lack thereof) really be the root cause of so many issues in a warehouse? We live in a world of cause-and-effect relationships. When we see issues, we are generally not looking at the problem. We are seeing a symptom of something that is deeper—at the root. We call this the root cause. If we look across the warehouse, we will likely see inefficiencies and inaccuracies in every department, and if we get to the root of the issue, we will find that many times, it is the result of some product non-compliance issue. 

Let’s say you are the third-party logistics (3PL) warehouse, and the company you are fulfilling for is a novelty ecommerce retailer called Fidget-4-Fun. No surprise, they sell a few fidget spinners on their website. The first shipment you receive from their vendor has 12,431 units, with 152 unique SKUs. The product comes in with no product labeling on the master carton and no unit labeling. The manufacturer packed everything into 10 large boxes to save on shipping costs. When the orders were originally placed, it was done on 3 different purchase orders, but because of manufacturing delays, the manufacturer just combined the 3 orders together so there is no separation in the boxes or on the packing slip. The packing slip sent to you uses the manufacturer’s part number but not the SKU that Fidget-4-Fun uses (the one listed on the POs and in your warehouse management system). The best way to figure out what you are receiving will be to create 152 unique piles of product, then count what is in each pile and try to identify which product is what by the product description. All said, this will be challenging based on the ambiguous names like “Star Struck”, “Liquid Eclipse”, “Mood Beam Extreme”, “Midnight Passion” and others. 

Your client posted the new items on their website along with a BOGO promo as soon as they knew the product landed on your dock. You have a 2-day dock-to-stock service level agreement (SLA) to hit. You are also learning that orders have already dropped for 30% of the inventory.  Your order fulfillment commitment is a next-day turnaround. These commitments will likely be impossible to achieve because you only have 4 guys on your receiving team. With that, your inbound volume also includes a container that dropped yesterday, two more dropping this week, and you typically receive 2 to 3 LTLs daily. While you have called your client and told them this is going to take some time to sort out, they are anxious for you to get orders shipped. So now, they are asking that you come up with a work around and just partially receive the products so fulfillment can begin.   

Imagine the receiving challenges, imagine how inventory will likely become inaccurate as the team receives the shipment in chunks without a full reconciliation before putaway, imagine the fulfillment delays and even the potential errors and delays in picking because items are poorly marked. Granted this may be the perfect storm fabricated in writing to prove a point, if you have been in the industry any length of time, you have felt the effects of at least a few of these issues. From my own personal experience, I have seen variations of this scenario play out too frequently. As a rule of thumb, for every process defect you encounter in a warehouse, it takes 3 to 4 times the effort and cost to correct it.  

Let me state that another way: if it costs you $2,000 to do something right it will cost you $8,000 to do it wrong and then fix it. Problems like what are described above along with less severe variations are a major hit to productivity accuracy and customer service.

Here is a chart that shows how product issues manifest themselves as symptoms in every department of the warehouse. 

What’s Next?

Perhaps you were convinced from the beginning, or maybe you were more skeptical, and you are now seeing the opportunity to address your efficiency and accuracy at the root level.  Wherever you are in this process, I want to encourage you to begin today or press forward with any efforts you have already made. It is likely that you are savvy and can take on much of this yourself. That said, we can all use a little help, and if you still have questions, we are here to help. Reach out about setting up a Best Practices Consultation to specifically address inbound routing. We have supply chain consultants that can give you guidance on:

• Creating your own inbound routing guide
• Assisting you with the change effort (internally and externally)
• Tracking noncompliance
• Handling chargebacks
• Developing supporting processes
• Measuring success

With clean fuel in your warehouse, you’ll be better positioned to win races now and in the future!