- Learn a step-by-step description of an ideal approach to benchmarking.
- Why qualitative and quantitative benchmarking go hand-in-hand.
- Steps to setting up a benchmarking program
Presented by: Michael Mikitka, CEO, Warehousing Education & Research Council (WERC)
November 28, 2012 - Consumer Goods Supply Chain Officer Summit 2012 - Shanghai Pudong, China
5. What we know…
Improve
Bottom Line
Improve
Metrics
Improve
Processes
5 www.werc.org
6. How do we know?
Percentage of Company Revenue Spent on Distribution Activities
0.72%
Retail
1.80%
0.90%
Consumer Products
4.40%
1.46%
Life Sciences
3%
2%
Third Party Warehouses
6%
2.46%
Wholesale Distribution
4.40%
2.60%
Manufacturing ‐ General
6.50%
0% 1% 2% 3% 4% 5% 6% 7%
Best in Class Median
Source: 8th Annual DC Measures Study, 2011.
www.werc.org
9. Leading Indicators…
• On‐time Shipments
• Perfect Order Completion
• Dock‐to‐Stock Cycle Time, in Hours
• Order Fill Rate
• Pallets Picked & Shipped per Hour
• Distribution Costs per Unit Shipped
• Peak Warehouse Capacity Used
• Material Handling Damage
• Percent of Orders with On‐time Delivery
There are hundreds of metrics referenced
across industry associations
9 www.werc.org
10. The most popular metrics are…
Metric In Order of Popularity – 2012 2011 Rank 2010 Rank
1. On Time Shipments ‐ Customer 1 1
2. Order Picking Accuracy – Quality 3 2
3. Average Warehouse Capacity Used – Capacity 2 4
4. Dock to Stock Cycle Time, in Hours ‐ Inbound Operations 5 6
5. Internal Order Cycle Time – Customer 6 10
6. Total Order Cycle Time – Customer 7 Not in Top 12
7. Peak Warehouse Capacity Used – Capacity 4 9
8. Lines Picked and Shipped per Hour – Outbound Operations 8 11
9. Annual Workforce Turnover – Employee 12 8
10. Fill Rate – Line – Outbound Operations 11 3
11. Lines Received and Put Away per Hour – Inbound Operations 9 Not in Top 12
12. Percent of Supplier Orders Received Damage Free – Inbound Operations 10 Not in Top 12
Source: 9th Annual DC Measures Study, 2012.
www.werc.org
19. Compare
Step 5: Identify Improvement Roadmap
Warehouse & Fulfillment: Gap Analysis
Process Poor Practice Inadequate Practice Common Practice Good Practice Best Practice
Gap
Rank 1 2 3 4 5
Receiving & Inspection
Material Handling & Putaway
Slotting
Storage & Inventory Control
Warehouse Management Systems
Shipping & Documentation
Picking & Packing
Load Consolidation & Shipping
Source: WERC’s “Warehouse Manager’s Guide to Benchmarking”, 2nd Edition (2010)
19 www.werc.org
20. Compare
Warehouse & Fulfillment: Road Map Rating Tool
Cost/Performance
Process Strategic Impact
Impact
Total Rating Gap
Receiving & Inspection 6
Material Handling & Putaway 6
Slotting 4
Storage & Inventory Control 5
Warehouse Management Systems 5
Shipping & Documentation 2
Picking & Packing 6
Load Consolidation & Shipping 4
High Impact High Gap
Medium Impact Medium Gap Highest Priorities in Red Secondary Priorities in Green
Low Impact
Low Gap Source: WERC’s “Warehouse Manager’s Guide to Benchmarking”, 2nd Edition (2010)
21. Compare
Step 6: Identify Improvement Targets
Warehouse & Fulfillment: Gap Review
Process Poor Practice Inadequate Practice Common Practice Good Practice Best Practice
Gap
Rank 1 2 3 4 5
Receiving & Inspection
Material Handling & Putaway
Slotting
Storage & Inventory Control
Warehouse Management Systems
Shipping & Documentation
Picking & Packing
Load Consolidation & Shipping
Source: WERC’s “Warehouse Manager’s Guide to Benchmarking”, 2nd Edition (2010)
21 www.werc.org
22. Compare
Step 6: Identify Improvement Targets
Major
Twelve Key Metrics Disadvantage Typical Advantage Best in Class
Opportunity
On time shipments
Customer Metrics Internal Order Cycle Time
Total Order Cycle Time
Dock to Stock Cycle Time, in Hours
Fill Rate ‐ Line
Operations Metrics Lines Received and Put Away per Hour
Percent of Supplier Orders Received
Damage Free
Lines Picked and Shipped Per Hour
Average warehouse capacity used
Capacity and Quality
Order Picking Accuracy
Metrics
Peak Warehouse Capacity Used
Annual work force turnover
Employee Metrics
Productive hours to total hours
22
23. Act – Step 7: Close Gaps
Warehouse & Fulfillment: Final Initiatives
Process Poor Practice Inadequate Practice Common Practice Good Practice Best Practice
Gap
Rank 1 2 3 4 5
Receiving & Inspection
Material Handling & Putaway
Slotting
Storage & Inventory Control
Warehouse Management Systems
Shipping & Documentation
Picking & Packing
Load Consolidation & Shipping
Highest Priorities in Red Interim Target
23
Secondary Priorities in Green www.werc.org
24. Act – Step 7: Close Gaps
Setting Targets
Benchmark 98%
Half Life Theory Interim Goal 95%
Current Performance 92%
The half‐life theory
suggests that an
interim goal should
be selected when
there is a large gap
to close Interim Target
24 www.werc.org
25. Benchmarking Challenges
A study by Penn State found several key challenges among
companies trying to benchmark
• Accurate/comparable data is the biggest barrier
• Implementing results
• Comparable processes
• Available resources
• Standard definitions
• Clear Goals for benchmarking
• Willingness to share
• Finding the right partner
• Senior management support
www.werc.org
26. Best‐in‐Class Companies Are Like Decathletes
Top ranking athletes across a set of events will:
Decathletes • Accumulate the most points among all events
• Win some events, but not all
• Know their own strengths and weaknesses
• Know the strengths and weaknesses of competitors
• Focus training first on events that match their relative strengths & events which
they feel they can or must win
• Spend remainder of training time and energy on the remaining events to assure
they are minimally competitive in all events
Top ranking companies across a process will:
Best‐in‐Class
• Beat competitors in most areas, not all
Companies
• Not be best‐in‐class in every performance category, but will win in areas that
match their strategies and priorities
• Know their own competencies, strengths, and weaknesses
• Likewise, know the same about their competitors
• Spend most of their resources in those areas which in which they must excel (in
accordance with competitive knowledge, customer and stakeholder
requirements, and business strategies)
• Minimally competitive in every performance category
Source: Performance Measurement Group
www.werc.org
27. Attributes of Good Performance Measures
A Good Measure Description
Measure only what is The measure focuses on key aspects of process
important performance
Can be collected Processes and activities are designed to easily capture
economically the relevant information
The measure and its causal effects are readily available
Is Visible
to everyone who is measured
Is quantitative The measure provides an objective value of performance
The measure conveys at a glance what it is measuring
Is easy to understand
and how it is derived
Beginner Mistakes: Companies starting to use metrics may leave out one or
more of these attributes
www.werc.org
28. Attributes of Good Performance Measures
A Good Measure Description
The measure makes the proper trade‐offs among
Is Process Orientated
utilization, productivity and performance
Is defined and mutually The measure has been defined and mutually understood
understood by all key parties (internal and external)
The measure validates the participation among various
Facilitates Trust
parties and discourages “game playing”
The measure is used to show progress and not data that
Is Usable
is collected; Indicates performance versus data
More Advanced Mistakes: Failure to consider all of the above attributes will
prevent a company from gaining success
www.werc.org
29. Going Back to School on Metrics
Grammar, Math & History rule when it comes to setting up metrics!
Grammar…
• What is the DEFINITION of your metric? Grammar
Do the Math…
Math
• A metric that does not require math is
probably just data History
Know your History…
Past
Present
Future
Back to School on Metrics
www.dcvelocity.com/print/article/20100915back_to_school_on_metrics/
29 www.werc.org
30. Michael Mikitka, CEO
Warehousing Education & Research Council
P: 630.990.0001 / mmikitka@werc.org
www.werc.org
Presentation Information: www.werc.org/cgsco2012
