Operations is the lifeblood of a distributor as it delivers upon sales\’ commitment of getting material to the customer. And at the end of the day, distribution, and customer satisfaction, is about getting the right material to the customer when and where they need it.
While technology can frequently improve processes, enhance efficiency, perhaps be more cost-effective and generate data that can by mined to enable continuous process improvement, it is people that are needed to execute upon the technology, sometimes interrupt the technology to support customer, or sales, \”emergencies\” and it is the people aspect that conceive new approaches (enhancements and innovations).
Consider when you\’ve seen pictures of Amazon warehouses that have robots running around. There are still people involved in running those warehouses, monitoring the robots and … picking material (or checking it in)! You can\’t \”set it and forget it.\”
For 2017 we\’ve asked Dick Friedman, a noted distribution warehouse and operations consultant, to share his thoughts and some case studies to help distributors (and those who have warehouses for distributing material – some reps, manufacturers). Here Dick shares two examples on how to ensure you don\’t lose a sale opportunity:
Many people think that “supply chain management” (SCM) refers only to inbound transportation from manufacturers and to distributors’ outbound transportation arrangements and activities, not to activities within a distributor’s facility. But successful SCM requires problem-free warehouse operations and inventory management (and constant communications between all partners in a supply chain). Customers are partners in every supply chain, so some people use the term “Customer Logistics” (CL) instead of SC. Here are a few distributor warehouse and inventory problems that limit the success of CL/SC, and tips for avoiding the problems.
Out of Stock But In Stock. Have you had this happen … a truck bringing electrical materials from a manufacturer arrived, was unloaded, and the received material was verified against corresponding PO data; everything needed arrived. But warehouse personnel were too busy filling orders to enter the received material into the system, let alone put away the products. The people who checked in the material did not know that the distributorship was out of stock of the product that had just arrived. 30 minutes after the check in, one of Murphy’s Laws came into play: a customer called with an order for several products, including the out of stock product that had not been “received in.” The rep who took the call told the customer that the distributor was out of stock on that one product, and the customer did not place the order…maybe for the entire order.
TIP – If entry of received shipments data often occurs several hours after the physical delivery, as does the put away, consider hiring a part-time person to do the check in, data entry and put away. If the volume of receiving grows substantially, an additional full-time person may be needed. Sales are too hard to come by. Losing sales due to poor information from the warehouse needs to be avoided as it could mean the customer gets \”comfortable\”, or \”served\”, by your competitor.
Keep Customers Happy, At A Loss. When the rep who took the call described above noticed there was no stock of the product needed by the customer, she offered a compatible but higher-quality product – at the same price as the out of stock one. The substitute product was a very slow mover and the purchase cost was more than the sell price paid by the customer. During the next few hours data for the out of stock product was still not entered but a few more customers called for it, and were sold the money-losing substitute. The next morning, data was entered and the products were put away, but a problem was already started. The system detected that the quantity on hand for the substitute had reached its “Min” level, and recommended ordering more, The system, or Purchasing, approved the recommendation and more material was purchased. Since it started as a slow mover, except for this one day, it will be in stock for a very long time. The system ignored the product that had been out of stock because there was no demand for it.
TIP – Use the ERP software feature that allows entry of the code for the product the customer wanted, then canceling it, entering an indicator signifying a substitution and entering the code for the substitute. The system would use data for the substitute in sales reports, but use only data for the formerly stocked-out product in determining when and how much to buy. If there is no such feature in the system, the problem cannot be prevented but can be minimized. Daily, print a report listing products that were sold for less than the target gross margin; data for products sold at a loss would appear at the top.
For more than 40 years, Dick Friedman has helped electrical distributors prevent inventory shortages and warehouse mistakes that lose sales and customers. Dick can be reached at 847 256-1410 for a FREE consultation. Or visit www.GenBusCon.com for more information.
Dick will be sharing other operational case studies and tips throughout the year. What challenges do you face that you\’d like Dick to comment on? As salespeople, have you faced these issues? How do you, or your company, respond?