My name is Michael Kavaky, I’m the General Manager for Veryable in Central and West Michigan. I have spent 20 years of my career in logistics and distribution, having worked in many industries such as Consumer packaged goods (CPG), chemicals, food and beverage, small parcels, and furniture. I’ve experienced the challenges that warehousing and distribution leaders face at all levels, from managing the floor directly all the way up to managing many facilities across oceans and borders. At the shop floor level, operational leaders are focused on driving short term objectives like finishing dock schedules, improving OTIF (On-Time In-Full), and avoiding overtime. At the regional level, leaders are focusing on long term perfect service, contractual agreements, logistics as a percent of sales, and cost reductions. No matter what the org level or the goal, it all comes down to operational execution and KPIs can help show you how well you are doing.
Challenges Facing DC Leaders: Competing Priorities, Fixed Resources, Limited Visibility
A major common challenge that logistics leaders face is how to overcome the unpredictable nature of consumerism and the increasingly short shipping windows. In a customer driven distribution environment, forecasting order volumes can be highly volatile and shift quickly along with the economic environment and consumer tastes. A summer holiday, seasonal period, or special pricing can quickly send a rather strong warehouse into chaos. This leaves a manager who must balance; inbound trucks and containers, put away, inventory, quality, replenishment, order picking, loading, e-comm, customer specific labeling, and reverse logistics, fighting daily to stay just on time.
Little imbalances in the operation can have a large effect on the business but also the end customer. Falling behind in unloading can impact shipping lead times. Falling behind in inventory can cause a lot of down time searching for a product you thought you had and probably short shipping a customer as a result. Pallets of returned products are unrealized inventory capital. The tradeoff list goes on forever. The real challenge is how can you keep these different departments moving in lock step to avoid sacrificing quality for on-time service, accuracy for speed, and so on.
Specific Issue
The Dilemma: One Savannah GA Summer, when warehouse work in the heat and humidity is difficult enough, our facility was being absolutely crushed by containers leaving the port. Due to union strikes in LA, an uncommon amount of containers were being routed through the Port of Savannah to avoid delays. Container releases far exceeded allocated resources for unloading. We would typically unload 10-12 containers daily, have them put away within 24 hours without needing to interrupt other areas. However, with 30 containers arriving at the yard daily, we found ourselves critically behind and at risk of spending thousands in demurrage fees with no end on the horizon.
The Not Ideal Solution: We pulled labor from other areas which prevented us from getting ahead on the dock schedule and at times jeopardized on time shipping in e-comm. We paid premiums to incentivize weekend work, and did the best we could to avoid containers late fees. With so many containers sitting in the yard, you’re faced with not only needing to unload FIFO to avoid demurrage fees, but now all that product in the yard is urgent for orders. This is the imbalance I was referring to. Slow unloading has now starved other work areas, thrown off the inventory allocation process in the network, perhaps delayed outbound orders, and maybe even caused double shipping to get the left-over product out on a different date.
The Operational Impact: As a result, the distribution center is faced with spending $100,000+ a month in container fees, overtime, and expedited freight. You may plan for some of these activities in hopes of not using the funds during budgeting, but $100,000 a month is enough money to noticeably impact logistics as a percent of sales figures. Not to mention having late orders and disappointing the customer. Once the wheels start to wobble, keeping the distribution on track is hard to do. These operational challenges are solvable and it doesn’t take level loading production, throttling back containers to match your head count or even sinking money into more overhead to accommodate the uncertainty. Rather, using a tool specifically designed for operational decision makers that allows quick adjustments without long periods of planning or long term investment. Take a minute to hear exactly how LSO improved lead time by increasing production 38%, or how CDS improved Inbound Shipments and Dwell Time.
Veryable Solution to Distribution Uncertainty
By adopting a degree of short notice flexibility (compared to the traditional fixed hours planned to imperfect volume forecasts) you can more quickly react to changing conditions without service interruptions.
In as little as 24 hours, you can bolster the unload team to ensure trucks and containers are being unloaded at exactly the right time. Matching the unload schedule with the exact number of unloaders needed to be successful, avoiding costly fees and further supply delays. Taking advantage of daily variation and only needing a short lookahead, distribution centers will minimize costs while driving higher service levels. With an unconstrained distribution center, you can support put away functions, improve warehouse space with increased consolidation, keep your inventory counts on time, and continue to flow product uninterrupted through the warehouse. The Veryable tool is designed to maximize productivity and efficiency, enabling growth and profitability, while at the same, pulling out waste and cost from the operation.
With the growth of e-commerce and import goods to the US, the need for distribution centers will continue to increase. ResearchAndMarkets.com predicts that the value of the warehouse market will grow to $86.41 Billion by 2024, up from $71.9 Billion in 2020. As customers continue to demand faster delivery, DCs are forced to have more inventory on hand than ever have before. “Just in time” inventory strategies no longer cut it. DCs will pivot to “just in case” inventory strategies that will help reduce or prevent future supply chain disruptions. These trends will require more from distribution centers, where adaptability and scalability are imperative.
Closing
At an operational level, warehouse and logistics leaders do not have to be at the mercy of the unknown. The Veryable industrial tool is designed to help front line decision makers thrive in all aspects of their facility by matching daily demands more closely with needed resources. Changing what can be a chaotic and turbulent environment by providing predictability and stability . At a tactical level for multi-site leaders, distribution centers need to evolve to survive. Embracing innovation while creating a more flexible fulfillment strategy is going to help you overcome labor constraints, supply chain disruption, and rapid e-commerce growth you’ll likely face for the coming years.
