Keeping Your DC in Peak Shape:
It’s Beginning to Look a Lot Like Christmas
Whether your temporary peak periods are linked to holidays or seasons, these tips will keep your distribution center merry and bright.
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With a new distribution center that's five times as large as the previous one, its first warehouse management system (WMS), and an additional foundry coming online in fall 2017, Lodge Manufacturing Company is poised to meet the demands this year's holiday rush will ring in. The 122-year-old manufacturer of seasoned cast iron skillets, griddles, and other cookware plans to begin drop shipping online orders generated by its customers' websites this holiday season. Drop shipping will eliminate double-shipping the products—from Lodge to the retailer and then to the consumer—while also erasing the need for retailers to stock every Lodge product in their own distribution centers. It also will allow Lodge's retail customers to offer a larger product selection online than they can display in stores.
But Lodge is leaving nothing to chance as it anticipates the impact of these changes. Following one of the seven commandments of distribution center holiday rush preparation, the Tennessee-based company is pilot-testing the new drop-ship option before introducing it to select retail customers.
"We're making sure we have the right processes in place by testing this new shipping process with a specialty gourmet retailer first," says Sam Touchstone, senior vice president, finance and administration for Lodge. "We set up the warehouse to support it and are coordinating with our WMS provider to make sure the new automated system works properly."
Here's more on the importance of that first step, plus six others, to make sure your distribution center is ready for the holidays, or any other high-volume period.
1. Test new processes or simulate peak periods months in advance.
Sean McCartney, executive vice president of operation services at Radial, a Pennsylvania commerce technologies and operations provider, does this internally and with clients, too. "To test operational capabilities and automation systems, we hold volume, then surge a facility in a compressed time period," he says.
Testing in advance lets companies head into peak season confident that they can handle the increased volume.
2. Use data analytics to organize the distribution center for maximum efficiency.
"We believe in data-driven warehouses," says Evan Garber, CEO of EVS, an enterprise software company in Boulder, Colorado. "The systems capture an incredible amount of data, but not everybody analyzes it to identify trends."
EVS works with clients to organize warehouses for peak periods around trends the data reveals. For example, if 80 percent of an online shoe retailer's orders during November and December are women's black shoes in sizes 7 to 9, the retailer should locate that inventory near the packing station to reduce picking time and distance.
This thinking influenced Lodge's new distribution center layout, which includes a 10,000-square-foot space with flow racks for web orders, the first time it has had a separate space for filling small parcel orders. When inventory is delivered to the center, it's now cross-docked, with products directed to both the web and warehouse fulfillment areas.
3. Get an early forecast from marketing and sales.
Lawson Products, a Chicago-based distributor of industrial maintenance and repair supplies, makes early forecasts a priority.
"We ask our marketing group to tell us about product promotions at least three months in advance and to let us know about the season's hot items," says Shane McCarthy, senior vice president, supply chain. "When we know products will be especially popular, we create fast pick zones for them."
Early forecast communication is also a priority at UPS's third-party logistics provider unit. "Planning for the holiday rush starts with understanding what companies expect during the peak period, and breaking it down to a forecast that's as granular as it can get," says Stephen Hydrick, vice president of North American distribution at UPS. "From our client's forecast, we start building operational plans."
"The projected volume drives the space allocated to incoming products plus the labor and training programs in the months leading up to peak," says Don White, vice president of enterprise solutions at WMS provider Snapfulfil in Colorado. "It also helps us estimate how long the distribution center will operate at what's often 140 percent of normal capacity."
4. Be prepared for labor shortages.
"Don't discount the scarcity of labor and the need to train a new workforce," notes White. He advises training seasonal workers during non-peak periods so supervisors can shadow them. Training early also helps weed out workers who don't meet expectations.
White also recommends moving trusted employees into positions involving more complex processes and using temporary labor for simpler tasks.
The amount of training, and when, depends on the task and how companies teach new hires. "If you use an app that simplifies the process, training and proficiency can occur in one shift," White says.
Mike Schoenfeld, vice president of logistics, head of contract logistics, USA, for third-party logistics provider DB Schenker in Atlanta, advises staffing up at least two months out from the peak period. "Try to onboard employees 60 to 90 days ahead of time so they're properly trained and you can tell who will stay through the seasonal surge," he says.
ABM, a New York City-based company that provides temporary warehouse staffing, understands this better than most because its services are labor-based. One solution ABM offers involves on-site account management so the company is close to the situation. To that end, ABM continually recruits, screens, hires, and trains workers who are then outsourced to clients.
The company "casts a wide net" to find enough seasonal workers, says Eric Kirchhoefer, vice president of sales and national accounts. "We blitz a region with advertising while we engage local churches and community groups," he explains. "We even set up a shuttle service to transport workers if necessary."
One of UPS's advantages is that it can shift employees to different buildings and projects when needed because many of its facilities are part of multi-building campuses.
"You need to get out in front of peak season early, bring workers in on time, treat them professionally, and train them so they can succeed," Hydrick says.
5. Hold off implementing new processes, systems, or technology just before or during peak periods.
"Implement anything new far enough from peak season that it can be perfected well in advance," says Schoenfeld. "Operations during the busy period need to be as clean as possible."
Poor timing is a common mistake. "Trying to implement a new system or automation in September or October adds a lot of risk to peak season," McCartney says. "So many things can, and have, gone wrong with new system implementation."
6. Evaluate how you handle reverse logistics.
During the holiday rush, when the focus is on getting orders out the door as quickly as possible, many distribution centers set returns aside, preferring to deal with them after outgoing volume drops. That can be a mistake. If products being returned are in demand, you want to get them back into inventory as soon as possible so you can continue to meet demand.
"Handle as many returns as possible in real time so you have more inventory to sell," advises White. "For example, if returns are 30 percent of an inspector's job during the holiday sales period, increase staffing for that task."
Snapfulfil's WMS demonstrates the wisdom of using the staff that receives and inspects new inventory to inspect returned orders as well. "Companies leverage the experience and proficiency that people gain during receipt inspection," he says.
7. Communicate often. Then communicate some more.
At Lawson, which used lean design and other initiatives to increase order completion rates by 60 percent and reduce back orders by more than 80 percent, DC employee teams meet at the start of each shift and again after lunch. Using a rolling blue board updated with the previous and current day's metrics and other relevant information, they discuss goals and challenges.
"This is old school, low-tech, face-to-face communication," says McCarthy.
"Consistent updates and regular planning sessions around the peak period help a company and its service providers address peak season challenges hand-in-hand," Hydrick says.