Turning Around a Logistics, Distribution & Storage Business
The MD of a mid-sized logistics, distribution & storage business realised that in order to stay in business, his operations needed a step change improvement. He tasked our consultants to help with the design and implementation of an Operational Excellence project. The aim was to decrease operational cost and improve staff attitudes towards the business.
Leaving No Stone UnturnedOur expert team started by reviewing the existing processes and practices within the business, with the aim of getting a clearer understanding of the challenges & attitudes in the organisation. Their review resulted in a collection of issues that needed to be resolved before any long term improvement could take place, these were:
- The whole organisation was working in silos. There was almost no communication or coordination between the different departments, meaning that constant delays and mistakes were commonplace.
- There was no operational or capacity planning. The organisation was based on a reactive/fire fighting approach with constant use of expensive subcontractors.
- There was no formalised third party supplier selection process or management system. Anyone could supply transportation services.
- The information obtained by the customer care team regarding customer requirements, was not detailed enough and frequently contained errors including inaccurate load handling descriptions.
- Goods control was poor. Items left in the company's care were frequently manhandled and as a result often damaged.
- There were no return load / back shift arrangements in place. In the majority of cases the vehicles were returning empty to the depots.
- Overtime was not controlled. Jobs that should have been completed during the day were often postponed, incurring overtime costs.
Redesigning OperationsThe issues discovered in the analysis were prioritised and resulted in an implementation roadmap focusing on areas generating quickest results: Improved call centre function, improved interdepartmental communication and most importantly, a new operational planning and control system. As the development of the new operational model started, the external team was strengthened by the addition of managers, supervisors and staff from different departments. Their involvement was twofold: 1) their input was needed to help with the design of the new model and 2) they would also become the advocates of change in the organisation.
Planning and Control SystemThe design of the new operational planning and control system, started by defining all aspects of a successful customer transaction. This included information gathering, transportation method, standard process, handling expectations and many more. As a part of this, a new shipment planning process was developed together with a planning & performance measurement function. This ensured that the fire fighting mentality would be reduced to a minimum and a more conservative approach to subcontractor usage. At the same time a subcontractor selection process was established with the aim to create framework agreements with realistic pricing. Operational key performance indicators (KPIs) were also developed by the client team members assisted by our experts. These showed the actual performance on a daily basis versus target, including cost incurred and revenue generated, and were used for managing operations.
Meeting StructureA new meeting structure was developed. Amongst others it included a daily planning and performance review meeting together with a weekly cost, profit and KPI review. Attendance by all departmental heads was mandatory. To back up these two main meetings, smaller interdepartmental meetings were designed to be used by the supervisors to actively manage the staff by setting expectations and later following up on the performance. Attendance by representatives from the departments directly affected by the work of the department holding the meeting was obligatory.
Call Centre RedesignFor the call centre, a new staffing model was developed based on the call volumes & patterns throughout the day. A new training program was also created ensuring a better understanding of customer requirements, information needed and the impact on the rest of the business. The major change however, was the creation of a team of dedicated account representatives for the large and high volume clients. This provided consistency allied to a "personal touch" whilst building rapport & a deeper understanding of client needs.
Implementing New Operating ModelUnlike a typical operational change project where the implementation normally follows the design, here the changes were implemented as they were created. The positive side to this was that results were delivered considerably faster. The downside was that it created confusion amongst the staff. For example some of the meetings went through a number of iterations before a final version was in place. Similarly, the planning process evolved over a few weeks from a simple prioritisation job into a complex process.
Not all staff members were able to adjust to the more complex processes. Some were unable to work in a structured way, whilst others were uncomfortable with the controls now being put in place. It resulted in some rotation within the organisation. Similarly, introducing operational KPIs generated some resentment in the areas responsible for the majority of the costly errors. Needless to say, almost by default a natural reduction in headcount occurred. The implementation phase finished with written procedures for all aspects of the new operational model in place.
ResultsThe first phase ended with the company returning to profit.
- The errors made by the customer care team decreased by 80%
- The collection & delivery times improved by 45%
- Return load capacity increased from under 10% to over 45%
- Overtime decreased by 45%
A Step Closer To Operational Excellence - Changing AttitudesAs the immediate improvement finished, the next phase of the project was to introduce a new culture, one based on the principles of striving towards excellence & continuous improvement. In order to realise this goal, all levels of the company needed to become engaged and to understand that their contribution mattered. This was difficult as the current culture was allowed to develop over a period of 13 years. The team started by identifying the informal leaders throughout the business and all levels. Some of these were the same people that were involved in the previous phase and some were new. All of these were then taken through a training and development program with the aim to raise business awareness and to train them in improvement techniques. A set of reoccurring improvement meetings was then put in place. These were to take place across the business every month, focusing everyone on problem identification and solution creation. For the managerial levels, new active management training was delivered. It was then followed with a coaching program where the managers were helped to change their attitudes within a period of 18 months. Complementing all these activities, a social focus program was also developed engaging all members of staff and their families - making it a family oriented business. The whole program was targeted to take 30 months and is still on going with positive outcomes being regularly reported. The results started having a positive impact after the first few months and after 18 months they included:
- Significant reduction of damaged goods & claims
- Loss of goods decreased by 80%
- Increased amount of return loads to 73% of available capacity
- Sick days taken decreased by 70%.
- Overtime decreased by a further 35%
- Ability to select the right staff when hiring
- Further decreases in collection & delivery times
How Can Excelr8 HelpOur logistics, distribution, warehousing & transportation specialist team have been working on and delivering improvement projects to the logistics & supply chain industry for years. Our team includes individuals who have held senior management roles within the industry and members of recognised trade bodies & associations including an FTA council member. Our approach is simple: define areas that require adjusting and create a holistic approach to operations improvement. Please contact us to find out how we can help your business realise it's potential & achieve it's goals.
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