Sales & Operations Process Improvement
Finding Millions of Freight Savings

August 2010
In This Issue
Client Testimonial
What is Mitch Doing?
Freight Savings Project
Greetings!
 

Last month we outlined how this Retailer attacked one of their highest priority projects, rationalizing SKUs (stock-keeping-units) using Lean Six Sigma tools.  This month we will review how they found millions of dollars of savings by looking at Inbound Freight; how they have products shipped from vendors to their distribution centers. 

 
Sincerely,

Mitch Millstein & Ray Davis
 Client Testimonial - CeeKay Supply

Supply Velocity gave us the tools to analyze our business and processes based on the facts and numbers versus our perceptions. Our common quote was "Let the numbers lead us". The key for our organization was how quickly we moved from classroom to actual project initiation.  We were able to jump in, start using the tools and see a difference right away.
 
The get-into-action approach was good for our culture.

Ned Lane
Pesident
 
Mitch Mapping Production-Scheduling-Inventory ProcessWhat is Mitch Doing?
Mitch is working with a Retail Client on streamlining processes at their new Fresh Food Commissary.

 (Yes this building used to be a Burger King and that is an indoor playground in the background). 
Inbound Freight Savings

Project Outline

  1. This project was fundamentally about getting two departments (Purchasing and Logistics) to see the entire process and determine how they could work together to save the company money on inbound freight. 

  2. Our first objective was to understand the problem and the opportunity.  We developed a problem statement.  http://www.supplyvelocity.com/files/Inbound_Freight_Aug_2010.ppt.  The problem statement helped us see the financial opportunity and clearly state the root cause.  Note, that this is not a "solution statement", it doesn't say what we will do to improve, just what we have to analyze to solve the problem. 

  3. Slide 2 shows how they made progress on increasing backhauls (company trucks shipping purchased product from vendors as they return empty from shipping good to stores), but how this progress was flattening out. 

  4. Next we Process Flow Mapped the current state of the vendor negotiation, inventory ordering and managing freight inbound to the distribution centers.  (See slide 3)

  5. We used the current state as a basis for developing the future state process.  If you view the PowerPoint file in slide-show, you will see how we eliminated processes and moved processes so Purchasing and Logistics can work together to save the company money. 

  6. Finally, we created a Control Plan to ensure that this collaboration continues. 

Lessons Learned 

This project was a great example of the power of making problems "visible".  Purchasing and Logistics were never able to work through these issues and reduce company freight costs.  The problem statement opened up everyone's eyes to the opportunity.  The Process Flow Map showed how the process currently works and made the solution obvious.  There were contentious meetings but the end results worked great and had agreement from both departments.