Becoming a better distributor

How to improve the efficiency of your new product sales

FOR ELECTRICAL SERVICE companies, distribution is a way to make more money. It seems simple enough to buy, warehouse and (hopefully) sell products. But distribution is a big change from motor repair.

Balancing inventory, personnel, and space calls for systems and technology. To excel in distribution, you need a handle on workload and productivity, which, unfortunately, is easier to say than do.

Most distributors don't track workload and productivity. This is consistent with the traditional view of distribution as secondary and part of overhead. Compared to manufacturing, warehouse operations get little attention. Moreover, tracking productivity until recently has been expensive. Fortunately, computers are cheap enough today to pervade households, not just businesses. As for flexibility, most modern software packages include a report writer that allows managers to create and customize reports with ease.

The usefulness of productivity information is clear. By measuring productivity, managers have a tool to deal with daily problems of controlling costs, improving operations, and planning ahead. For example, growing warehouses never seem to have enough personnel. The foreman may claim to be unable to keep up with the volume of orders. Without productivity information, the foreman's word is hard to challenge. A similar situation arises from new technology. Without tracking productivity before and after the change, benefits can't be judged. Productivity in distribution What's the best way to measure warehouse productivity? The trick is defining workload per labor hour.

Take order picking, for example. You'd be tempted to say units pulled is the workload, but it's actually the number of order lines picked. That's because lines equal the number of locations a picker traverses to fill orders. If three pickers spend eight hours pulling 1,200 order lines, productivity is 50 lines per labor hour. Units pulled is less relevant than lines. For receiving, workload relates to the number of receipts; for packing, it's units packed; for shipping, it's orders themselves.

For other resources, the measurements are similar. Space filled, a form of workload, is the size of each item times the quantity on hand.

Productivity is how that space compares to the total available. Likewise, the productivity of inventory depends on usage. Turnover relates volume used or sold to the average amount on hand. (See the above box for a summary of these measures.)

Once calculated, compare the statistics for your company with what you expect. Don't be surprised if they come in low at first. If never measured before, productivity may be out of hand. Just the lack of standard container sizes, fit to racks, can cause space utilization to drop to 50%. Unwatched inventory levels can easily exceed six months' supply. For personnel, idle time may be excessive.

Data is available to benchmark in detail, if desired. The U.S. Department of Agriculture has developed labor standards for receiving, pulling, and shipping based on the type of equipment used and distances involved. You can quickly estimate, from the volume of activity in your warehouse, the personnel theoretically needed.

Most companies find that just measuring productivity results in an immediate improvement, once employees buy in. Resistance can be reduced by keeping the measures at the group level. Unlike stopwatch studies, pressure to perform is not placed on particular individuals. This approach retains the strength of time studies without the aggravation. Tying results to an incentive plan motivates employees to do even better. Gainsharing passes along a portion of savings from improved productivity to paychecks.

Calculating these statistics gives insight into potential improvements from the beginning. If you agree it's valuable, this is something you'd want to see weekly or even daily.

Distributing better

Measuring productivity is key to evaluating new ways of doing things, including innovative technology. Experimentation leads to continuous improvement.

In order-picking, for example, say productivity has stagnated. In that situation, there are many approaches to try. Consider these:

Establish areas for picking that are separate from bulk storage, to ease filling orders. Divide and conquer even further by setting up zones within picking areas.

Store the fastest-moving items in the most accessible zones or locations. Pre-route picking by computer program in conjunction with a locator system, to minimize walking.

Pick more than one order at once. Depending on lead time allowed, this might be orders for an entire day or more. Obtain specialized carts if necessary. If the volume is high enough, set up sorting of picked orders as its own function.

Automate picking for very high volume operations.

Ways to better use space include: Try random storage locations, as opposed to assigning them to certain parts. While this practice improves on space utilization, it may inhibit order picking. For that reason, it works best for bulk storage. A possible compromise is fixed locations for groups of like items but random storage within those areas.