Read more

GuideWorking Together to Improve theOperational Efficiency of RegionalDistribution Centres (RDCs)

ForewordFreight Best Practice is funded by the Department forTransport and managed by Faber Maunsell Ltd topromote operational efficiency within freight operationsin England.Freight Best Practice offers FREE essential informationfor the freight industry, covering topics such as savingfuel, developing skills, equipment and systems,operational efficiency and performance management.All FREE materials are available to download fromwww.freightbestpractice.org.uk or can be orderedthrough the Hotline on 0845 877 0 877.The aim of this guide is to:Describe the main areas of, and issues relevantto, RDC operationsGive examples of how, and by how much, RDCoperators and partners have changed theiroperations for the betterSignpost a range of sources of more in-depthgood practice information on specific subjectareasDisclaimer: While the Department for Transport (DfT) has madeevery effort to ensure the information in this document is accurate,DfT does not guarantee the accuracy, completeness or usefulnessof that information; and it cannot accept liability for any loss ordamages of any kind resulting from reliance on the information orguidance this document contains.This publication has been reproduced by Freight Best Practice andthe information contained within was accurate at the date of initialpublication (2005).i

Contents1 About this Guide 11.1 What Is the Purpose of this Guide? 11.2 Who Should Read it? 11.3 How to Use the Guide 11.4 How Will You Benefit? 11.5 What Is Covered in the Guide? 11.6 Good Practice Checklist 22 Understanding RDC Operations 32.1 The Role of the RDC 32.2 The Need for Efficiency 32.3 Strategic Considerations: Critical Issues in RDC Operations 42.4 RDC Operation Stages 52.5 Key Efficiency Factors in RDC Operations 73 Inbound Activities 83.1 Intake Planning 83.2 Vehicle Reception 93.3 Product Receipt 114 Internal Product Management 134.1 Warehouse Design 134.2 Warehouse Management Systems (WMS) 144.3 Storage Systems 164.4 Handling Systems 165 Outbound Activities 195.1 Outbound Planning 195.2 Product and Load Preparation 195.3 Picking and Packing 205.4 Cross-docking 225.5 Product Despatch 235.6 Vehicle Specification 235.7 Vehicle Loading 246 The Importance of Partnerships 266.1 Internal Partnerships: Your Staff 266.2 External Partnerships: Suppliers, Customers and Contractors 266.3 RDC Freight Quality Partnerships 277 The Importance of Performance Monitoring and 29Key Performance Indicators (KPIs)7.1 The Importance of Performance Measurement 297.2 Setting Targets 307.3 Monitoring and Reviewing Performance 308 Useful Contact Points and Additional Reference Information 328.1 Contacts 328.2 Useful Trade/Industry Publications 32iii

Case StudiesCase Study 1: Improving Performance through Better Human Resource Management at Waverley TBS p.9Case Study 2: Improved Intake Planning at Scottish & Newcastle p.10Case Study 3: Fixed Delivery Time at Vitacress p.11Case Study 4: Radio Frequency Identification at Vitacress p.12Case Study 5: Flexible Loading and Unloading Facilities at Henkel Loctite Adhesives p.14Case Study 6: Warehouse Layout - What to Avoid p.14Case Study 7: Warehouse Management Systems at Akzo Nobel p.15Case Study 8: Improving Warehouse Utilisation through High Density Storage (Turners (Soham) Ltd and p.17Bibby Distribution Ltd)Case Study 9: Materials Handling Equipment at Bibby Distribution Ltd p.18Case Study 10: Improved Fulfilment at Waverley TBS p.20Case Study 11: Store Friendly Delivery at Boots p.21Case Study 12: Cross-docking at Costco p.22Case Study 13: Scheduling and Vehicle Specification at NHS Logistics Authority p.24Case Study 14: Reducing Deliveries at Philips DAP p.25Case Study 15: Back-loading at Costco p.25Case Study 16: Encouraging Employee Contribution and Input at Cadbury Trebor Basset p.27Case Study 17: The Power of Partnerships: Philips DAP and NYK Logistics p.28iv

1 About this Guide1.1 What Is the Purpose of thisGuide?This guide has been researched and designed to helpencourage greater understanding and increased take-upof good practice in operating regional distribution centres(RDCs) in an efficient and sustainable way. Its role is toencourage the partners involved in RDC operations,including RDC operators and senior managers, to takeactions to improve efficiency and meet customer serviceobligations, while at the same time reducing theenvironmental impact of their operations.1.2 Who Should Read it?You should read this guide if you are:Directly responsible for the day to daymanagement of RDC activities, such asoperations managers (both in-house and thirdparty)A senior manager, such as a logistics anddistribution manager who is likely to take ultimateresponsibility for any initiatives that are developedA transport operator, supplier or any other partywhose own operations may be influenced by RDCoperations1.3 How to Use the GuideFor some organisations, this guide will act as a valuablerevision and checklist to help ensure that all theopportunities for operational efficiency within theirbusiness have been identified and, more importantly,acted upon.For other organisations, particularly those that haveexperienced recent growth in their warehouseoperations, it will act as an essential referencedocument, outlining the various steps towards efficiencyand sustainability in operations. It should also offer theseorganisations guidance on the future direction of theirRDC operations.1.4 How Will You Benefit?The benefits of researching, reviewing and implementingoperational best practice can be significant. Byimplementing best practice, an RDC operations orlogistics manager can lead the way in reducing bothoperating costs and inefficiencies, therefore helping toimprove profitability and minimising the environmentalimpact of operations.1A transport manager involved in servicing RDCs canalso benefit from operational efficiency, by implementingbest practice within the fleet, for example, by improvingcommunication links and reducing empty running.The guide is also intended to act as an effectivesignpost to further points of reference and additionalopportunities to share information and good practice withindustry groups and other organisations involved in RDCoperations.Much of the information contained within this guide isalso applicable to the operation of national distributioncentres (NDCs). Although these operate on a nationalscale and tend to hold more stock than RDCs, theprocesses of inbound movement of goods and internalproduct management leading to outbound movement ofgoods are fundamentally similar.Because of the interrelated nature of RDC operations, itis worth remembering that the initiatives and technologydiscussed in this guide, such as hand held dataterminals and radio frequency identification, may oftenbe useful tools at a variety of points in the supply chain,and not just at one specific stage of RDC operations.1.5 What Is Covered in the Guide?Section 2 - Understanding RDC Operations -defines the role of the RDCs, key operationalstages, strategic considerations and potentialpoints of conflict with other partiesSection 3 - Inbound Activities - covers thebetter management of goods arriving and enteringthe warehouse - intake planning, vehiclereception and product receiptSection 4 - Internal Product Management - isabout using systems within the warehouse to helpbalance supply with demand - the warehousedesign and layout, the warehouse managementsystem (WMS) and handling and storage systemsSection 5 - Outbound Activities - identifies bestpractice in the preparation and despatch of goodsto customers - outbound planning, loadpreparation, picking and packing, cross-docking,product despatch, vehicle specification andvehicle loadingSection 6 - The Importance of Partnerships -covers working together with your staff, suppliers,customers and contractors as well as the broadercommunitySection 7 - The importance of PerformanceMonitoring and Key Performance Indicators(KPIs) - a brief guide to performance monitoringand KPIs commonly used by RDCs to improveoperations

The guide has a practical approach and contains casestudies and easy reference tables. Throughout theindividual sections, ‘First Ideas for Action’ tables outlinesimple first steps for improving efficiency for the variousparties involved in RDC operations.1.6 Good Practice ChecklistThe checklist below will give you some indication of howthe guide may apply to you.Operational Checklist Tickbox ( or )When inbound drivers arrive at your RDC do they receive clear instructions on what todo and where to go?Do you have a system in place to deal with missing documentation for inboundproduct? Does this system work?Have you recently reviewed the design of your warehouse to find out if space can bebetter utilised so product movements can be decreased?Do you use a warehouse management system (WMS), and if you do, can it beimproved or updated? Are there better packages now on the market?Have you recently reviewed the type of storage system used in your RDC? Wouldvery narrow aisle racking help to increase storage capacity?Could you make environmental and financial savings by switching from diesel to LPGor electric forklift trucks?Are your picking and packing operations as good as they could be? Can processesbe improved or could technology like scanners or voice picking be introduced?Have you looked at ways that vehicle utilisation could be improved to reduce yourtransport costs?Could you improve relationships with your suppliers, customers, contractors and thelocal community? For example, have you ever considered setting up an RDC freightquality partnership?Do you use key performance indicators (KPIs) to measure efficiency of inbound,internal and outbound processes (e.g. on-time arrival of vehicles, picking productivityand throughput) to assess the effectiveness of your operations?2

2 Understanding RDCOperations2.1 The Role of the RDCThere is a common misconception that only majorsupermarkets operate RDCs, but they are actually usedin a wide range of market sectors and can take manydifferent forms. Major retailers operate RDCs to managedeliveries of products from suppliers to retailers.Producers and suppliers also run RDCs to providematerials for ‘internal customers’ such as manufacturingand production facilities. More recently, the ‘shared user’concept has become more popular whereby a third partywill operate an RDC on behalf of a number of clients (inorder to achieve economies of scale that theorganisations cannot achieve individually).Fundamentally, RDCs exist for one or both of thefollowing reasons:To provide a buffer between supply and demand:there are certain kinds of products (for examplegroceries) that have a fluctuating demand. Itmakes sense to have a small stock of theseproducts so that when customers’ demand rises,they can be supplied more quickly. With theadvent of just in time (JIT) manufacturing andother ‘lean’ systems however, companies arefinding ways to make this buffer smaller andsmallerTo allow consolidation and sorting of products:suppliers tend to produce large volumes of asmall range of goods, whereas retailers, likesupermarkets, tend to demand smaller volumes ofa large range of goods. RDCs allow manydifferent types of products to be consolidated anddelivered in a cost-effective way2.2 The Need for EfficiencyIn recent years, because production costs haveincreased, logistics activities have gained increasingstrategic importance for most companies. In addition,consumer demands have become more complicated andproduct life cycles have shortened, while the productrange has increased. Companies are faced with thechallenge of producing an increasingly large variety ofproducts in a responsive manner, while keepingmaterials and inventory to a minimum.RDCs have helped many companies meet thesechallenges, by allowing a greater (often national)consistency of product availability and helping controlthe outward movement of products to managefluctuations in supply and demand. They also helpminimise travel distances by uniting suppliers andcustomers that may be spread over a wide geographicalarea.If not managed effectively, an RDC can actually becomea barrier that prevents a product getting to the customer,for example, through incorrect picking of products ormisrouting of consignments. RDCs represent a majorcomponent of total logistics costs and, generallyspeaking, may not in themselves generate a profit -getting a product to customers is what generates thevalue, not merely storing it in an RDC.The key to efficiency is to maximise throughput atminimum cost. Cost pressures mean that many RDCsno longer hold large reserves of products and operate ata steady pace. RDCs need to be an efficient, effectiveand sustainable link between suppliers and with thecustomer. There are many companies finding new andinnovative ways of meeting customer demands in acost-effective manner. For example, using goodwarehouse design principles to minimise handling, orworking more closely with suppliers and customers tolower costs and increase responsiveness to demand.3

For your operation to be most efficient, it is important tounderstand the different objectives of the various partieswith whom you deal with and to realise that by sharinginformation with others, you can make efficiencyimprovements to your own operations. For example, ifsubstantial delays in offloading are being experienced onsite, then through close communication in notifyingsuppliers and inbound hauliers of the problems, an RDCoperator can reduce the level of queuing at the RDCgate. Although most inbound traffic may have dedicateddelivery windows, some smaller vehicles with multipledrops may be able to divert and carry out otherdeliveries while the delays clear.2.4 RDC Operation StagesFigures 1 and 2 provide an overview of the keyoperational stages of RDCs. The following genericstages are relevant in most operational settings:Inbound Activities - booking in and planningdeliveries, receiving the vehicle and its load and‘put-away’ of the productInternal Product Management - the internalsystems that help relocate and store productswithin the warehouseOutbound Activities - planning deliveries,picking and packing goods from the warehouse,cross-docking and vehicle selection and loadingFigure 1 RDCs - Overview of Key Operational StagesBuyingProcesses and issues such as stock ordering,seasonal variance and product line developmentIntake planningProcesses, such as booking in, resource schedulingand linking with subsequent operational processesInbound traffic flow (A)Products from suppliers/consolidation centres.Carried on supplier/RDCnominated vehicles,of which, the latter maybe returning fromoutbound deliveriesMain RDC ancillaryand support servicesVehicle maintenance.Mechanical handling.Packaging waste andrecycling including palletmanagement and control.Security, admin and IT.Facilities management,utilities and servicesPartnershipsVehicle receptionArrivals of vehicles at an RDC and related issues,such as reporting in, queuing and driver accessProduct receiptIncluding processes, such as offloading,load and quality checkingInternal product managementIncluding processes, such as sorting, relocation,put-away and cross-dockingOutbound planningResource planning, load preparation anddelivery schedulingProduct and load preparationIncluding picking, packing, cross-docking,load assembly and loadingPerformance monitoringInbound traffic flow (B)Returns, pallets andtrays, etc from deliverypoints - or consolidationcentresProduct despatchVehicle despatch and control en routeCustomer receipt, etcDelivery of product to customer and collectionof returns, pallets, trays, cages, etc5

2.5 Key Efficiency Factors in RDCOperationsFor RDC operations to be most efficient, there is a needto:Ensure customer service levels are metMaximise the overall effectiveness or throughputof the operations at a minimum costMinimise the environmental impact of operationsMeeting Customer Service LevelsSetting appropriate and achievable service levels inpartnership with others in the supply chain sets thefoundation on which efficiency targets can be set,measured and reviewed. This provides the basis forcontract price and future service level agreements.Pre-planning, sound organisation and active operationalmanagement are vital.Maximising Effectiveness WhileMinimising CostBecause customers often consider RDC operations as acost, rather than a profit centre, there is a real tensionbetween service and cost. For example, criticalupgrades and improvements to the WMS to improvewarehouse efficiency might be denied, due to the capitalinvestment necessary. While this type of pressure orquestionable economy exists in RDC operations, somebusinesses have responded positively to this challenge,consolidating into a series of fewer, larger RDCs andinvesting heavily in management and operating systemsthat maximise efficiency.Minimising the Environmental Impactof OperationsAlthough environmental performance may not be at theforefront of every RDC operation, and probably notaccounted for in any normal financial review, it isincreasingly becoming a part of everyday business lifeas well as being a key Government policy area. Thismanifests itself in environmentally based taxation andlegislation, both in the operation of transport and in theway in which packaging and waste are dealt with. Manycompanies also wish to demonstrate to customers thatthey take their corporate environmental responsibilitiesseriously. Making the most of the environmental benefitsarising from improvements in operational efficiency canoffer win-win opportunities.For example, the Co-operative Group recycled 550tonnes of plastic packaging waste from its storesthrough three of its RDCs in 2001. This had a directpositive impact on the environment and helps todemonstrate to the Co-operative Group’s customers thatthe company is an environmentally aware retailer.7

3 Inbound ActivitiesFigure 3 Inbound ActivitesPartnershipsBuyingIntake planningVehicle receptionProduct receiptInternal product managementOutbound planningProduct and load preparationProduct despatchCustomer receipt etcIf RDCs only sourced product from one location, it wouldprobably be quite easy to manage inbound deliveries.However, most RDCs tend to consolidate deliveries frommany different suppliers, and this can make inboundoperations complicated.Inbound movements are just one operation in a greater‘flow’ and are often driven by outbound operations (i.e.customer orders). Obviously, the effectiveness ofoutbound operations will determine how much productcan be brought into the RDC in the first place.3.1 Intake PlanningIntake planning is the first key stage in the operation ofan RDC. This refers to the activities taking place beforegoods actually arrive at the warehouse - booking indeliveries, planning resources for intake and linkingthese with the resources needed for outboundmovements.The key stages in intake planning are outlined in thetable below.Table 1 Intake Planning: Key StagesEstablish schedule and book deliveriesShare booking information with relevant partiesPrepare resources for planned workloadsLink intake with outgoing requirements,(e.g. for cross-docking)Performance monitoringWhile the task of booking-in deliveries may seemstraightforward, it is important because if deliveries arenot co-ordinated properly, they can have significantrepercussions on other aspects of your and suppliers’operations.It is essential that the booking system in place is robustand effective to reduce the likelihood of any errors. Goodcommunication is essential when booking delivery timesto avoid any misunderstandings. RDC operational staffneed to be aware of, and be trained in, the system fortaking a booking. The party making a booking - possiblythe supplier or the contract haulier - should be givenclear information about the agreed delivery window, anyspecial delivery instructions and be issued with abooking reference number for verification. Bookings areas important as any other aspect of RDC operations,such as vehicle scheduling, and should be given just asmuch attention.As far as possible, delivery schedules should bedesigned in a way that maximises staff utilisation. Forinstance, scheduling vehicles and loads to arrive evenlyover a delivery period and not in ‘bunches’ can helpminimise staff downtime.It is important that scheduling information is sharedamong other relevant parties in the supply chain. Manysupply chain planning and warehouse managementsoftware packages provide ‘visibility’ so that suppliersand transport operators can log in and see exactly whenand where deliveries need to be made, as well asspecific booking times. This can help reduce delays andincrease throughput.First Ideas for ActionInbound Transport Operators and SuppliersTalk to the RDC manager about yourscheduling needs. If certain time slots arebetter for your operation, they may be able toaccommodate youRDC OperatorsLook at your shifts. Can you change to meetdemand better? If the length or start time ofshifts could be changed during peak periodssuch as the end of the week, would this meetdemand better?Because most tasks in RDCs are performed by people,this makes staffing a central consideration in the forwardplanning process. Fluctuations in demand mean thatresource requirements can vary by month, week, day, oreven by the hour. Therefore, staff levels need to beadjusted quickly to meet seasonal demands. The casestudy opposite shows how Waverley TBS was able to8

Case Study 1: Improving Performancethrough Better Human ResourceManagement at Waverley TBSWaverley TBS, a subsidiary of Scottish & Newcastle,is the largest wine and spirits wholesaler to theon-licence trade in the UK. The company mainlyimports wine in bottles and in bulk from around theworld, distributing to hotels, restaurants, pubs anddirectly to secondary distribution depots run byScottish & Newcastle and other companies. Thecompany’s RDC in Tyne and Wear employs 75 peopleand is one of two facilities serving the UK market.One of the biggest challenges for the company hasbeen the highly seasonal nature of demand forproduct. Apart from longer seasonal cycles, such asthe Christmas period, the RDC also has to deal withpeaks and troughs in weekly cycles. High levels ofdemand are experienced on Tuesday, Wednesdayand Thursday, but significantly lower levels for otherdays. This means planning can be difficult and cancreate problems in meeting orders. Added to this isthe fact that the RDC holds 1,800 different productlines or stock keeping units, which can makeoutbound activities time consuming and slow.Investing in additional warehouse capacity was anexpensive option the company was keen to avoid.In 2003, the company decided to implement a rangeof improvements in human resource management toaddress these problems. It was decided that moreflexible shift patterns were needed to cope with thechanging demand cycles. On Mondays, warehousestaff are now given the option of working a shortershift provided they make up the hours on Tuesday toThursday. So far, staff have responded very positively,and it means that additional resources can be usedwithout the expense of overtime. In addition,employees are contracted not to take holidays inNovember and December, which is the busiest periodfor the RDC.improve product intake (and subsequent stages ofinternal product management and despatch) throughimprovements to human resource management.3.2 Vehicle ReceptionVehicle reception is the actual process of a vehiclearriving to be unloaded at the RDC, and encompasses awide range of procedures. These include controlling theflow of vehicles, dealing with queuing issues, advisingdrivers about site requirements and delivery bays to beused, and responding to problems such as vehiclesrunning late or arriving early.The key stages in vehicle reception are outlined in thetable below.Table 2 Vehicle Reception: Key StagesArrival at RDCValidation ofbookingAdvise receivingpoint of arrivalAdvise driver of:• Site procedures• Unloading point andtime• Holding area(if applicable)• Any outboundcontrolsRDCs are one link in a tightly managed chain, so aproblem at vehicle reception can have knock-on effectson other areas, such as product despatch. Goodmanagement of inbound vehicles means that transportand warehouse labour can be used more effectively but,most importantly, that outbound operations (which mayactually be carried out by the same vehicles) are moreefficient, meaning that product gets to the shelf or to thecustomer when it needs to. Establishing fixed deliverywindows can allow you and your suppliers to bettermanage certain fast moving goods, such as fresh foods.It should, however, be remembered that these fixedwindows might be inflexible for the delivering haulier.A common problem for hauliers servicing RDCs relatesto the amount of time spent queuing to be offloadedeither on or off site. Many complain about the limitedentrance capacity at RDC sites and often the need toqueue on the public road outside. It is important,therefore, that simple procedures are developed andoutlined to operators in advance to ensure drivers knowwhat to do if they encounter a backlog on arriving at theRDC and to reduce the potential for causing obstructionsor nuisance to other road users. For example, can theybe redirected to suitable off-site parking to wait to becalled forward rather than park at the roadside? Whilewaiting, can they use RDC facilities?9

A diverse range of vehicles may service an RDC. Largesingle drop consignments from suppliers are likely to bedelivered in articulated vehicles with bodies appropriatefor the types of product being handled, for example,insulated or refrigerated vehicles for certain foodstuffs.Single pallet or less than full load consignments, on theother hand, may arrive in smaller rigid vehicles, so it isimportant that facilities exist to offload a range ofdifferent vehicle types in as safe and efficient a manneras possible.Although there may be inherent risks involved inpreloading trailers, such as damages to product or theft,increasing the number of trailers available might reducemotor vehicle turnaround time and actually lead toincreased utilisation of drivers and tractor units.Fundamentally, trucks are designed to be on the move,rather than to offer additional warehousing space. Thishas become ever more important with the advent of theworking time directive and its likely impact on roadtransport operations, as efficient use of available drivertime resource becomes more critical.The case studies below reveal how these ideas helpedimprove operations at Scottish & Newcastle and atVitacress.Case Study 2: Improved IntakePlanning at Scottish & NewcastleScottish & Newcastle is an international brewinggroup exporting products to more than 60 differentcountries. Its RDC in Normanton, West Yorkshire isone of four in the UK, all operated by ACR Logistics,and employs approximately 160 people. The RDCholds product from both local operations as well asforeign suppliers, which are assembled anddespatched to the off-licence trade as well assecondary depots for onward distribution to hotels,restaurants, pubs, clubs and small regionalwholesalers.Brewing production sites often have large runs ofproduct, and the RDC is expected to hold theadditional volume. According to Jan Vermeulen,Business Project Manager North of ACR Logistics,the RDC was not always well equipped to deal withthe demanding production schedules of thebreweries. “We had a number of problems that wererestricting our throughput. Trailer turnaround timessometimes took as long as five hours, staffrecruitment was not effective, and our generalprocedures and systems were letting us downbecause we were getting a very high rate of returns.”A wide range of changes was implemented tooperations to improve the flow of product into andout of the warehouse. The company increased itstrailer pool to enable the warehouse to manage itsdowntime better. This meant drivers could droptrailers off and immediately pick up a preloadedtrailer. Changes were also made to the way coreproducts were handled. Traditionally, these weretaken into the warehouse, put-away, picked and sentout on the same day, which created a lot of needlessdouble handling. The distribution system waschanged so that core products were transporteddirectly to secondary distribution centres, and not viathe RDC.As a result of these changes, productivity has beenimproved significantly. Inbound activities can now bemanaged more effectively and product is despatchedon time. Levels of returns have dropped, which, inturn, has reduced the time spent on re-work.10

Case Study 3: Fixed Delivery Timesat VitacressVitacress is Europe’s largest grower/packer ofwatercress and specialises in baby leaf salads andother vegetables. The company supplies a number ofmajor UK supermarkets, and sources raw materialslocally and internationally. Like many suppliers offresh produce, the company operates on a JITsystem which means product is only prepared whenthere is a confirmed customer order. The company’sdistribution manager, Peter Bray, says that thismeans the whole product system revolves aroundpredicted run times to delivery points. “To providestability to our own operation and to make sure ourcustomers’ needs would be meet, we negotiatedfixed booking times at the RDCs we deliver to. Thismeans our customers always receive product at itsfreshest and our drivers have more certaintyregarding their shifts. In addition, this has alsoopened the door for back-loading opportunities,which has helped us lower transport costs.”First Ideas for ActionInbound Transport Operators and SuppliersRDCs are often under pressure to move verylarge product volumes. Make sure your vehiclesarrive at the RDC on time. If you experiencedelays, alert the RDC as early as possible.Look for ways to improve scheduling to reducevariability of travel times (e.g. avoiding peakhour traffic where possible)Talk to your drivers. Make sure they understandthe need to be aware of operational and healthand safety site procedures at the RDC. Forexample, do they know who they should speakto if they have to change a tyre on the site?Also ensure that they are well aware ofprocedures and penalties relating to late arrivalRDC OperatorsKeep your suppliers ‘in the loop’ and advise themof any delays or problems you experience thatmight affect them. This can help minimise theircosts which will benefit you in the long runMake sure your procedure for vehicles intake isequitable and transparent. If some driversdiscover they can ‘sneak in’ by turning up 30minutes early, this causes disruption to youroperations and creates a source of tensionbetween you and some suppliersProvide accessible facilities (e.g. restrooms,coffee and tea) for incoming drivers, as youwould for your own employees3.3 Product ReceiptProduct receipt involves the transfer of goods fromvehicles into the warehouse. The goods aresubsequently inspected for quality and checked toensure that the correct quantity of items has beendelivered. The final step involves a confirmation ofdelivery being provided to drivers or suppliers.The key stages in product receipt are outlined in thetable below.Table 3 Product Receipt: Key StagesArrival at unloading pointValidate documentationValidate products and quantity orderedIf accepted, check load for quality, quantity,best before dates and pallets receivedIf not accepted, procedures applied forexchange or replacementConfirmation of delivery to driverA good balance between accuracy and speed is thecritical issue when it comes to product receipt. Speed isimportant because products cannot normally beconfirmed as received unless they have been checkedagainst a consignment note (although in reality someconsignees may accept products unchecked). Accuracyis critical because if a mistake is made counting orscanning, it costs time and money to investigate errorsthat may not become evident until later in the process.Ultimately, these problems represent inefficiencies thatmake it more difficult to get products to your customers.Good clear product labelling is, of course, vital to helpensure accuracy at the time of product receipt. Theinformation on the product label in terms of productdescription, quantities and destinations should beconsistent with the details contained in the consignmentnotes.It is important that there is a system in place to deal withlost consignment notes. It is inevitable that on someoccasions drivers will turn up without the correctpaperwork for their load. A decision needs to be takenas to whether or not to accept the load and the11

paperwork forwarded later. If the paperwork could befaxed through, will this be acceptable? If so, is there asystem in place to make sure the faxed copies get fromthe office to the unloading bay?Technological solutions can help overcome some ofthese problems and are likely to become a moreattractive option as the costs of associated hardwareand communication reduce. For example, electronic datainterchange and radio frequency identification can helpreduce or eliminate inaccuracies arising from manualcounting procedures. Bar coding technology is widelyavailable and generally very affordable and can also beused to improve product intake. Instead of manuallycounting unloaded items, they can be scanned inminutes or even seconds, with 100% accuracy.Technology may not be appropriate for all types ofoperations (such as low volume goods), so it is worthnoting that better practices in manual handling systemscan also help improve your operations. For instance,making lists used for cross checking clearer and easierto read, for warehouse staff, may reduce errorssignificantly.Case Study 4: Radio FrequencyIdentification at VitacressAlthough Vitacress and its customers run efficientoperations, discrepancies between proof of deliverynotes and checks done at product delivery are a factof life. Regardless of who might have made themistake, it takes alot of time on both sides to resolve.Technology, however, is helping overcome thisproblem.One of the company’s major customers has recentlystarted using radio frequency identification at one ofits RDCs. The system involves a tag being attachedto each tray of salad products loaded on moveableracks, or ‘dollies.’ Each tag contains informationabout the product, its use-by date and Vitacress’supplier code. Soon, additional information will beadded relating to the depot and the store to whichthe product is destined to go.When a load arrives by lorry at the RDC, the dolly istaken out and pushed through a port hole whichinstantly scans the contents. This is much moreaccurate than other methods, which rely on someonewith a scanner to physically scan every tray. This hasvirtually eliminated discrepancies at the point ofreceipt. The system is also web enabled, soVitacress’ distribution manager can log onto hiscustomer’s website in the morning to find out ifdeliveries arrived on time on the previous day.Vitacress has just invested £35,000 in a system towrite to the tags, but should recover the costs withintwo years as a result of reduced turn around times.In addition, there is also a significant cost saving forthe RDC because product receipt is quicker andmore accurate. Thesystem means there is greatertransparency for the RDC, suppliers and customersbecause everyone can see exactly where orders are.First Ideas for ActionInbound Transport Operators and SuppliersEmphasise the importance of RDC proceduresto your drivers. Make sure they always havepaperwork ready when unloading. Ensuredrivers are aware of procedures for dealing withconsignment note alterations, which can be acommon point of conflictRDC OperatorsTry to minimise turnaround times for yoursuppliers by unloading vehicles as quickly and assafely as possible. Look at technology such asbar coding and radio frequency identification thatmay help you speed up the processTalk to your supplier and make sure theyunderstand the system you have for dealing withorder discrepancies/consignment note alterations12

4 Internal ProductManagementFigure 4 Internal Product ManagementPartnershipsBuyingIntake planningVehicle receptionProduct receiptInternal product managementOutbound planningProduct and load preparationProduct despatchPerformance monitoring4.1 Warehouse DesignIf you are an RDC manager, it is probably unlikely thatyou will be able to start with a new and ‘ideal forpurpose’ facility. It is more likely that you walk into awell-established facility that has evolved over time. Thatdoes not mean, however, that principles of good designand layout have to be ignored. By making simplechanges to your workspaces you may be able toincrease productivity by enabling staff to get morequickly to the items they need. The way products areorganised in racking, shelves and on the warehousefloor is critical. Without a well-structured system in place,deliveries are likely to be missed and products willinevitably go missing or get damaged.Important considerations in warehouse design include:Maximising space utilisationMinimising and controlling movementProviding a safe work environmentCustomer receipt etcInternal product management refers to the set ofprocesses in which unloaded products are prepared foronward movement, or placed into storage. Warehousedesign, internal IT systems, storage systems andhandling equipment all affect the performance of anRDC, but once developed or installed, they tend to bedifficult and costly to modify. It is therefore important thatthese areas are carefully considered from the outset.Capital and infrastructure are long-term investments, soit is important to balance present systems costs andbenefits with more strategic considerations. Will thestorage system and handling equipment you use now,be suitable for other types of products which you maycarry in the future? Is there sufficient additional capacityin the RDC to allow your business to grow? Gettingthese things right from the beginning can help avoidwasting resources in the future.The key stages in internal product management areoutlined in the table below.Table 4 Internal Product Management: Key StagesCross-docking where incoming products arealready prepared for despatchIncoming products for storage allocated tospecific areas in the warehouse and recordedin the WMSProducts for storage put away by mechanicalhandling equipment and confirmed in the WMSOf course, it is important to remember that whenchanges are made to warehouse floor layout or productlocation, staff need to be well briefed. People becomeused to finding items in the same place, so whenchanges are made, minor disruption can be experiencedas staff become accustomed to the changes.Many RDCs now use ‘warehouse simulation’ softwarepackages as a means of modelling different layouts andscenarios. Basic modelling packages can be purchasedoff the shelf, or alternatively, specialist consultants can beused to carry out larger modelling on an operator’s behalf.Keep in mind, however, that as well as being potentiallyexpensive depending on the level of detail required, anymodelling solutions need to be specific to the individualwarehouse, and software packages may need to betailored to your own operations.Although technology can offer a helping hand inwarehouse design, simple initiatives can often be the mosteffective. For example, a colour-coded system can beused to show when cages or pallets are due to leave thewarehouse, and can help highlight those that might belate. Working areas can be arranged in a way thatminimises cross movements. This can help makeoperations more efficient and safer, by reducing thepotential for collisions between people and handlingequipment. It may make a great deal of sense to have fastmoving items in more accessible areas of the RDC thanslow ones.The Henkel Loctite case study shows how improvementsto the interface between vehicles and the warehousecan improve vehicle loading and turnaround. The Costco13

case study provides an example of how poor physicallayout can delay picking operations and can have animpact further down the supply chain.Case Study 5: Flexible Loading andUnloading Facilities at HenkelLoctite AdhesivesHenkel Loctite Adhesives is an internationalcompany that manufactures consumer products forthe DIY and stationery retail, commercial andeducational markets. The company’s UK NDC isbased in Winsford, Cheshire.Several years ago, the company’s business volumesincreased to the point where it needed to considercontracting external storage. When constructing theirown larger building, management looked at the basicwarehouse infrastructure to see where they couldachieve some quick wins to improve vehicleturnaround times and throughput. The companyinvested in loading docks with ‘dock levellers’ -devices designed to bridge the gap and level out theheight differences between vehicle beds and buildingfloors - as well as full size access doors to enablevehicles and trailers to be reversed inside thebuilding. This provided the facility to load and unloadtrailers from the rear or the side, and all in conditionsthat protect products and employees.The levellers also provide the flexibility for transportoperations to deploy varying vehicle/trailer types(such as double deck trailers) to suit differentoperational needs of customers. In situations whereproduct is placed adjacent to the trailer parking areawithin the warehouse, the system means that sideloading and unloading can be completed in justseven to eight minutes with two forklift trucks. Thishas helped increase throughput and lower unit costssignificantly.Case Study 6: Warehouse Layout -What to AvoidFirst Ideas for ActionRDC OperatorsConduct a warehouse review. Look at thephysical layout and understand why it is usedthat way. Are there any clear bottlenecks?Remember to consult your warehouse staffbecause they have the most experience in dayto-dayoperationsPhysical layout becomes increasingly importantas more and more products lines are carried.Thelogistics team at Costco, a cash and carrycompany, conducts regular visitsto other RDCs tosee if they can find ways to improve their ownoperations. Recently, they visited an RDCoperated on behalf of a supermarket andaccording to Logistics Manager, Ian Chalmers,saw problems caused by a fundamentally flawedwarehouse design. “It looked to us as thoughvery little thought had gone into the way productswere arranged. For instance they had vegetablessitting right next to DVDs, which meant that theywere inevitably packed into the same cages. Atthe store end, no one would have wanted thesetwo products together. It took one poor person atthe RDC 45 minutes to do a pick, because theyhad to go up and down so many different aisles.It was useful for us to see this because we usedthe visit to create a case study to show managershow we could improve our own pickingoperations.”4.2 Warehouse ManagementSystems (WMS)The main purpose of a WMS is to control the movementand storage of materials in a warehouse. It is an ITsystem designed to control the movement of stock into,through and out of a warehouse. It is normally basedaround software, a server and PCs, and oftenincorporates mobile transaction recording devices, eitherhand held or mounted on mechanical handlingequipment. A WMS can be thought of as the ‘commandcentre’ that links different systems together and monitorsincoming goods, customer orders and stock levels. AWMS can help you manage your resources better andhave positive benefits throughout your operations, forexample, reducing labour costs, increasing throughputand storage capacity and enabling more responsivecustomer service.14

It is important to remember that the success of a WMSdepends entirely on good quality management and that,as with any IT based system, there are inherent risks inrelying solely on a WMS. If the system goes down ordevelops a bug, then warehouse operations can beseverely affected. RDC operators need to make surethat they have adequate system support, on a 24-hourbasis if the operation requires it. Any WMS should alsobe flexible enough to allow for upgrades at a later date.Ideally, the WMS should also be compatible with other ITsystems within the RDC operation, such as deliveryscheduling software.Because a WMS manages and tracks all product flows,it is integral to good inventory management. Wheninventory data is updated in real time, stock can be keptlow, but at a level that enables demand to be metadequately. While it is beyond the scope of this guide tocover issues relating specifically to inventorymanagement, it is worth remembering that keepinginventory at extremely low levels may not always be thebest policy if it means you are forced to transport smallerquantities of product frequently.The Akzo Nobel case study presents an example of aWMS interfaced with mobile radio data terminals (RDTs)- these are robust computing devices used to send andreceive information over a wireless data network. Thereare many of these systems available on the market, withvarious levels of sophistication and additional features.These can include the ability to interface with other ITsystems, like supply chain management software orenterprise resource planning systems, which are used tohandle the manufacturing, logistics, inventory,distribution, shipping and accounting processes.Case Study 7: Warehouse ManagementSystems at Akzo NobelAkzo Nobel is an international paint and decorativecoating manufacturer with operations inapproximately 60 countries. The company is split intothree different divisions (Coatings, Pharma andChemicals) and has manufacturing plants and RDCsin a variety of locations throughout the UK.The company’s RDC in Warrington operates 24hours a day, receiving bulk products frommanufacturing locations in the UK and mainlandEurope for storage, picking and supply to tradecustomers (e.g. builders).ReplenishmentRadio data terminals (RDTs) are an integral part ofthe distribution centre’s WMS, and have allowedoverall operations to be managed more effectively.After products are identified on receipt, the WMSreviews stock levels and tells fork-lift truck driverswhere they need to be stored by sending a‘put-away’ location to the RDT. The system makesdecisions about where products should go based onproduct throughputs (i.e. sales), physicalcharacteristics (such as weight), current stocks andavailable space. When products have been movedinto storage and tasks have been completed, it isconfirmed by the driver’s RDT, and inventory recordsin the WMS are automatically updated.PickingOutbound requirements are also fed into RDTs thatare used by pickers. The WMS provides instructionsabout the products that need to be collected andwhere they need to go. The RDTs are used toconfirm items that are picked, and inventory is againupdated. This system enables work to be centrallymonitored on one computer screen, which meansthat output can be easily adjusted in real time.System BenefitsBecause the system manages all picking andpacking operations, Akzo Nobel was able to use thedata to reorganise the warehouse in such a way asto minimise travel distances by operators (i.e. havingmost frequently picked products closer to outboundbays). It also avoids the need for operators to visitthe central control room repeatedly to receiveinstructions and confirm actions. This has reducedthe average picker travel distance by 90 metres perassembled pallet, resulting in lower costs andincreased throughput. More generally, the company’sWMS has helped it reduce inventory levels, but atthe same time, be more responsive to customerdemand.15

First Ideas for ActionRDC OperatorsLook at how well your WMS is interfaced withother company systems. Does the systemautomatically re-order stock, or does someonetake data off the system and re-input it intoanother system? Look for areas wherepaperwork and re-typing of data can beeliminatedIf you don’t use a WMS, evaluate the costs ofinvesting in one. Quantify and cost the time youcurrently spend updating inventory andgenerating orders to replenish stock. While thecost of a WMS may seem high, it may reduce agreat deal of paperwork and pay for itself withina few years4.3 Storage SystemsYour storage system may already have beenestablished, but it may be worthwhile to review theequipment that you use to see if it is still the mosteffective. The main types of storage systems include:Block Stacking - the storage of product in rows,so that each row touches another, i.e. there is noclearance or wasted space between rows. Blockstacking conserves space, but should only beused when storing large quantities of an itemAdjustable Pallet Racking - one of the mostpopular of all storage systems for pallets. Thesystem consists of vertical frames and horizontalbeams which are adjustable in height toaccommodate a variety of pallet sizesDrive In/Drive through Racking - provides anideal solution for crushable goods that cannot beblock stacked or for pallets with predictable stockmovements, as stock rotation is operated on a‘first in, last out’ basis. Fork lift trucks drive intothe installation to pick up or drop pallets, whichare stored one behind the other on speciallycantilevered railsVery Narrow Aisle Systems - require the use ofspecialised handling equipment and can furtherincrease the storage capacity of warehousesbeyond narrow aisle and standard wide aislesystems. Very narrow aisle systems make itpossible to store and retrieve unit loads in aislesas narrow as 1.6 m (63 inches)High Bay Racking - storage up to the eaves ofthe warehouse, often up to around 25 metres inheightObviously, one of the key trade offs lies between theneed to maximise the space used, but at the same timeprovide easy access to the products stored to minimisehandling. The physical characteristics of the goodsthemselves will determine the type of system used, butinvestment decisions should be guided by a number ofconsiderations:Ground level space and height limits availableThroughput speeds requiredFuture capacity and flexibility requirementsComparative costsThe case study opposite shows how mobile and verynarrow aisle storage systems can be used to increasestorage capacity and utilisation of warehouse space.When considering mobile racking, the following must betaken into account:The more specialised a warehouse is, the lessflexible it is and potentially the more difficult it isto adapt to future needsTraining is essential for staff using mobile rackingThere are potential health and safety issues dueto the system’s moving partsA contingency plan needs to be put in place incase the system breaks down4.4 Handling SystemsThere are many different forms of handling equipmentavailable for materials. The key is in knowing which typeof equipment is most appropriate in a given context andwhich is most suitable for your operation. Like mostother equipment used in the warehouse, the physicalcharacteristics - size and weight - of your products willdetermine what you need to use. The distance productsneed to be moved will also be a factor.For most RDCs, the type of equipment used generallycomes down to decisions between:Counterbalance trucks, reach trucks or pallettrucksManual, electric, diesel or gas power sourcesShort and long term costs of the various optionsAppropriateness for the specific operationCounterbalanced fork lift trucks are robust and quick,with capacities that can range from 1,000 kgs to about45,000 kgs in the case of container handlers. Generally,these trucks are used to lift and stack to heights of up toaround 5 metres. The load is carried in front of the front16

Case Study 8: Improving WarehouseUtilisation through High DensityStorage (Turners (Soham) Ltd andBibby Distribution Ltd)Mobile RackingTurners (Soham) Ltdis a third partylogistics companyspecialising intemperature controlledtransport anddistribution activities.The company’s mainRDC in Newmarket, Suffolk, has 49 loading baysand approximately 9,290 m 2 (100,000 sq ft) crossdockingspace. More than 700,000 cases are pickedeach week for a wide variety of clients.This site uses a proportion of mobile racking in thefrozen store. This has enabled the company tomaximise storage density. Each length of racking canbe moved and ‘parked’ close together. Whole aislescan be moved to allow fork lift truck access betweenracks to store and retrieve pallets. The system hasdoubled the storage capacity of conventional wideaisle racking. As an added benefit, the new rackingsystem maintains temperatures more effectively thanothers because of the higher density of productstorage, which has reduced power consumption.However, as is the case for any storage method,there are trade-offs that need to be made. Care isneeded to store items so as to minimise rackmovements, and this can be difficult without a goodWMS. The equipment is also a lot more expensivethan normal racking systems, involves highermaintenance costs and specialist mechanicalhandling equipment. Despite these issues, however,the increased storage capacity means that theinvestment will pay for itself within five years.Very Narrow AisleBibby Distribution Ltd is one of the UK’s leadingindependent third party logistics companies, and has41 operating centres across the UK. The company’sRDC in Bicester, Oxfordshire, is dedicated to asingle client in the brewing industry. The siteoperates with very narrow aisle racking layout, whichhas 25% more pallet space than conventional wideaisle racking. Although this achieves increasedcapacity due to its denser storage profile, thedownside is that it can act as a limiting factor onspeed of throughput. These problems have beenovercome through better forward planning and ‘dualcycling’ (putting away and retrieving pallets duringvisits to each aisle). Because the warehouse canstore more, the costs of additional storage requiredat times of peak volumes can be constrained.wheels, so a counterbalance weight is built into the rearof the truck. Turning circles for medium capacitycounterbalance fork lift trucks can typically be about 4metres, limiting the amount of work which can beundertaken in tight spaces.Reach trucks, on the other hand, may only require aturning circle of about 2.5 metres, depending on the sizeof the load. Reach trucks are electrically driven and theload is carried partially within the area between the truckwheels. This means the overall length of a reach truck islikely to be shorter than that of a counterbalance truckand there is no counterbalance weight. When a reachtruck lifts or sets down a load, the whole mast slidesforward bringing the forks forward to a position wherethey can access the load. The capacity for reach trucksis typically around 1,000 kgs to about 4,000 kgs, with amaximum lift to about 8 metres.The hand pallet truck is the most commonly used truckfor horizontal movement of pallets. Cranking the steeringarm pumps the truck’s hydraulic system, lowering thefront wheels and raising the load enough to allowmovement. Hand pallet truck lifting capacities can go upto around 2,000 kgs and are ideally for use only on goodcondition horizontal floors. For more frequent movingover longer distances or inclined floors, electric pallettrucks may be preferable. These can be pedestriancontrolled or ride-on, with load capacities up to around3,000 kgs.Manual trolleys and pallet trucks are relativelyinexpensive and easy to manoeuvre in tight spaces, butcertain factors need to be taken into account when usingmanual equipment in an RDC environment:The performance of manual equipment can beaffected by the surface on which it is usedIts ease of use can be affected by any slopeCovering large distances from aisle to aisle usingmanual equipment can be time consuming andenergy intensiveThere are health and safety related issuesconcerning the use of manual equipment andoperational risk assessments should be carriedout and appropriate training provided to staff17

Compared to manual equipment, powered vehicles oftenrequire more space, but have greater lift capacity andcan reduce travel time within the warehouse.In terms of different fuel types, diesel and gas poweredvehicles provide high levels of power and lift which canenable better use of space in hard to reach areas, butmay pose problems if used in confined indoor areas.Electric vehicles are cleaner and can improve the qualityof warehouse space, but may not provide the sameperformance as gas or diesel vehicles and requirededicated charging facilities.Choosing the most appropriate equipment for anyapplication is important to make sure the operation runsas efficiently, effectively and safely as possible. Timespent on equipment specification and selection is,therefore, time well spent.One of the major considerations in acquiring and usinghandling systems and equipment is likely to involvecosts, both in terms of up-front investment and ongoingrunning costs.The following financial aspects should be considered:Capital investment costPossible residual or resale valueOperating costsCosts relating to training staffEnergy consumptionMaintenanceCost of consequential loss through equipmentdowntimeSavings resulting from the use of the equipmentThe case study opposite shows the issues consideredby Bibby Distribution in deciding on the most appropriatehandling equipment to use in its chilled warehouse.First Ideas for ActionRDC OperatorsThe market for handling and storage systemschanges rapidly. Look at your systemsregularly and find out if they are still the mostappropriate type for your product mix. Ask yourwarehouse staff how effective equipment is,and how they think it could be improvedCase Study 9: Materials HandlingEquipment at Bibby Distribution LtdBibby Distribution Ltd was interested in usingelectric counterbalanced fork lift trucks for its thirdparty logistics facility in Bicester due to theirlower running costs and they produce noemissions (improving air quality in thewarehouse). When considering longer term costs,however, the company choose gas poweredtrucks. This decision was made for severalreasons. Firstly, the company would have neededto construct a special area for battery rechargingoutside the warehouse because, if placed insidea chilled environment, the heat from chargingequipment would have increased powerconsumption and the risk of contamination.Secondly, there would also have been anincreased health and safety risk due to moisturebuild up on the charging equipment. Lastly, thelower air temperature would also have slowed thecharging rate of the batteries. By investing in gaspowered fork lift trucks, the company has beenable to improve productivity without the need foradditional capital investment. Its very narrow aisletrucks are electric, but receive power from acontinuous conduit - a ‘buzz’ bar - attached to thevery narrow aisle racking.18

5 Outbound ActivitiesFigure 5 Outbound ActivitiesPartnershipsBuyingIntake planningVehicle receptionProduct receiptInternal product managementOutbound planningProduct and load preparationProduct despatchCustomer receipt etcAlthough all operations in an RDC can be consideredimportant, outbound activities represent one of the mostcritical stages because they involve goods beingtransferred from you to your customers. If a productordered for stock is late, it may not have any discernableimpact on business, however, if a product does not arrivewhen a customer needs it, they may become dissatisfiedand switch to another supplier or brand.The effectiveness of your outbound activities willinfluence, and be influenced by, the effectiveness ofother operational stages such as inbound activities andinternal product management. The three key stages inan outbound distribution system are planning, productand load preparation, and product despatch.5.1 Outbound PlanningOutbound planning involves the processes that takeplace before goods actually leave the warehouse -booking deliveries out of the RDC and in with their enddestination, planning resources to handle workloads andlinking these with the resources needed for inboundmovements.The key stages in outbound planning are outlined in thetable below.Table 5 Outbound Planning: Key StagesEstablish schedule and bookingsShare booking information with relevant partiesPrepare resources for planned workloadsPerformance monitoringLink intake with outgoing requirements, (e.g. forcross-docking)19Like unloading and put-away, most tasks relating to loadpreparation and despatch are performed by warehousestaff, which means that adequate planning of humanresource is critical. Staff attitudes and approaches canvary from shift to shift and RDC managers should try toensure all staff are consistent in their approach tosystems and procedures.To maximise throughput, many large RDCs useadditional trailer capacity to allow them to prepare loadsthroughout the day. This can be a particularly usefulstrategy in the context of high volume cross-dockingoperations, but may require significant capitalinvestment. Although an increase in the trailer fleet forpreloading operations may lead to reduced utilisation perindividual trailer, it can also lead to reduced turnaroundtimes for tractor units and, therefore, more efficient useof the fleet’s motor vehicle resource. As with inboundplanning, this may be particularly useful with the adventof the working time directive (WTD) and its likely impacton road transport operations, as efficient use of availabledriver time resource becomes more critical.5.2 Product and Load PreparationLoad preparation is the core activity of outboundoperations, and involves preparing orders from itemsheld in stock (picking), or from products recently boughtinto the warehouse but not put into storage(cross-docking). In an ideal world, cross-docking wouldbe used for all products moving through a warehousebecause it involves much less handling than picking.Picking tends to be more labour intensive, but isunavoidable in many situations because customers willnot always order sufficient quantities to allow crossdocking(which is why many RDCs exist in the firstplace). Once loads are marshalled, they are checkedagainst orders or despatch documentation to ensurequality and accuracy.The key stages in product and load preparation areoutlined in the table below.Table 6 Product and Load Preparation: Key StagesMatch cross-docked products with outgoingdelivery documentation and move to loadmarshalling areaPick stored products for despatch based ondata held in the WMS and move to marshallingareaComplete marshalled loads checked againstdespatch documentation for accuracy,completeness and condition

5.3 Picking and PackingBy their very nature, picking and packing activities tendto be more time consuming and labour intensive thancross-docking. As order quantities become smaller andstock keeping units increase, this becomes even moretime consuming and costly. The central aim of anypicking operation should, therefore, be to prepareproducts for despatch accurately with a minimum ofhandling to reduce damage and potential for pilferage,within the shortest possible time frame. The case studybelow provides an example of how technology andredesigning warehouse processes can help to achievethis.Voice picking technology is now being used by manydifferent companies and there is a wide range ofsuppliers of this equipment. Voice-directed picking followsthe same process as a radio frequency based scanningsystem, except that picking information is deliveredthrough the picker’s headset via a wireless radiofrequency link from the host WMS or picking programme,rather than through a terminal screen. A typical pickoperation starts with the picker hearing instructions forthe next location. Upon arrival, they confirm that thelocation is correct by speaking either the last few digits ofthe location’s barcode or its check digit. If the location iscorrect, they hear the quantity to be picked, respondingwith a phrase such as ‘got it’ when they are finished andready for the next task. At any point in the process apicker can request more information; for example, askingthat instructions be repeated or the product described. Ifthe picker reports an incorrect confirmation number, he orshe is advised and the host system waits for correction.Two different technologies exist - speaker dependentand speaker independent.Speaker DependentSpeaker dependent voice technology stores a templateof each user’s voice speaking the limited number ofwords that will be required in the picking operation. Ittakes about half an hour to ‘train’ the computer byspeaking each word used in the picking cycle severaltimes, until the system understands each user’s uniquepronunciation. The advantages are that this systemallows any style of speaking with any accent or in anylanguage to be recognised even in noisy environments.Case Study 10: Improved Fulfilment atWaverley TBSAs well as operating in a market where demand canbe highly seasonal (see intake planning case studyin Section 3), wine and spirits wholesalers such asWaverley TBS are challenged with managing everincreasing numbers of stock lines. At the company’sRDC in Tyne and Wear, more than 1,800 differentproduct lines or stock keeping units are held, whichcan make outbound activities time consuming andslow. As a result of sustained business growth, thecompany needed to find a way to improve itsdistribution system without investing in additionalwarehouse capacity.As a result of holding so many product lines, singlepicking represented a significant component ofoperations. This was always very time consumingbecause staff had to drive around the warehouse onpallet lifters collecting items individually. In 2003, thecompany, therefore, decided to invest in a newsystem for its picking operations.To speed up operations and improve output, asemi-automated system called Fast Alley wasinstalled for single bottle picking operations. Thisinvolved a conveyor belt system being fitted betweenracks of products. Rather than having individual staffmembers filling cartons, they could instead bemoved along the belt and be filled by people locatedat different points along the line. As well asimproving throughput, the system also simplifiedoperations and eliminated cross movements withinthe warehouse. When picks are complete, cases areweighed and shortages are identified, and cartonscan then be directed to a special area for checking.Of 35,000 separate picks done each week, there hasbeen a reduction to an average of just 20 pickingerrors from 85 and substantially less breakages thanpreviously experienced. Overall, productivityincreased by 30%, and by more than 50% for splitcase picking.There were also a number of indirect benefits fromthe system. Because it was easier to learn than theprevious system, training was reduced from a weekto three days. In addition, the conveyor could also beused to remove empty boxes from the warehouse,which when sorted, provide the company withrevenue of £50 per bale.20

The disadvantages with this system are the need forretraining and for individual speech units. Many thingswill affect the sound of a voice, from change of mood tohealth. When changes happen, the template may ceaseto recognise the changed voice. For example, a workerwith a cold may have to retrain their system on somewords and then retrain them back when their coldpasses. Additionally, at the start of each shift, eachindividual picker must receive the correct voice templateto ensure voice recognition.Speaker IndependentSpeaker independent systems, on the other hand, do notrequire unique voice templates. They use the broadvoice recognition rather than unique templates. Any usercan use any speech unit, so there are no logistics issuesat the start of each shift. In addition, there is no pickertime spent training and retraining the system. Thedisadvantage with this system may be that it is languagespecific and may not cope as well with speech variationsand accents.The benefits of using voice systems obviously vary fromcompany to company, but significant improvements inaccuracy and productivity have been frequently reportedacross a range of different industries. Although capitalinvestment may be significant, improvements inproductivity and reductions in errors have been reportedto lead to payback within as little as six months, wheremore than one picking shift is operated. If single pickingshifts are operated, then payback in improved efficiencyover one year may be a more realistic expectation.While the value of technology is not in doubt, it is worthremembering that it is possible to make significantimprovements to your operations by other means. Forexample, the case study below shows how ‘storefriendly’ units of distribution can help improveproductivity further down the supply chain. Qualityprocedures undertaken by all staff throughout the pickingand packing process - allowing damages to be identifiedand rectified at any time - can also be used to ensureproducts are delivered to customers in the best possiblecondition.Case Study 11: Store Friendly Deliveryat BootsBoots is an icon of the British high street, however,having well positioned retail outlets can sometimescreate challenges for transport and distribution, saysKevin Dann, South West DC Group Manager. “Manyof our stores are in very narrow streets, whichmeans a lot of our deliveries need to be made bysmaller vehicles. Additionally, many of our storesdon’t have much back shop space, which can limitour ability to get stock in quickly. We are a retaildriven organisation so getting the product onto theshelf when it is needed is everything.” According toKevin, roll cages, were particularly problematic. “Rollcages have always been the workhorse of RDCoperations, but they can become dangerous andunwieldy as they get old. The biggest problemthough is that they tend to take a long time to unloadat the retail end. Boots sells a diverse range ofproducts, and when they are all thrown together inroll cages it can be a labour intensive task to unpackthem.”In late 2003, Boots made a strategic decision tomove away from roll cages in favour of ‘storefriendly’ units of distribution. The company hasinvested heavily in small interlocking collapsiblecrates which are now used for single pick operations.Rather than putting all items into roll cages, staff fillcrates with common types of products. “So, insteadof packing shampoo, mouthwash and electricshavers all in one cage, we now have thingsgrouped together which makes them much easier tounpack at the retail outlets” says Kevin. The cratesare packed together in stacks on wheeled dollies andthen strapped down before they are put onto lorries.The system is now fully implemented and in timeKevin anticipates that it will generate considerablesavings for the company. “The new crates havetaken longer to pack initially, but this will improve astime goes on and staff become more familiar withthem. We expect that the crates will help us moveproduct through the system more efficiently, andimportantly, will save a significant amount of stafftime at the retail end, which means they can spendmore time with customers. Even if warehouse costsincrease slightly, they will be more than offset bysavings at the store end of the system.”21

5.4 Cross-dockingCross-docking refers to a situation where productreceived at an RDC is not put into storage, but preparedto be shipped directly to retail stores. This practice isbecoming increasingly common through the use oftechnology that allows suppliers to see what productsare needed by end customers (e.g. vendor managedinventory). Cross-docking requires inbound andoutbound product movements to be linked closelytogether, and for an area of the warehouse floor to bespecifically dedicated to it. Because it eliminates putaway,storage and selection operations, it cansignificantly reduce distribution costs. Although productmay in effect go out via cross-docking as soon as itcomes in, it is important to still record what’s beenreceived and what’s passed through the RDC. So,systems still need to be in place to check productlabelling and accompanying paperwork. The case studybelow examines an effective cross-docking operationused by cash and carry company Costco.Case Study 12: Cross-docking atCostcoCostco is an American based company operating achain of cash and carry membership warehousesthat sell nationally branded and selected privatelabelmerchandise to businesses purchasing forcommercial use or resale, and to individuals who aremembers of selected employment groups. Thecompany’s business is based on achieving highsales volumes and rapid inventory turnover. Pricesare kept low because retail outlets offer a limitedassortment of merchandise in set quantities. For thisreason, very little handling needs to be done at thecompany’s NDC in Magna Park, Lutterworth. The14,399.5 m 2 (155,000 sq ft) warehouse is primarilyacross-docking operation. A purchasing departmentin Watford consolidates orders from the 15 retailwarehouses (outlets). Product is brought into thewarehouse each morning and rarely stays in morethan 24 hours. Loads are bar coded and arranged inthe centre of the warehouse according to their finaldestination. Theyare then consolidated, stacked andput into trailers, which are parked and picked up thefollowing day. Shipments to Scotland are done viarail because it is more cost effective. Ordering inlarger volumes helps keep the prices low and thecompany also uses its international purchasingpower wherever possible. For example, if USoperations order 100 containers of patio furniture,UK operations might order five more on the back ofthe order to get the same low price. Costco’soperations are focused on moving volumes quicklyand with a minimum of handling, and there is a highlevel of awareness of logistics issues through alllevels of the company. Unlike many otherorganisations, Costco’s purchasers are highlyfamiliar with minimum order quantities and the waythe warehouse operates. They know, for example,how many cartons of tissues fit onto a pallet, andorder accordingly to allow minimum handling at theNDC. The drive for efficiency is not just confined toUK operations. Recently, the company developed amodel to show overseas vendors how to packcontainers to maximise loads. Instead of packingproducts and then loading containers with pallets,which take up a lot of space, a system is usedwhereby groups of boxes are clamped together withnylon bands. These can then be unloaded veryquickly with special clamps when they arrive at thewarehouse. Extra care has to be taken to ensure theload is secure and to reduce any likelihood ofdamage. The company has also been developing anoperational manual for its UK suppliers, based on asimilar initiative undertaken for its US operationswhich was found to be highly successful. Themanual instructs suppliers on how goods should bepresented, recycling and bar coding standards, howreference numbers work and so on. As aresult ofthese initiatives and a recent push to increaseback-loading (see Vehicle loading, Section 5.7), thecompany’s logistics costs are just 0.75% of turnover,whichis much lower than other companies movingcomparable volumes of product.22

First Ideas for ActionRDC OperatorsLook at the stock keeping units handled in yourwarehouse and see if they can be unitised toreduce handling. Are there certain low valueitems that could be sold in pallet quantities toallow cross-docking?Develop a quality programme to showemployees good packaging techniques forvalue adding or customisation work. Positivemessages can be reinforced by relativelysimple methods like posters around thewarehouse5.5 Product DespatchProduct despatch is the final stage of the RDCoperation. Vehicle specification and vehicle loading arethe two key processes that take place during this stage.Transport represents a very significant component oftotal logistics costs in most operational settings, and so itis worth remembering that even minor improvements invehicle utilisation (made either by you or your contractor)can result in large cost savings.The key stages in product despatch are outlined in thetable below.Table 7 Product Despatch: Key StagesEnsure correct specification trailers (e.g.temperature controlled) for allocated loadsLoad products onto designated trailer or vehiclefor despatchMove loaded trailer to holding area to awaitdespatchProvide trailer and load identification referenceinformation to site exit controlIssue load and vehicle documentation to driverLocate correct trailer and depart on journeyValidate trailer and load information at exit5.6 Vehicle SpecificationTime spent developing the best specification for avehicle is time well spent. Decisions relating to vehiclespecification can actually be made on several levels. Ata strategic level, vehicle specification involves makingsure that the vehicle you purchase (or lease) is the mostappropriate for the work you need to do. This involvesconsidering a wide range of factors, including purchaseprice, maintenance costs and running costs. A cheap butpoorly specified vehicle, unfit for its intended purpose,could end up costing more in fuel over its service lifethan an initially more expensive vehicle, but one which ismore appropriate to its intended use.On a more practical operational level, vehiclespecification involves matching the right vehicle to theright load. In other words, you need to consider anyspecial requirements of the products, and make sure thevehicle is not too big or too small for the load. While itmay seem economical to use only one or two types ofvehicle in your operations, costs will be driven up if youtransport a high number of part loads. Investing inadditional trailer capacity within the fleet may seemexpensive, but can help improve vehicle turnaroundtime. If well managed, this might improve assetutilisation but it carries with it the risks inherent inleaving products loaded on vehicles, such as damagesand increased risk of theft.The case study overleaf shows how improved outboundscheduling and vehicle specification can lead tosignificant cost savings.Finding Out MoreTruck Specification for Best OperationalEfficiency - a step by step guide to vehiclespecification, from chassis, engine andtransmission specification, through to choiceof body aerodynamic features and ancillaryequipment.To obtain a free copy of this guide, call theHotline on 0845 877 0 877, or visitwww.freightbestpractice.org.ukAlternatively, emailinfo@freightbestpractice.org.uk for furtherinformation.23

Case Study 13: Scheduling and VehicleSpecification at NHS Logistics AuthorityNHS Logistics Authority manages the warehousing anddistribution of medical supplies on behalf of hospitals,clinics and doctors’ surgeries. The Authority employsover 1,400 staff and manages more than 43,000different product lines. The organisation has an annualturnover of more than £770 million and has six RDCsspread across England. The greater part of thetransport operations is contracted out by the Authorityto a third party. The contractor employs 368 staff tocarry out the Authority’s business.The primary goal of the Authority is to deliver in full andon time to the customer in the most cost effective way.The Authority recently rationalised its RDC networkfrom 12 to 6 to achieve cost savings, however, thismeans that new regions are geographically larger andhence kilometres of travel have increased. Transporthas been identified as a priority area. In particular, theAuthority aims to reduce kilometres of travel, decreasevehicle turnaround times and increase vehicleutilisation generally.Working with its contractor, the Authority isintroducing a number of initiatives to increase currentvehicle utilisation by around 20%. Traditionally,vehicles tend to leave depots at 06:00 and mostreturn at 13:00. However, following talks with anumber of its customers, it now also carries out nightdeliveries to many of them. It is practical for manyhospitals to do this because they always have staffavailable at night to receive products. In Normantonalone, this initiative is saving more than £160,000per year through reductions in travel time. Doubledeck trailers have also been introduced on aparticularly long route from Normanton to Gateshead.This has reduced the runs required each day fromseven to just three - effectively cutting costs in half.5.7 Vehicle LoadingConsidering the distances delivery vehicles can driveeach week over the course of a year, it is very much inyour best interests to maximise the loads in outgoingvehicles. Fewer part-loaded vehicles mean fewerdeliveries and lower costs. Look at ways to increasevehicle fill rates. It may be possible to makeimprovements by modifying your units of distribution orby better vehicle specification. Ask your customers howoften they actually need to receive deliveries. As shownin the case study on page 25, it may also be possible toreduce your transport costs simply by encouragingcustomers to switch from daily to weekly deliveries.More efficient use of your fleet can be made byscheduling deliveries and planning routes to minimisejourney times and reduce overall distance travelled.Computerised routing and scheduling packages andin-cab telematics equipment, such as vehicle trackingsystems and on-board navigation units, can help youoptimise the use of your fleet resource and enable youto react more quickly to events requiring changes to youroperation.Factory gate pricing may also be an area which could beexplored to improve fleet utilisation. This is based on thesame principle as ‘ex works’ in international trade terms- in other words, the price for the product is agreedbetween the supplier and the customer but excludes thecost of any transport from the factory, i.e. it is up to thebuyer, rather than the seller of the goods, to arrangetransport. Through successful load planning and vehiclerouting, factory gate pricing can offer opportunities toback-load vehicles which might otherwise run back tobase empty after completing deliveries.It is worth remembering that your transport operationsdo not finish when vehicles reach the customer. As theCostsco back-loading case study shows, empty runningvehicles present an opportunity to generate revenue.24

Case Study 14: Reducing Deliveries atPhilips DAPPhilips is a globalcompany withoperations spanningmore than 62 differentcountries. Philips DAP(Domestic and Personal Care) is one of five divisionswithin the company and sells everything from electrictoothbrushes to coffee machines. In 1997, the divisionmade deliveries to its customers every day of theweek. The division found that it was wasting a lot ofresources sending out a large number of small ordersand decided to start making deliveries just once aweek. After consulting with customers, it found thatsmaller deliveries often caused them headachesanyway, and somewhat unexpectedly, most actuallywelcomed the change. As a result, the division wasable to reduce its transport costs by 30%.Case Study 15: Back-loading at CostcoCostco moves a large amount of freight to its cashand carry membership warehouses, and for thisreason, transport has always been identified as akey area for efficiency improvements. According toIan Chalmers, Logistics Manager, the company wasalways interested in back-loading opportunities andother ways of improving vehicle utilisation, but waskeen to avoid the practical difficulties that sometimesarise with these types of initiatives. “We considereddoing something like factory gate pricing (wherecustomers arrange inbound logistics and transport ofproduct from suppliers), some years ago, but wedecided this would lead to a lot of administrativeproblems. If you wanted to take a load from sayStoke back here to Magna Park under factory gatepricing, you would have to charge the supplier acertain amount, pass most of it onto the haulier, andkeep the difference. It creates so much paperwork,and given the cost of raising invoices,it just wouldn’tbe worth it”, said Ian.To avoid these administrative hassles, Costco hasinstead opted for a system where the hauliercharges the supplie rdirectly on the company’sbehalf. Ian has extensive experience in haulage soknows when they are charging a reasonable rate. Ifhe thinks they are getting charged more than theyshould, the company can contact other hauliers tosee if it can get a better price. This approach meansthe company gets a good price and reducestransport requirements while avoiding administrationcosts. Costco is now back-loading on 97% of itstransport operations. It has been doing this for aboutthree years and as a result of this and otherinitiatives (see Cross-docking, Section 5.4), transportand logistics costs have been reduced significantly.Finding out MoreComputerised Routing and Scheduling forEfficient Logistics - two guides (full andpocket-sized) describe the different types ofcomputerised vehicle routing and schedulingsystems available and their benefits.Telematics - provides details of the basicelements of telematic systems and theinformation you get from them, as well asproviding advice on what you shouldconsider when buying a system.Make Back-loading Work for You - providespractical advice to help integrate and increase backloadingwithin your activities in order to improve andreduce empty or light running.To obtain a free copy of any of these guides, call theHotline on 0845 877 0 877, or visitwww.freightbestpractice.org.uk. Alternatively, emailinfo@freightbestpractice.org.uk for furtherinformation.First Ideas for ActionRDC OperatorsLook at loaded vehicles leaving the RDC. Is there a lot of empty space in trailers? Could internal shelvingor another type of vehicle configuration improve vehicle fill?Would factory gate pricing help to improve vehicle utilisation by providing inbound loads for your vehiclefleet?25

6 The Importance ofPartnershipsFigure 6 Importance of PartnershipsPartnershipsBuyingIntake planningVehicle receptionProduct receiptInternal product managementOutbound planningProduct and load preparationProduct despatchCustomer receipt etcPerformance monitoringBy their very nature, RDCs work with many differentorganisations, which makes partnerships a vital ingredientof any system. Close collaboration with otherorganisations up and down the supply chain, such assuppliers, customers and contractors, ensure efficientday-to-day operations and may enable you to identifyother areas where changes can be made.The idea of partnerships can be extended to the staffwithin your own organisation. There can be no doubtthat performance in an organisation improves whenemployees feel valued by management and have asense of ownership of what they are doing.This section also examines the concept of RDC freightquality partnerships (FQPs), which involve close workingbetween private companies, local authorities and otherrelevant stakeholders. They have been developedsuccessfully in the freight transport industry and offer anumber of potential benefits in the context of RDCs.6.1 Internal Partnerships: Your StaffRecruitment and retention tend to be problems for mostRDC operators. Despite recent advances in technology,most physical processes in warehouses are actuallyperformed by people, which means that your employeesare your most valuable asset. Because RDCs tend tooperate together in clusters at strategic locations,employees can easily move from one facility to anotherwhen the market is strong. This makes recruitment andretention strategies particularly important - selecting theright people for the job and building a cohesive teamthat works well together can improve productivity.Consultation with staff members to ask their views onwhat could be done to make the operation more efficientcan help make people feel more involved.Demand can often be seasonal, creating a need to‘flex-up’ during peak periods and take on new staff, whothen need to be released during low seasons. Recruitmentis important because it allows you to meet demandeffectively. Better retention strategies help you keep yourcore experienced staff who are highly familiar with youroperations, productive and can help train new employees,as shown in the case study on page 26.Look at your employees as partners in yourorganisation, not simply a cost. The reality is that manytasks that are performed in an RDC are repetitive.Providing better facilities for your employees such aschildcare, study rooms and even gyms, may seemexpensive but can have a positive effect on retentionand may be economical when you consider how muchyou spend looking for a new employee every time oneleaves. It is now standard practice in many companies tooffer education and training for career development.Flexible work practices can also make it easier for parttime workers to come back to your operations when youneed them.First Ideas for ActionRDC OperatorsEncourage mentoring for new employees andhelp them develop important skills morequicklyReward staff during busy periods and alwaysencourage and provide a forum for feedbackEngage staff in the running of the operation byasking them for their views on how thingscould be done betterEmpower staff with the responsibility to takethe lead in certain areas by creating ‘IssueChampions’. Separate Champions could focuson reducing fuel consumption, improvinghealth and safety performance, reducingdamages to products or increasing recycling ofpackaging6.2 External Partnerships: Suppliers,Customers and ContractorsIt should always be remembered that RDCs are simplyone link in a greater supply chain, and the efficiency ofthe operation will depend to a large part on the efficiencyof other parties you work with. As shown in the case26

study on page 28, something as minor as a load whichoverlaps a pallet can cause your whole system toexperience problems. You can overcome many of theproblems you experience in your own operations simplyby improving the way you communicate with yoursuppliers and customers.Case Study 16: EncouragingEmployee Contribution and Input atCadbury TreborBassetCadbury Trebor Basset isan icon of the confectioneryindustry and has acomprehensive distributionnetwork within the UK andinternationally. Thecompany prides itself onhaving good relations withits employees and hasalways recognised that it is in its best interests tohave well trained and motivated employeesoperating in a safe environment.At its RDC in Chesterfield, Derbyshire, thecompany’s policy is to set clear objectives, maketasks easy to undertake and ensure staff are welltrained and fully understand businessrequirements. A significant emphasis is placed onworking safely. All staff at the RDC are trainedusing standard ‘lesson plans’. These are ‘checklist manuals’ that provide information relevant toparticular training subjects. The plans ensure thatno key areas are overlooked, whilst enablingthose carrying out the training to do so in a waythat best suits them.The company has also adopted a peer orientatedapproach to training. A ‘buddy’ system is used toimprove the skills of new employees. Fromexperience, the company has found that highlyproficient pickers quickly identify the mosteffective methods and can pass these abilities onto others to improve their performance.Guidance from them is more readily accepted bytheir peers, than from direct supervisory ormanagement instructions.These initiatives have enabled Cadbury TreborBassett to maintain high levels of workmanshipand productivity, and to retain staff in anincreasingly competitive labour marketplace. Theneed to actively encourage and value employeeinput and contribution is felt to be extremelyimportant in achieving high levels of customerservice. This is also a quality that is looked for inthe company’s third party operations.As a supplier, get to know your customers’ operationsand the types of problems they experience. Ask if youcan visit your customers’ RDCs and meet the operationsor logistics manager. Invite them to come and look atyour operations. By establishing a rapport with thecompanies you deal with, it will make it much easier tosolve problems when they occur, as shown in the casestudy opposite.First Ideas for ActionInbound Transport Operators and SuppliersWhy not visit the RDC with a driver when theyare making a delivery? This will help youbetter understand their operations and findways of working together to makeimprovements. It also represents an invaluableopportunity to get to know the operations orlogistics managerRDC OperatorsTake your buying staff on a tour of the RDCand show them how it operates. Makingbuyers aware of capacity issues can smoothout inbound deliveries because they will betterunderstand the limitations of the RDCInvite groups of suppliers to visit the RDC tosee your operations6.3 RDC Freight QualityPartnershipsFreight quality partnerships (FQPs) are partnershipsbetween the freight industry, local government,businesses, community groups and other relevantstakeholders. The aim of a partnership is to develop anunderstanding of freight transport issues and problems,and to promote constructive solutions that take intoaccount environmental and social concerns. In thepartnerships developed to date, there is clearly a rangeof issues that are of common interest to RDC operators(or in the case of business parks, groups of RDCs), localauthorities and the general community, such as trafficcongestion and deliveries at unsocial hours. Thepartnerships provide an ideal forum in which to explorethese issues and find solutions to problems that mayaffect your operations as well as others.27

Case Study 17: The Power ofPartnerships: Philips DAP and NYKLogisticsbowling day. The relationship works so well that NYKstaff identify themselves as working for Philips. “Ifyou asked any of my warehouse staff who theyworked for, they would say Philips, not NYK” saidIsabelle.Working with OthersNYK Logistics manages the warehousing andtransport operations for Philips DAP (Domestic andPersonal Care) from a shared facility at GrangePark, Northampton. The two companies have beenworking in close partnership for about four years.Working with Each OtherAccording to Marianne Wilson, Logistics Manager atPhilips DAP, the arrangement has been verysuccessful from the start because the two partieswork together as partners. “We have always had avery constructive and open relationship. The key isto understand where the other party is coming fromand to talk to each other openly about issues andproblems that need attention. Often, there will bethings we don’t agree on, but we tell each otherthat.”Isabelle Risse, the Philips DAP Contract Manager atNYK Logistics, expanded on this, saying “For astrategic partnership to work, you share the benefits,but you also have to share the pain. If Phillips asksus to do something which may be impractical orexpensive for us, we explain it to them and reach acompromise.” The relationship between the twocompanies has been strengthened further throughjoint social events, such as the annual Philips/NYKAfter making a number of improvements to their ownwarehouse operations, the two companies are nowfocused on streamlining outbound logistics. Thenature of the product means demand tends to bevery high in the lead up to Christmas, which meansthat it can sometimes be difficult to get product intocustomers’ warehouses. Sometimes communicationmay break down between the customers’ buyingdepartments and their warehouses, which meansloads can arrive only to get turned back. “This has ahuge impact on our logistics costs. Because we dovalue added work for many of our customers, if aload gets returned, we often have to do reworks andthis becomes very expensive”, Marianne said.The two companies have always adopted a veryconstructive approach to dealing with these types ofproblems, and visit customers’ premises on a regularbasis to see how things can be improved. “Forexample, we were getting a lot of returns from onecustomer, so we went and visited one of theirRDCs”, said Isabelle. “We found that because theyuse robotics equipment, if a load overlaps on apallet, it cannot be handled. This was very useful forus to know because we were able to make thenecessary changes very easily to rectify thesituation. It would have been very difficult to learnabout this problem without actually seeing theiroperation.” The companies also invite customers tocome and look at their own operations, and therehas been a positive response to this. According toMarianne, “it is a very constructive process becauseif everyone gets an understanding of what eachother’s problems are, it makes them much easier tosolve.”Finding out MoreFreight Quality Partnerships - a step by step guide on how to set up and run FQPs.Freight Quality Partnerships Case Studies - examples of what has been done in existingpartnerships.To obtain a free copy of any of these guides, call the Hotline on 0845 877 0 877 or visitwww.freightbestpractice.org.uk.Alternatively, email info@freightbestpractice.org.uk for further information.28

7 The Importance ofPerformance Monitoringand Key PerformanceIndicators (KPIs)Figure 7 Importance of Monitoring KPIsPartnershipsBuyingIntake planningVehicle receptionProduct receiptInternal product managementOutbound planningProduct and load preparationProduct despatchCustomer receipt etcPerformance monitoring7.1 The Importance of PerformanceMeasurementUnless you can accurately measure the resources youuse in delivering services, it is very difficult to identifyareas that can be improved or assess the impact of anychanges you make.Benchmarking, targeting, monitoring and reviewing arethe ‘glue’ that binds initiatives together and allows you tobuild on the positive changes you make to youroperations.The starting point for any performance monitoringprogramme should be internal benchmarking. There islittle point trying to compare yourself to others if youdon’t have a thorough understanding of your ownoperations to begin with. Figure 8 shows the keyprocesses in a benchmarking and performancemonitoring programme.KPIs should be effective management tools, helping youto run your operation. However, if too many KPIs aredeveloped or those selected are too complicated tomeasure reliably, then they start to lose their realusefulness to the operation.KPIs need to be kept simple and be easy to measure.Careful consideration should be given to the type ofKPIs you choose to measure and monitor yourperformance. As a general rule, err on the side ofsimplicity. Try to have as few KPIs as possible (perhapseven just one for each operational stage) and makethem easy to measure and to interpret.In addition, operational staff need to see the real valuein monitoring performance levels, if they becomeimmersed in recording too many obscure individualKPIs, they are likely to lose sight of the wider operationalbenefits. The Figure 9 overleaf contains a range of KPIsthat are commonly used by RDC operators.Figure 8 The Key Processes in a Benchmarking and Performance Monitoring ProgrammeMeasureBenchmark using KPIs to understand whereyou are today, where you were previously,and how you compare with othersReviewWithin an agreed timeframe, examinehow effective your efforts have beenin meeting the targetTargetSet targets based onstrategic objectivesMonitorMonitor your progress towards thetarget periodically with KPIsTake actionImplement changes to help youmeet your objectives29

Table 8 Commonly Used KPIsInbound On-time arrival (%) Number of vehicles arriving +/- 15 minutes of booked time as aproportion of total arrivalsOn-time unloading (%)Inbound load accuracy (%)Number of on-time vehicles unloaded +/- 15 minutes of bookedtime, as a proportion of total on-time arrivalsNumber of incorrect items as a proportion of total items received(per load)Internal Capacity utilisation (%) Number of utilised stock locations as a proportion of the totalcapacity at any point in timeCost per unit received/stored/picked/despatched, etc (£)Fixed/variable costs (%)Labour costs (£)Mechanical handling equipmentutilisation (n)Number of very narrow aisletruck movement cycles(put-away and retrievals)per hour (n)Attributable fixed and variable costs divided by number pallets/casesor other units related to the activity being measuredTotal costs, split into those that vary with level of activity and thosethat remain constant regardless of the level of activityOperational labour costs as a proportion of total costsNumber of hours actual use recorded by each truck for eachshift/day/week (this is important where costs to users are based onlevels of use)Number of actual recorded operating hours per truck divided bynumber of movementsOutbound Picking productivity (n) Number of pallets or cases picked in each hour devoted to pickingactivity (This can be measured by operator or as a total)Picking accuracy (%)On-time despatch (%)On-time in full deliveries (%)Number of incorrect items picked as a proportion of the total picked(this can be a retrospective measure with errors being identified atthe point of delivery. Providing relevant records are maintained, thiscan be measured by operator or as a total)Number of on-time loads completed +/- 15 minutes of scheduled timeas a proportion of total loadsNumber of deliveries made on time with correct (exact) load as aproportion of total deliveries (relevant even if RDC is not responsiblefor final deliveries)Inbound/ Pallets/unit throughput (n) Number of pallets/units received and/or despatched peroutboundhour/shift/day/week/month/yearCase or other individualthroughputs (n)Loading bay utilisation (n)Number of cases or other individual units received and/or despatchedper hour/shift/day/week/month/yearTotal number of vehicles unloaded/loaded per shift/day divided bynumber of bays7.2 Setting TargetsOnce KPIs have been selected and a way of measuringthem has been established, the next step is to settargets for improvements. This is where externalbenchmarking can be very useful. Where possible, try tolook at what other similar organisations/operations areachieving. While it may not be possible to know whatyour direct competitors are doing, it may be useful tovisit warehouses that are a similar size and have asimilar range of products. This can at least give you anidea of what is possible and what you should aim toachieve. Rather than comparing absolute numbers, youmight want to aim for general improvements to youroperations in percentage terms (e.g. a 15% increase inpicking accuracy or a 5% increase in throughput).7.3 Monitoring and ReviewingPerformanceTargets don’t need to be perfect - the act of setting oneand monitoring your progress towards achieving it isimportant. Always remember that monitoring andreviewing is an on-going process. If the target was metvery easily, you need to go back and look at your30

enchmarking, and increase the target. If you fall wellshort of the target, you should try to understand why thismight have occurred and re-adjust your future targetlevels.RememberActivities contracted out to third parties, liketransport or warehouse operations, should also bebenchmarked, monitored and reviewed in the sameway as in-house operations. Contractors will oftencalculate and report KPIs themselves but, as aminimum, they should provide the information youneed to derive them yourself.Finding out MoreKey Performance Indicators for Non-foodRetail Distribution - discusses the resultsof the 2002 benchmarking survey in thissector.Key Performance Indicators for the FoodSupply Chain - discusses the results of the2002 benchmarking survey in this sector.Key Performance Indicators for PalletDistribution Networks - indicates how tomeasure key performance indicators anddiscusses the results of the 2004benchmarking survey in this sector.Fleet Performance Management Tool -Excel© based tool to help small to mediumsized fleet operators improve theiroperational efficiency through themanagement of KPIs. Consists of a CD andaccompanying manual.To obtain a free copy of any of these guides,call the Hotline on 0845 877 0 877, or visitwww.freightbestpractice.org.ukAlternatively, emailinfo@freightbestpractice.org.uk for furtherinformation.31

8 Useful Contact Pointsand Additional ReferenceInformation8.1 ContactsThe Chartered Institute of Logistics and Transport in theUK, with over 22,000 members, is the professional bodyfor those individuals and organisations that are involvedin, working in, or that have an interest in, the logisticsand transport sectors.The Chartered Institute of Logistics and Transport (UK)Logistics and Transport CentreEarlstrees CourtEarlstrees RoadCorbyNorthants NN17 4AXwww.ciltuk.org.ukTel: 01536 740100Fax: 01536 740101Email: enquiry@ciltuk.org.ukRFID News and Solutions - a bi-monthly publication forsupply chain professionals in most major industries andvertical markets who are responsible for designing,purchasing and implementing RFID technologies andsolutions.www.rfidnas.comModern Materials Handling - a publication for supplychain professionals in most major industries responsiblefor purchasing and implementing materials handlingsolutions.www.mmh.comMaterial Handling Product News - a journal reporting onthe entire range of material handling products, fromthose used at the loading dock, to those required in themanufacturing process and for storage and distribution.www.mhpn.comSupply Chain Management Review - a senior levelpublication dedicated to the art and science of movinggoods to market.www.manufacturing.net/scmThe Chartered Institute of Purchasing and Supply is aninternational organisation, based in the UK, serving thepurchasing and supply profession. The institute isdedicated to promoting best practice, continuousimprovement in professional standards and raising theawareness of the contribution that purchasing andsupply make to corporate, national and internationalprosperity.The Chartered Institute of Purchasing and SupplyEaston HouseEaston on the HillStamfordLincolnshire PE9 3NZwww.cips.orgTel: 01780 756777Fax: 01780 751610Email: info@cips.org8.2 Useful Trade/IndustryPublicationsLogistics and Transport Focus - the journal of TheChartered Institute of Logistics and Transport.www.ciltuk.org.ukRFID Journal - independent media company devotedsolely to radio frequency identification and its manybusiness applications.www.rfidjournal.com32

Freight Best Practice publications, including those listed below, can be obtainedFREE of charge by calling the Hotline on 0845 877 0 877 or by downloadingthem from the website www.freightbestpractice.org.ukSaving FuelFuel Management GuideThis is the definitive guide to improving the fuelperformance of your fleet. It gives step-by-stepexplanations of the key elements of fuelmanagement, how to measure performance andhow to implement an effective improvementprogramme.Operational EfficiencyHeathrow Airport Retail Consolidation CentreThis case study explains how consolidatedservices to Heathrow Airport reduce lorrycongestion and improve air quality.Developing SkillsSafe Driving TipsWritten especially for commercial vehicle drivers,this pocket-sized guide provides essential safetyhints and tips on all aspects of driving safely.Performance ManagementIntroduction to Job Costing for FreightOperationsThis guide is aimed at helping you understand thetrue cost of your operation down to individualvehicles in the fleet.Equipment and SystemsTesting Times for TrucksThis report briefly describes four trials that test theeffects of differing variables on fuel consumption.Public SectorEfficient Public Sector Fleet OperationsThis guide is aimed at fleet managers in thepublic sector to help them improve operationalfleet efficiency.June 2007.Printed in the UK on paper containing at least 75% recycled fibre.FBP1020 © Queens Printer and Controller of HMSO 2007.Operational Efficiency