Why is everyone buying from Amazon and not us?
All businesses have methods of doing things, most of which have grown up along with the company. It’s a good idea to examine these processes and procedures periodically, because they tend to get off track over time. Here are questions to ask, illustrated with personal examples. These examples start with the obvious and become more subtle and complex.
• Does it still need to be done? Cultures develop within companies and departments, rules are developed to enforce that culture, and most people just blindly follow those rules, just like in society at large. The longer the company has been in existence, the worse it gets. In one of my first jobs, back in the IBM mainframe days, I remember asking a woman why she was writing freight charges on a certain colored invoice and sending it down to the IT department. She told me it was because ‘they’ needed them. So, I walked downstairs to the IT department to see why they needed them. Turns out they didn’t. For the last five or so years they’d been throwing them away. That was the end of that procedure, but the poor lady in order entry had wasted at least five years of her work life meticulously transcribing numbers to pieces of paper that were then immediately thrown away. It cost the company a few $100K too.
I’ve seen this much more often than you’d expect (or hope)—you ask people why they are doing such and such, and they’ll reply that Mr. Jones in the Accounting department needs it. When you check it out, it turns out Mr. Jones left the company five years ago. Autopilot is great for long flights, but not so good for business processes.
• Have the business circumstances changed? This problem happens most often in growing companies. A procedure that worked fine when the company was small grows into a monster when the company expands. My classic example of this involved an acquired company which did a tremendous amount of marketing, mailing millions of business reply cards (BRCs) offering free samples of state specific test prep books to teachers. In the late summer of each year this company hired the equivalent of 40 full time, seasonal workers to handle the data entry and shipping influx, and still carried a 6 - 8 week backlog. Without going into too much detail, the problem stemmed from BRCs which didn’t specify item codes, because the codes varied based on the customer’s state. When we took over this procedure at the shared services facility, we created a website with an image of the BRC, loaded the mailing lists into a database, and simply had the order entry person find the customer by state, and then click the boxes the customer had checked off on the BRC. It eliminated virtually all errors and cut processing time per BRC from ten minutes to seconds. Instead of ramping up by 40 people, we didn’t have to hire anybody. Follow up: The following year, when we had more time, we eliminated the process altogether—the teachers could go to the company website and download a sample chapter, which not only saved many $100,000s in expenses, but also reduced illegal copying of the books.
PCI compliance requires protecting credit card information
• Is it legal and compliant? This one can happen at any company—it can be a legacy issue or a shortcut issue. PCI compliance (how you handle credit cards) is a classic case that many companies don’t handle properly, and if you are caught being noncompliant, you aren’t allowed to accept credit cards, which is not a good thing. The obvious fixes involve not storing credit card numbers on site, which is easy with today’s technology, but sometimes you see deeper problems. One of the worst problems I’ve seen is a company where the customer service personnel wrote the customers’ credit card numbers on their orders, for entry later. That alone is bad enough, but worse, the orders were then scanned into a document management system, making the problem virtually impossible to correct going backwards. In this case, the first step to getting out of this hole is to stop digging (stop writing the numbers down), and then take the old documents off line.
A forest of 6 high, narrow aisle racks in an automated warehouse
• Are there simply smarter ways to do things? This should be an ongoing question asked at every company. Just because we’ve always done it this way doesn’t make it the best way, and with technology changing so fast, there are more and better solutions continually available.
A good but subtle example is when a company moves to an automated warehouse from a typical ‘pick an order and ship it’ warehouse. Of course there are a lot of changes that are involved, but a small one illustrates the point. In a traditional warehouse, and even many new warehouses, items are always put into the same location. That allows workers to learn where the items are, and pick them more quickly. It also saves space—if you are down to 10 items, and receive 30 more, you just put them in the same place and now have 40 items in that location. Makes perfect sense, but is it the most efficient way to run the overall operation? The answer, in a fully automated warehouse, is usually ‘no’.
Many warehouse management systems employ what’s called ‘random put-away’….that means that you don’t put items into predefined locations, but just put them anywhere there’s an opening (and where the computer says to put it). Then you ‘pick the first location to zero’. In the example above, if you had an order for 15 items, the picker would get 10 from the first location and 5 from the second.
Why is this more efficient, particularly because the order was picked from two locations instead of one? Answer: Because an automated warehouse depends on 100% accurate inventory counts, which means you need to constantly do ‘cycle counts’….you are constantly counting the inventory in your warehouse by location. So, when the order picker pulls those 10 books from the first location, he counts ‘0’ in that location, keying it into his handheld device. That is a cycle count which takes no time at all, because he can see the location is empty (the inventory count is zero), and he has just counted a fast moving item. This eliminates the need for a full shut down for physical inventory, plus dramatically increases accuracy in the warehouse. It’s not intuitive, but it sure works.