“The High Cost Of Not Knowing”

Procrastination and impatience may seem like opposite ends of the behavioral spectrum, but they have remarkably similar effects on distribution operations.

In a recent Warehousing Short Course at Georgia Tech, I remarked that the cost of not being able to plan tomorrow's work today makes a big difference in warehouse operating costs. "How big?" one of the students asked. I was caught without a good answer.

Since then I have tried to accumulate examples of what things cripple our ability to plan.

Of course, in today's just-in-time world, same-day shipping has become a normal expectation. Certainly, there are circumstances where significant reductions in field inventories are made possible by overnight delivery. But, often the need for overnight response is a result of either procrastination or impatience.

Why does a body shop need next-day delivery of paint when they've had the car in the shop for three days? Why do I ask for the present to be sent overnight when my mother's birthday is on the same day every year? Why does a back order need to be shipped by itself the same day the product is received when it's been out-of-stock for three weeks? Why do we discover only when we call the customer for carrier routing that they want to cancel the order?

The answer to most of these is that we've become so accustomed to instant response that it has become a decision, by default. The service is available. The cost is modest, or buried in somebody else's budget. We are too busy handing someone else's urgent need to plan proper lead time into our own.

In the name of customer service, we have offered instant response at a low cost to the customer, but at a high cost to ourselves. That's OK when only the few who really need it, ask for it. We are always willing to jump through hoops a few times a day. But, when it becomes the norm, then our daily workload is not only unpredictable but unplannable too.

What does it cost? Not just the premium shipping cost. Not just the extra cost to walk one order through the process. But, the cost of not being able to:

• Schedule staffing to meet a workplan
• Level activity over an 8-hour shift
• Spread flow over multiple shifts to reduce capital investment
• Create efficient order batches for picking, and
• Know when the day will end.

Employees are prepared to work unexpected overtime every once in a while. But, when the end of every day is a mystery, it keeps their families from being able to plan on them.

How many hours do we lose waiting for the orders to come in? How many times do we search for fill-in work to use the guaranteed hours? How many employees leave because they can't plan their lives around our erratic schedules? These are the costs that we absorb in our DCs because we've made instant response the norm. But it doesn't have to be that way to the degree that it now is.

And by the way, Mom, your birthday present will be early this year!

ABOUT THE AUTHOR

James M. Apple, Jr. is a Director in The Progress Group. Prior to co-founding The Progress Group in 1991, he was a Partner with Coopers & Lybrand's SysteCon division. During 1992-1995 he served as a Senior Systems Advisor with Vanderlande Industries, a major conveyor and systems provider in Europe.

Jim is an internationally recognized thought leader in the area of facility design and integrated distribution systems. His contributions to the improvement of distribution practices have been recognized by his receipt of the prestigious Reed-Apple Award, which is given for lifetime contributions to the advancement of the material handling profession. Jim has also received the Institute of Industrial Engineers' Facilities Planning and Design Award. He has written numerous articles and handbook chapters on warehousing and logistics operations and is a popular speaker on logistics seminar and conference programs.

Prior to SysteCon, Jim worked as an Industrial Engineer with IBM, was Supervisor of Facilities Planning for the Oldsmobile Division of General Motors and was Executive Vice President for an automotive aftermarket parts supplier. He holds B.S. and M.S. degrees in Industrial and Systems Engineering from the Georgia Institute of Technology.