ROFDA Benchmarking

Results - How do u rate?

Supply Chain Consultants

Spring, 2009
Common factors that effect Presented by

DC performance Keith Swiednicki

Senior Partner
KOM International
Keith_swiednicki@komintl.com
www.komintl.com
1
IQ-The Cognitive Reflection
Test (CRT)

90 second test was developed by Shane

Frederick, an assistant professor at MIT to
predict whether a person would be good at
managing money.

2
90 Second Quiz to Managing
Money
 (1) A bat and a ball cost $1.10 in total. The bat costs
$1.00 more than the ball. How much does the ball cost?
_____ cents

 (2) If it takes 5 machines 5 minutes to make 5 widgets,

how long would it take 100 machines to make 100
widgets? _____ minutes

 (3) In a lake, there is a patch of lily pads. Every day, the

patch doubles in size.If it takes 48 days for the patch to
cover the entire lake, how long would it take for the patch
to cover half of the lake? _____ days
3
Answers
 Correct Answers

 (1) 5 cents
 (2) 5 Minutes
 (3) 47 Days

So – How do you do
managing risk and money?
4
Cognitive Results
 The CRT was administered to 3,428 respondents in 35
separate studies over a 26-month period. Respondents'
ages range from 15-63 with the mean age of 24.

 Overall mean CRT score = 1.24

 Low(0 correct) = 33%
 (1 correct) = 28%
 (2 correct) = 23%
 High (3 correct) = 17%

5
Agenda
 Objective
- ROFDA Ops Committee
 Summary of DC Productivity Survey Results
– List of Participants
– Profile of Participants
– ROFDA Comparisons – ‘08 vs’09
– Best of Breed Results (Top 3 Wholesalers)
 The Productivity “Drivers”
 Opportunities to Lower Operating Costs
 Bottom Line Potential
 DoMoreWithLess
 Case Study – Automating Slow Movers
 Questions?
6
Objective

 Measure and report productivity facts.

 Provide accurate benchmarks for participating ROFDA

members to use when analyzing company DC operations.

 Offer suggestions of how to improve operations through

development of best practices.

 Offer explanations for opportunities and issues challenging

the industry and members.

 Provide executive management with a summary of the most

important points.

 Identify and quantify the key costs of operating a food7 DC.

List of Participants – 11
Companies
1. Affiliated Foods Inc.
2. Associated Grocers of the South
3. Associated Grocers Inc.
4. Associated Wholesalers Inc.
5. Associated Food Stores
6. Associated Grocers of New
England

Supply Chain Consultants

7. Associated Grocers of Maine
8. White Rose Foods
9. Olean Wholesale Grocers
10. Merchants Distributors Inc.
11. URM Stores

“10 ROFDA Members included in this report” 8

Participant Profile
Characteristics Yes No

Union 73% 27%

Engineered Standards 0% 100%

Incentives 45% 55%

Computer Directed Putaway w/wo 91% 9%

RF
Voice Technology 82% 18%

Characteristics Discreet Zone

Order Relationship 55% 45%

Characteristics Z Pick Street

Add.
Selection Method 82% 18% 9
Participant Profile

Characteristic Average

Average Fill Rate 97%

Average Warehouse Scratches 2%

Average Labor issues 19%

Average Volume with Lumping services 74%

Average Typical Order Turnaround Time: 1.1

No Touch Receiving Yes No

9% 91%

10
Participant Profile Cont’d
Departmental Comparison
Departmen Averages 2008 2009
t
Dry Cases Shipped 332,453
319,323
Total Throughput 49
44
Selection (Cases/Hour) 138
135
Order Size 201
165
Item Variety 9,971
9,305
     
Freezer Cases Shipped 122,031
104,787
Total Throughput 59
50
Selection (Cases/Hour) 140
130
Order Size 92
73
Item Variety 2,550 11
3,535
     
PerishablesCases Shipped 242,677
ROFDA Dry Comparison
Dry Grocery Cases/Man-Hour
Function 2008 ROFDA Average 2009 ROFDA Average Top 3 Average (Total
Throughput)

Volume Volume Volume

Receiving 389,206 366,513 549,407
Shipping 375,491 332,453 497,641
Total 764,696 698,966 1,047,048
Direct Labour Paid Hours Cases / Hour Paid Hours Cases / Hour Paid Hours Cases / Hour

Receiving 689 565 628 583 976 563

Moving Stock 1,367 559 1,078 648 1,377 761
Selection 2,893 130 2,403 138 3,081 162
Loading 1,146 328 656 506 861 578
Shipping 4,039 93 3,059 109 3,942 126
Other 17 22,473 N/A N/A
Subtotal Direct 6,112 61 4,766 70 6,295 79
Indirect Labour Paid Hours Cases / Hour Paid Hours Cases / Hour Paid Hours Cases / Hour

Managers 510 1,499 406 819 408 1,219

Clerks 289 2,648 229 1,450 320 1,555
Inbound Checking 358 2,137 256 1,297 178 2,794
Inventory Control 311 2,462 177 1,877 191 2,606
Outbound Checking 115 6,642 49 6,812 47 10,687
Housekeeping 1,026 746 439 757 432 1,152
Maintenance 187 4,099 219 1,519 206 2,413
Other 203 3,759 281 1,185 563 883
Subtotal Indirect 2,998 125 2,056 162 2,345 212
12
GRAND TOTAL 9,110 41 6,822 49 8,640 58
ROFDA Freezer
Comparison
Freezer Cases/Man-Hour
Function 2008 ROFDA Average 2009 ROFDA Average Top 3 Average (Total
Throughput)
Volume Volume Volume
Receiving 129,458 178,129
Shipping 122,031 176,935
Total 251,489 355,064
Direct Labour Paid Hours Cases / Hour Paid Hours Cases / Hour Paid Hours Cases / Hour
Receiving 142 910 220 809
Moving Stock 345 728 360 986
Selection 875 140 1,009 175
Loading 150 813 217 817
Shipping 1,025 119 1,225 144
Other
Subtotal Direct 1,512 81 1,806
98
Indirect Labour Paid Hours Cases / Hour Paid Hours Cases / Hour Paid Hours Cases / Hour
Managers 125 975 116 1,530
Clerks 87 1,409 91 1,936
Inbound Checking 44 2,801 62 2,848
Inventory Control 57 2,156 82 2,154
Outbound Checking 24 5,001 38 4,674
Housekeeping 99 1,230 122 1,453
Maintenance 81 1,511 74 2,401
Other 31 3,929 80 2,212
Subtotal Indirect 547 223 665 266
GRAND TOTAL 2,060 59 2,470
72
13
ROFDA Perishables
Comparison
Perishables Cases/Man-Hour
Function 2008 ROFDA Average 2009 ROFDA Average Top 3 Average (Total
Throughput)
Volume Volume Volume
Receiving 237,814 184,131
Shipping 242,677 186,963
Total 480,491 371,094
Direct Labour Paid Hours Cases / Hour Paid Hours Cases / Hour Paid Hours Cases / Hour
Receiving 407 584 269
684
Moving Stock 603 796 387
958
Selection 1,623 150 885
211
Loading 242 1,005 88
2,124
Shipping 1,864 130 973
192
Other
Subtotal Direct 2,875 84 1,629
115
Indirect Labour Paid Hours Cases / Hour Paid Hours Cases / Hour Paid Hours Cases / Hour
Managers 223 1,089 185
1,011
Clerks 138 1,756 89
2,091
Inbound Checking 116 2,086 50
3,705
Inventory Control 120 2,018 99 14
1,893
Outbound Checking 35 7,032 10
18,696
Housekeeping 236 1,026 202
Warehouse Labor – ROFDA
Members
ROFDA Results

Total Direct Paid Hours – represents 70% of labor expense

Average

Order picking is costly and accounts for large % of warehouse labor expense

“Focus on Selection travel and walk time”

16
Design Considerations:
Travel

Pick Line Length vs. Variety

Mom and Apple Pie
ROFDA Results
Total Indirect Paid Hours - represents 30% of total
Average

 Top 3 spend more time on Inventory control & clerical and less time on
maintenance and inbound checking than the ROFDA average

“ A Clean Warehouse is a Productive Warehouse” 19

The Basics – Facility
cleanliness
Question For You Opportunity

Our facility appears dirty, we

have allot of product damage,
housecleaning is not our strong Clean
card. facilities have
Our facility is reasonably clean higher morale
but it is by no means spotless. and better
productivity
We are proud to take people on
tours of our facility because it is
immaculate. Our associates take
pride in the cleanliness of the
building.
Facility Cleanliness
September 24, 2004

“A clean facility

is a productive
facility.”
“A dirty facility is
one of the most
telling signs of
weak operations
management.”
The Basics - Ergonomics
Question Opportunity

Our associates pick products that

are heavier than 30 lbs from
locations above ground-level. Good
ergonomics will
reduce worker
Our heaviest products > 30 lbs injuries in the
are always positioned at ground- back, neck,
level. shoulder,
elbow, wrists,
knees and
ankles
We have ergonomic pick
locations to facilitate the way in
which associates lift heavy
products.
The Basics – Facility
Lighting

“The dock is where the success or

failure of distribution operations will be
“Proper lighting
determined”
technology will
reduce energy
costs, and
improve labor
productivity,
accuracy and
morale. ”
Ergonomics

“Reduce worker picking

injuries by keeping
heavy products at
ground-level, or by
bringing the picker to the
product.”

September 24, 2004

Productivity Drivers – effect on
performance

Top Common Factors: Opportunities to lower costs:

 Engineered Standards
 Incentives
1. Volume  Computer Directed Putaway
2. Order size  Voice Technology
3. Pick Line length  Order Turnaround
4. Hit Rate/Density  Order Relationship
 Selection Method
 Selection Accuracy
 Fill Rate
 Scratches
 Labor Turnover
 Lumping %
 No Touch Receiving

25
“The Drivers”
What is the Impact of Average Movement
 Weekly Cases Shipped

  Volume >320,000 Volume <320,000

Cases Shipped/Week 573,901 131,247

Selection (Cases/Hour) 145 119

Direct Labor Throughput Rate 71 65

“Direct Correlation between Volume and Productivity”

26
50% of variation in logistics cost can be explained by volume alone
“The Drivers”
What is the Impact of Order Size

  Order Size >244 Order Size <244

Cases Shipped/Week 483,637 206,467

Selection (Cases/Hour) 133 150

Direct Labor Throughput Rate 67 76

Indirect Throughput Rate 146 206

Total DC Throughput - Cases/Man Hour 46 55

“ Order Size impacts selection rate”

27
“The Drivers”
What is the Impact of Item Variety
 Unique Sku’s Stored in Facility

  Sku’s >10,000 Sku’s<10,000

Cases Shipped/Week 446,811 195,224
Selection (Cases/Hour) 141 131
Direct Labor Throughput Rate 72 64
Indirect Throughput Rate 158 172
Total DC Throughput - Cases/Man Hour 50 47

“ More Variety less efficient”

28
Opportunities to Lower
Operating Costs
Aside from the basics - facility cleanliness, lighting, ergonomics and
safety
1) Measuring and improving labor productivity – standards and
incentives
2) Warehouse Software and Equipment Technologies
3) Improving picking operations and strategic handling of small
orders
4) Measuring product velocity and cube information
5) Layout development and fast / slow concepts
6) Optimized pick location management / slotting
7) Budgeting and accounting of distribution operations with ABC
Costing
“The Drivers”

What is the Impact of Standards & Incentive Programs

(1)Operators with incentives are more productive than those W/O

  Incentives No Incentives
Cases Shipped/Week 458,350 181,377
Selection (Cases/Hour) 137 144
Direct Labor Throughput Rate 71 66
Indirect Throughput Rate 161 164
Total DC Throughput - Cases/Man Hour 49 47
Errors 2/1000 4/1000

“ Incentives providing benefits?”

All participants have Standards

30
Standards & Incentives
Question Opportunity

We do not measure labor For

productivity in our warehouse. distribution
We measure labor hours by operations
function mainly for labor with high
planning and budgeting wage labor
purposes. expense or
militant
We have engineered labor unions,
standards in place for some of standards
our job functions. We regularly and
inform associates of their incentives
productivity performance. can reduce 5-
We have labor incentives 15% labor
developed against standards expense
Standards and Incentives
 One of the most significant productivity
gains in a high volume distribution
operation will be derived by:
– Implementing and maintaining labor
standards
• E.g. Red Prairie, Tom Zosel, In-House
– Implementing an incentive system
Incentive Systems
 Things we have learned:
– Paying for employee meals is a form of incentive that
works well to reduce turnover
– Pay out incentives frequently (e.g. with pay checks)
– Base incentives on individual performance except for
receiving, returns, salvage…
– Incentives should include penalties for errors, shorts
and unsafe behavior (e.g. lose incentive if errors are
encountered)
– Incentives should be based on industrial engineered
labor standards, preferably by zone or aisle
– Incentives only paid if no absenteeism for the period
– Incentives should allow an operator to increase wages
by a measurable amount (e.g. 20% or more)
Slotting Methodology
Question Opportunity
Our picking is random from all vertical
levels of storage.
Our primary fixed pick locations are not Optimized setup
always at ground-level but we try to keep of a pick line will
slow movers in locations that are not often reduce
accessed from ground level order picking
hours upwards of
Our pick locations are all at ground level. 15%

Our pick locations are assigned to

products by slotting software to maximize
picking efficiency.
 Location Numbering
Systems
X-Pick U-Pick Z-Pick

FREQUENT STOP POINT FREQUENT STOP POINT

FREQUENT STOP POINT FREQUENT STOP POINT FREQUENT STOP POINT
(FAST MOVERS) FREQUENT STOP POINT (FAST MOVERS)
(FAST MOVERS) (FAST MOVERS) (FAST MOVERS)
(FAST MOVERS)

A = FASTEST ITEMS A = FASTEST ITEMS

A = FASTEST ITEMS A = FASTEST ITEMS A = FASTEST ITEMS
A = FASTEST ITEMS
B = FAST ITEMS B = FAST ITEMS
B = FAST ITEMS H = SLOWEST ITEMS B = FAST ITEMS
H = SLOWEST ITEMS
C = SLOW ITEMS C = SLOW ITEMS
C = SLOW ITEMS C = SLOW ITEMS
D = SLOWEST ITEMS D = SLOWEST ITEMS
D = SLOWEST ITEMS D = SLOWEST ITEMS

Location address systems should be intuitive

e.g. AA-RR-LP (aisle-rack-level-position)
Bottom Line: Total Labor
Savings
Potential Savings realized by Wholesale Best of Breed
• Total throughput savings of 9 cases/man-hour compared to ROFDA

Cases Shipped Hours Staff* @ $35k

100,000 439 13 $ 455,000

250,000 1,098 31 $ 1,085,000

500,000 2,195 63 $2,205,000

* at a rate of 35 hours per week 36
Results – Payback 1yr
Improved Productivity Projections
Labor Rate by Function Benchmark Alternative Alternative Alternative Kom Klinic Top 3
(Cases per Paid Hour) (Kom Klinic) A B C Average Kom Klinic

Moving Stock 653 847 791 741 1,019 1,127

Selection 144 179 182 169 190 257
Loading 482 482 482 482 1,020 1,208
Other N/A N/A N/A N/A 770 2,933
Total Direct Labor Rate 76 89 89 85 95 135
Total Indirect Labor Rate 287 287 287 287 227 297
Total Throughput 60 68 68 65 67 93

Cost/Savings Comparison
Alternative Total Capital One-Time Costs On-Going Savings Lifetime (years)

A $ (717,200) $ (321,310) $ 1,080,456 1.5 to 2.0

B $ (143,000) $ (172,810) $ 1,029,202 1.0

C $ (126,500) $ (167,310) $ 680,955 .8 to 1.0

37
DoMoreWithLess
 Milk your WMS for More
- can your WMS do more to reduce labor costs,
improve inventory management, attain more accurate
shipments, and improve space allocation?
- what else can your system do?
- have you looked into add-on capabilities?
Use challenging economic times as an opportunity to
scrutinize operational efficiency to help weather the
storm and reap benefits when the market turns

38
DoMoreWithLess
 Attack Freight Costs
- use analytical tools to identify how, why, when and where your costs are incurred.
Manage freight more efficiently and gain net savings of 3-20%

 Make use of Best Practices to Plan, Procure and Manage Freight

- scrutinize processes in planning, procurement and shipping revise or eliminate all
those not ideal, innovative or well integrated with other functions

 Cash in on ergonomics
- do you have lift trucks or racks with ergonomic features? … are you running regular
programs to promote ergonomics and safety? … inform your insurance provider …
you could see your premiums drop

39
DoMoreWithLess
 Stop Doing Things
- get end-to-end visibility on your operation and stop shipping, handling or
warehousing anything unnecessarily… doing things 2x, 3x, 4x is costly

 C-Dock/RLP/FT to Cut handling and Inventory

Carrying Costs
- select items to most
 To-Automate-or-not-to … easily bypass the storage racks
- and thereby
smaller footprint,increase
productivity efficiency
gains, reduced labor requirement, 18 month
to 3 year ROI… may be worth having in place for when the recovery hits

40
Accounting/ABC Costing
Question Opportunity

Our financial accounting of

logistics expenses is weak. It is Strong
difficult to understand our cost accounting,
structure and how the money is budgeting
being spent. and ABC
Our financial Accounting and costing are
Budgets are strong. simple and
inexpensive
We use ABC Costing to and ways to
understand the cost of understand
transactions and logistics events. costs
ABC Costing Warehouse Productivity
Scorecard
Direct Labor Measurement Average Average Total Total Total Labor Cost per
Function Criteria Wage Rate Throughput Transactions Paid Cost/week Transaction
Including Rate/hour /week Hours/
Fringe week
Benefits

Receiving Pallets Received $17.37 28.0 5,816 208 $3,607 $0.62

Putaway Pallets Putaway $22.44 12.7 5,816 458 $10,276 $1.767

Stocking/Stuffin Cases Cut & $22.32 125.9 102,375 813 $18,135 $0.177
g Stocked
Split Case Pieces Picked $13.97 586.0 1,857,496 3,170 $44,297 $0.0238
Picking
Full Case Cases Picked $14.73 107.0 56,433 527 $7,768 $0.138
Picking
Replenishment Pallets $17.93 9.3 6,904 742 $13,310 $1.93
Replenished
Packing/Checkin Cases Packed & $14.97 107.7 55,520 516 $7,717 $0.139
g Checked
Loading Pallets Loaded $20.86 13.5 3,161 234 $4,884 $1545

September
Indirect 24, 2004
Labor Pieces Shipped $13.81 138.5 1,913,929 1,001 $13,820 $0.019

Total Pieces Shipped $16.15 249.6 1,913,929 7,669 $123,814 $0.167

ABC Labor Costing by
Process Cost / Sales Order Line
Function Carousel Carousel Case Flow Split Case Full Case
4 pods 2 pods Rack Conventional Conventional
Pick to light
DIRECT LABOR
Receiving $0.0051 $0.0051 $0.0051 $0.0051 $0.0051

Putaway $0.0158 $0.0158 $0.0158 $0.0158 $0.0158

Replenishment - Full Case $0.0203 $0.0203

Replenishment – PTL / $0.0506 $0.0506 $0.0506

Carousel
Replenishment

Selection – Carousel 4 pods $0.0382

Selection – Carousel 2 pods $0.1291

Selection - Pick to Light $0.0714

Selection – Split Case $0.3272

Conventional
Selection – Full Case $0.2276
Conventional
Loading $0.2776 $0.2776 $0.2776 $0.2776 $0.2776

Subtotal Direct Labor $0.3822 $0.4732 $0.4155 $0.6409 $0.5413

Ambient Activity Profile
SKUs % cases % Cube % lines

Conventional

Floor 4300 93 95 90
VNA 6457 7 5 10

Mechanized

Floor 2457 79 88 73
Active: 1283/52%

Mini-Load 8300 21 12 27
Active: 3635/44%

Dynamic Pick Line: Slot only for one shift

ASRS: Dynamic Pick Line
 Unit Load/Mini-Load
drop required pallets to tunnel
drop required trays to pick face
based on shift or batch orders
restock above: based on history
maintain weight/stackability
 Considerations
set-up lead time
load stability
available slots and location
Dynamic Slotting: Benefits
 Picking
– Reduced labor, eliminating merge and travel time
 Replenishment
– Reduced labor requirements
– Dynamic replenishment dependant upon daily SKU requirements
– Increased accuracy
– Reduce inventory
 SKU Density
– Higher than conventional racking solutions
 Flexibility
– Order driven system
– Dynamic slots
• Recycle slot after pick
• Can assign multiple slots to SKU
 Modularity
– Easily expandable
Mini-Load Module

Slow Movers: 77% SKUs, 21% Cases, 12% Cube, 27% Lines
12’ aisle, pallet jack merge
Order picker truck backup; 35’ high
Mini-Load Input

“Decanting”
Pay me now or pay me later
Ergonomic Decanting

Mezzanined Station
Pallet Lift to Slider Table
Mini-Load: Pick Path

Mezzanined infeed optional

Mini Load Pick Profile

Multiple Tray Sizes

System Controlled Slotting
Cost Comparison
Conventional ASRS
Building $61,000,000 $46,000,000
ASRS
unit load na $27,000,000
mini-load na $8,000,000
Other MH $8,000,000 $4,000,000
Capital $69,300,000 $85,000,000
Labor $12,000,000 $9,500,000

Payback: 8.5 years

Not Exactly a Slam-Dunk….but
Option 2.5: Embedded Mini
Load
Integrate modules within conventional layout
4 in Ambient, 3 in Frozen
respect weight range/crushability
group national /program accounts

 $8mm investment
 enhanced ergonomics
 facilitates variety increase
 streamlined receiving
 picker merges all product
 reduced pick errors
 reduced dock delays
 reduced truck driver sort
 order-picker backup
 experience with automation
 best of both worlds
 can retro-fit other facilities

Other? Just Ask DICK

Supply Chain Labour
Transportation Stores/Manufacturing

Vechicles Other
20% 25%
Labour
39%

Fuel
24%
Labour
Operating
75%
17%

Warehouse Returns

Rent
25%
Other
35%

Labour Utilities
55% 5% Labour
65%
Computer
2%

Supplies
13%

54
“The Drivers”
What is the Impact of Union versus Non-Union

  Union Non Union

Cases Shipped/Week 246,206 562,445
Selection (Cases/Hour) 125 158
Direct Labor Throughput Rate 63 80
Indirect Throughput Rate 141 195
Total DC Throughput - Cases/Man 44 57
Hour

“ Non – Union operators are more productive”

55