Uncovering the Mystery: The $25M Heist Tied to The Supply Chain Sleuth!
In a significant setback for a major national retailer, a $25 million investment in automation and upgrades for its Distribution Centre (DC) has been largely wasted due to a flawed fulfillment and replenishment strategy.
The retailer, which has expanded its product portfolio beyond traditional items, found itself grappling with a unique challenge. The old products were standard in format and size, while the new ones came in various shapes and sizes with no standard format. This mismatch led to a core operation issue: the series of pick-and-pack workstations where boxes of products are opened, some contents picked, and sent onwards.
In an attempt to streamline operations, the company adopted a "Don't Touch" strategy. This principle aims to eliminate unnecessary handling, time, and cost by minimizing the need to open cases in a DC. However, the lack of vision, strategy, foresight, and change leadership resulted in a significant financial loss for the company.
The "Don't Touch" strategy would have offered numerous advantages. It could have increased productivity and throughput by over 10 times the current levels, reduced DC operating costs by millions of dollars per year, and reduced store material handling costs by millions of dollars. Unfortunately, the number of full case orders is very low, making the implementation of this strategy challenging.
The old strategy led to inefficiencies, with boxes often containing a unique assortment of numerous SKUs, leading to multiple handling of each item. This issue was particularly evident in the pick-and-pack stations, where the startup only managed to ship 1% of pre-startup levels initially.
The consulting or engineering firm that developed and implemented the project is not identified in the provided search results. However, Costco, a store that practices the "Don't Touch" strategy effectively, offers a successful example of how this strategy can be implemented successfully.
Despite the financial loss, the author's solution, which focuses on moving the vast majority of operations to full case quantities and eliminating piece packing entirely, is still being shared to prevent similar situations in the future. The principle of the "Don't Touch" strategy is seen as a valuable tool for improving warehouse efficiency and reducing costs.
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