HOW TO RUN A LOGISTICS IMPROVEMENT PROGRAM?
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Successful logistics improvement programs follow a certain logical sequence. First, quality KPIs are measured, then productivity KPIs are put in place, then idea generation and implementation is started.
Start with the quality KPIs
In many operations, outsourced or not, the quality KPI’s are not exactly defined, let alone measured, reported or understood. To fix this, is the starting point of all improvement programs. The quality KPIs indicate how well the operation runs and examples are On-Time-In-Full delivery, picking accuracy, stock accuracy, etc. It is important to understand what the level is, what the ambition is and what happens during your project. If you deploy initiatives that lower the scores in these type of KPIs, most probably someone will start to complain. Therefore, you need to know the starting point and the trend.
In case of outsourced logistics, most likely the Logistics Service Provider (LSP) plays an important role in the measurement and reporting. The outcomes are discussed to understand root causes of (under)-performance.
What counts for quality, also counts for productivity. In many occasions, they are not measured and/ or reported. Even in case of in-sourced logistics, the effort is not always taken to go further than total absolute cost or simple ratios such as logistics cost per € sales. If you want to improve productivity, it is very important to understand in detail what input is needed to reach the output. To start with this measurement is important, otherwise, you cannot understand what you have improved and whether it was worth the effort.
Thorough analysis of the KPI- and productivity scores will give you already many ideas to improve the operation. Next to that, the Japanese lean production systems have taught us that a good “gemba-walk” should generate at least 1 good improvement idea, that all ideas are good, also the small improvements and the everybody should contribute. The best ideas to improve are generated bottom up: by the shop floor employees. Motivate them to express ideas and make this as easy as possible. The continuous improvement boards, prominently positioned, should do the job.
Finally, and if needed, change more structural things
If you have found out during your continuous improvement, that more structural issues such as your building, WMS, or even the LSP, are limiting further improvements, change them as a final step. Why change them as a final step? Because if you start here, you will never be able to compare the new situation with the old. If the grass seemed greener to you with the LSP at the other side of the street, and after 1 year it seems that the cooperation with this supplier is much better you won’t be able to compare performance and/ or productivity because you have never measured before. So, who knows what the benefit exactly is? Exceptions are clear: if things are just not working, you might be forced to step in, make a change and start building from there. But there will always be a risk that you draw this conclusion too quickly.
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