Distribution

Distribution

Distribution center surpasses every performance record established in 60-year history of chain’s six other distribution centers.

Situation:

This retail chain organization, established in 1939, has expanded from a single store to a multibillion-dollar business that currently operates 5700 stores and opens new locations at a rate of 600 to 700 per year. With the slogan of “A better life for everyone” the organization offers budget prices on a variety of products. Seven distribution centers across the Southeast and Midwest, each with an employee base of 500 or more, service this growing chain. Typically when a new DC opens those employees have only 8-10 weeks to become competent at regularly and accurately servicing 600-700 retail stores. These circumstances typically result in issues of high stress, turnover, safety and accuracy (meaning the right product in the right place at the right time). In a recent opening of a new million-square-foot facility, the chain’s management decided to try behavior-based Performance Management (PM) in an attempt to avoid the many problems inherent in such an endeavor.
 

Solution Implemented:

The new center’s managers chose to focus on recognizing the specific behaviors that would bring the performance results they desired. They involved all employees in thematic contests in which their observed behaviors were posted and graphed (anonymously) as supervisors concentrated on recognizing anyone who performed the behaviors. Within months this DC had shortened the learning curve by a full year, taking six months to meet and then surpass all performance standards set by the other centers. In fact, this DC beat the standard productivity numbers from day one. Also, because the PM methods are positive, attendance rates remain higher than that of any other facility and turnover is lower. Rewarding the targeted behaviors related to accuracy, productivity and cleanliness has led this DC to achieve breakthrough progress in those areas. Currently, this DC, raised on PM, services 90 more stores than do the other DCs. Today, the parent retail chain is focused on taking PM to the other DC operations as quickly as possible.
 

Results of Intervention:

• With a network accuracy rate of 70 percent, this distribution center (the only one to use PM) consistently achieved 90 percent accuracy within months of opening its doors. This will save the company at least $250,000 per year. This number does not include the sales made possible by being able to provide stores with continuous shipping. Other benefits: Exception-based “moves” of product have been cut by more than 25% and payments to vendors for incorrect receipts of purchase orders have been reduced by more than one-third.
• An average attendance rate of 95 percent at the PM’d DC surpasses the 88 to 90 percent attendance norm at this retail chain’s non-PM’d distribution centers.
• Without emphasizing productivity numbers, the DC’s shipping department quickly set a record of 42 cartons processed per man hour.
• Safety shows measurable improvement since emphasis on specific safe behaviors began. Lost time accidents are down 45% and medical-only accidents are down 22%. The client estimates that this represents a savings of $50,000 at the DC.

“We are achieving better numbers than we’ve ever achieved before. Our accuracy is higher;
our accidents are going down; our costs are lower than they’ve ever been and we’re setting
new records on throughput activity and accuracy.”

– VP Logistics