Sometimes, overcrowding, damage, customer complaints, service calls, even exchanges, labor costs and order cancellations need consultative solutions.
One of the amazing things about furniture retailers is the variety of ways they incorporate operational procedures into their marketing strategies. For example, one retailer I know, preps and delivers almost everything while another, doing similar volume, processes 21,000 customer pickups in-the-box at their unique customer pickup center. Some retailers focus on same day delivery from stock, while others do more than 90% special order business. It doesn’t matter what business model they choose, highly successful retailers always coordinate their marketing strategies and operational systems through the entire cycle of ordering, warehousing, delivery and service after the sale.
Ask your key managers and yourself this question. “Is the operations side of our business meeting the needs of your overall strategy?” Some common indicators that operations improvement is needed are overcrowded warehouses, damaged merchandise, customer complaints, service calls, even exchanges, labor costs and order cancellations. While all these indicators may be satisfactory, changes may still be necessary if you are planning for growth and recognize the necessity for increased capacity. Whatever your strategy, you may consider using a consultant to achieve your operations goals.
Consulting services can be considered an investment rather than an expense. This month’s article will help you to choose a consultant and will provide information and data you will need to get the most value.
You should not use a consultant as a status symbol or to develop ammunition for an internal political battle. Your consultant should have recent related furniture warehouse experience and preferably should not be tied to a single supplier. The buyer of management advice has a right to expect that the advice given is both objective and independent. To meet expectations, the client and consultant must have a clear understanding of the issues to be reviewed before the study begins. Once a consultant is selected, you should insist that the appropriate people at your company make themselves available to him or her. Projects for updating existing processes and operations or new facilities planned in this way are productive from day one.
Whether you have annual sales of two million dollars or two hundred million dollars, you will want to have a pre-planning document. There isn’t a cookie cutter solution for operations, so a specific document should be developed based on your unique business situation.
Keep in mind that positive results can be achieved within a few weeks in some areas... like cleaning up a backlog of service orders, changing the layout in the prep and deluxing area or having a clearance sale to convert dead and slow movers into cash. It usually takes at least three months and frequently much longer to implement systems to synchronize supply chain management.
If you are looking at an existing building or a new facility, planning should start with site selection. The earlier the consultant is involved in the planning process, the higher the potential benefit. Preliminary layouts can be done to verify site functionality and future growth opportunities. Planning ahead and doing the job right the first time is always less expensive than re-doing it later. Some mistakes are very costly, if not economically impossible to correct. For example, an option on adjacent land may be available at nominal cost for future expansion flexibility.
A move to an existing facility, acquisition of racking and material handling equipment usually takes several months or longer. Construction of a new facility typically takes six months from the date foundations are dug. Planning before the first spade of earth is moved can take as little as a month on a developed site and much longer when environmental problems or fire protection issues relating to available water volume or water pressure are present. One year is the typical time between the date you review alternate sites to the time you move in.
One final word. You may be able to achieve significant improvement without building a bigger warehouse. Improved inventory management techniques can significantly extend the useful life of an existing facility. You may also be able to easily alleviate problems through better inventory management oversight. Check every sku where inventory exceeds sixty days and ninety days. You may be surprised at your findings. Twenty per cent or more of total inventory tied up in these categories isn’t unusual. It is always cheaper to manage information than inventory. Other improvements in layout or operating techniques can also yield significant benefits.
The following lists provide planning considerations for conducting warehouse and delivery studies for existing, new and renovated operations.
Existing Operations
1.Evaluate current inventory and consider whether you have been managing your inventory well, or if more oversight is required to clean up non-saleable merchandise, obsolete merchandise, sold but not delivered items, return to manufacturer for credit merchandise, items to donate to charity, etc.
2.Review the operating indicators noted above and others you have found to be useful for monitoring operations. Determine areas of opportunity to discuss with the consultant.
3.Collect and make available your facility and layout prints.
4.Have any available reports on labor and space usage on hand. Productivity is typically measured as labor per unit handled, overall and by function. Space reports may summarize usage by type of rack, the product category or a combination of these based on height of opening.
5.Make a written list of the changes you expect to take place in your operation over the next several years?
- What is the anticipated growth in your business? Are you planning to open more stores or relocate current ones? If so, will these be located within the current area(s) or in new markets? Where?
- Calculate possible changes in price points for merchandise sold. Same, up, down?
- Look at changes in your product mix over time. Do you plan to sell more or fewer case goods, upholstery, carpets, accessories, appliances, RTA…?
- Will the size of product sold remain about the same or change? If so, how?
- Are you primarily a special order store or do you sell from stock? What’s the percentage? Do you plan on doing more special order or more sales from stock?
- Describe your vendor sourcing strategy. Consider primary vendors, quantities bought at a time, LTL, truckload, full containers, etc. How might you change your vendor sourcing strategy to include direct imports? Are you a member of a buying group?
6. Think about policies and procedures that set you apart in serving your customers that must be reflected in the warehouse facility, prep area or shop. Some companies deliver "in the box" while others do extensive prep work.
7. Check into whether or not you are using your computer systems effectively. What systems are working well, need updating or beg to be replaced with better technological solutions?
8. Consider strengths and development needed for warehouse and delivery personnel.
Planning A New Or Renovated Facility
1. Do you have a specific builder or architect in mind?
2. Are there any identified site challenges such as historic district limitations, unique building codes, environmental issues, truck access routes, etc. to be considered?
Contributing editor Dan Bolger of The Bolger Group helps companies achieve improved transportation, warehousing and logistics. You can send inquiries on any aspect of this article or on transportation, warehousing or logistics issues to Dan at dbolger@furninfo.com.