Driving higher performance in your warehouse

By Bruce Ennis -- Industrial Distribution, 10/2/2008 9:44:00 AM

A Lean Six Sigma Black Belt was assigned the task of improving warehouse performance for a Western Canadian industrial distribution center. Process improvement of any kind can be a challenge. Improving a process that is sustained by entry level employees creates even greater challenges. During the course of this project, the Black Belt rediscovered what many business leaders subconsciously know, but often forget—special care must be taken when attending to human-dependent processes. This is the story of a project manager’s discovery of the unique differences between “human” and “automated” business processes.

I was a quality leader employed in the manufacturing sector for 19 years. In the 1990’s, I became fascinated with lean manufacturing and Six Sigma, now commonly grouped together and referred to as Lean Six Sigma.

In 2003, I became a Six Sigma Black Belt. In my first year, I led a successful project that saved close to $1 million—tops in the company. For my effort, I was flown to New York to share Six Sigma “success secrets” with the CEOs of several multi-national corporations. I thought to myself, “This Six Sigma is easy.”

That ended when I accepted an offer to apply my expertise in an entirely different field: industrial distribution, a business where human, not automated, processes frequently predominate.

First project: warehouse picking
My first assignment was to improve the performance of our warehouse “picking” process. A picker is an employee who is paid to pick (and sometimes pack) customer orders. Their job is vitally important. Pickers must select exactly what the customer wants, and they must do it in a timely manner.

It’s not easy. The DC stocks more than 40,000 different products. We require our pickers to be productive and accurate. A breakdown means our customer is either not going to get what they asked for, or they’re not going to receive it when they need it.

The pay rate for a picker is modest and the work is frequently mundane. As a result, the picking function is challenged with very high turnover year after year. Economics played a big part in how I approached this project. As with most Six Sigma improvement initiatives, project leaders are restricted to a tight budget. A costly redesign was not an option. Instead, I was charged with improving the existing process and optimizing what we already had.

A good Lean Six Sigma project manager is taught to get in the trenches and “walk a mile in the shoes” of the people that perform the actual work. In my first week of walking a mile in a picker’s shoes, and of mapping the process, I made several discoveries:

• Metrics: Our performance measurements were weak and not defensible.
• Pay Structure: Everyone was paid at essentially the same rate. Tenure, not performance, was the barometer for pay differentiation.
• Job Pride: There appeared to be little dignity in the picking role.
• Leadership: Active, hands-on leadership was missing.
• Human Dependency: Although technical systems (software, conveyers) were definitely part of the process, the core of our warehouse picking function relied on people.

Manage what you measure
There is a business adage that states “you manage only what you measure.” World class companies measure what’s critical to their success. These measurements are often referred to as Key Performance Indicators. Without KPIs, a business is unaware of where it is or where it is going. A job that lacks clearly-defined measurements usually lacks clearly-defined goals for its employees. Performance deteriorates. The attitude that “It’s just a job” pervades.

As I immersed myself in the world of picking, I flashed back to a summer job I had when I was 16. I was required to keep a supply yard clean and repair damaged equipment. I received very little feedback from my boss. No one cared what I did, or how much I did. I hated that job.

The same phenomenon existed in our warehouse. Without KPI measurements or feedback (i.e., strong leadership), performance suffered. I witnessed exceedingly wide variability among warehouse staff; variability in passion, competency, productivity and accuracy.

Like my summer job from so many years ago, our pickers did not feel validated. It seemed what they did didn’t matter. I recognized very quickly that an enormous opportunity for improvement existed in the optimization of how we managed our human capital.

Develop a measurement system
Performance measurements are powerful motivators. According to a Voice of the Customer survey, two things mattered with respect to being a good picker: accuracy and productivity. My challenge was to develop a measurement system that measured both the volume and the accuracy of the work.

I was told by numerous managers that it is impossible to apply metrics to warehouse distribution simply, because of the massive product offering and the varying degrees of difficulty in picking one item versus another.

“How do you compare the productivity of an employee that picks large items such as stepladders all day, versus an employee that picks nuts and bolts?” they asked. “How do you quantify accuracy? We’re not comparing apples to apples here.”

It wasn’t easy. I began collecting and analyzing reams of warehouse data, over 4,000 man-days of picker work. I broke the information into warehouse “zones” and analyzed the differences. Using box-plots and a concept called normalization, I was able to create a system for our company to compare fairly the accuracy and productivity of warehouse pickers, regardless of what items they picked or where they picked it.

Research indicated that four critical changes would yield significant improvements to productivity and accuracy:

• Transparency—Now that we had data, we needed to communicate to our employees how they were doing and how their performance compared to others’. This creates a foundation of accountability and expectations in the workplace. It also validates the picking role, sending a clear message that their work matters.
• Utilize “Dashboards”—Dashboards are tools that depict statistical information in a visual way. They are easy to understand and therefore provide instant interpretation.
• Reward Excellence—Recognize and reward individuals who demonstrate superior performance. The current system did not cultivate excellence.
• Restore Pride—Establish a respectful, collaborative relationship with the staff. Apply the Voice of the Customer techniques to understand their workplace needs.

Pay For Performance
“Reward your best people, not your worst” – Jack Welch, former CEO, General Electric

Rewarding excellence proved to be the most sensitive of the four proposals. Why? Because I proposed we reward our line-level staff in a manner never tried before—with money.

It has always seemed odd to me that at a corporate level, monetary incentives are commonplace, yet on the ground floor they are almost unheard of. Wouldn’t someone earning $20,000-30,000 per year be just as motivated by the opportunity to make extra cash as the executive earning a six-figure income?

After polling our warehouse staff, the answer was obvious. The P4P model I proposed provided an opportunity for all employees to earn extra cash. Despite anxiety regarding the problems that can surface with floor level “pay for performance” programs, my employer was immensely supportive of my study.

Planning the pilot
I received approval from our CEO to run a four-week pilot that provided carte-blanche authority to change they way we administered our picking process. After several meetings with our picking staff, the following changes were authorized:

• We would measure the accuracy and productivity of every picker, every day.
• We would post the results in visible locations.
• We would reward excellence. Superior performance was monetarily rewarded.

I would meet with the pickers every week to solicit feedback on how we could improve the process.

The data would not be used in a punitive manner. Root causes of picking errors or lower productivity would be identified and corrective action (usually additional training) would be prescribed.

The one-month pilot was a thoroughly rewarding experience. For four weeks I collaborated with 20 pickers, asking them each day, “How can we make this better?” I received wonderful feedback on how to ensure the new picking process was mutually beneficial to the staff and to the company.

At the end of it all was a picking process, developed jointly by warehouse employees and a Six Sigma Black Belt, that was more rewarding, more fun, with improved performance. Results included:

• Overtime was completely eliminated. Prior to the project’s launch, overtime was a chronic problem. Pickers were routinely asked to stay late or work weekends to attack the backlog of work orders. It had been years since 100 percent of orders were completed the same day they were requested. Less than five days into our pilot, productivity had increased so dramatically that the pile of pick tickets was obliterated. Pickers felt an enormous sense of accomplishment as they watched the backlog disappear.
• Productivity increased by 25 percent. This is a conservative value, as on several days we simply ran out of work. Had there been more pick tickets to process, productivity values would have been higher. We celebrated this accomplishment by allowing the employees to go home early on some of the days. On others, we organized “5-S’” teams, the lean practice that involves cleaning, organizing and polishing the workplace. Another interesting discovery: The most productive workers were also the most accurate. This was surprising to many, as they believed an increase in productivity would lead to a greater number of errors.
• Absenteeism was reduced by 47 percent. When asked to explain the dramatic reduction in absenteeism, the workers said there were two primary contributors: They had a chance each day to make a little more money and it was more enjoyable coming in to work. Morale had clearly improved.

Conclusion
Disciplines such as Lean and Six Sigma have dramatically improved the health and profitability of scores of businesses. Irrefutable evidence exists to support this. What must never be forgotten, however, is the importance of your employees—the lifeblood of your organization. The ability of a business to motivate and inspire its workforce is a prerequisite to successfully improving people-dependent processes.

Bruce Ennis is a Lean Six Sigma Master Black Belt. He currently works for an international industrial distribution company, leading their North American Lean Six Sigma program. He can be contacted at ennisb@telusplanet.net