W H I T E P A P E R
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IS YOUR DC HIDING
SOMETHING?
The Cost of Unproductive Time in
Distribution and Fulfillment
If your DCs are nothing more than cost centers
that are hampered by unproductive processes
and inefficient strategies, you can apply advanced
warehouse technologies to squeeze more out
of your day-to-day fulfillment operations and
improve your bottom line.
IS YOUR DC HIDING SOMETHING?
The Cost of Unproductive Time in Distribution and Fulfillment
W H I T E P A P E R
In this market brief, we’ll explore the DC-
related productivity challenges that companies
are facing, and the ways in which unproductive
time in your DC might be costing you more
than you think.
The Many Faces of Unproductive Time
Unproductive time takes on many different
faces in the distribution environment, where
both direct work (handling merchandise, picking
orders) and indirect work (cleaning activity,
empty pallet collection and breaks/lunches) can
all impact an operation’s overall productivity
levels. Spread over many people, shifts, and/
or locations on an annual basis even seemingly
minute spans of unproductive time can add up
to significant financial losses for employers.
In the DC, unproductive time can also be
traced to bad processes and methodologies.
Performing a specific function repeatedly,
but in an incorrect or inefficient manner, for
example, can also hamper productivity. For
this reason, Honeywell recommends frequent
“health checks” and refresher training
sessions for employees who play a key role
in ensuring smooth workflow processes and
as little unproductive time as possible. It
also recommends looking at the end-to-end
processes, reviewing quantitative studies,
and examining potential technology/tools that
can help streamline processes and reduce
unproductive time.
On average, the DC that employs at least
50 workers loses close to 3,000 hours of
productivity in any given year. Breaking those
numbers down, 48% of companies believe that
there is up to 15 to 22 minutes of unproductive
worker time available within the average 8-hour
shift. In many cases, companies are turning to
technology to help solve the problem.
Technology may be helping companies work faster and with fewer resources,
but the modern-day distribution center (DC)
is still some way from achieving optimum
productivity.
However, during that time span, the average
amount of unproductive time per 8-hour day
has increased from 15 minutes to 22 minutes.
Using order mispicks as a benchmark—and with
companies reporting approximately 134 mispicks
per week—the total cost of mispicks is $400,000
annually, according to the recent Honeywell report,
Unlocking Hidden Cost in the Distribution Centre.
Realizing that no one can afford to waste
valuable time or dollars in today’s competitive
business environment, more organizations are
turning to their logistics and DC managers to fix
these and other productivity problems.
Nearly eight out of 10 (79%) managers have
been tasked with finding cost savings from
existing operations. The amount of cost-savings
managers have been tasked with finding is not
minimal. In fact, most have been asked to find
an average of 19% in cost reductions in their DC
operations, according to the Honeywell report.
“With more distribution executives reporting
directly to their CFOs, these executives are
being asked to help drive their organizations’
bottom-line profitability,” says Bruce Stubbs,
director of supply chain marketing at Honeywell
Safety & Productivity Solutions. “Any time
you reduce inefficiencies and drive costs out
of a cost center like a DC, those actions can
significantly impact the shipper’s bottom line.”
IS YOUR DC HIDING SOMETHING?
The Cost of Unproductive Time in Distribution and Fulfillment
W H I T E P A P E R
“They’re throwing people
and technology at the
problem in a Band-Aid-
like fashion. But they don’t
always look at the root cause
and how to mitigate it.”
—Bruce Stubbs, director of supply
chain marketing at Honeywell Safety &
Productivity Solutions.
For technology to have a positive impact on
productivity, it must be married with good
processes. In other words, simply layering good
technology on top of bad processes doesn’t
work. If, for example, you implement a new
system, but continue to rely on paper or poor
methods and procedures to manage your DC
operations, then you won’t get the full benefit of
the technology investment.
A better approach is to utilize workflow
solutions that are developed with best practice
methodologies, and that can be applied
efficiently—and then honed accordingly over
time—within the distribution environment.
Following the paper trail
Any time Honeywell works in a DC to help ferret
out inefficiencies and improve productivity,
they start by looking around for paper. “If I
see any paper documents, pick lists or picking
labels being used on the DC floor,” says Stubbs,
“I know they’re probably associated with an
unproductive, inaccurate, paper-based process.”
These paper-based processes are also onerous
from a training standpoint, and particularly
for companies that have global and/or diverse
operations. “It’s nearly impossible to print out
all of the materials in multiple languages or
expect everyone to understand and follow one
language,” says Stubbs, who adds that roughly
25% of people working in any given DC in North
America, France, Germany, or the U.K. do not
speak the native language.
“When someone can’t get up to speed on
accuracy and efficiency quickly, it creates an
even bigger problem for DCs that are striving for
better productivity,” adds Stubbs.
In fact, 89% of managers believe that
investment in new technology would enable
time savings and improve worker productivity,
thus significantly reducing these lost hours.
Voice technology, for instance, is helping
operations pick more accurately,
utilize hands-free options, improve
employee focus, and save
money—as much as $300,000
over previous solutions in a small
DC operation.
Wanted: Double-digit
productivity gains
Honeywell’s experience shows
that the operation that moves
from a manual or paper-based
DC management approach can
easily expect 20% productivity improvements by
switching to automated processes.
In some cases, these changes are being driven
by customer demands and complaints. And
while the top 5% to 10% of companies are
investing in continuous improvement projects,
many more operations have largely chosen to
ignore the perils of decreasing DC productivity.
“A lot of companies just do what they have to
do to meet their fulfillment obligations for the
day and then be done with it,” says Stubbs.
“They’re not really focused on how to do things
better or be more productive over time in a
strategic manner.”
This can be a costly oversight, as Honeywell’s
global survey found. “They’re throwing people
and technology at the problem in a Band-Aid-
like fashion,” Stubbs continues, “but they
don’t always look at the root cause and how to
mitigate it.”
IS YOUR DC HIDING SOMETHING?
The Cost of Unproductive Time in Distribution and Fulfillment
W H I T E P A P E R
When orders are received correctly, inventory
balances are updated, and new orders are
generated and fulfilled based on those
inventories, filled rates are high. When just one
of those three processes goes awry, orders get
shorted, shipments are delayed, and customer
service is negatively impacted.
“Everyone has their sights set on the perfect
order, but when the order isn’t picked right, then
that’s where the highest revenue losses come
into play,” says Stubbs. Honeywell’s survey
estimates that businesses are seeing $400,000
annually in mis-pick losses. “That’s a pretty large
number that can be reduced by marrying good
processes with today’s advanced workflow
technologies like voice, handhelds, mobile
printers, and 2D barcode scanning.”
It isn’t getting any easier
With e-commerce continuing to grow by leaps
and bounds, customer-driven demand for
speedier delivery with later order cut off times,
coupled with visibility and flexibility means
the omni-channel distribution environment is
becoming increasingly complex. The operations
that aren’t taking the time to optimize their DC
workflow processes now could find themselves
in real trouble.
As the sheer velocity of orders moving through
the typical fulfillment center continues to grow,
operations will either have to add more space
and/or workers—both costly endeavors—or
optimize their workflows in a way that allows
them to do more in the same amount of space
and with the same number of employees.
“If companies can’t meet customer demands,
they’ll have to deal with lost sales, returned
goods, and other costly impacts,” says Stubbs.
“Eventually, these operations will fall behind
the curve and be overwhelmed by their
competitors.” •
Paper also inhibits accuracy and, in many cases,
leads to low morale among workers and safety-
related issues. An employee who is constantly
shuffling through paperwork and stopping mid-
task to manually record data must direct his or
her attention away from the work at hand. For
someone who is navigating an 8-hour shift in
areas where automation, conveyors, and forklifts
are in use, the consequences of that distraction
can be potentially dangerous.
Once Honeywell has identified a company’s
paper trail and assessed its potential impacts
on productivity, they then look at the types of
materials that the facility is handling. A pallet-
based operation that’s using radio-frequency
(RF) scanning to manage inbound and
outbound shipments, for example, is probably
more efficient as a whole than the DC that’s
handling individual cases (or single picks sent
directly to customers).
Many times this single pick DC will try to
use paper or RF to get the job done instead
of implementing workflow technologies like
handheld technologies like hands-free wearable
devices, voice, and mobile printers. “In these
instances,” Stubbs says, “technology adds an
incremental layer of accuracy and productivity
that operations won’t get from more traditional
paper-based methods.”
When assessing their productivity levels, DCs
should also consider error rates—both for
inbound and outbound freight. Whether the
receiving process is handled accurately (or not),
for instance, can have a ripple effect across the
entire supply chain. In fact, receiving is often
seen as one of the most critical processes in the
DC for driving productivity improvements.
IS YOUR DC HIDING SOMETHING?
The Cost of Unproductive Time in Distribution and Fulfillment
W H I T E P A P E R
About Honeywell Safety and
Productivity Solutions
Honeywell Safety and Productivity Solutions
is a global leader in providing productivity
solutions built around our high performance data
collection hardware including rugged mobile
computers, voice-enabled software, bar code
scanners, radio frequency identification (RFID)
and workflow printing solutions. Our solutions
serve customers in field service, healthcare,
industrial, manufacturing, healthcare retail,
supply chain, and transportation and logistics
markets. Honeywell Safety and Productivity
Solutions enable companies to accurately track
every item throughout their supply chain and
improve efficiency, saving immeasurable hours
in cross docking, yard management and pickup
and delivery operations. Our data collection
solutions deliver real-time information exactly
where it’s needed so companies have complete
and timely visibility of their goods at all times.
To learn more about our solutions, please visit
www.honeywellaidc.com.
Contact Information
Honeywell Safety and Productivity Solutions
www.honeywellaidc.com
®
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Maximize Efficiency in Distribution and Fullfilment
Technology may be helping companies work faster and with fewer resources, but the modern-day distribution center (DC) is still some way from achieving optimum productivity. In this market brief, we’ll explore the DC-related productivity challenges that companies are facing, and the ways in which unproductive time in your DC might be costing you more than you think.
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