Part 1 of 5
As business conditions change, distribution networks are frequently challenged to respond to the new reality. The change can be related to growth, shifts in sales channels or product mix, or difficulty in attracting labor to meet current and future needs.
Whether the situation calls for a small enhancement to an existing DC or multiple new nodes in the network, effectively designing and implementing the optimal solution can be a daunting task with many moving parts.
DLN and Connors Group have successfully guided numerous clients through transformational projects that kept them ahead of changing business conditions.
In this five-part blog series, we will provide a roadmap to successful transformation leveraging our extensive collective experience. The roadmap will help to avoid common pitfalls by outlining the requirements of a successful project approach.
By using this roadmap to guide your own transformation, you can set your team up for the best chances to have a successful project that delivers to your expectations for years to come.
Phase 1 – Conceptualization – Solutions Development
The initial phase of implementing an optimized distribution solution is determining what the solution itself should be. In this phase it is critical to stay open-minded – biases towards certain technologies or “how we do things around here” can’t become your anchor for potential solutions. The best results are fundamentally driven by data and an agnostic view of potential processes and technologies that can best meet your needs.
Start by clearly defining the business objectives of the project and ensuring alignment within the company executive leadership team. This future vision for the business should become the ‘North Star’ and definition of success for this project.
Next, analyze and review historical data from your operations, and review with the team to set a solid definition of current state. Apply factors such as sales growth, SKU growth and channel shifts to the historical data, in line with the future vision of the company.
The resulting growth model will become the target for your distribution solution, and the gap between the growth model and your current state data represents the additional capabilities that your solution will provide to the business. If a budget has been determined, define it as an additional project requirement early to avoid wasting time on solutions that are not feasible due to budget constraints.
Pro Tip:
Avoid Pitfalls with Quantitative AND Qualitative Requirements
Be sure to document all business requirements, especially those that do not directly appear in the growth model but are necessary to achieve it. For example, you may plan to increase sales by offering faster order fulfillment than your competitors.
If your solutions development team loses track of the requirement for faster fulfillment, you may end up with a design that can support the overall sales volume, but without the capability to meet the service commitment you are counting on to drive those sales.
With future-state business requirements in-hand, the design effort can be started in earnest. If you have not already engaged an experienced distribution design firm, this is a great time to leverage their expertise on the wide and growing array of storage and material handling solutions on the market. The design team should determine the optimal storage requirements based on SKU velocity specs and other operational assumptions, as well as the throughput rates of key flow paths based on projected volume.
With these definitions in place, the team can assess different operational methods and technologies, and perform a trade-off analysis to determine the optimal overall concept.
Pro Tip:
Avoid Pitfalls with Iterative Design Process
Avoid the temptation to design in detail on the first pass. Investing too heavily in one design can sap your time and resources to properly explore all viable alternatives. Break your overall operation down process by process (e.g. receiving, replenishment, picking, etc.) and start with a spreadsheet-based analysis of as many applicable concepts as you can think of for each process. Pick the best 2-3 to do a deeper analysis of before selecting the best one to carry into a detailed design.
Once the design elements are
defined at a conceptual level you can begin developing an engineered design.
Review and refine all areas of the concept in more detail, thinking about specific equipment geometry, connections between processes, and secondary processes that may have been assumed or omitted in the conceptual phase (e.g. returns, error handling, etc.).
At this stage, it usually makes sense to start putting the layout into CAD and getting solid estimates on equipment costs, timelines, and requirements that will need to be provided by you or other partners involved with the implementation.
For more complex or unproven designs, computer simulation may be valuable tool to identify potential problems in a simulated environment. Typically, this is the appropriate phase to start building a solid project budget and business case justification for approval as well.
Pro Tip:
Avoid Pitfalls by Starting Change Management Process Early
Companies that are inexperienced with significant distribution projects frequently overlook planning for all the activities that need to happen around the project itself. More experienced companies understand the requirements, but still often engage in them too late or too lightly.
Best practice is to start planning for change management as early as the engineered design phase to ensure that adequate resources are applied at the best time to have team members across your company informed and prepared for the changes that lie ahead.
As the engineered design comes together, you should also begin planning for Change Management, which can be loosely defined as orienting all of the people who interact, directly or indirectly, with the aspects of the distribution system that will be changing. For a small retrofit, this may be limited to the associates working in the area. For greenfield sites, it can impact the entire workforce of multiple DCs and multiple departments at the corporate HQ, including Procurement, Transportation, and HR, to name a few.
”In either case, there will be a significant number of people that need to participate in implementing the solution - and even more that may be less involved but still must be informed and trained.
The Conceptualization phase is one of the most critical because it lays the foundation for future project success.
As the saying goes, the battle cannot be won in the first phase, but it can be lost here (or, at minimum, made much more difficult).
Beginning with a well-founded business objective, and working through a data-driven concept analysis and comparison, engineered design refinement, and holistic implementation plan including change management processes, you can set your project up for a smoother implementation and eventual successful go-live.
Stay tuned for part 2 of this series, covering the next phase: Pre-Implementation. This will cover Detailed Design & Program Planning.
About the Authors
Luke Nuber
DLN Integrated Systems
Andy Hunter
Connors Group
