Retail: Deploying warehouse performance

Case study
06/16/2015

Context and challenges

Logistics is business critical for our client, a world leader in mass distribution. In fact, the group’s operational excellence is dependent upon its logistics performance. That is why, when choosing a logistics service outsourcing policy, our client relied on long‐term partnerships, based on the following
principles:

  • Operational excellence through continuous improvement
  • Win-win logic with its partners
  • Cooperation and creation of a strong relationship
  • Shared risk management

To ensure the performance of partner warehouses, Argon teams were tasked with organizing site audits.
This exercise aimed to provide points of reference for sharing best practices, without passing any judgment, and to improve performance by showing drivers for improvement. These developments had to be implemented while preserving or even improving the existing service level.

Approach and drivers

The project was divided into three phases:

1. Preparatory phase

This involved drafting questionnaires, which, during the operational audits, helped to identify the drivers to use as part of an improvement initiative. A modeling methodology identifying different cost items objectively positioned the performance of sites according to market benchmarks on a maturity grid. This was used to define the current status of the audited sites, in addition to maturity expectations and targets.

2. Site audit​

This phase involved data collection, organized by Argon, which was used to perform the preliminary analyses. Interviews were staged with key stakeholders and a site visit was made, culminating in the completion of questionnaires. The four‐day audit was performed on site and comprised three sharing and approval meetings.
The questionnaire was used as a qualitative tool to position the site’s maturity with respect to good practices and against our client’s other sites.
This phase culminated in a detailed performance analysis and supported recommendations.
The quantitative and qualitative aspects were used to create an action plan and calculate the related challenges. The calculation was based on a detailed model of each cost item, which was used to assess the impact of any methodology or process changes.

The audit was completed with a handover, with the aim of providing the site and our client with:

  • A performance analysis
  • Recommendations for improving performance
  • A calculation of extra costs and gains related to the transformation

3. Delivery of a packaged tool​

The third phase involved providing our client with a packaged tool, to provide it with access to country-specific standard models. Argon provided training sessions on accessing and using the tool.

Results

Based on this comprehensive approach, Argon’s teams performed pilot audits on two sites of different sizes but which conducted similar activities.
These audits demonstrated the strengths of both the service provider and the order‐giver, which included strong workforce flexibility and versatility, well‐controlled short‐term planning and a wellcontrolled budget process in terms of construction and tracking. Their weaknesses were also recorded: a high quantity of leftovers in just‐in‐time deliveries, a higher‐than‐average rate of absenteeism and, above all, potential for improvement in methods (warehouse layout, workforce per task, etc.) to increase
productivity.
A costed action plan was developed, based on seven points: absenteeism; receipt; stocking; picking replenishment; preparation of homogeneous pallets; dispatch; and preparation of packages in stock. The action to be taken regarding the preparation of packages in stock was detailed to increase productivity by 15%, i.e. a gain of more than 7% in workforce.
Following this pilot, we assisted our client in auditing 33 sites in 11 countries. The potential savings identified for each site accounted, on average, for 10.5% of the personnel budget.