For upstart businesses, bigger isn’t necessarily better.
I talk to small business owners every day about their challenges, and many of them – especially those on a solid growth path – tell me they struggle at times with operational efficiency.
They’ve built a successful business around a solid idea, and the customers have followed. Now they realize there’s more to the story – and more work to be done.
These companies have overcome challenges, including distribution and scale, by adding people, enlarging their physical space or investing in better technology.
This is a logical and practical approach.
But starting and running a business is tricky, and if you aren’t also carefully evaluating issues that impact efficiency, more people, more space and better technology may not be the solution.
In fact, a better strategy might be doing the opposite of what you think is logical.
“Always start with the process.”
I’m reminded of a famous observation from Bill Gates: “The first rule of any technology used in a business,” he said, “is that automation applied to an efficient operation will magnify the efficiency. The second is that automation applied to an inefficient operation will magnify the inefficiency.”
You may not need to expand your warehouse or move to a new space just yet. You might be focused on the wrong end of the issue.
As this diagram from UPS Customer Solutions shows, more employees and better technology will not compensate for a subpar process.
In fact, things could get worse. Always start with the process.
I work with a group of engineers who help businesses optimize their warehouses.
They do so by sharing the same insight and methodology used to build and optimize many of the systems and processes that have made UPS one of the world’s most efficiently run companies.
Here are some of the bigger pieces of the puzzle they consider when engaging our clients.
We consistently find that an additional inventory turn or two can mean hundreds of thousands of dollars annually to the bottom line.
This is a huge task, but not a simple one to address. It requires careful consideration of a number of issues including:
Methods, Measurements and Metrics
Establishing the key factors to measure and developing a reliable way to measure them is a way of moving from guessing to knowing.
How many lines per hour can you process in receiving? How about pick-pack-ship? What are the trends?
“By remembering the small things, you’ll be ready. ”
Often the measure of a good day is just “getting it all out the door.”
But without the ability to accurately measure productivity in your operations, keeping pace with growing demand will continue to be a challenge.
At first glance, this seems like a fairly obvious place to look. Just make sure the fastest moving items are closest to the shipping and packing station, right?
But when you plot the travel path of order pickers in your operation, how much sense does it make? Does that path mostly have straight lines? Or lines that resemble a plate of spaghetti?
Less travel distance means less time spent pulling orders. A thorough analysis can provide the opportunity for dramatic improvement.
Are You Ready?
Though it’s not as flashy as your latest marketing initiative, improving warehouse layout and throughput, or implementing the 3Ms – methods, measurements and metrics – is a great opportunity to reduce the cost of goods sold, a huge factor in serving all those existing and new customers this year and beyond.
Too many businesses have failed because they lost sight of these seemingly incremental improvements.
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