What's Your Strategy for Speed in Distribution?

By: SupplyChainBrain
March 16, 2015

Analyst Insight: Speed is a game-changer. Leaders are enabling faster fulfillment and reaping real bottom line and competitive advantage benefits. The key is balancing potential revenue gain or service level improvement against the investment and operating costs required to deliver on the promise. Choosing the right strategy depends on understanding the impacts, not just within the distribution center, but across the entire organization. – Helgi Thor Leja, Industrial Distribution Leader, Fortna Inc.

Everyone talks about speed, but how do you know that investing in faster fulfillment is right for your business? You have to understand where speed applies. It should tie back to your fundamental business strategy. A faster-cycle-time operation is usually a more expensive one. But if speed is defined as a competitive advantage for your company, you may need to make certain investments to get that strategic edge. To determine your path forward, you need to evaluate the impact and costs of speed at three levels of your strategy:

Overall Business Strategy

At the highest level of your strategy, you need to understand the requirements around speed. How much faster do things have to be to remain competitive? And if the requirement is same-day/next day, you have to ask “what’s the benefit of that service level?” Conversely, what’s the cost of not accelerating fulfillment? The answer should be focused on financial performance or profitability. Do you offer faster fulfillment as a defensive strategy against competition and look for an offset in order volume, margin, transportation savings, or some other competitive advantage?

Distribution Strategy

Once you've determined that faster fulfillment is important to your business strategy, you need to consider the impact of speed on your network, transportation, inventory and other strategies. Alignment is key. You don’t want to speed up processing in your DC, only to lose that time to a transportation strategy that is not aligned or an inventory strategy that doesn't support just-in-time ordering.

Distribution Center Strategy

Once you have alignment within your distribution strategy, it’s time to look at the ways you can speed up fulfillment within each function. For example, how do you increase speed within the four walls of the DC, without losing accuracy and impacting operating costs. Look at work content, wasted time, and opportunities for lean practices to reduce the amount of time between receipt of orders and shipping. If you are trying to speed up retail shipments, you might look at technology-based solutions that will make the operation more productive and yield speed benefits. But there are times when a manual process is the fastest way. For an e-commerce operation with higher peak throughput, the fastest way may be through simple systems that can handle high volume, not systems and equipment that have throughput constraints.

Speed may offer competitive advantage, but carefully consider the impact to labor costs and infrastructure investment. It requires a delicate balancing act between service and cost. The best way to start is to understand the requirements, impacts and benefits associated with accelerating fulfillment.

The Outlook

Before investing in accelerating fulfillment, you need alignment on customers’ real service requirements, the financial benefits of faster service and the impact of decisions around speed at all levels of the business.