Implementing Lean 4P's to Turnaround Warehousing Operations
Overview
Our client, a global temperature-controlled warehousing and transportation services provider, offers the food and perishable goods industry with cold storage solutions throughout their supply chain ecosystem. With over 200 warehousing locations globally our client is an industry leader in conventional and automated warehousing.
G1 was engaged to help turn around several of their low performing sites all across the US. Two of these sites are described in this case study.
Their New Jersey site is close to the Port of Philadelphia and warehouses, repacks and ships products for distribution to client DCs and retail outlets. This site was struggling to recruit and retain seasonal labor during peak periods and had missed EBITDA by $2 Million in 2021 due to lower sales revenues than budgeted, and high operating costs.
The Utah site is a major distribution hub for food producers moving product to the West coast markets. This warehouse had struggled to meet customer service levels since it had acquired a major food producer in 2021. This food producer was planning to bring in additional lines of business into this warehouse, but given poor service, it was now considering pulling its business out of the warehouse and moving it’s business to a competitor.
The challenge
G1 was leading the implementation of the 4-Ps’ Lean approach across low performing sites with local cross-functional Tiger Teams. To learn more about this approach, refer to our Insight article. Using the 4-P’s Lean approach in New Jersey and Utah revealed the following problem areas.
For the New Jersey operation, we ran a detailed Profitability Analysis by customer and found that pricing had not been adjusted correctly for the services provided. In addition, the Tiger Team found that HR recruiting for seasonal workers would only start 30 days before peak. Hiring earlier would result in higher labor costs before labor was fully needed, thus lower labor productivities. However, this also resulted in not meeting recruiting targets in time for peak, when the labor market was tight. We also found that labor training and people engagement was not formalized and so retention was low. The 4 P assessment also found problems with equipment maintenance and Wi-Fi coverage in parts of the warehouse.
In Utah, the Tiger Team found that the major root cause of the low productivity impacting customer service was issues with the Warehouse Management System (WMS). This WMS had not been properly configured and set up to support the food producer, so Operations had implemented costly and inefficient manual processes to make this business work. There were problems also with product flow and inventory control that impacted site productivities and customer service.
The solution
As at all G1 4-P sites, we developed very detailed plans of action for addressing problems across the whole operation. All of the actions had clear accountabilities, due dates and were aligned to an operational Milestone. In addition, metrics with operational targets were defined for Profitability, People, Plant and Productivity.
The table below shows examples of milestones by “P”. At most sites you will have between 3-5 Milestones per area, but where we had major issues in some areas, some sites had more Milestones for a specific area.
G1 provided the project management and hands on, onsite support needed to drive the targeted metrics.
In New Jersey, over a period of 4 months, the Tiger Team worked on fixing issues primarily around:
Improving recruiting and retention processes and organization with HR.
Creating Standard Operating Procedures to support training and retention.
Implementing a Plant Maintenance program to improve and sustain equipment availability.
Solidifying customer agreements with Business Development to correct pricing of services.
Working with Finance to fix issues with billing and invoicing that had resulted in high or missed receivables.
In Utah, over a period of 6 months, the Tiger Team identified a lot of ‘low hanging fruit’ to help improve labor productivities. The Operations team then was able to quickly take action to address those issues, and sustain these improvements by implementing Leader Standard Work. The bigger issue at the Utah site was fixing the WMS issues. With Executive Leadership support, the G1 Tiger Team team was able to contract with a software vendor to work on these issues. G1 provided the project management to develop, test and deploy these fixes during the period of this engagement.
The outcome
In New Jersey, we were able to turn the site around in 4 months (May 2022), so that they went from -4% in EBITDA in 2021 to making 21% in EBITDA by November 2022.
In Utah, productivity improvements resulted in the operation going from -12% in EBITA in January 2022 to +30% EBITA by Q4. As part of the labor productivity improvements, The Tiger Team worked with Operations and HR to implement Leader Standard Work in order to sustain these improvements. But, more importantly, customer service levels improved dramatically and the food distributor customer decided to grow its business footprint at the site by adding a major new line of business to the distribution center, allowing the site to beat its revenue budget for 2022.
Why G1?
Based on our track record with this client, they trusted our team to take on this challenge. G1 brought the IT project management expertise, WMS/ERP experience, and deep supply chain expertise that our client needed. G1 also provided an unbiased third party expert perspective that allowed us to connect the dots across cross-functional teams and work for our client with outside vendors.
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