How do you stack up?
NHFA's Annual Oper-ating Experience Re-port (AOER) is a valuable resource for retailers to compare their business to others throughout the USA. Data is provided annually by NHFA members which is then compiled, tabulated and analyzed by Industry Insights, Inc., in cooperation with the NHFA staff.
The information is particularly useful because it is presented in numerous ways; category of store, sales volume, geographic region, etc. The study also contains compensation data for typical positions and insight on emerging trends. The data can serve as a benchmark if you are building a new warehouse.
One message is presented throughout the study. In comparing your results to industry statistics, if yours are different, they are not necessarily good or bad.... only that additional review is required. In the balance of this article, I will focus on ideas that you may pursue if your warehousing and delivery costs appear to be out of line. My comments are general; the statistics are in the study.
When reviewing an operation, one of the first things I look at is the selling profile. Is the retailer selling at high price points or low price points? This is necessary because it takes the same amount of labor to handle a $1,500 sofa or a $500 sofa of the same size. Assuming $50 cost to receive, warehouse and deliver either piece, the cost as a percentage of the selling price will be 3.3% for the $1,500 sofa and 10% for the $500 sofa.
Another consideration is the configuration of the warehouse. Is it a one floor warehouse with good flow with storage close to receiving and shipping.... or is it a basement where everything has to be handled several times?
Recognizing there are facility restraints, labor efficiency is an important factor. There's a very simple technique to determine if your warehouse and delivery department is overstaffed. Walk through the warehouse on a non scheduled basis and count how many people are actually doing productive work.... or conversely, loafing. If receiving/delivery activity is below normal on that day, the staff should be preparing returns, cleaning, prepping stock for display, relocating seasonal goods, etc. Or they shouldn't be there at all. If productivity is high but you are consistently paying overtime premiums, consider adding staff.
In some areas of the country there is an ample supply of quality people available for part time or temporary work. An option is to develop a flexible work force of college students, off duty fire men, homemakers, etc. A distribution center in central Ohio maintains a core workforce for 30% of their peak needs and gets 70% from Ohio State University on a part time basis.... 10 to 30 hours per week. The work force is very productive. To be successful with this approach, your supervision has to develop scheduling insight!
In previous articles we have recommended examining the inventory for obsolescence. Don't congest valuable warehouse space with stuff that will never sell. Face the problem and resolve it. Improve your inventory turns.
If your home delivery costs appear to be out of line, examine how your deliveries are scheduled. We see too many instances where excess miles and hours are wasted by poor route planning. Look at the work sheets and see if they make common sense. Plan your work, work your plan. Consider going on the routes as the helper or driver and see how long it really takes to make the deliveries.
Bottom line, you can't improve performance unless you measure it. Starting with the NHFA framework, calculate measures for your business and monitor them over time.
Daniel Bolger, P.E. provides warehousing, transportation and logistics consulting to clients throughout the USA. Questions on this article or others by Mr. Bolger can be sent to FURNITURE WORLD at dbolger@furninfo.com.