No Desperate Measures
By Clifford F. Lynch
DC Velocity, January 2003
In 1610, Galileo Galilei said,
“We must measure what can be measured, and make measurable what cannot be
measured.” Over the years, this
statement has evolved to the more direct, often-quoted axiom, “You cannot
manage what you cannot measure.” But today some 400 years later, distribution
center managers still struggle with the premise.
Some DC operators have developed
meaningful performance and productivity standards and metrics, but a surprising
number have not. There is no valid
reason for not having a well-thought-out and meaningful measurement program in
any DC. Although literally hundreds
of rules and suggestions for establishing metrics exist, the following four
basic axioms will apply across all industries for either proprietary or contract
- The first axiom is the tried and
true, “You can’t manage what you can’t measure.”
It is particularly applicable to warehousing.
If managers don’t know how the DC is performing against standards
and benchmarks, they will be forced to make decisions in a vacuum.
In the case of service failures or cost overruns, there will be
absolutely no way to identify, analyze, or solve the problems.
- Not mentioned nearly as often is
the second part of Galileo’s admonition, “Make measurable what cannot
be measured.” In
other words, the job is to identify activities within the warehouse in
discrete segments against which you can establish measurable and achievable
standards. A common mistake is
to establish standards that are so vague they are meaningless.
- Measure only what is important
and actionable. One problem
with measurement programs is that they often lead to “report abuse.”
Some managers become so fascinated by the reports themselves that
they will insist on measuring the most meaningless activities.
If it does not have an impact on the operations, its cost or customer
service, forget it. Better
still, examine whether the activity is necessary at all.
- Finally, “Performance
measurement must be balanced.” Too
many measurements can bury a warehouse operation in details and actually
lead to diminished performance. Too
few, or too general, measurements make performance difficult to evaluate and
manage. Timing should be
balanced, as well. Do not measure everything every day.
There are a number of areas in
any DC that lend themselves to accurate and meaningful measurement.
Here’s a look at some of the most common measures:
Order cycle time is
simply the time elapsed between the time an order is received and the time
it leaves the dock. In a highly
sophisticated order fulfillment operation, this time will be measured in
hours; in other more relaxed environments, in days.
performance will be a measurement of either on-time shipping or
delivery, or both.
Order fill rate represents
the number of orders that were shipped complete as ordered, without any back
can be determined by cycle and/or total counts and calculating the
differences between physical and book records.
Consistent unfavorable variations here can be an indicator of other
problems, such as orders shipped incorrectly or receipts not counted
the most important measurements in any warehouse will relate to productivity.
Some of the most common measurements are cases or unit loads per
person-hour, orders per person-hour or order lines per person-hour.
Some warehouse managers measure only total productivity; i.e., for
warehouse employees as a group. I
believe it is just as important to measure productivity of individuals, as
well. This can be a valuable
tool in evaluating and rewarding personnel.
techniques are employed, good warehouse management requires good warehouse
F. Lynch is
principal of C. F. Lynch & Associates, a provider of logistics management
advisory services, and author of Logistics Outsourcing – A Management Guide.
He can be found at www.cflynch.com.