Picking, Packing, and Shipping Four Times Faster

Situation

The distribution and transportation services division of a Fortune 100 pharmaceutical and health care products manufacturer recognized a mounting need for change. Its supply channel was going to experience increasing customer demands for swifter order cycles and error free deliveries. Moreover, operating division management was seeking lower distribution and transportation costs.

Responsible for the corporation's strategic distribution channel dispersing $2.5 billion dollars worth of products annually, this division is housed in a network of five strategically located distribution centers.

Solution

Challenged to become a customer-focused, low cost provider of distribution services, the division launched a Total Quality effort with Rath & Strong's help.

As an initial step in implementation, the division chartered a steering committee to select distribution processes that could be realigned to better meet customer expectations. It then developed an 18-month project plan and communications strategy, establishing six initial pilot projects which involved 32 division personnel. Each pilot team participated in Rath & Strong's team training sessions where they developed team building skills and learned the technical tools and techniques of Total Quality including problem-solving methodology.

A number of specialized improvement methods were employed as well. The division's customer relations pilot team applied Rath & Strong's Customer Value Analysis ^SM process to identify the needs of 18 consumer health care customers. Two cycle time reduction pilot teams used Value-Added Flow Analysis to map processes and reduce the time it took to process pharmaceutical and health care orders. Three quality improvement pilot teams applied various quality engineering tools to eliminate "picking" errors in the pharmaceutical order assembly process, improve carrier performance, and reduce customer deductions off invoices.

Underlying the division's success with Total Quality was a particularly active leadership by senior management and the steering committee. Receiving early "buy-in" from distribution center management, for example, has been critical since the majority of distribution personnel report to them. Regular visits by the vice president and staff heading the Total Quality effort to each center to stress the need for Total Quality services also proved to be important.

Results

Within eight months, the division achieved major business improvements in key processes impacting customers:

• In the consumer health care order assembly process, Less Than Truckload (LTL) orders shipped the same day increased from 25 percent to 95 percent, while Small Package Delivery (SPD) orders increased from 73 percent to 100 percent. 
• "Picking" errors in the same location's pharmaceutical order assembly process were reduced by 87 percent. 
• In another location's pharmaceutical order assembly process, LTL orders shipped the same day increased from 20 percent to 92 percent, while SPD orders rose from 50 percent to 92 percent. At the same time, annualized shortage and damage claims were reduced by 74 percent in value. New standards for carriers also reduced transit time for regional LTL carriers by 50 percent and national carriers by 25 percent to 40 percent. 
• The rate of customer invoice deductions decreased 30 percent, while the backlog of processing was eliminated by cycle time improvements of 67 percent.

The results the division has achieved so far through Total Quality-and is continuing to achieve-are helping it to successfully transform itself into a true customer-focused organization.