WHAT FEDEX CAN TEACH INVENTORY MANAGERS

Though it seems like yesterday, it was really more than 20 years ago that Federal Express came into my life in a big way. I took on FedEx as a customer and kept them as a customer for over 17 years. Working side-by-side with their people taught me a lot, and I learned firsthand what made FedEx so successful. Guess what? Almost all of the things that make FedEx successful can be applied to any company in any market.

CUSTODIAL POSSESSION

Strange at it may seem, FedEx became successful not because they guaranteed package delivery by 10:30 AM the next day, but from the application of a single revolutionary concept throughout the entire organization. That concept is known as Custodial Possession. It can be described this way: Once we pick it up, it isn’t YOUR package; it becomes OUR package. That makes US responsible for keeping up with it until it is delivered. WE have to do whatever we can to make sure OUR package is delivered.

Custodial Possession didn’t stop with the couriers, sort hub employees, pilots or drivers. It could be found throughout the company. Everybody from customer service operators, dispatchers, computer operators, network managers, even engineers knew that they played a role in delivering OUR packages on time.

That was a radical departure from the philosophy and business practices of other delivery companies.

Why would a concept like Custodial Possession be relevant to a warehouse manager or a manufacturer? Because there is a subtle difference between how you treat what’s yours and how you treat what’s not.

Talk to anyone who rents things from cars to apartments to TV’s and they all tell you the same thing: Nobody dishes out abuse like someone who doesn't "own" the item.

And it’s true. Rental cars with dirty diapers piled deep in the back seat of a returned car. Coffee stains on rugs. Bathroom fixtures ripped from the wall. Picture tubes smashed. The reason? An underlying feeling that because it’s not “MINE” someone else is responsible.

If it’s not MY car, then YOU are responsible for keeping it clean. If it’s not MY package, then YOU are responsible for getting it delivered. If it’s not MY inventory, then YOU are responsible for how it’s received, put away, picked or shipped.

Fred Smith realized for millions of packages to be delivered by 10:30 AM the next business day, everyone at FedEx had to be convinced that every package picked up, loaded on a plane, ran through the sorting system, loaded on the outbound plane, put on a truck and delivered was “MY” package. Delivering MY package overrides everything else.

It works. That commitment to delivering MY package is best illustrated by a story.

During my time working with FedEX, I saw a package get bumped off the sort conveyer. It was found and brought to the sort manager. (BTW, at the end of every sort the entire hub and flight line is inspected from top to bottom and end to end to locate any packages that may have been bumped off.)

The sort manager at FedEx didn’t have to think about it. He bought a first class ticket on the next commercial flight out to the destination city, put an employee on the plane with the package who then hand delivered it to the recipient. And it was delivered before 10:30 AM.

So, what does Custodial Possession have to do with inventory? Well, think about what happens to all those packages. An order is given for delivery. The item is picked up and delivered to the warehouse where it is received, accounted for and sorted. Then another order has it picked for pre-ship preparation, then it's moved to shipping, put on a vehicle which then delivers the item to the customer. At each step of the way, FedEx knows exactly where it is, where it's been and where it's going.

Do your warehouse operators, procurement managers and customer service people treat inventory as though it were THEIRS? Is everyone committed to making sure that inventory is ordered in the right quantities and delivered before it’s needed to fill orders or to move into manufacturing? Is it received carefully and checked against outstanding orders to ensure quantities and part numbers are right? Is inventory staged in such a way that put away can be done quickly and items made available for customer orders or movement to manufacturing quickly?

Or does inventory get a “lick and a promise” as my grandmother used to say?

When it comes time to fill a customer order, do your systems and processes ensure that the right product in the right quantities are picked, then carefully packed for shipment? Does your inventory management process make sure that not only what is being shipped is being shipped the way the customer wants it and when the customer needs it?

If you want to gain an unfairl competitive advantage, don’t emulate your competition, think about Custodial Possession and use it to set the bar way up high and keep it there. FedEx did and look where they are today.

Next Up: A SENSE OF URGENCY

Gloom and Doom for WMS?

In his June 15, 2010, editorial, Bob Trebilcock, Executive Editor of Modern Materials Handling said:

“The warehouse management system market is still a $1 billion market … but it was hardest hit among these three core applications (WMS, TMS, RFID).

Why the big drop? Just as end users are getting more mileage out of their lift trucks and conveyor systems in this recession, they’re probably thinking twice about upgrading or replacing a WMS system unless they have to.

Does a WMS deliver real results? Absolutely. But I think many users are going to try to make due for now.”

So, if you’re a WMS systems developer or integrator, the future must look pretty bleak right now.

Or does it?

True, a lot of companies in distribution and manufacturing implemented new ERP systems in the mid-2000’s. True, a lot of companies are “keeping it close to the vest” when it comes to anything new, not just WMS. And true, a lot of companies are in the “if it ain’t broke, don’t fix it” mode.

So why should manufacturers and distributors be bullish on implementing a WMS right now?

Time, competition, green initiatives and price.

TIME.
The downturn in the economy has given a lot of companies time to flush their inventories. It doesn’t matter whether the inventory is raw materials or components used in manufacturing or items on the shelf waiting for orders from customers, smart operators squeezed the pipeline in an effort to drive inventories throughout the supply chain down.

With inventories at record lows, they now have the time to look at the benefits they can get by implementing a WMS. Why? So they can continue to manage inventories at the lowest possible levels in the future. The smart operators know that they have the give of time to look at and implement a WMS that will give them greater control over their inventories.

COMPETITION.

Believe it or not, a lot of companies see this gift of time as an opportunity to gain a competitive advantage. Think of this: Going from paper orders to automated order entry eliminates errors, which eliminated picking errors, which eliminates shipping errors which creates happy customers. Competitive advantage.

Instituting automated cycle counting and min/max quantities based on order lead times, purchasing trends and quantity discounts, ensures materials needed for shipment or manufacturing are available when they are needed and in the right quantities to fill orders. The result? Lower inventory costs, which falls right to the “P” side of ledger.

Implementing real-time, wireless automated data collection from receiving through to shipping not only increases accuracy, but speeds order processing as well. End result? Increased productivity which means doing more with the same or fewer numbers of workers. Another competitive advantage.

Know what we call competitive advantage? Profit.

GO GREEN.

Everyone remembers the commercial where the group is sitting around a conference table trying to come up with ideas that will save $13 million dollars. One guy finally pipes up: “How much does all of this cost?” he says as he waves his hand across a table laden with charts, reports, printouts, graphs and books. “Could be millions” says the overwrought executive.

Is millions. Not could be. Is.

Paper is dangerous. It can be lost, misplaced, torn, faded, misfiled or shredded. Yet it is the blood that pumps through the veins of every company in the world. Smart operators are looking at the paper generated throughout the customer order, purchasing, receiving, manufacturing, quality control, put away, picking, staging and shipping process. Why? Because most of it is so unnecessary. With the right WMS system, like A3 Technologies Fontana IMS, paper is replaced with images, images that can be accessed by whoever needs them instantly. No more waiting for the inter office mail. No more “50 copies and a distribution list.” The WMS system eliminates paper and helps the company go green at the same time.

PRICE.

The relative cost to implement a fully integrated WMS system has been falling and is at its lowest point in years. Smart operators know that as the economy picks up, so will demand for WMS and so will the price. Now is the time to look at a WMS system that can deliver what they want, the way they want it and at a price they can afford.

To learn more, contact A3 Technologies about Fontana IMS.