Core Business Process - Distribute Products

Description

This process manages the activities that are used to distribute the entity’s finished products to the customers logistic centres.  

Process Objectives

1. Improve on-time delivery of products
2. Improve order fill rate
3. Provide excellent customer service at optimal cost
4. Finished goods assets secured
5. Product quality maintained
6. Reduce order fulfillment cycle

Critical Success Factors (CSF’s)

1. Good understanding of customer delivery requirements (1,2,3,5)
2. Accurate stock recording and rotation (1,2,6)
3. Accurate order picking (2,3,6)
4. Performance-based contracts with transport providers (1,6)
5. Maintain goods in a protected, secure environment (4,5)

Key Performance Indicators (KPI’s) Linked to CSF’s

• On-time delivery rate; order fill rate; order fulfillment cycle time (A,B,C,D)
• Days supply; distribution inventory turnover (A,B,C)
• Order picking accuracy (C)
• Total logistics cost per case (D)
• Number of cases lost or damaged in the warehouse (E)

Inputs

Finished goods in warehouse Customer delivery point data Equipment Utilities

Finished goods stock records Service level targets / priorities Security

Delivery packaging and pallets Transport resources Labour Customer orders

Activities

Outputs

Ordered goods in customer’s warehouse Load utilisation data

Customer invoicing data

Closing stock level in manufacturer’s warehouse Customer service measurements

Systems

Inventory recording system

Order picking system

Pallet recording system

Classes of Transactions

Routine Inventory movements Invoicing

Non-Routine

Accounting Estimates Reserve for obsolete inventory

Risks Which Threaten Objectives

1. Incomplete/inaccurate customer orders (1,2,3,6)
2. Non-competitive distribution services (1,2,3,5,6)
3. Poor stock rotation/management (4,5,6)
4. Unreliable transportation providers (1,2,3,6)
5. Inadequate warehouse facilities (4,5)

Management Responses Linked to Risks

• Monitor on-time performance and accuracy of shipments to customers orders (A,B,D)
• Monitor distribution costs vs budget and service against “best practices” and competition (A,B,D)
• Measure inventory turnover and days supply in warehouse (C,E)
• Use performance-based contracts with carriers (D)

Other Symptoms of Poor Performance

No delivery performance data No transport/order picking schedules

Untidy warehouse High level of back orders

Poor stock records

Performance Improvement Observations

Continuous replenishment programmes Logistics studies

Cross-docking programmes Distribution facility network optimisation

Activity-based costing (cost-to-serve analysis) Cost restructuring models