Tag Archive: capacity

Ideas to Fill Peak Capacity Periods

February 27th, 2019

As we toured several e-commerce facilities such as UPS and Amazon, it became obvious that the sheer volume during peak season presents a huge dilemma. For example, UPS goes from 250-300 containers per night to 450 during peak season. Now that is quite a surge! Amazon has similar surges and stated facts such as 68 million orders on Cyber Monday.

Peak season occurs in other industries, as well. For example, building products companies tend to have a summer season since there are more issues to navigate in winter conditions. Since working with a large number of these companies, we’ve seen it range from a low of around 10-20% surge to almost 70% of the year’s volume sold during the summer. That can definitely be a challenge to navigate!

In this case, we are talking about labor but the same issues relate to machine capacity, storage capacity, transportation capacity and many others. We find that this area alone can achieve a significant return on investment as companies better align demand with supply. In fact, in 80% of our clients, these types of programs do the best job of achieving bold customer promises and profits simultaneously.

We have found several ideas to fill peak capacity periods. Of course, there is no one formula for success.  Each company has unique circumstances that require different solutions. However, a few ways to meet peak capacity include:

  1.  Hiring temporary workers for the peak season – of course, this strategy sounds like an easy win. If only it were that easy! UPS starts hiring seasonal workers prior to the holiday season in order to provide training. In 2018, they expected to bring on 100,000 seasonal workers. Over the last 3 years, 35% were hired into a full-time role after the peak season, creating an interesting enticement. Since every e-commerce related business needs seasonal workers, you need to provide some sort of benefit or enticement to fill these positions.
  1.  Overtime – of course, this is commonly used throughout manufacturing and logistics organizations. We’ve seen many aerospace firms running at high rates of overtime for many months, even years, in a row. It can be a tricky issue as employees become accustomed to higher paychecks, and the costs add up. On the other hand, people get tired and can get less productive and want a break. Counter-intuitively, it can also be the better financial decision given the learning curves associated with complex manufacturing roles. Of course, the answer is, “It depends”.
  1.  Hiring people with developmental disabilities – as our Inland Empire Economic Partnership leadership regional academy toured Goodwill and we have worked with clients such as Oparc, we have learned that people with development disabilities can be an ideal solution to fill peak capacity.  Thanks to Oparc for their research statistics: 1 in 7 people have intellectual or developmental disability, yet, only 19% participate in the labor force, leaving a significant opportunity to supplement the labor force. Studies show that these folks rate higher in reliability, productivity and loyalty. For example, a DuPont study showed that 90% of employees with Disabilities rated average or better on job performance. According to Walgreens, disabled employees had 40% lower accident rate, 67% lower medical treatment costs and 78% lower overall costs associated with accidents. And, Marriott shows a 6% turnover rate vs. 52% overall. It is worth checking this option out! Please contact us for a referral.
  1.  Partnering with companies with counter cyclical peak seasons – again, have you thought about partnering with strange bedfellows? Why couldn’t an e-commerce company with a winter peak season collaborate with a company in the building products industry with a summer season? In a way, the 3PLs follow this model. Having counter cyclical clients is an important aspect of maintaining a strong workforce as a 3PL.
  1. Outsourcing – one of the advantages of outsourcing and overflow capacity is that you can use it when you need it. Of course, you’ll pay a premium but it can still provide maximum value in several cases and meet the peak season requirements.
  1. Leveraging your extended supply chain – you never know what collaboration might make sense with your suppliers, customers and other supply chain partners until you ask. Explore the possibilities.

One thing is definitely true. You will not succeed during peak season if you wait until it hits to address your capacity shortfalls. Be clear on your strategy and make sure to build it into your plans. It isn’t all about peak season. Perhaps off-peak is “the time” to upgrade your infrastructure such as your ERP system, your business processes and to explore your customer collaboration opportunities. If you’d like an expert to weigh in on your plans, contact us.

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The Resilient Supply Chain: Do You Have Resilient Employees?

October 24th, 2018

Resiliency isn’t easy,  If it were, every organization would have already perfected it.  Yet, in today’s volatile, Amazon impacted, disruption-heavy environment, you must build resilience.  

What is Resilience
Let’s start by talking about our meaning of resilience.  In addition to having the ability to adjust and recover quickly to changing business conditions.  A company must also have the capability to proactively think through the most likely disruptors and develop strategies to thrive amidst the chaos.   

Are your employees resilient?
If a customer changes his mind, how does your team handle it?  Do they see it as a challenge or a chore? Do they complain or start asking questions to understand what’s behind the change and whether it is likely to impact future orders?  Do they communicate upstream and downstream so all parties are in the loop and aware of what is coming?

If a supplier runs into a capacity issue and is late to deliver, what do your employees do?  Actually, let’s back up – do they know about the delay in advance? If so, has it been communicated?  What approach is taken with the supplier in these circumstances? Do you know whether your demands are realistic or not?  Or are you overloading your low cost supplier so you don’t get beat up for purchase price variances? Think about these questions and then go back to answering the resiliency question.  

Learning from Failure
Here is another key question:  What does your team do if they fail?  Do they look for the person to blame? Does the leader blame the weakest link?  Or does the leader blame “them” (next level management)? Or does the leader accept responsibility even if it isn’t his/her fault?  No matter who is at fault, how does the team react? Do they jump on the situation and look for solutions? Will they be more likely or less likely to collaborate upstream or downstream to find answers or ideas to test?  Perhaps most importantly, will they hide under a rock or spur into action?


Start by understanding your resiliency culture.  Then, you can purposefully change it to focus on resiliency.  



Transportation Capacity Tight & Rates on the Rise

April 6th, 2018

Supply Chain Briefing

Transportation capacity is tight and rates are on the rise. And,  it doesn’t look like it will change anytime soon!  The lack of qualified drivers, tighter enforcement of driver work rules and the dramatic changes brought on by e-commerce are creating challenges for shippers not to mention higher rates.  According to the Journal of Commerce and the 2018 TPM Conference, impacts abound with “rollover freight”, dropped tenders and longer transit times.

The last one is key – in today’s Amazon-impacted market, customers expect quicker deliveries; not extended ones!  Are you thinking about transportation trends and the impacts on your company?

 

Spot market rates are up 30% year over year.  Intermodal is up as well. According to Truckstop.com, partial freight is up significantly.  Shippers cannot wait to build full truckloads. Capacity remains at 20% below pre-recession levels.  Events have created even more demand – starting with the hurricanes last fall, followed by the new mandate for electronic logging devices (ELD) in December. Drivers definitely have the upper hand. Are you driver friendly?

What Should We Consider and/or What Impacts Could Arise?
Have you thought about the state of your transportation infrastructure lately?  The majority of our clients do not have fleets.  However, even with a fleet, you still need drivers and might suffer from effects caused by tight capacity and higher rates.  

Have you taken stock of your transportation partners?  Are you treating them as a vendor or a partner? In this environment, it could make quite the difference to delivering on-time with a superior customer experience.  Remember, your trucker is a face to your customer. And with Walmart driving change in consumer products as well as unrelated industries by charging fees for late deliveries, your lack of a transportation infrastructure could add up quickly!

Do you have backup transportation built into your model?  Are you considering additional transportation partners such as third-party logistics providers (3PL) and brokers?  Perhaps they shouldn’t be considered a last resort.

 



Global Manufacturers Struggle to Keep Up with Demand – Are You?

January 17th, 2018

Supply Chain Briefing

According to an Industry Week article, factories across the globe are showing signs of strain in keeping up with demand. China, Germany, France, Canada, the UK and the US all show that capacity might not be keeping up with supply. In fact, the U.S. reading from IHS Markit has reached its highest level since March 2015. Inflationary pressures are surfacing.

Are You Prepared?
This certainly coincides with what we are seeing in the market – if you aren’t preparing in advance, you are likely to be left in the dust. Customers are unwilling to wait or dampen their experience. They’ll find someone who can meet their needs. Are you prepared to meet your demand – and your competition’s?

Details and Planning
I used to work in a paper mill and converting operation like the materials pictured above. Meeting demand is far reaching – just think about the space constraints in storing these materials? Success follows forethought and preparation.

What Should We Consider and/or What Impacts Could Arise?
Do you know your capacity? It certainly seems appropriate to start by understanding your machinery and equipment capacity, your labor capacity, your storage capacity and your suppliers’ capacity to name a few. How much can you increase your volume without running into a wall? 5%, 20% or 50%?

Driving Profitable, Scalable Growth
One of the issues we partner with clients to address is how to drive profitable, scalable growth. Keeping up with growth is one question.  However, perhaps a more important question is whether you can sustain growth and have a scalable infrastructure.

Do you have the people, development programs/skills, processes and technologies in place so that you can grow without adding people at the same rate as your growth?

First of all, with virtually 0% unemployment, it will prove challenging to find good people. Next, even if you are able to find them, think about your ramp up curve for effectiveness. In most manufacturing environments, it can be 3 months to a year to bring a higher-skilled resource up the learning curve. Also, have you thought about what your customers expect in 6 months to a year? Don’t think about their current needs; look beyond if you plan to be their partner in growth.

So the question remains, are you prepared?



Forecasting: How Far Should You Look into the Future?

July 3rd, 2017
SIOP S&OP

Setting strategy or designing a sales, inventory and operations planning (SIOP) process requires forecasting. How far into the future do you look and why?

Whether setting strategy or designing a SIOP (sales, inventory and operations planning) process, one of the most important questions to consider in forecasting is how far into the future will you look? And why?

As we think about whether the answer should be 1 month, 1 quarter or 1 year, check your thinking. When assessing the future it is important to think through the elements that may impact your forecast.

10 Questions to Ask When Forecasting and Designing SIOP

1. Do you have customer contracts in your business/ industry? If so, how far out do they go?

2. Regardless of the commitment level, how far out do you have information that is somewhat reliable? If it changes substantially from month-to-month, is it of any value?

3. How reliable is your forecast by product or customer grouping? Forget about items and sku-level forecasts. How about product category forecasts?

4. Do you have access to demand data into your supply chain?

5. Are you asking questions about what is coming down the pike? If not, why not?

6. How much cushion do you have? Do you have inventory or capacity availability?

7. How prepared is your supply chain? Can they handle volume spikes?

8. Are you willing to dedicate people to gain a view into the future? Why or why not?

9. Have you considered a strategic sprint? Why are you setting arbitrary time frames when customers don’t care what you do? They want what they need when they need it.

10. Are there downsides to looking too far into the future? What are they?

 

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