Joe Tillman, our newest guest blogger, is co-author to DC Velocity’s and the Warehousing Education and Research Council’s annual benchmarking study “DC Measures.” Joe is a senior researcher for Supply Chain Visions, Ltd. He has extensive experience in streamlining efficiencies and processes in warehouses and DCs.

Many retail executives, and especially the late McDonald’s founder Ray Kroc, tend to favor the bathroom metric. (Yes, an interesting name for a metric, but consider: if your bathrooms are gross, what does that say about the rest of your operation?) The bathroom metric showcases the importance of being aligned to the overall mission and strategy of a company.

By aligning shop floor metrics to corporate strategy, companies link accountability to accomplished work and can begin closing the performance gap.

The key is to show workers how their performance impacts the business, and then work with them to facilitate the selection and implementation of the measures.

A simple five-step process called Validating the Value Add (VVA) can be a powerful force to usher in change for a warehouse or DC. VVA establishes shop floor or department metrics that support overall company objectives and goals.

When used properly, VVA can create an environment in which people use the metrics to drive positive change in the business.

  • Step 1: Clearly define company objectives. Companies should determine their desired outcomes and strategy and then articulate them: “I want to achieve a ten percent improvement in shipping accurate orders.” Make sure to link operational and functional tactics back to the overall strategy. Follow up to make sure everyone understands the strategy and what their role is in helping to achieve that strategy.
  • Step 2:  Develop the value-add statement. Create value-add statements that are under your team’s or department’s control. Consider how the team or department adds value in achieving the company’s desired outcomes. Be sure to have a measureable performance goal. For example, “Our team adds value by maintaining 99.4% or better accuracy on order picking.”
  • Step 3: Measure the progress against VVA. Once clear expectations have been set, measure the team’s or department’s progress against their goal. Make it easy to see that goals are indeed being met by summarizing data so that the results are clear. Also, be sure to include historical data to track trends. Step 3’s focus is for employees to easily understand and track their performance against the company’s desired outcome.
  • Step 4: Build a Pareto of reasons for not meeting the goal. Create a process for a root cause analysis and development of corrective action plans. For example, a Pareto chart (80/20) will show where to focus your efforts. The obvious problem is usually not the root cause, and in order to keep the problem from recurring, the team must drill-down to find the underlying reasons for the problem. A good technique is to ask “Why?” five times.
  • Step 5: Take action – Fix the problem. This is where results begin. By outlining the steps you are taking to correct problems that have been identified in Step 4, you mitigate emotions and finger pointing. Additionally,  taking action will help drive change to improve your performance. However, if you are unwilling to correct the problem, your efforts up to this point mean nothing.                     

The performance gap between the best and the rest will not close without a conscious effort to drive performance at the lowest levels in the operations. Best-in-class performers did not attain their status serendipitously; they look behind the numbers to understand how their level of performance was reached by identifying the unique processes, tools, and methods required to achieve best-in-class performance.

Contact Joe Tillman with questions or comments on this post.