Kenco provides customer with $900,000 in supply chain savings

Overview

Kenco Logistic Services is the managing 3PL of an Orlando Regional Distribution Center (RDC), which is a 500,000 square-foot facility shipping nearly one million units a year.  Kenco also manages the Dallas, Columbus, Atlanta and Milton distribution centers for its customer.

The Lean/Six Sigma Black Belt project was a co-joined effort by both Kenco and its partner to maximize the efficiency of the workforce to reduce overall cost within customer’s supply chain.  Because of the overall success, this Black Belt project has been selected to be implemented their entire network
The concept for this project was simple: balanced work will have a balanced impact on both cost and efficiency.  The team began by applying the DMAIC process (Six Sigma problem-solving model: Define, Measure, Analyze, Improve, Control) and by using Six Sigma principles.

Challenge

The major challenge within this Black Belt project included adjusting to paradigm shifts by both the team and by the customer.  Below are some of those major challenges encountered by the team:

Solution

The first solution implemented by the team focused primarily on staffing.  Because of the variation in volume, the managing 3PL would always be faced with either a surplus or shortage in labor required within the warehouse and would find it very difficult to maximize the efficiency of the workforce.  The team had to prove to the customer that the labor issue was customer driven and that extreme variation in the volume truly caused degradation within the efficiency of the workforce.

The second challenge the team had to overcome involved proving to the customer that “The Work is not the Work”.  The customer believed that the inbound volume, although much more in quantity at the beginning of the week then at the end of the week, had no negative impact on the workforce.  After thorough analysis, the team realized that the workers were fatigued by the end of week due to the heavy inbound volume that occurred at the beginning of the week.  It became necessary to even inbound volume out as much as possible throughout the week.

The third solution the team provided to the customer was that the volumes inbound to the facility was primarily replenishment stock and therefore the site was incurring unnecessary labor by receiving that stock within 24 hours. By allowing a longer receiving time frame, the work could be spread out more evenly.

Results

The results for this project were solely based on the results that Orlando realized during the pilot.  Orlando annually would save $79,000 from leveling inbound loads and the customer’s network could save up to $900,000 from the project being implemented nation-wide.  The team and the customer both feel that the network savings could be much more than estimated.  The network savings were based on the savings realized in Orlando and at the Orlando RDC’S annual volume.  Larger sites within the network could then see more annual savings.

Although this project was piloted in Orlando, the Atlanta RDC is now going through the process of implementation.  Kenco’s customer is planning on implementing this project nation-wide throughout its network. What they found will change the dynamics of how day to day business is performed. The Kenco team was able to analyze operations and provide cost-savings solutions to the customer.

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