Distribution Center Management Balanced Scorecard Approach

Distribution center management in fast-paced business environment is a very challenging mission. If you work in retail, every day is hectic because you have to handle thousands of inventory storage units and you have to respond to growing customer demand. Management of the distribution center must maintain a balance between demand and supply. Because distribution center is the center of gravity, products are received / sent by / to many members in the supply chain.

In distribution centers, you have to manage not only operations, but also business profits and growth. In order to successfully execute management center management, you must have a balanced approach that the team can understand, implement and monitor the progress. I have developed a range of strategic management system for distribution center using Simplified Balanced Scorecard, centered on 4 perspectives.

Economic perspective

This perspective shows you how well your distribution center is doing. If you fully understand how to make money now and in the past, you will have a better idea of ​​how much effort you and your team are making in distribution center management. To do this, you need to divide the customer into segments, gathering revenue figures in the past (for example, 5 years back) up to the current period. When you’re done, I think you should be able to highlight 2 important segments, namely segment with good result and overlooked segment.

customer perspective

For a good performance segment, I suggest you do regular customer satisfaction surveys to make sure you do not lose this segment to your competitor. In addition, try to establish customer service policies to ensure that each of your customers receives standardized response and service. For segments that are overlooked, you have to keep the customer. Just come in to say hello to your inactive customer and listen to their suggestions and comments. This information is very useful and can be used as input for the next perspective.

Internal business processes

Once you have obtained information from both the good performance segment and the overlooked segment, you should now have a very good idea of ​​how to improve your operations. The purpose of the internal business process perspective is precisely that, to improve your operations so that you can win new customer and retain existing customer. I have put together a generic distribution center management enhancement initiative as follows,

Process Improvement: this can be done by mapping business processes, identifying non-value added activities in the distribution center, and making process flow changes.

quality control: you may want to consider implementing quality management system such as TQM or ISO. This is highly recommended if you receive lots of complaints from customers about shipping or document errors.

information technology: I personally believe that not all distribution centers have an integrated IT system. Different system creates root among processes. For example, if the order processing system is separate from the storage system, operators have to make data entry in 2 different systems to complete the shipment. This is time consuming and high cost. Investments in integrated information systems should be considered.

innovation: Investing in innovation sometimes increases costs more than saving costs. However, you need innovation. Existing customer may run away to a more modernized distribution center or you do not have a point of sale to give you new prospects if your distribution center is outdated. I would recommend RFID, Status Tracking, Vehicle Tracking and Equipment Automation to streamline your distribution center.

Cost control: Three high-cost areas are storage space, truck use and order picking. These elements deserve much attention.

Safety and compliance: The trend for corporate social responsibility is spreading around the world. You may not be able to do business with large customers if you are not aware of issues such as workplace safety, traffic safety, hazardous material, fire safety, regulatory compliance and so on. These are not revenue generating topics, but they are important.

Learning and growth

You can’t do everything yourself, employee is basic to business. Experienced employees do the job correctly, satisfy the customer and generate revenue for you. This is the importance of the last perspective.

Logistics and supply chain management is a relatively new topic, and I believe many distribution center staff do not have formal education / training in this area. Do not hesitate to give your employees knowledge, it is OK neither on job training nor structured training. You should try to inject new ideas and knowledge to your staff as much as possible.

Last but not least, the employee is the essence. Satisfied employee tends to provide very useful information when taking an improvement initiative. On the other hand, dissatisfied employees create disruptions, defy change and act unprofessionally towards the customer. Employee satisfaction survey or employee retention program helps you operate your distribution center in a sustainable way.