Balanced Scorecard Approach to Distribution Center Management
Managing the distribution center in a fast-paced business environment is a very challenging mission. If you work in retail, every day is hectic managing thousands of stock keeping units and responding to increasing customer demand. Distribution center management needs to maintain the balance between supply and demand. Because the distribution center is the center of gravity, it receives/ships products from/to many members in the supply chain.
In the distribution center business, you have to manage not only operations, but also the profits and growth of the business. To successfully run distribution center management, you need to have a well-balanced approach that your team can understand, implement, and monitor progress. Developed a sample strategic distribution center management scheme using a simplified Balanced Scorecard that focuses on 4 perspectives.
financial perspective
This perspective shows you how well your distribution center is performing. If you have a full understanding of profit now and in the past, you’ll have a better idea of how much effort you and your team put into managing the distribution center. To do this, you need to divide the customer into segments, collect the revenue figure in the past (for example, 5 years ago) up to the current period. When you’re done, I think you should be able to highlight 2 important segments, namely the well-performing segment and the overlooked segment.
Customer perspective
For a well-performing segment, I suggest you run a regular customer satisfaction survey to make sure you won’t lose this segment to your competitor. Also, you should try to establish a customer service policy to ensure that each of your customers receives a standardized response and service. For the overlooked segment, you need to do customer retention. Stop by to say hello to your inactive customer and listen to his suggestions and comments. This information is very useful and can be used as input for the next perspective.
Internal business processes
After getting information from both the well-performing segment and the overlooked segment, you should now have a very good idea about how you should improve your operations. The purpose of the internal business process perspective is just that, to improve your operations so you can win new customers and retain existing customers. I put together a generic improvement initiative for distribution center management as follows,
Process improvements: This can be done by mapping business processes, identifying non-value-added activities in the distribution center, and making changes to the process flow.
Quality management: you may want to consider implementing a quality management system such as TQM or ISO. This is highly recommended if you receive a lot of customer complaints about shipping or document errors.
Information technology: I personally believe that not all distribution centers have an integrated IT system. The disparate system creates disorder between processes. For example, if the order processing system is separate from the warehouse system, operators must enter data into 2 different systems to complete the shipment. This is an expensive and time consuming operation. Investment in an integrated information system should be considered.
Innovation: Investment in innovation sometimes increases costs more than saves costs. However, you need to have innovation. Existing customer may flee to a more modern distribution center or don’t have a point of sale to introduce to your potential new customer if your distribution center is outdated. I would recommend RFID, condition tracking, vehicle tracking, and equipment automation to streamline your distribution center.
Cost management: Three high-cost areas are warehouse space, truck utilization, and order picking. These articles deserve a lot of attention.
Security and Compliance: The trend of corporate social responsibility is spreading all over the world. You may not be able to do business with large clients if you don’t pay attention to issues like workplace safety, highway safety, hazardous materials, fire safety, regulatory compliance, etc. These are not income generating topics, but they are essential.
Learning and growth
You can’t do everything yourself, the employee is essential to the business. Experienced staff gets the job done right, satisfies the customer, and generates revenue for you. This is the importance of the latter perspective.
Logistics and supply chain management is a relatively new topic and I believe many employees in the distribution center do not have formal training/education in this area. You shouldn’t hesitate to provide your staff with the knowledge, it’s fine whether it’s on-the-job training or structured training. You should try to inject new ideas and knowledge into your staff as much as possible.
Last but not least, the employee is the essence. The satisfied employee tends to provide very useful information when an improvement initiative is carried out. On the other hand, the dissatisfied employee creates a disturbance, defies change, and acts unprofessionally with the customer. Employee satisfaction survey or employee retention program will help you run your distribution center sustainably.
