This major high street electrical retailer’s national distribution centre (NDC) for the UK, Ireland, and France was based in the East Midlands. NYK provided the warehousing and UK transport. The contract was worth circa £16m per annum, employed 170 FTEs, 150k sq ft, 50 vehicles and 120 trailers.
At the beginning of the financial year the NYK Logistics contract management identified that the contract would face a significant financial problem. Furthermore the site needed to absorb considerable growth and improve all operational KPI’s.
As part of a management restructure, the start of the year saw a new NYK Logistics Managing Director for the business unit that included this client. In the Spring Proffitt Consultants were engaged by the new MD to review the operation and put together a proposal that would return the business to profit in the same year.
Kevin Higgs of Proffitt Consultants headed up a team of supply chain experts who used software tools to model the warehouse and transport operations. These models used the concept of “low”, “medium”, and “high” volume weeks to build up an annual capacity model and hence an annual P&L. The model results were then compared to the actual results from the prior year to both validate the models and to identify the main variances between actual and forecast. Once the models were validated they were used for scenario analysis. The results of this scenario analysis were used to determine the warehouse space, warehouse racking, floor space, MHE types and numbers, FTE numbers, vehicle numbers and locations.
In order to address the customer’s concerns relating to the maximum capacity, additional modelling of the Xmas peak was carried out. The peak day and the corresponding week were modelled in detail to determine the warehouse’s maximum throughput and potential bottlenecks.
This analysis and its results were shared and discussed with the customer. This process rebuilt their confidence in NYK’s ability to delivery a supply chain solution and a successful Xmas peak. As well as rebuilding the customer’s confidence the models demonstrated that one cause of NYK’s losses was that the commercial rates were too low. Ultimately this resulted in a revised rate structure and a rebalancing of the operational risk in NYK’s favour.
Operationally the output of the analysis and supply chain modelling were;
- Revised picking process
- Dock plan
- Visual operation managed by visual KPIs
- Racking reconfiguration and increased bulk pick locations
- Capping of peak volumes
A key element in implementing these changes was that the management organisation was reviewed and ultimately aligned with the customer’s and NYK’s requirements.
