So this electrician walks into the counter area at E.B. Horsman & Son's largest branch, in Surrey, British Columbia. He picks up a few of the usual items from the self-serve displays — some connectors, some cable ties — he walks up to the counter, and says, “Gimme 16 meters of three-conductor two.” The counter salesperson hits a few buttons and before the electrician even has time to get to the coffee maker, the coiled wire appears on the counter.
This may be a bit of an exaggeration, but it's no joke. Far from it, according to Roy Bragg — it's the experience every customer should have every time he walks in the door.
Bragg, as vice president of operations for Vancouver-based E.B. Horsman & Son, is charged with managing and fine-tuning the behind-the-scenes operations of one of the largest independent electrical distributors in Canada. The company stakes its reputation on operational excellence above all else.
If the electrician had been quick enough, he might have seen his order's progress on the monitor above the counter. That monitor displays his order, the name of the worker picking it, how many line items he's picked and the percentage progress in picking the order. It's a glimpse at one of Bragg's favorite tools for managing warehouse operations — a PathGuide Latitude warehouse management system (WMS) the company installed six years ago. Bragg and his team have been tweaking and exploiting it ever since.
E.B. Horsman & Son views operational excellence as its core differentiator in the market. With 15 branch locations and a central distribution center producing over $100 million in revenues annually while competing against the national chains that dominate Canada's electrical distribution industry (see “View from the North” on page 22), running a tight ship is imperative.
E.B. Horsman installed the Latitude WMS in the course of a complete replacement of its computer system in 2003. The system they had been using was no longer supported — it was a 20-year-old character-based legacy system that had done all it could do to support the company's growth. Bragg had been through four conversions at previous employers and knew pretty well what was available in the market and what the company needed. The system he and his team selected, Prophet 21 Commerce Center (now owned and supported by Activant Solutions, Livermore, Calif.), had all the capabilities the company needed in an enterprise resource planning (ERP) system, but Bragg wanted to go further. He wanted a warehouse management system that would support the company's pursuit of extreme levels of operational excellence.
The company had already been using radio frequency (RF) bar-code scanners, but in a very rudimentary way, Bragg says. “We lacked a lot on the warehouse side (with the old system). We had a simple bin-item relationship with not a lot of functionality beyond that — it was just captured in a slave and downloaded — it wasn't true RF. We knew that what was available was light-years ahead of what we had.”
It was the people at Prophet 21 who recommended he look at PathGuide Technologies' Latitude system. Bragg says he was impressed from the beginning.
“I was impressed with what I saw — the functionality, the software was quite evolved, and they had a futuristic outlook on keeping features flexible and expandable. If we go to carousels, conveyor picking, the automation-type tools, their software would definitely handle all that,” Bragg says. “But more important was their support line of communications. Live, friendly and knowledgeable. Quick response to questions and problems.”
As part of that support, Bragg and his warehouse supervisor went to PathGuide's headquarters in Mukilteo, Wash., just outside Seattle, for a few days of training. PathGuide has a mock warehouse that they stock with the same kinds of products their clients have on their shelves. They set up the same ERP system the customer uses and create a working model that mimics as closely as possible the way the system will work once installed, says Eric Allais, president and chief executive of PathGuide.
“We set it up so they can walk through in a hands-on way with RF terminals, go through transactions — from receiving to put away, pick, reporting,” Allais says. “So when they go on-site, it's a train-the-trainer approach.”
Bragg took no chances with the implementation process. At his request, PathGuide sent one of its software engineers, Steve Beach, up to Vancouver to spend three weeks preparing for the changeover. Beach and Bragg spent a full two weeks of eight-hour days going through every process in the warehouse in the finest possible detail.
“Because I had been through the process before, I know when you don't look at this from a systems perspective, you're setting yourself up for a rocky start on any system,” Bragg says. “Steve and I went through every single process in detail at the floor level, then we would go to a room and we looked at how that was going to play out in the Latitude software. We tackled the large bugs, the bigger wrinkles, then moved on to the next process. The value of that, with Steve being programmer, was that he was able to fix things on-site. Where we needed a report, where there were gaps between their software and our processes — we looked at all of that and made sure we had a good understanding of how that was all going to work once we turned on the new system.”
The preparations worked. The first day E.B. Horsman took the system live in its distribution center, they were able to receive everything and ship everything on schedule. “There was no interruption to business whatsoever,” Bragg says.
So what did E.B. Horsman gain from the changeover? The results speak for themselves in a way that couldn't be more clear, as PathGuide is glad to list in a recent promotion featuring E.B. Horsman:
Receiving accuracy and receiving productivity each increased by nearly 200 percent.
Pick accuracy levels currently run better than 1 error in every 1,300 line items.
Pick productivity increased 192 percent.
Yearly inventory losses have been cut to approximately 0.002 percent.
Ramp-up time for new employees to become proficient was reduced from three-to-six months down to one month.
Bragg points to additional benefits: “We were able to eliminate 50 percent of our travel time in picking and receiving. For those who are in the distribution game, that stat alone pays for the system.”
The conversion to the new Prophet 21 ERP system and the Latitude WMS paid for themselves inside two years, Bragg says.
As a side benefit, the system allowed E.B. Horsman to dramatically increase the capacity of its 20,000-square-foot distribution center.
“We were able to delay moving to a larger facility for five years due to product organization and zoning. Considering the real-estate in Canada has dropped 30 percent in the past year it could mean significant savings in the future as well.”
Using the Tools
Bragg says the results have been a pleasant surprise. But, impressive as those results are, it's clear that the WMS is simply a tool — it's how E.B. Horsman uses it that makes the difference.
“It's been a bigger pleasant surprise year-after-year,” says Bragg. “We've taken that software and beat the doors off efficiency and accuracy. We don't say ‘good enough.' We're constantly improving. We have weekly meetings with our warehouse and management group to constantly look for new ways to improve efficiency and accuracy. The beauty is we always find something. We find we're able to say we could really use improvement in this area, and nine out of ten times we're able to do it.”
Bragg is willing to admit when the company's accuracy slips a bit — during the week we talked, he said shipping accuracy was around 99.89 percent by line, down from a recent high of 99.93 percent.
To attain such tight performance, workers in E.B. Horsman' distribution center are trained and measured on their accuracy.
“Our core focus, primary focus at the DC is right stuff and right amount of stuff,” Bragg says. “In fact, 40 percent of our wage reviews are weighted to that. In other words, you can be good in all areas except for that and not get an increase. Period. That filters people out of here pretty quick as far as understanding that's important. That's the culture that we've built.”
The WMS software gives Bragg and his warehouse managers fine-grained insights on performance in the warehouse by employee, zone, aisle and by any parameter he chooses to look at. That objective measurement of workers' performance is backed up with more subjective measures and direct accountability to the other workers.
Each new employee goes through a probationary period. At the end of that period, the experienced workers get the final stay in whether the new hire stays or goes.
“Ken, our warehouse supervisor, goes around and has a chat with five or six of the senior individuals,” Bragg says. “They look at statistical information, they talk about, ‘Is he fitting in with the group? Does he show care and concern? Would you keep him?' If the majority come back ‘no,' we go back and look at the reasons — we don't want to be biased at all — and Ken has to let that employee know that he's not going to be passed on to full-time.”
The system upgrades and the focus on constant improvement have allowed E.B. Horsman's distribution center to set pretty high standards in serving the company's 15 branches spread throughout the mountainous coastal terrain of British Columbia. Each branch carries about six weeks'-worth of stock. The furthest branches are about 1,600km (just over 994 miles) north from the DC, a two-day drive. All the other branches are replenished daily by 7 a.m. E.B. Horsman doesn't own any trucks, preferring instead to contract with the dominant local carriers in each area.
The DC is open twelve hours a day, from 6 a.m. to 6 p.m., and all orders received that day are shipped that day. For five years now, nothing has ever been left for the next day, Bragg says. The DC turns its inventory 11 times a year.
Receiving accuracy is perhaps the most critical stage of the process, and mastering receiving is the key to getting product to flow as smoothly as it does in E.B. Horsman's distribution center, says PathGuide's Allais. “If you received-in the wrong product, or wrong quantities, everything else you do creates a bottleneck,” he says.
Latitude allows receiving to check inbound items against the purchase order and post the results to the host computer. By doing that, “you're making the material instantly available for sale. If an item needs to be labeled, bar coded, you can do that right there at the point of receiving,” Allais adds. “You're adding efficiencies, but more importantly at the receiving end, you're adding control. You're not introducing problems that will compound later if you receive wrong material or wrong quantity.”
Discrepancies discovered in receiving are transmitted immediately to accounts payable and back to E.B. Horsman's suppliers, eliminating hours of troubleshooting meetings among warehouse managers, accounting and others while also improving supplier relations, Bragg says.
Latitude also gives the distribution center the ability to do things that would have been nearly impossible before, such as picking in the receiving branch's bin-location order for a cleaner put-away at the branch level.
Meanwhile, Back in Surrey…
The benefits E.B. Horsman has gained in its distribution center are beginning to roll out to its branch operations as well. In April 2008, the company installed Latitude at that Surrey branch. Having the branch on the same system allows further efficiencies, such as shipping its daily transfers to Surrey with a single scan and receiving it at the branch with a single scan.
In the Surrey conversion, E.B. Horsman installed some additional modules for branch-level operations, including one called “Front Counter” — that's what enabled the speed of service the electrician experienced at the beginning of the story.
The system allows the order taker at the counter to request from the warehouse staff that something be picked and brought to the counter immediately. The priority pick will beep in the warehouse staff's RF scan guns, telling them they have a priority order and to pick them right away and take them to the counter, all without the counter person having to say a word. The person doing the picking can interrupt what he or she was doing, pick the priority order, and return to the previous task seamlessly.
“In the past, they're yelling down, ‘John, I need 16 feet of 3-conductor two,' and John would bring back 16 meters of 2-conductor 3. Now he just puts his item in the system and he selects ‘priority pick.'” The rest is a matter of automation, mixed with some operational excellence.