Sunday, October 25, 2015

Same Day Delivery with a Warehouse on Wheels

Image result for warehouse on wheelsMove your customers to same day delivery using technology from another industry.

As you may have noticed I am a big fan of Amazon's services in general and one of the latest offerings, Amazon Prime Now, led me to discussions with a number of clients who wanted to emulate or explore how they could also achieve same day delivery.  Companies like  McMaster-Carr have made a billion dollar business on the same day delivery model.

If you are not familiar  with it , Amazon Prime now offers thousands of products on a two hour delivery time frame and having used the product extensively I must say  I would pay for the convenience however it's currently free to prime members.

Having said that to differentiate themselves in the Retail Pharmacy space a client recently said , what other value can we bring to these clients?

During the meeting it was suggested that same day delivery was a good value as it would allow them to tell patients/customers, "No problem I can have the prescription filled by 3pm today."

This would also steer them away from the traditional pricing arguments and haggling over price
as other competitors could not deliver this service and eventually customers would either come to their pharmacy more often or possibly even pay a rush fee.

The problem was that they while they did have the inventory to handle the demand they did not have the distribution network and wanted to expand it outside the normal 2-3 hour zone from thier main warehouse.
In a previous blog post we covered using existing clients to expand the supply chain and using those not as supply chain endpoints , but rather as mini warehouses. However there are complications at those locations and your don't always have controlled access, certainly an issue in the the Pharma supply chain.
Image result for warehouse on wheels tools

So what was the solution? 

Borrowing from our successful MDS-EMS  Supply Chain Management for Emergency Medical Services  Software solution , we took the concept of a warehouse on wheels and created the mobile inventory warehouse that solved the issue.

Customer orders can be routed directly to the driver and mapped out so if there is not enough time and he or she can move along a predetermined route delivering products through out the day.
As demand increases multiple vans/trucks can be added and the standard MDS-EMS replenishment system means they are in and out of the distribution center in minutes instead of hours when restocking the mobile warehouse.

The Mobile Inventory System works by allowing Each mobile warehouse to  replenish packs and loose items from the DC/supply depot. On a scheduled basis or on demand customer sales orders are sent to your supply truck. The orders are updated via wireless web connection from your supply warehouse and the MDS-Nx System. The truck Prints labels and delivers the goods on the truck, then returns to the main warehouse, after supplying and restocks or delivers additional orders until inventory is depleted. Packs are replenished and any lose items are restocked using each pack’s bar coded label. An invoice is generated for the items consumed and the customers account is charged. All items are displayed on the website as available for same day delivery and if an order is mixed items - they can choose to ship later with entire shipment from the DC or have it routed to the same day truck driver.

By building prebuilt "packs" of the most frequently used items and or creating a usage pattern for the clients in that area  you can increase the likelihood of customers using the program and you can either charge higher product prices for same day items or a surcharge for delivery.

Alternately you can just this as the tool the separates your company from the competition.

For more information on TSH or MDS call The Systems House, Inc. at 1-800- MDS-5556. Or send a message to
Click here and tell us how we can help you with your business solutions.

Sunday, October 18, 2015

Smaller Faster Warehouses?

Turns out bigger is not always better when it comes to distribution.

Image result for small warehouseMost of our blog posts look at what the larger distributors are doing and try to adapt the concepts to small and medium sized business. But for this week a surprising trend is emerging..
The E-Commerce Supply chain is driving demand for smaller, Urban Distribution Centers.

In today's world of e-commerce distribution, speed and mobility are key. Just like how any customer who orders a widget from expects it to be on their doorstep two days later or less, businesses ordering commercial products now expect the same speedy service from distributors.

As the pace of B2B continues to transform distribution trends, it appears one of them is in the distribution centers themselves. New data from real estate firm CBRE Inc. shows that demand for industrial facilities under 100,000 square feet in urban areas is on the rise.

Traditionally, large distribution centers have been located in suburbs and small towns, where property and labor are cheaper than large cities. But with end users growing more reliant on 1-2 day, or even same-day delivery, distributors and retailers have had to find ways of moving products to them faster.

David Egan, CBRE’s head of U.S. industrial research, told the Wall Street Journal, “You need to expand and make your supply chain much more complex if you want to be able to promise and deliver on that same-hour, same-day or overnight delivery everyone is coming to expect.”

One of those growing ways retailers/distributors are moving products, CBRE has found, is by snatching up smaller distribution facilities in urban "light industrial space," keeping their logistics network mobile, and perhaps cheaper.

These facilities are often in older industrial buildings where location is the big factor instead of a priority on the latest, greatest machinery found in large warehouses. CBRE's research found that such urban light industrial property has more availability than the increasingly tight market for large industrial facilities, and for relatively reasonable rents.

CBRE reported that industrial real estate demand has pushed rents to near pre-recession levels, growing by 1.3 percent in Q2 2015 and nearly 3 percent so far this year. The firm expects 3.2 percent of additional growth through the end of 2015, which would bring rents to within 4 percent of the previous cycle high.

CBRE analyzed 44 neighborhoods prone to probable online shoppers across 14 major metropolitan areas and, according to the report, found that Atlanta, Boston, Chicago and Philadelphia offer ample access to both e-commerce customers and light industrial space choices.
Image result for stockroom healthcare
The practice of adding smaller, urban distribution centers certainly suits retailers of consumer products, but what about distributors of other industrial or healthcare products?

Population centers may be more for the retail crowd, but what CBRE's research shows is that distribution centers can have a place there too, even if it's in smaller pieces than massive warehouses. Using smaller, urban DCs could be effective for stocking your most popular B2B products instead of feeling a need to include absolutely everything in your product catalog at every location. The traditional single warehouse or JIT Model is changing. If you have the product closer to or at your customers IE a Stockroom at a customer and treat is as a mini warehouse.
You can take advantage of the same concepts.

Consumer retailers have begun using crowdsourced delivery services such as Deliv, or even Uber-like rideshare services , Amazon is testing a new delivery service called Amazon Flex that allow ordinary citizens to drive packages to destinations. Those services go hand-in-hand with brick-and-mortar retail stores in population centers. But most those packages are delivered to an individual person, whereas  B2B orders are going to other businesses. We have yet to see any many distributors jump on the bandwagon of those delivery services, but that's not to say it won't eventually happen. Especially for those who run their own delivery fleet now.

Image result for doctors stockroomBut here is an interesting concept, many distributors operate stockrooms and offsite customer owned inventory locations today.
Rather then viewing those as endpoints in your supply chain, change the view to a more 360 degree view and understand they can be satellite warehouses providing the right amount of inventory at the right location at the right time.

How many doctors offices would crowdsource and deliver for you?
If you have a medical center with thirty offices in a building, and half of them can hold some extra inventory, by using an effective inventory management and shipping solution ( Like MDS-Nx ) you can create those warehouses and get customers the products they need just like amazon.

For more information on TSH or MDS call The Systems House, Inc. at 1-800- MDS-5556. Or send a message to
Click here and tell us how we can help you with your business solutions.

Sunday, October 11, 2015

Why does that matter?

Image result for why does it matter Often we talk about supply chain metrics or KPI ( Key performance indicators) without explaining the purpose or reason we measure them and watch them.

On a daily basis we often push a number or percentage and tell people to watch them, but the most common question we get is.... 
Why does that matter? 

So to help you along today here a few simple metrics/indicators and why they matter. 
In addition since many the of the metrics don't really explain what is good or what is bad we can look at some of the different types of graphs to help us see a trend and figure out how to correct or react. 

While some of this data may be readily available in your ERP/Business management system, if not you can always start with a spreadsheet or a piece of paper. 

As the saying goes, "If you can not measure it, you can not improve it." - Lord Kelvin 

Cash Conversion Cycle 

In it's simplest form , how long does it take for your money to make money. 
Image result for cash conversion cycleTake the Invoice Payment Date from your vendor and the Cash Receipt Date from your Customer. The Number of days between the two is your cash conversion cycle. 
In most distribution companies this is not always that simple as you may purchase and pay for a case of gloves but sell them by the box. So the most common way to normalize or make the number meaningful is to use an average of the days rather then a single transaction. 
What is is supposed to look like?  While it can vary universally every agrees a lower number is better. Anything under 30 days is excellent but most companies who hold inventory hover around 80-100 days

Why it matters? The shorter your cycle time to the more money you will have to buy more inventory and sell more etc. It basically going to decrease the amount of operating capital or money you need to expand you business. 
Instead of looking to more funding to expand the business look at ways to shorten the cycle time. Credit cards, ACH payments, Cash discount for quick payments. 
These are all tools to help the cash conversion cycle and can speed up payments on the consumer side as well as the purchase side. 

Inventory Days/Weeks of Supply

This is the  number of days it would take to run out of supply if it was not replenished.
Image result for days of inventoryIt is calculated as inventory on hand / average daily usage.  Inventory Management seeks to minimize inventory days of supply in order to reduce the risks of excess and obsolete inventory. 

What is is supposed to look like?  
In most distribution operations a 1-2 month spread is typical or 30-60 days on hand. 

Why it matters? 
Excess inventory tends to tie up  cash flow. Why let the money sit in inventory in the warehouse , typically inventory like a car will lose value while sitting in the warehouse and the more you reduce the inventory you are keeping the less cash you will have sitting in the warehouse. and the more you will have to operate and grow your business. 

Using an effective inventory management solution can yield more cash to help your run the business. 

Image result for fullFill Rate

While their are many arguments over what goes into the fill rate  starting with a simple calculation that can be tweaked is suggested when starting the process. 
For now lets assume the fill rate is the percentage of a customer's order that is filled on the first shipment. 
This can be represented as the percentage of items, SKUs or order value that is included with the first shipment. 

(1 - ((total items - shipped items) / total items)) * 100 

What is is supposed to look like?  
While again i can vary form company to company the floor or bottom value we see if usually around 93% or 94%   if you are not there then you either need to increase inventory 
or review customer order patterns to match them up better with your purchasing and delivery schedule. 

Why it matters? 
Fill rate is typically the most quoted metric to match with customer satisfaction and is a good measurement of efficiency for your company as it involves a number of areas. 

Tools to improve your fill rate can be inventory management, customer usage analysis and possibly customer commitments. Often a client/customer will commit to purchasing a specific quantity for you or allow you to do strategic planning with them so that the fill rate matches to their expectations. 

These measurements or metrics allow you to simplify your review processes and by understanding the reasons behind why each one matters you can help others in the company understand the concept of a KPI or Metric and turn those into measurable results to help drive your business. 
For more information on TSH or MDS call The Systems House, Inc. at 1-800- MDS-5556. Or send a message to
Click here and tell us how we can help you with your business solutions.