Distribution Case Study
Argent Global Services was engaged to develop and implement cost reduction initiatives within a Global Parts Distribution Center being operated by a 3PL (3rd Party Logistics Company).
Background
Argent was contacted by a Third-Party Logistics company (3PL) to assist in developing cost reduction and operational improvement initiatives at the North American parts distribution center it was managing for one of the largest engine manufacturers in the world. The operation was unable to meet increased customer demand, experiencing excessive turnover and heavily reliant upon temporary labor. The unstable workforce had resulted in the addition of approximately 300 “new” employees, resulting in constant training and quality issues.
Company Fact Sheet
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Objective
Argent was tasked with developing cost reduction and performance improvement initiatives throughout the operation, determining optimum staffing levels, stabilizing the workforce and improving quality and service levels.
Methodology
Argent deployed a team of engineers, working hand-in-hand with the local 3PL management to assess the operation and identify opportunities for improvement. Direct observations were performed in all major activities to identify operational obstacles and opportunities for potential quality issues. Time and motion studies were conducted and element-level performance data was collected to determine accurate performance goals (Engineered Labor Standards). Best Methods were documented and an Individual Accountability Program was implemented. The program included individual performance expectations, a Labor Management System (LMS), scheduled and consistent performance feedback, a Performance Coaching Program and incentives.
Results
The implementation of the productivity improvement program, which included Best Methods, Coaching and consistent feedback, resulted in the reduction of 300 temporary employees. In addition, layout changes, additional racking and improved slotting resulted in a significant increase in capacity. New workstations were designed and installed in the Packaging area, which improved hourly throughput by 250%.
The changes also resulted in a much more stable work environment and greatly reduced turnover. Besides increased capacity, the improved layout and slotting resulted in improved Inventory, which improved the Orderfill accuracy and quality. Customer Service measurements across the board were positively impacted and Customer Returns were reduced significantly.
Although Argent was brought into the operation by the 3PL, the contract between the customer and 3PL was a “shared savings” agreement with cost savings split equally between the 3PL and their customer.
Project Highlights
- 33% Decrease in Direct Labor Teammates
- $12M Annual Labor Cost Reduction
- Error Rate Reduced 75%
- Stabilized Workforce