A national distributor of replacement window and door hardware located in California's Inland Empire (IE) contacted Productivity Constructs, Inc. and requested recommendations to optimize their distribution network.  Their existing distribution network consisted of the organization's primary manufacturing and distribution facility (400,000 square feet) as well as a 35,000 facility located in the Nashville Tennessee area. 

The (IE) facility employed approximately 82 distribution employees and shipped 75% of revenue and 60% customer shipments while the Nashville distribution facility employed 15 people and shipped 25% of company revenue 40% of customer shipments.

Productivity Constructs, Inc. studied the product mix and movement for each facility and recommended the following:

o    Close the Tennessee facility

o    Consolidate all inventories at the headquarters facility

o    Install approximately $70,000 of Capital Equipment in the headquarters facility

o    Implement a new layout and pick path design in the Order Picking Module in the IE facility

o    The minimum savings would exceed $280,000 per year

The organization expressed concerns that the Nashville facility was under lease for an additional year at $10,000 per month and the organization would get no benefit from the balance of the lease.  Additionally the organization expressed concerns regarding the capacity of their primary facility in the Inland Empire and their ability to maintain excellent levels of customer service from their west coast facility.  After some discussion client recognized that the cost of doing nothing (keeping the Nashville facility open) was significantly greater than the projected opportunity cost reductions of consolidation.

After considerable discussion the organization agreed to move forward and over a 90 day period the Tennessee facility was closed and the inventories moved to the company's IE facility.  The capital equipment improvements were installed in the IE facility, and the new design and layout was implemented in the order picking module to optimize efficiency and minimize travel distance.

The efficiencies generated by the project were considerably better than anticipated, the company was able to reduce its total distribution labor significantly (28 people) and return to a one shift and operation in the IE facility.  The total indirect labor savings exceed $750,000 annually and the company continues to identify productivity improvements in other related areas.  The organization was able to reduce their order turn over time and improve their customer fill rates by approximately 2% because they now had their inventory in one location. 

The company's senior management team is very excited about the efficiency gains which will exceed $500,000 the first year and $900,000 annually as well as providing them with improved control and resource utilization.

© Productivity Constructs, Inc.