Even then simplest of products can create a complex supply chain journey. Often what seems like a simple purchase may involve several hauliers, logistics providers and reconciliation centres before reaching the final leg of the journey, and along the way there are continual opportunities for mistakes to occur such as misguided pallets or pick errors.

One of these opportunities is at the distribution centre, where bulk pallets are broken down for store/consumer pick – any error here could be the difference between items being available (or not) to the consumer and is known as ‘on shelf availability’.

It is at this point in loss prevention and profit protection epicentres where thoughts begin to differ. Working with some of the UK’s largest, fastest, and most complex supply chains we often come across the term ‘wooden dollars’, meaning if product is still in the depot and not in store, then it is not a loss as the product is still within the supply chain and will go to store…eventually.

Supply Chain Auditing

When a consumer visits a store to find that a product is not available, not only has the supply chain failed and the customer possibly lost, but also the profit on that item has not been made – which in itself debunks this ‘wooden dollar’ theory.

It simply does not make sense to invest purely in precision and on-point supply chain technologies and in-depth training without the validity of stock integrity throughout the supply chain and subsequent processes. Why? even with the upmost devoted effort, ultimately everything is still reliant upon either human or a manual intervention.

Some form of check at each of the many pinch-points across the distribution centre process is critical and it ensures the investment is not only working, but is also maintained at an optimum level. And it’s not just one check that should be applied…

…Imagine a network of pipes with a series of bends. Over time, wear and tear takes its toll and water starts to escape through some of the bends. Then, what happens when you apply pressure at the first hole? The speed and amount of water escaping at the holes increases, right?

The experience of the last 20-years suggests a similar analogy. Apply a check in one location without any kind of monitor at any of other pinch-point and you may only be pushing the problem further down-stream.

And the validity of stock integrity?

Regardless of the operation, product type or the complexity of a products supply chain journey, there are six functions that have been identified within the distribution centre environment as key to ascertaining the root cause of errors that occur.

Each of the six functions are as vitally important as the other. As aside from the ‘leaky pipe’ analogy the performance and any possible solution are generally the responsibility of different departments.

  1. In-bound – did the stock arrive in the correct size, colour, quantity, quality, shelf life, weight, or description?
  2. Receipting and put-away – was the delivered item receipted as the correct quantity and was it placed away in the correct pick slot?
  3. Pick – are items being substituted, is the quantity correct, are the sizes correct and why is a variance occurring?
  4. Marshalling – pick errors could be case quantities but what is the impact if a whole pallet ends up in the wrong aisle or sent on the wrong day?
  5. Load – was it sent outbound on the correct vehicle?
  6. Endpoint – for multiple drop-offs, did the correct pallet get dropped off at the right location?

A monitor or check applied in some form at most or all of the key areas will provide steady improvements in stock integrity. In fact, our experience shows almost a 3% improvement at Goods In-bound by comparing the physically received to invoice; over 2% improvement in Picker Accuracy; misguided pallets and left-off’s reduce by 50% and a 30% improvement in accuracy of stock from direct supply to store suppliers/store receipting.

So the next time you are considering what might be affecting your supply chain or where you should start with an audit, addressing each of these points could well improve your overall efficiency and profit significantly.

Faisal Ashfaq | Head of Supply Chain Management