Seven Day Replenishment

Let’s blast forward into the future and imagine that you could get any item you currently stock in seven days or less. It’s leap of faith time. Try for a moment to imagine what this would mean for your warehouse business.

The obvious.

You could carry far less inventory.
With less inventory, you need less space.
You could rearrange your warehouse in a completely different way.
You could add more product lines.
Move into a smaller space - space costs money.
You will need fewer people in the warehouse (less unloading, stocking).
Turn the warehouse guys into truck guys - do two deliveries a day.
End of the month/year inventory counts will certainly get easier.
Less obsolete/slow-moving inventory to mark down.
On-hand cash goes up.
Your bottom line looks a whole lot better.

Now enough about you - what would this mean for your customers?

They know that the longest wait they will ever experience will be one week, max.
Your costs have gone down dramatically (less space, fewer workers, way lower cash value of inventory) so you can lower your prices.
At the same time, you will offer superior customer service.

Let’s ask the manufacturers to sprinkle a little magic dust around and imagine a time in the future when they could make everything the warehouse customers wanted in one week. What would that mean for you?

You get many of the same benefits:

More factory and warehouse space.
Less cash tied up in inventory (incoming raw inventory, WIP inventory and finished goods inventory).
Exemplary customer service (and who doesn’t want to make and ship anything a customer orders on Monday before the end of the week?).
Foreign suppliers would have one heck of a time competing.
Production scheduling becomes easier. Keep one week’s worth of finished goods on the shelf, and as material is shipped, replenish the shelves. This means no more long production runs (contrary to the still popular belief, long runs are more expensive than short runs).
You will be producing what the customer is consuming - which is to say what he wants - not what you think or hope he might want three months from now.

I am not making this stuff up. There are large distribution houses and manufacturing companies doing this right now. Some are so good they need only carry a day’s worth of inventory to meet customer demand.

It’s counter intuitive to think small production lots of say, five or 10 or 100, when mass production has told us to make jillions. Yes, some time is lost in doing multiple set-ups in a week (though I have seen the Lean Technique SMED - Single Minute Exchange of Die) reduce three-day changeovers to less than 40 minutes. Small lot sizes save you so much more in cash, space and customer responsiveness, it is worth it.

For the moment, just daydream for a few minutes about what it would mean to your warehouse/manufacturing business if you could replenish everything and anything in one week or less. I believe this vision will be so seductive, you will actually be ready to take another leap of faith next month, when I talk about how smaller lot sizes will make you a more nimble and better competitor and save you a bucket of money along the way.

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Joan S. Adams has consulted for industrial clients for more than 15 years. She headed DITT, the consultancy arm of the French National Utility, Electricité de France, and was a managing consultant at A.T. Kearney. Later, she started Pierian, a consultancy that brings sustained and measurable success through operational excellence, customer focus, and competitive market strategy. Joan Adams speaks French and Spanish. She has worked on projects in Europe, Central America, Africa, Asia as well as North America. She has engineering degrees from the University of Wisconsin-Madison and MIT. She also has an MBA from the Wharton School. She can be reached at adams@pierian.net.

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