– Supply Chain Insight –
Strategic Planning Phases Applied to Logistics
Before we discuss where fulfillment optimization systems fit in, let’s first agree that, in any successful distribution operation, proper planning is critical. Of course, this is relevant not only for maintaining an optimal fulfillment operation year-round but also to ensuring problematic capacity constraints don’t come up unexpectedly.
Effective short-term and long-term planning typically happens at three stages: strategic, tactical, and operational. The goal of each stage is different and while the responsibility for each stage typically falls on different levels of the organization, the most important thing – outside of the planning being done in the first place – is that each stage is connected and working towards a common goal.
No matter how much work and thought are put into these different stages independently, if they are disconnected or do not focus on a common goal, they are more than likely to fail during execution, whether it’s right away or in 5-10 years.
Depending on what business you’re in and what responsibilities you have, goal definition and timelines can vary so, for the purpose of this article, we’re going to focus on what they mean to warehousing and distribution leaders.
Let’s begin by defining each of the three planning stages.
We’ll start with strategic planning, which covers the longest-term decisions that distribution and warehousing leaders typically make – between 2 and 10 years in advance. By nature, strategic planning decisions are typically projections based on a current baseline or current state. This usually creates a couple of challenges because it means the plan is not only predicated on sound forecasts but also on data or assumptions that correctly reflect the current state of the business or specific operation. Now, with many strategic plans, in order to cover for deviations and future uncertainly, multiple scenarios are often created for an array of potential outcomes considering both internal and external forces.
While strategic planning is the most uncertain form of planning, with multiple course corrections commonly required over time, it’s necessary when planning for new distribution centers, expansions to existing operations, or when planning for substantial technology investments such as automation or even a management system update/upgrade.
Next, let’s review tactical planning, which refers to adjustments to operational conditions within the current infrastructure’s capabilities. While tactical plans are typically made with the existing operation in mind, any tactical adjustments are still outside of the day-to-day operation and usually require some level of investment, equipment implementation and/or change management strategy. This is why the majority of tactical plans are created between 1 and 12 months in advance.
Tactical planning is oftentimes carried out for the purpose of challenging and optimizing an existing layout beyond what is possible through day-to-day maintenance. This includes (but is certainly not limited to) carrying out an expansion or retrofit, making seasonal adjustments to material handling equipment, or productivity improvement initiatives that may alter existing practices or processes.
While certain assumptions and course corrections are common within the strategic planning timeline, they are not when it comes to effective tactical planning. Multiple adjustment / implementation scenarios may be created to suit different goals, timelines, and levels of investment but, as immediate execution is the goal at this stage, all data and background analysis must be based on current state and as tactical plans are mid-term goals, projections into the future are not typically necessary.
Finally, the focus of operational planning – done between 1 day and 1 month in advance – is the daily optimization of the operation, within current state. Just as mid and long-term planning are critical for the efficient growth of any distribution operation (and to the mitigation of unwanted surprises), operational planning is crucial to meeting day-to-day goals, including the adherence to labor budgets, throughput quotas, productivity standards, and staff safety requirements, to name a few.
Operational planning should continuously challenge and connect to tactical plans each and every day.
For example, a big part of operational planning – outside of proper shift crewing – is the optimization of direct labor processes like order selection, pallet put-away, pick slot replenishment, etc. And one of the most effective ways to guarantee that your direct labor processes are as streamlined and waste-free as possible is to ensure that all of your active items are slotted in their most productive slot type. This not only includes slotting all new items optimally right from the start but consistently evaluating your layout for re-slotting opportunities.
Now, done properly and consistently, operational planning should prompt tactical plans as, once all opportunity at the operational level has been executed on, tactical plans can be deployed to free up new, previously unnoticed improvement opportunity. This is one of the primary reasons operational planning and tactical planning should be closely connected as tactical plans represent a changing of the operational goal posts, so to speak, and should cause minimal disruption.
Over the years, Syncontext has developed a strategic decision making framework to plan logistics infrastructure and resources from capacity planning to daily operations:
Ok, so where do fulfillment optimization systems fit in to all this?
Well, it all starts at the operational level with day-to-day fulfillment optimization.
SKUStream, our fulfillment optimization system, was built with integrated data analytics, and numerous detailed proprietary algorithms dedicated to proactive and daily SKU optimization, capacity management, and the evaluation of re-slotting opportunities based on the most impactful direct labor categories and limitless customizable parameters.
Once integrated into the daily operation, SKUStream not only provides the intelligence to elevate efficiency and reduce waste, but it also enhances and even automates many time-consuming and manual non-value-added processes and activities.
But it doesn’t stop there.
While at the operational level, SKUStream is continuously basing its day-to-day SKU optimization recommendations on rack-level requirements. These requirements are also the basis of SKUStream’s tactical planning capabilities, allowing for relevant and assumption-free conceptual design that can be used to model a new warehouse expansion, compare different slotting strategies, and even estimate the return on a technology investment or equipment adjustment.
Now, that’s all fine and well at the conceptual level but what about when it becomes time to execute? After all, that’s not just the most important part, it’s also often where most plans disconnect.
SKUStream’s slot file generation and mass slotting engine, used for executing on conceptual plans, creates a bridge between the conceptual plans and the physical layout by not only ensuring the mass slotting (to/from) list is based on the same data used in the conceptual planning, but also that the execution can be tracked move by move. This ensures the implementation is as smooth and surprise-free as possible.
When it comes to implementing a new site or just mass-slotting an expansion or retrofit, disconnect between concept and execution is all too common, and can be very costly.
Now, finally, on the strategic side of things, as distribution operations are meant to evolve over time, and are usually designed to handle 5-7 years of growth, no plan is complete without projecting future requirements, not just at design year when the site is expected to be full, but each and every year up to that point.
Starting with the same current state baseline that’s used to model present day requirements, SKUStream’s design engine allows for the creation of a highly flexible working model, used to project year-over-year growth in multiple areas of the business, including SKU variety, shipping volume, customers, customer types, etc.
Understanding how these projections affect the operation year-over-year is critical when planning staffing models, pick paths, storage requirements, throughput capabilities, and even when an expansion or new site will be necessary.
As you can see whether you’re planning for the future or just looking to reduce waste and optimize your day-to-day, a fulfillment optimization system can help you.
Don’t take my word for it, however.
If you’re interested in understanding how a fulfillment optimization system can help your operation, whether it’s through enhanced tactical and strategic planning or through day-to-day optimization, I would suggest a strategic opportunity assessment as your next step.
Using your own operational data, a strategic opportunity assessment (SOA) will both highlight and quantify previously unseen areas of improvement opportunity within your operation – both operational and tactical – and show you exactly how to execute on these opportunities. Whether you’re looking to reduce your labor spend, increase productivity, or lessen capacity constraints, an SOA will not only point you in the right direction but serve as an improvement roadmap that can be used all the way to execution.