For one DC, the trap turned out to be its own order approval process. An order for urgently needed replenishments from Taiwan was delayed a full six days because the only person authorized to sign off on the purchase was out of the country. For another DC, the trap turned out to be the company's accounting department. A $3,300 order never reached the DC because of miscommunication with the people in credit. For yet another, the trap lay in a procedural oversight that snarled an incoming shipment from Malaysia. After a series of delays, the shipment finally arrived at the DC only to be held up again while workers frantically searched for a hidden packing slip.
In all three cases, the DCs were ensnared by what we call "velocity traps"—mishaps that disrupt the smooth flow of material, information and cash that's so essential to a well-performing supply chain. Unfortunately, these are hardly isolated cases. Velocity traps are everywhere. Even a well-designed distribution system has velocity traps that can rob a DC of its highest performance potential.
What makes the DC particularly vulnerable to these traps is its position in the larger supply chain network. In its daily transactions, the DC acts as both buyer and seller, simultaneously buying from its upstream suppliers and selling to its downstream customers.
On the surface, the transactions look simple enough: You fill the order, deliver the merchandise and transfer the cash, completing what's known as the order-to-delivery-to-cash (ODC) cycle. (Or if the DC is ordering replenishments, you place the order, accept the delivery and transfer the cash.) Add up the time it takes to complete each step, and you have a measure of DC velocity. It's just that basic.
But the execution, as every DC manager knows, can get complicated. Potential pitfalls lurk in every one of those transactions. The customer's order never reaches the DC. The DC ships the merchandise only to have it rejected at the customer's dock. Payments are misdirected. Orders are put on indefinite credit hold. There are a million ways to lose velocity. It may not be possible to avoid every trap. But the more you know about problems that can interfere with the flow of material, information and cash, the better you can prepare. What follows is a look at some common velocity traps:
The sooner you deliver a shipment, the sooner you get paid. Seems simple enough, but a lot can happen between the time you receive an order and the time your customer takes delivery of the goods. Here are some common traps to watch for:
Most of the traps described so far mainly affect outbound shipments, causing delays in a DC's efforts to get shipments out the door. There are others that affect mainly inbound shipments. Here are some common "inbound" traps:
While everybody accepts that moving material from point A to point B takes time, most assume that information flow is instantaneous. But that's not always true. For all our lightning fast digital transmission capabilities, plenty of people still communicate via phone, fax and even mail and then spend hours or days waiting for callbacks. Here are some other traps to watch for:
Follow the money
However irksome they may be, problems that halt the flow of materials or data generally surface quickly. The customs broker calls with the bad news. The warehousing software notifies the supervisor that an item is out of stock. Whatever the problem, the DC manager can start taking steps to resolve it.
That's not necessarily true of the velocity traps that can disrupt the flow of cash. Days, weeks or months may go by before the shipper or receiver hears about the problem, which only lengthens the delay. Here are some common cash flow-related traps:
It doesn't take a hurricane, fire or earthquake to snarl a supply chain. The smallest miscue or oversight can disrupt the flow of material, information and cash, causing velocity to plummet. Review your operation to determine where it might be vulnerable. Then eliminate the traps and watch your DC's velocity soar.