Moving from Warehouse to Distribution Center Cross Docking.

Moving from Warehouse to Distribution Center Cross Docking

Todd BrandtUnit Head - Logistics Warehousing

Tom StewartFinance Manager

Materials Management Financial Analysis

Mayo ClinicRochester, MN

Agenda

Mayo Clinic Background

Warehouse vs. Distribution Center

Need for Change

Road to Success

Value

Mayo’s Mission

Mayo will provide the best care to every patient every

day through integrated clinical practice, education, and

research.

Primary Value

The needs of a patient come first.

Mayo Clinic

Mayo ClinicScottsdale, AZ

Mayo ClinicScottsdale, AZ

Mayo ClinicRochester, MN

Mayo ClinicRochester, MN

Mayo ClinicJacksonville, FL

Mayo ClinicJacksonville, FL

RochesterMethodist Hospital

RochesterMethodist Hospital

SaintMarys

Hospital

SaintMarys

Hospital

CharterHouse

CharterHouse

Mayo Health

System*

Mayo Health

System*

Mayo ClinicHospital

Mayo ClinicHospital

St. Luke’sHospital

St. Luke’sHospital

* A network of clinics and hospitals in 64 communities in southern Minnesota, northern Iowa, and western Wisconsin

Mayo Clinic Rochester

28,080 Employees*

322,772 Unique Patients*

1,951 Licensed Beds*

77 Buildings

$633M of Supply Spend

*as of 9/06

MAYO CLINIC ROCHESTERDIVISION OF MATERIALS MANAGEMENT

Unit HeadSupply Chain Logistics-

Inventory T. Brandt

Unit HeadSupply Chain Logistics-

Distribution & Whse/Records

S. Borgen

Unit HeadSupply Chain Logistics-

Par Stocking C. Schneider

Director Value Analysis

T. Nelson, R.N.

Admin AsstB. SchroederC. Thornton

Finance ManagerPurchasing

D. Schmitz

Finance ManagerMM Financial Analysis

T. Stewart

Director

Linda Akiens

Department ChairRochester Finance

B. Schmidt

Division ChairSupply Chain Management

J. Francis

Mayo Distribution Center

60,000 sq ft with 24 ft Ceilings

5,000 sq ft Mezzanine

4,000 sq ft Controlled Environment Area

8,000 Lines / day Ordered > 50% low unit measure lines

700 Customer Requisitions Daily

400 – 500 Receiving Lines Daily

Average Tenure = 16 Years

What is a Warehouse?

Warehouse

Storage

Minimize expense

Fill it up!

Few metrics

Past- The 90’s

Product Migration

Inventory

Low visibility

Few policies and procedures

No stocking criteria

Traditional Approach

Fill it up!

Measurements

Mayo Inventory Center (MIC)

9.5

5.1

-

2.0

4.0

6.0

8.0

10.0

12.0

Inv (in millions) Turns

Inve

ntor

y V

alue

/Tur

ns

1995

Past- New Millennium

Product Stabilization

Inventory

Increased visibility

Develop policies and procedures

Unofficial stocking criteria

Guarded Approach

Limited space available

Measurements

Mayo Inventory Center (MIC)

9.5 10.0

5.1

9.1

-

2.0

4.0

6.0

8.0

10.0

12.0

Inv (in millions) Turns

Inve

ntor

y V

alue

/Tur

ns

1995 2004

Need for Change

Customer Needs

Just in time

Low unit of measure

Growth

Space utilization

Financial Viability

Change patient demographics

Improving cost structure

What is a Distribution Center?

Distribution Center

Organized process

Customer focused

Unique demands

Visible metrics

Cross docking

Consolidation area

Road to success

Assemble Team

Create Strategy Map

Determine Baseline

Implement Plan

Measure Progress

Have Some FUN!

Assembled Team

Leadership Sponsor

Analytical Staff

Line Staff

Supervisors

Systems Support

Consultant

Strategy Map

Current State

Future State

Road Map

Slow Moving Parts

Defined Slow Moving

Identify Items

Criteria

Communicate

Disposition

Monitor

Velocity and ABC Codes

What is Needed

Create Legend

Slotting

Correct Size

Label SKUs

Reporting

Velocity and ABC Codes

Classification Based on Point System* Order Schedule Location Capacity

A2 points Ordered daily by the largest

customer base.Min. 3 days

B

3 points More than one Customer was

ordering either daily or

weekly.Min. 1 week

C

4 points More than one customer ordered

at least once per week. Min. 2 weeks

D

5 points 19 customers are ordering less

than once per week or less

than 52 times per year.  All

ESingle Customer SKUs One customer orders daily. 

Min. 3 days

F

Single Customer SKUs One customer was ordering either

daily or weekly Min. 1 week

G

Single Customer or Critical (NMMC)

SKUs

One customer was ordering less

than once per week or less

than 52 times per year.  Min. 2 weeks

631 “A” SKUs

29 Pick Aisles

2 Floors

427 Over-Stock Locations

“A” Velocity SKUs Current Locations

Order Management and Staff Optimization

Current Patterns

Institution Needs

Customer Needs

Who Controls?

Change

Technology

Enterprise Resource Planning

Point of Use

Warehouse Management

Lot tracking

Expiration tracking

Electronic transactions

Staff productivity

Standard Operating Procedures (SOP’s)

Requires Process Changes

Inventory control

Slotting

Receiving

Picking

Cycle counting

Communication Tool

Change Behaviors

Distribution Processing*

Customers Needs

Lean Process

Save Space

Reduced Inventor

* Internal or External

Cross Docking

Consolidation

Non-stocks

Delivery Times

Reduce trips

Space

Current State

Stock to Non-stock

Inventory

High visibility

Turns

Implement SOP’s

Official stocking criteria

Lean Approach

Low unit of measure

631 “A” SKUs

10 Pick Aisles

Ground Floor

211 Over-Stock Locations

“A” Velocity SKUs New Locations

Product Slotting

Measurements

Mayo Inventory Center (MIC)

9.5 10.0

7.9

11.6

5.1

9.1

-

2.0

4.0

6.0

8.0

10.0

12.0

Inv (in millions) Turns

Inv

en

tory

Va

lue

/Tu

rns

1995 2004 Proj 2007

Value Customer Satisfaction

Right product

Right place

Right time

Growth

Optimize space needed for growth

Financial Viability

Optimize Staffing

Improved inventory turnover

Inventory reductions

Cost to Serve Benchmarks

*Data provided by National Medical Logistics

2.0%

3.5%

5.0%

6.5%

8.0%

9.5%COST

TO

SERVE

SCHEDULED BULK DEL. 3 DAYS/ WK

NEXT DAY BULK DEL.. 5

DAYS/ WK

LOW UNIT DEL TO PAR LOC 5

DAYS/WK

LOW UNIT TO PAR LOC. 7 DAYS/WK

CROSS DOCKING

SERVICES

UNLIMITED STAT ORDER

DEL

98%+ FILL RATE

COMMITMENT

SERVICE OFFERING

++ + + + +

Future State

Laboratory Expansion

Lot track

Temperature sensitive

Clinical Growth

Space constraints

Flexibility

Best Practices

Key Performance Indicators

Documented SOPs

Point-of-use Replenishment Process

Scheduled Pick Waves

Scheduled Deliveries

Velocity Slotting

Summary

Evolution Traditional warehouse

Distribution model

Customer Flexibility

Value Lower cost

Quality

Q & A

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