Don't Get Caught In The Modification TrapAPICS Logo

Michael D. Atherton

This article appeared in APICS Magazine.  APICS is the American Production and Inventory Control Society. 

Many firms select package software systems as part of their efforts to achieve business objectives. In the world of physical distribution the temptation to modify a system to match a current operating environment is overwhelming. Warning: don't get caught in the modification trap.

The decision to invest in a physical distribution system should be driven by objectives spelled out in the corporate strategy.  The strategic plan must drive all activities, from the decision to invest through acquisition, implementation and , ultimately system operation. Project teams may first fall into the modification trap when they lose sight of strategic objectives.

Relevant elements disseminated from the strategic plan should drive the requirements for a package distribution system. A package system will already have documents to serve as a functional specification.  These may include concept manuals, user manuals, and design documents. The project team can use these documents, vendor demonstrations, and even invest in a pilot program, to select and verify the system.  The team must keep in mind at all times that it is not selecting features and functions , but selecting the system that will enable the firm to achieve its objectives.

The objectives that relate to logistics and physical distribution often include: 

  • improving customer service through: 

    • simple order placement inquiry and transmission

    • timely and reliable order delivery

    • accurate complete undamaged damaged orders 

    • error free paper work 

    • electronic data interchange

  • improving utilization of fixed assets to increased throughput and cube utilization 

  • improving labor productivity 

  • improving integration with suppliers and customers to increase customer value

These objectives are part of Total Customer Satisfaction (TCS) marketing strategies and Total Quality Management (TQM) philosophies firms are implementing. They emphasize the improvement process as essential to achieving a competitive advantage.  Improvements in the quality of distribution services lead to increased customer satisfaction and customer loyalty. T hese factors contribute to increases in market share and margins.

Project teams must focus on the corporate goals of the improvement process.  It is easy to fall back into myopia, focusing on features and functions as ends in themselves.  The value that customers receive from a firm's products and related services is dependent on the efficiency with which they're produced (competitive price potential) their inherent quality and the reliability of delivery.

Strategic planning is a closed-loop process.  It should incorporate the systematic improvement of quality as the cornerstone to its success. The last step in the strategic planning process is to execute the plan.  This is the step where systems are designed, acquired and implemented.  It is early on in this step that project teams fall into the modification trap.

The weakest link

Physical distribution has the potential of being a bottleneck for the delivery of the highest quality products in the marketplace. How ironic that many firms invest in improving product quality but cannot get those products to customers efficiently, accurately and on-time.  Increased costs and poor customer service in physical distribution can erode value both in terms of price and service.  Many firms have identified logistics, specifically physical distribution, as a primary element of competitive advantage.  If the justification for investing in a physical distribution system is competitive advantage in price and service, why modified a system to match an operation that is not achieving those objectives?  The acquisition of a physical distribution system is an opportunity to reevaluate all procedures, processes and systems for their contribution to customer value and the firm's bottom line.

Package systems provide many benefits. They're fully tested and implemented systems, which reduces project risk. They possess broad functional capabilities for achieving the existing objectives and satisfying future requirements. Package systems also cost less than customs systems and have a shorter implementation life cycle, thus providing a higher return on investment and a shorter payback period.  Furthermore, vendors provide support, ongoing development and implementation services.

Package systems are designed to accommodate a wide variety of distribution requirements across diverse industries, while enabling the user to implement best practiced functionality such as:

  • Expected receipt verification

  • Directed putaway 

  • Fixed and random locations

  • Directed picking drama

  • Dynamic for worked stocking locations

  • Cross docking

  • Location capacity tracking

  • Rules based/configure locator

  • Product/location restrictions

  • Putway and picking verification

  • Location sequence

  • Shipment verification

  • Facility zoning

  • Parcel creation and verification

The systems are configurable to unique environments and make the benefits of best practice functionality available to the user.  Many project teams fall into the trap by specifying and modification and system procedures that will make a package system fit their "unique" existing operations.  A project team can quickly dilute the benefits of a package system if it does not keep objectives in the forefront during each step of the project life cycle.  Take for example the project team whose operation manually put product into available locations and then marked the locations on a chalkboard at the end of each aisle.  The corporate plan in part called for acquiring a physical distribution system to:

  • Maximize spatial utilization to a naval facility consolidation across divisions
  • Improved inventory accuracy
  • Eliminate the expense of expediting and picking process
  • Implement cycle counting to eliminate and expensive for a day full physical

Physical distribution systems do this by consolidating product into locations until they are full.  The system issues putaway tasks and supervisors verify the tasks have been completed.  With directed Radio Frequency (RF) technologies the material handler confirms the placement of product in the location in real-time.   Strict operating procedures and directed picking with verification eliminates the need for expediters.

The design team wanted to continue putting material away manually, then tell the system where it had been put away. The chalkboard would be replaced by the system's location database but because they would not be using system assigned locations for directed putaway, the system could not maximize cube utilization.  A corporate objective and an element of the investment justification would not be achieved.  Fortunately, a design review session brought this out and the project team stuck with baseline functionality that enabled it to achieve the original objective.

Focus on that the target

Successful project teams first review corporate strategic objectives. If the logistics strategy is defined in the plan, the team reviews it.  If it is not, the team develops its own pace on the corporate plan.

Next, it reviews operations and determines requirements for meeting objectives. This leads to an operating plan.

Finally the team evaluates distribution control systems based on the operational requirements that will enable the organization to meet its strategic objectives.

Project teams that fall into the modification trap do so because they review their current operations and then specify a functional checklist.  Their evaluation identifies the system and modifications that most closely match their current operation.

This evaluation process does not identify the system that enables the firm to meet its strategic objectives. Project teams must be vigilant and recognize that there is no benefit in systematizing an operation that is not able to meet strategic objectives.

Project teams fall into the modification trap by writing a detailed specification for the "perfect system."  It narrates in great detail exactly how the system should work. The magnitude of modification that result from this type of specification usually leads to very high cost, added complexity, confusion, delay and dilution of the benefit of implementing a package system.

When to modify

The project team should select a physical distribution package based on the baseline system's capacity for achieving strategic objectives. Once the package has been identified that supports this, modifications should be specified only to the extent that they contribute to meeting those objectives.

Strategic modifications and enhancements include changes to comply with specific industry standards, customer requirements, and government regulations. Packages provides the core of the system.  The modifications close any remaining gaps between baseline functionality and the implemented system's capacity to enable the firm to achieve its objectives.

If you have questions, please click here to email Mike Atherton or call him at 703-486-8497

Copyright 2003, Latitude Associates