Progistix and Xerox: Improving depot operations and inventory performance

Progistix, one of Canada's largest thirst-party logistics service providers, specializes in providing companies with complete logistics in the technology, telecommunications, and retail industries. Progistix designs and executes customer-designed supply chain solutions for their client's business-to-business projects, for their business-to-technician projects, and for their business-to-consumer ventures. Progistix specializes in dealing with businesses that require rapid-order time, precise order selection and delivery, and information-rich typefaces. It handles more than $2 billion worth of products and parts per year, accomplishing approximately 1.1million business-to-customer and business-to- business orders and approximately 350,000 business-to technician requirements. Its three prominent companies include Bell Canada as well as Xerox and Amazon.

This case involves Xerox.

In 1999, Xerox looking for ways to reduce inventory, whilst maintaining their level of customer service, employed Progistix to improve their service. Xerox became Progistix's largest client representing approximately 80% of their Critical Part's Network revenue. Progistix re-designed and ran the 14 parts depots and five supplies depots of Xerox assuming control for configuration of the systems, as well as information technology and processes at the depots. Progistix partners saw to the day-to-day operation of the depots as well as providing staffing.

The matter here was that although Xerox and Progistix were mutually satisfied with heir working relationship, after five years both were exploring ways to improve the network particularly since competitors had similar approaches.

The first objective was to improve depot operations. Specifically there were two operations one in Scarborough, the other in Toronto, and the one in Scarborough seemed to be under performing while the Toronto depot, located close to it, was exceeding performance requirements.

Secondly, inventory turns for the Xerox COPN had leveled during the past 3 years, and Gary wished to make improvements in this area.

Thirdly, Gary was looking for ways to do things differently in order to improve system-wide inventory turn performance specifically by seeing whether and how they could further reduce inventory requirements.

Issue Identification.

The issue is three-fold:

The first objective was to improve depot operations. Specifically there were two operations one in Scarborough, the other in Toronto, and the one in Scarborough seemed to be under performing while the Toronto depot, located close to it, was exceeding performance requirements.

Secondly, inventory turns for the Xerox CPN had leveled during the past 3 years, and Gary wished to make improvements in this area.

Thirdly, Gary was looking for ways to do things differently in order to improve system-wide inventory turn performance specifically by seeing whether and how they could further reduce inventory requirements.

The entire issue could be summed up as looking for a fresh way to make changes in order to improve their performance in a radically new manner whilst cutting inventory and reducing costs. A case that could serve as case study and observation for ways in which they could achieve their goals could be the Scarborough-Toronto situation where investigation could focus on possible reasons for the disparity in performance even thoguh Scarborough -- under performing -- had more technicians than its sister branch.

Environmental and Root Cause Analysis

At the time when Xerox contacted Progistix in 1999, they were employing approximately 1,200 technicians across Canada, with some in areas as remote as the Northwest territories. Service calls lasted for an hour to almost 2 hours and technicians were able to complete approximately 80% of their calls with the 110 to 150 stock keeping units (SKUs) in their kits, which represented an inventory value of approximately $3,500. Their total number of SKUs to service all technologies was 70,000 and technicians completed 95% of calls with 6000 SKUs. Parts and supplies were kept in two warehouses in Canada, their inventory was substantial, and remote depots were efficient. However, depots had much unused space and an excess of workers (two instead of the required one), as well as multiple carriers throughout Canada, each with different requirements and capabilities. This caused diversification in service deliveries. There was also no formal reporting mechanism and performance metrics were non-existent.

When Progistix took over, they provided common raining, measures, and performance objectives. Services also varied depending on regional needs and on higher-key clients.

A service call process typically ran in the following way: a technician diagnosed the problem at the customer site; of the technician did not have the needed part the technician contacted Xerox call center to request the part and the part was ordered on Xerox's system; Progistix directed the order to the nearest depot; the part was picked, packed, and delivered to the technician; and used parts returned to the depot. The entire process took approximately 30 minutes. Each technician accomplished approximately 16.5 service calls each week with technicians assigned to smaller machines making more than those assigned to larger machines.

The Progistix delivery services lasted anywhere from 30 to 90 minutes depending on the customer's location. Very remote locations were served by the next day. Their rate and response of delivery exceeded that specified in their contract to Xerox and they delivered approximately $142 value in parts. They also complied with Xerox's strict inventory requirements, by keeping detailed inventory records, recording the time of each delivery and synchronizing inventory levels daily sharing their daily reports with Xerox. A quarterly review kept the company informed too.

The anomaly really was in the contrast between two of Xerox's largest depots, Toronto and Scarborough. The Scarborough depot employed 81 technicians whilst the Toronto deports employed only 65 technicians. Two people staffed both. The problem was that that there were differences in their performance and Gary wondered how this could occur specially since both were relatively close to each other. With costs of delivery from the Toronto depot being $17.26 and rush orders costing $21.23, the Toronto depot was exceeding performance requirements, whilst the Scarborough depot only 30 km away, cost $21.43 on average deliveries, with rush orders averaging $31.78. Miscommunication also caused some of their deliveries to be occasionally delayed.

Xerox and Progistix shared a mutually satisfying working relationship. Gary's intent was to explore the problem mentioned above, to see whether he could make additional improvements in their system and to improve their inventory turn performance.

Alternatives or Options.

Taking the Toronto-Scarborough case as basis for investigating ways to cut inventory and improve performance, we can extend analysis to the system as a whole. There are several issues that stand out between the two depots. Firstly, excess of technicians in the Scarborough depot (ratio 81:65) may complicate and slowdown the operation causing communication problems hence lagging in time of delivery and greater expense in delivering rush orders.

A second factor to investigate is the character and description of the technicians as well as the ways in which they interact with one another. It may be that conflict exists in their configuration and that redesigning of the workforce, particularly cutting it down to a smaller size, may help operations.

A third possibility may be in the personality of the two fill-time employers running he Scarborough setup. Again a comparison of these two employers contrasted with those employed by the Toronto depot may be instructive.

A thorough onsite observation and analysis of performance of both the Scarborough and Toronto locations would be helpful with points of contrast conducted. This could be conducted via research strategies such as observation, interviewing, focus groups, and survey. The case would be instructive by serving on the one hand (taking the Toronto situation) as data for improving Progistix performance and on the other hand (taking the Scarborough situation) as data for screening out and delimiting problems. In fact, even the Scarborough situation could serve, by highlighting causes of problems, to improving Progistix's general performance.

Finally, when Xerox turned to Progistix in 1999, two of their concerns were deficiency in communication between service deliverers and non-existent performance metrics. It is unclear whether Progistix has seen to this problem. It may be that another of Xerox's original problems has remained: that of excess of workers and of depots having too much space.

Monitor and Control

Of optimistic value to Progistix is the CRS perspective that organizations can only grow when they are 'at-the-edge-of-chaos', meaning that they are neither too rigid nor too responsive to decay, but can reproduce themselves. Stability and ability to change must be balanced.

The communication should occur within the large interpretive framework of the group to inhibit miscommunication; it does not necessarily require steering by management but only for a general convivial atmosphere of shared communication.

In other words, an organization is not just thought of as an entity of individuals but rather as an organic living process of communications between a group of individuals who constitute the organization, and if this communication is managed well, novelty, creativity and constructive change can ensue.

The purpose of the manager in such a structure is to notice where blocks may ensue within the conversation, and to participate in such a way so as to assist in removing these blocks and in shifting the themes. She will also seek opportunities to speak to people from other organizations (in this scenario from other Xerox depots), and seek ways to introduce these conversational snippets into the conversations of her own workforce. She will be particularly concerned with trying to understand the covert politics and unconscious group processes that might be blocking conversation, or trapping conversation in repetitive themes. Managers, in other words, will serve as the watchdogs of the conversation and figure out ways of actively assisting communication to constructive ends when it seems impeded.

Progistix can, after conducting intensive research between its Scarborough-Toronto sites, and, perhaps, supplementing this with research on other sites institute the CRS method and observe whether effects / improvements are occurring. They can, alternately, alternate or supplement this with the OD and AI methodologies. Additionally, they can also set up about crating a performance matrix and assess whether reducing the workforce of the Scarborough depot and switching the facilitators of the site to another location may produce changes within the locations and introduce lessons to the improvement of their organization as a whole.

Source

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