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Leadership Accomplishment Challenge: The vice president of logistics for Hilti US approached me and indicated that our drywall screw line occupied too much floor space in the National Distribution Center. He challenged me with significant reductions of product in Tulsa and improved service level to our customers. This task had not been accomplished before at Hilti.
Safely reducing inventory without jeopardizing service could only be accomplished by: Reducing Lead Time from Taiwan Reducing transportation time to distributing warehouses Shifting inventory to increase stock at Hilti Distribution points while reducing stock held in the National DC Increasing sales (temporary reduction)
Product arrived in the port at Long Beach California. The containers were loaded on to trucks, which were delivered to Tulsa, Oklahoma. Product was stocked in Tulsa until the distribution network needed it. Distribution Center stock was replenished from this central location.
Distribution Center locations • Visalia, California • Seattle, Washington • Denver, Colorado • Dallas, Texas • Minneapolis, Minnesota • Albany, New York • Atlanta, Georgia • Birmingham, Alabama • Jacksonville, Florida • Frederick, Maryland • South Bend, Indiana • Plus three Canadian locations
Research uncovered: • A California based vendor who was willing to pool purchase volumes in order to take advantage of price discounts. • This vendor had a warehouse in Beuna Park, California, a short distance from Long Beach, where this product docked. • The vendor had surplus warehouse space in his Buena Park Warehouse.
I negotiated a cross-dock program with the vendor where product would be delivered to the port, trucked to his warehouse, stored temporarily, and then sent to nine of the twelve Hilti distribution points in the US.
Additional research uncovered the vendor distributed products throughout the US as well. I negotiated an agreement where our product would be shipped rail “piggyback” along with our vendors goods—saving considerable freight costs. • Eventually, I negotiated a binding contract where our product was stored in five of their warehouses Nationwide. • The vendor retained ownership of the product at his location until a distribution point required additional product and I released a purchase order. • This reduced our lead time from 90(+) days to within a week, allowing us to significantly reduce our safety stocks. This reduction took place at not only the National Distribution Center, but also, the satellite distribution warehouses as well. • The vendor warehouses, distributing product were located in: • Fullerton, California • Houston, Texas • Atlanta, Georgia • Chicago Illinois • Houston, Texas
The benefits, to Hilti, of this program: • Reduced inventory at the National Distribution Center (the driver of this project). • Reduced inventory at all satellite distribution centers • Reduced handling and administrative costs. • Freight cost reduction • Lead times reduced from over 100 days to within one weeks. • Lower carrying costs, calculated at cost of inventory * 1% per month • The net result saved Hilti over $150,000 annually, by reducing lead times and therefore reduced inventory. This projected savings also incorporated components of savings due to warehouse space that was not necessary to rent and additional manpower used to warehouse and ship the product. Transportation cost and product cost savings were not included in this calculation. • Increased Service level at the Distribution Center level, increasing from 82% to an average around 94-95%, eventually topping at 97%.
