Moving from Warehouse to
Distribution Center Cross Docking
Todd Brandt
Unit Head - Logistics Warehousing
Tom Stewart
Finance Manager
Materials Management
Financial Analysis
Mayo Clinic
Rochester, 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 Clinic
Scottsdale, AZ
Mayo Clinic
Hospital
Mayo Clinic
Rochester, MN
Rochester
Methodist
Hospital
Charter
House
Saint
Marys
Hospital
Mayo
Health
System*
Mayo Clinic
Jacksonville, FL
St. Luke’s
Hospital
* 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 ROCHESTER
DIVISION OF MATERIALS MANAGEMENT
Department Chair
Division Chair
Rochester Finance
Supply Chain Management
B. Schmidt
J. Francis
Admin Asst
Director
B. Schroeder
C. Thornton
Linda Akiens
Unit Head
Finance Manager
Purchasing
D. Schmitz
Supply Chain LogisticsDistribution & Whse/
Records
S. Borgen
Unit Head
Finance Manager
MM Financial Analysis
Supply Chain LogisticsInventory
T. Brandt
T. Stewart
Unit Head
Director
Supply Chain LogisticsPar Stocking
Value Analysis
C. Schneider
T. Nelson, R.N.
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
Inventory Value/Turns
Mayo Inventory Center (MIC)
12.0
10.0
9.5
8.0
5.1
6.0
4.0
2.0
-
Inv (in millions)
Turns
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)
Inventory Value/Turns
12.0
10.0
9.5
10.0
9.1
8.0
5.1
6.0
4.0
2.0
Inv (in millions)
Turns
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
A
Based on Point System*
Order Schedule
Location Capacity
2 points
Ordered daily by the largest
customer base.
Min. 3 days
3 points
More than one Customer was
ordering either daily or
weekly.
Min. 1 week
B
4 points
C
5 points
D
Single Customer SKUs
More than one customer ordered
at least once per week.
19 customers are ordering less
than once per week or less
than 52 times per year.
All
One customer orders daily.
E
Min. 3 days
Single Customer SKUs
F
G
Min. 2 weeks
Single Customer or Critical (NMMC)
SKUs
One customer was ordering either
daily or weekly
One customer was ordering less
than once per week or less
than 52 times per year.
Min. 1 week
Min. 2 weeks
“A” Velocity SKUs Current Locations
631 “A” SKUs
29 Pick Aisles
2 Floors
427 Over-Stock 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
“A” Velocity SKUs New Locations
631 “A” SKUs
10 Pick Aisles
Ground Floor
211 Over-Stock Locations
Product Slotting
Measurements
Inventory Value/Turns
Mayo Inventory Center (MIC)
11.6
12.0
10.0
9.5
10.0
9.1
7.9
8.0
5.1
6.0
4.0
2.0
Inv (in millions)
1995
Turns
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
C
O
S
T
T
O
S
E
R
V
E
9.5%
8.0%
6.5%
5.0%
3.5%
2.0%
SCHEDULED
BULK DEL. 3 +
DAYS/ WK
NEXT DAY
LOW UNIT DEL
BULK DEL.. 5 + TO PAR LOC 5 +
DAYS/ WK
DAYS/WK
LOW UNIT TO
PAR LOC. 7 +
DAYS/WK
SERVICE OFFERING
*Data provided by National Medical Logistics
UNLIMITED
98%+ FILL
+
STAT ORDER +
RATE
DEL
COMMITMENT
CROSS
DOCKING
SERVICES
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
brandt.todd@mayo.edu
stewart.thomas@mayo.edu