4 Ways to drive productivity in the last quarter mile
September 5, 2024
By Jeff Hicks | VP Fastenal Solutions
By Jeff Hicks | VP Fastenal Solutions
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Supply chains can be epic adventures. It takes a long string of events to move materials from the manufacturer, to various distribution centers, to the buyer’s facility, to the end user’s hands. The product may traverse the planet over land and sea, but when we talk about reducing costs in the supply chain, we often focus on the most complex and expensive span: the proverbial “last mile.”
The last mile refers to the activities and costs associated with transporting the product from a final transfer point to the buyer’s receiving dock. As much as 50 percent of the total freight cost can be incurred in the last mile, so it’s no surprise that freight tends to dominate the conversation. However, a far larger opportunity can be found even closer to the finish line – not on the water or the road but within your facility. Putting a price tag on processesHow big is the opportunity in this “last quarter-mile”? At Fastenal, our Lean Solutions team uses what we refer to as a Total Cost of Ownership Analysis, or TCOA, to help companies quantify the cost of supply chain activities in their business. The team recently analyzed several hundred TCOAs performed at customer sites to tease out general trends.
A couple of key findings
A quiet productivity killerIn a manufacturing environment, supply chain activities require the time and attention of two broadly defined groups of employees.
These activities are so repetitive and routine that we rarely scrutinize them - they're just part of doing business. But over the course of a year, they can quietly add up to thousands of labor hours spent on things that create no direct value for the customer. 
Embracing Industry 4.0Companies have adopted different technologies to make certain supply chain activities more efficient. The problem is they rarely sync together. For example, you may have great software to manage the procure-to-pay process (the transactional aspects of the supply chain) but zero visibility to what’s actually on the shelves, what’s coming into the facility, and how it’s being used in the business. These types of siloed systems (and blind spots) are hallmarks of the Third Industrial Revolution, aka Industry 3.0, an era that began about 50 years ago.
Today we’re figuring out how to get the different technologies to interact with each other, ushering in a Fourth Industrial Revolution characterized by digitalization and connectivity. The goal: improve how we collect, organize, and analyze data to create a more productive path for supply chains. This isn't some far-off future vision. Here are four ways we can use Industry 4.0 technology today to drive productivity in the last quarter-mile. 1. Uncage your inventory to gain insightsWhat do we do with inventory in our businesses? We tend to stash it away and lock it up. A
common name for a storeroom is “the cage.” A material handler protects the locked cage to prevent wasteful consumption, account for the disbursement of inventory to the right personnel (often using pen and paper), and ensure inventory is available. This basic model has been our answer to controlling and tracking industrial product behaviors for decades if not centuries. Today there’s a better way: technology paired with process improvements. For example, scanning tools can improve the speed and accuracy of transactions. Internet-connected fixtures can tell us what we need to know about our inventory – what, where, and how much. And industrial vending devices can perform the once-manual activity of establishing controls. These devices also collect data around how products are used in very specific areas of the business. Why is a certain CNC machine consuming tools so quickly? Is there a more cost-effective glove for the application (one that might have a higher piece price but lasts twice as long)? More broadly, what are the usage patterns surrounding specific parts and locations? Visibility to consumption at the point of use surfaces these types of questions, illuminating new opportunities to operate more efficiently. By breaking out of the cage, we’re able to take time and cost out of the supply chain. 2. Optimize inventory levelsHow low can you go? For years, this was the million-dollar question when it came to inventory levels. The pandemic gave rise to a more urgent question: How can we secure the supply chain? Today, it’s about leveraging a secure supply chain to match inventory levels with consumption
practices – right amounts, right locations, on time, every time (even in tough times). This all sounds lovely, but in the real world it can feel impossibly complex to optimize inventory for hundreds (or thousands) of product needs, factoring in lead times, usage history, forecasted demand, contingency planning, whether it’s a direct or indirect need, etc. Each decision presents dilemmas. Too much inventory means less capital and floorspace for production. Too little risks expediting fees or, worse, a potential stoppage. A one-size-fits-all approach invites risk – you’re just as likely to miss the mark as you are to hit it. But there’s also risk in attempting to make more nuanced decisions based on incomplete or inaccurate data. Technology can bring the picture into sharper focus. Earlier we mentioned how companies are using vending devices to better understand inventory consumption behaviors. The technology also provides visibility to current inventory levels and sends replenishment requests when stock runs low. This functionality can be extended to non-vended items as well (e.g., bin stocks) through technologies like RFID sensors, infrared beams, and high-precision scales. These different mechanisms help us answer the same basic questions: How fast is the product turning, what is the current inventory state, and when does action need to be taken in the supply chain to maintain the target min-max inventory level? With a strong supply chain and tools to analyze usage data, monitor current levels, and automate replenishment, we’re able to hit the sweet spot for your business: ensuring continuous supply without accumulating inventory assets. 3. Increase final goods productionIf we had to pick one role to maximize productivity, isn’t it the production employee? After all, their output is company revenue. So, if key performance indicators are focused on production rates, why are we tasking production staff with procurement/material handling activities like requesting, acquiring, and returning items necessary to produce goods?
A combination of technology and vendor managed inventory (VMI) support can help keep production employees on the production line, focused on producing finished goods. A common example is point-of-use devices (like those mentioned on the previous page) that report the current inventory state of production parts and cutting tools in specific work cells or line positions. This allows the VMI provider to remotely monitor and proactively replenish those locations so the product is always right there when your employees reach for it. Another common example: positioning vending devices along high-traffic pathways to provide controlled 24/7 access to PPE and other daily consumables. In both cases, employees are spending a fraction of the time to access critical supplies throughout the day, which in the aggregate can translate to days and weeks of added productivity. The benefit is very direct: Less time searching, walking, and waiting means more time creating products and revenue for the business. 4. Have a strategy for aligning technologyThese types of tools should be seen as part of a larger strategy to capture, share, and analyze data. However, it can be difficult to gain a holistic view using hardware and software from various providers. In an Industry 4.0 environment, the goal is to knock down those walls.
Companies can find success by consolidating to strategic supply chain partners who help them align technologies in ways that create a complete data story – covering multiple product categories, connecting all supply chain stakeholders, and spanning not only the last mile but the last quarter-mile as well. The takeawayThe last quarter-mile is the most expensive link in the supply chain, which makes it the greatest opportunity for cost savings. It’s also an area you directly control – because it exists within your four walls. By using technology to automate supply chain activities, illuminate inventory and usage data, and improve labor productivity, the last quarter-mile can become a runway to differentiate your business and sprint ahead of the competition.
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