Helmac Products, perhaps best known for its inexpensive handheld lint-rollers, certainly didn't know when it drew up plans for its corporate relocation that it would leave behind enough loose ends to nearly spell disaster for the privately held company. Logistics needs had compelled the move, but when it took place in 2000, only a handful of executive and operations personnel went along from Michigan to Georgia. Not long after the move, the company's distribution operation imploded, and the company began to struggle. A long-maintained pattern of shipping orders within 24 hours of receipt rapidly deteriorated to six or seven days, sometimes more. Only after intervention early this year by PricewaterhouseCoopers (PwC) and the FSL Group, a logistics consulting firm in Atlanta, combined with a concentrated effort by Helmac management and employees, was the company brought back from the brink of disaster, its financial stability and excellent service levels to customers restored.
"Our company grew very rapidly during its last several years in Flint, and we never quite found the time to systematize our processes," explains Barb Tomaszewski, vice president of distribution for Helmac. Ironically, Tomaszewski initially did not follow the company to Alpharetta, Ga., near Atlanta, but did return to the company in November 2000.
"We became highly personnel-dependent, and when the company moved, we seriously underestimated the value of the knowledge retained by the people who had been running the business for years," she says.
The overconfidence that had hobbled the move gave way to a more realistic belief in capabilities after the outside experts were called in. "We made tremendous strides when the consultants were here, and we continued to make strides when they were gone," says Tomaszewski. "Our physical inventory audit was at the end of May, and by June 1, our operation began humming better than ever. We now have a passionate yet disciplined management team and workforce that has become extremely synchronized and powerful after facing the ominous challenges that we encountered during our move. Now, we're in the position to take on the world again."
Helmac began business 45 years ago in the basement of company founder Nick McKay Sr., in Flint, Mich. Helmac steadily expanded its product line to include a wide range of products used to clean, protect and freshen homes and clothing. Recent additions to its traditional product line of lint rollers, refills and brushes include household rubber gloves, shower curtains, bath mats, ironing board covers, laundry bags, and various types of cedar items.
A growth-oriented company with an emphasis on increased market penetration, acquisition and new product development, Helmac supplies its products to retailers, mass merchandisers, warehouse clubs, drug, grocery and specialty retailers, and bed, bath and drug store chains, with most shipments moving outbound to customer distribution centers.
John Moore, vice president of manufacturing, also did not move with the company originally, but has since rejoined the Helmac team. According to Moore, manufactured goods make up about 65 percent of the business. The other 35 percent consists of imported purchased finished goods, primarily from Asia. Helmac also does some repackaging of imported finished goods, taking bulk products and sealing them onto plastic cards with UPC codes and performing other retail-oriented packaging, an activity the company groups under manufacturing.
Though Helmac maintains a manufacturing facility in Canada to serve that market and ships from Georgia to overseas affiliates, the company's market is vastly domestic.
The company's problems on the logistics front began to develop following a management decision nearly seven years ago to become more aggressive about growing the business, explains Tomaszewski. At that time, Helmac's Flint facilities consisted of a 40,000-square-foot plant for manufacturing and storage of finished products.
"Our business started to grow in leaps and bounds, and we were experiencing a 30 percent compound annual growth rate year to year," says Tomaszewski. "Before we really knew it, we had outgrown our facilities and were utilizing three additional overflow sites that together gave us an additional 50,000 square feet of distribution space."
The company manufactured in the original distribution center, and shipped from an adjacent warehouse, so Helmac operations personnel had to shuttle finished goods and raw materials back and forth between facilities, sometimes using a company cube van, sometimes enlisting the help of Helmac's contracted LTL carriers, and sometimes contracting with additional motor carriers.
"It was a logistical nightmare that was managed solely by years of experience - it wasn't automated, and it wasn't elegant," says Tomaszewski. "We didn't have a lot of discipline, but we had years of experience that allowed us to operate profitably under those conditions. Everything in the logistics area depended on the individual people and their personal business knowledge. And heaven forbid that any of our key people get hit by a beer truck, because it would have been devastating."
Helmac's line includes a wide range of products used to clean, protect and freshen homes and clothing.
It was a no-brainer that a new building was in Helmac's future, but the site selection decision was quite difficult, particularly whether to leave Michigan. Helmac eventually was attracted by an aggressive incentive/investment package dangled by the Georgia Department of Industry, Trade and Tourism and the ability of the region to meet Helmac's labor and lifestyle needs. The company opted to establish its executive offices and design center on the outskirts of Atlanta, in Alpharetta, and a new manufacturing and distribution center 140 miles away in Waynesboro, Ga. The split decision reflected competing interests between management and operations, specifically the type of employees Helmac sought to attract and retain. The Waynesboro location could pull labor from surrounding rural communities, while Alpharetta provided a "downtown environment" closer to the type of talent, capabilities and services required by management. It was presumed that it would be more attractive not only to prospective management candidates but would encourage management-level relocations should Helmac seek to move any future corporate acquisitions to Georgia. "Making those decisions was a slow and arduous process, and that's why we lived with the ugliness of the multiple warehouses in Flint," says Tomaszewski.
So the move was set for the summer of 2000. Meanwhile, a couple of other factors were contributing to the disruption of normal business. Helmac acquired the housewares division of HBD Inc., a textile products company that both manufactures and imports product, and began integrating its product line into the Helmac mix.
Another key factor was that Helmac, facing Y2K concerns, agreed to be an early release site for a new ERP software system. Helmac had been using ERP software from Symix Corp., a decision that followed a 12-month selection process conducted with help from consultants from PwC. Symix then bought another software company, changed names to Frontstep and developed an ERP offering called SyteCentre. Helmac agreed to the early release status and proceeded to go live with the new software at the Flint facilities on Dec. 4, 1999.
"We traditionally have been a very energetic company and have developed the unfortunate habit of biting off more than we can chew," Tomaszewski candidly admits. "The discussion came up as to whether we could implement and be an early release site for this new software that was targeted to our industry. They sold it to us pretty hard, laying out all the benefits, and our response was sure, we can do anything." Though Helmac had used the Symix program for a wide range of applications, including inventory control, accounting, customer service and manufacturing, the SyteCentre software acquired from Frontstep had a much different look and feel, says Tomaszewski, which didn't help. "We also implemented in the peak of our busy season," she points out. "To say that we had not worked all the bugs out of it would be an understatement. We didn't investigate it thoroughly, we implemented it in 80 days and during the peak of our busy season, when we also were planning for a move and the acquisition. Clearly, we didn't give it the proper attention it needed."
The move began on schedule in June 2000 and was completed in August. Unfortunately for Helmac, there were few followers. In Flint, Helmac employed a management office staff of approximately 25 people and an average of 150 plant and operations personnel. When the move occurred, only six or seven office people came -- all in sales -- and less than a dozen on the operations side. None of the key plant and distribution center managers came, nor did the key implementers of the SyteCentre ERP. "All told, within an eight-month period we acquired a company, we implemented a new ERP system, and we moved to Georgia," says Tomaszewski. Is it safe to say that the company underestimated what was going to be involved in all this? "That would be a gentle way to put it," she acknowledged. "We had acquisitions in the past, and also ERP implementations, but we had no prior experience of making such a vast operational change in such a short time frame. Couple that with moving several hundred miles, perhaps we did underestimate what it would take to make a smooth transition."
Helmac proceeded with the move in June 2000 and completed the transition in August. Problems emerged immediately. For example, racking that had been ordered for the distribution center had not yet arrived, so stock was stored haphazardly. "Right from the get-go, it was a disaster," says Tomaszewski. "When racks finally did arrive, the workers in the distribution center just threw product on them and started shipping. The company was getting into the heart of its busy season, and we were making a lot of errors because we were very under-resourced as far as knowledge goes. And the people who knew enough to truly get some of the work done were terribly overworked just trying to get orders out the door to save customers. They were working 16 to 18 hours a day, seven days a week." Two of those people were Nick McKay Jr., Helmac's CEO, and Doug Taeckens, president and COO, says Tomaszewski. "They spent an ungodly number of hours out on the floor in shipping and production, just being laborers and trying to teach the new employees."
In addition to bringing Tomaszewski and Moore back into the fold, Randy Garbaty, purchasing manager, also came in from the Canada facility to help rebuild the purchasing department. All of these were moves to restore quality service, a symbol of the dedication Helmac prides itself upon to its customers.
The ERP required organization in the warehouse in order to function properly, but that discipline was not there. "It was nearly devastating," says Tomaszewski. "Our old software would allow us to drive inventories into a negative balance, which would allow us to work out the inventory problems when we had time. Our new software would not allow us to process incomplete orders or ship into negative numbers and tried to force upon us the discipline we didn't have."
In order to get shipments out the door, Helmac depended on "workarounds" to drive inventory into negative numbers. "We were behind on customer orders, and customers were screaming. We had people who didn't know our systems operating our systems. We would have inventory sitting on our docks, but the system said we didn't have it. And since the system said we didn't have it, we couldn't ship it."Not shipping was not an option, so the workers processed the shipment outside of the ERP. Then, even when shipments did leave the dock, the ERP wouldn't process the billing because the system had no formal record that the order had been shipped. "There were times when we had thousands of dollars that needed to be invoiced, but we couldn't get it invoiced because people didn't have the expertise to clear up that report."
The problem extended to receiving as well. A purchase order for raw materials would arrive at the receiving dock, but employees there weren't trained on how to receive properly or where to go if there was a problem. Consequently, the inbound materials wouldn't be received into the ERP. Even though the ERP reported no inventory of certain materials, production personnel could see the raw materials there in the warehouse, so they would force the work orders through on the raw materials and production side, again outside of the ERP. As a result, production couldn't report the activity against the work order because the raw materials weren't in the system.
"It was a vicious cycle that just spiraled out of control," says Tomaszewski. Since it again was the peak of the busy season, Helmac sought help from outside consultants. PwC's assignment was to help with processes, systems, and training issues, so Helmac would have the proper discipline in place. The FSL Group focused on the organization of the distribution center and the physical movement of the product. Consultants from Frontstep worked with PwC to help figure out how the system could help Helmac get where the company needed to be.
"We desperately needed to get our company back on track and to give our customers the service they traditionally received," says Tomaszewski. "For many years, we had shipped orders complete within 24 hours of receipt. When your supply chain gets used to that, and all of a sudden you push your lead times out a week, the customers scream. They had been managing their inventory to a one-day lead time -- our customers didn't even have to think about us because our product would arrive in good condition when it was supposed to be there."
PwC was selected because of its familiarity with the software and with the Helmac operation. FSL Group initially had been enlisted by Helmac's traffic manager, Barbara Scadding, to help in post-auditing freight bills. "They were here, they saw the mess we were in, and they essentially said 'Hey, we can help.' They made us a proposal that made a lot of sense, and we brought them in." All three groups arrived in mid-January 2001 and spent two months in solid consultation, formulating and implementing process changes, and educating and training the appropriate personnel.
Attacking the disarray in the distribution center, FSL took approximately 1,000 active Helmac SKUs, analyzed picking frequencies and assigned home-pick location and proper overflow locations into six zones, or aisles, in the warehouse sector of the distribution center. Helmac was operating three manufacturing and two shipping shifts a day. FSL used the vacant shipping shift to bring in outside labor and relocate stock in the warehouse area and clean up before the incoming ship shift arrived, then the FSL team would brief the arrivals on the relocations that had taken place in the past eight hours. The entire process of relocating stock during the open shift took approximately a month.
With the restructuring of the warehouse area and establishment of processes, Helmac's efficiency returned to normal as sales continue to grow. The company's fiscal year began June 1, and sales are up 46 percent above a year ago, 6 percent over forecast.
Here's how it works. Helmac's largest customers send in orders via EDI. Other orders are e-mailed, faxed or received by telephone. Those orders go to the customer service department in Alpharetta, where Helmac's EDI software integrates with SyteCentre. Customer service views the orders and assigns appropriate ship dates. Generally the assignment is to ship within 24 hours, but customers sometimes specify ship dates a week or two in the future. At this point, plant scheduler Elizabeth Davis builds manufactured inventory based upon a combination of demand of product due to ship within 24 hours and desired safety stock levels.
The distribution center is approximately 70,000 square feet. Storage space occupies approximately two-thirds of the distribution center, with the remainder largely dedicated to staging. Two dock doors are designated for outbound LTL shipments, and a UPS trailer occupies a third door. Inbound shipments arrive at one of three designated inbound doors.
During each working day, the shipping department starts looking at orders due to ship the following day. Orders are released to the shipping floor based on item availability. More than 95 percent of all orders are shipped complete, and in the case where a back-order exists for a particular item, most Helmac customers direct the company to remove the back-ordered item from the order.
Orders flow through the zones. A paper pick list is printed on the floor, and the items on the order are listed in sequence relative to zone location. The items most frequently picked are situated in the front third of each zone. Order pickers load specified items on a pallet. In the case where multiple pallets of product are ordered, pickers take those pallets directly to a specified location at the distribution center's staging area, and update the ERP with the location information. As orders flow through the zones, they end up at an auditing station adjacent to the staging area, where an internal auditor checks each outbound shipment for accuracy. Once the order is audited, a Con-Way Transportation driver on the Helmac dock wraps and loads outbound shipments continuously throughout the day shift. In the evenings, shipping department personnel audit and wrap outbound loads and position them in the LTL staging area. Carriers count the outbound cartons as a final control on order completion and inventory accuracy as well as to facilitate the processing of any subsequent freight claims.
A VMI program with a consignment component is under way.
Helmac recently selected Con-Way as its primary core carrier following a freight bid procedure conducted by FSL Group. "Con-Way has shown us to be very partnership-oriented, they have a tremendous reputation in the industry, and they stepped up with some very competitive pricing," says Tomaszewski.
Helmac ships between 50 and 150 skids per day, but it can vary greatly day to day. The company also relies on FedEx and UPS to move the 500 or so outbound small package shipments a day. "We rate shop each order, and any order between 10 and 30 cartons gets compared between UPS and Con-Way," says Tomaszewski. "That affords us significant savings in freight as well."
Helmac does have a handful of freight-collect customers, and their orders are located in the LTL staging area until the delivering motor carrier arrives for pick-up. Export shipments usually are in LCL quantities, with the routing controlled by the customer.
For material inbound to the plant, Helmac has a vendor compliance program that requires advanced shipping notice via e-mail or fax. Those ASNs include purchase order, carrier, PRO number, quantities and item numbers. "One of the problems we initially had on the receiving dock was vendors identifying products by their item numbers, not ours, so our receivers sometimes didn't know what they were bringing in," says Tomaszewski. "Having them use our numbers eliminated a considerable amount of confusion."
Helmac kept many of its Michigan vendors once it made the move to Georgia, but the higher freight costs sparked an ongoing initiative to shift freight-collect vendors to a freight-prepaid status. "When we were in Michigan, the freight cost from these vendors was negligible and we absorbed it," explains Tomaszewski. "Now, it's their responsibility to shop the freight market for the best combination of price and service to get their products to us here."
A plant controller -- a new position -- monitors all of the inventory transactions on a daily basis. An aggressive ongoing cycle count tabulates inventory of the top 20 items, which comprises 80 percent of all inventory in the distribution center every two weeks, with a strict schedule for the remaining SKUs. The new cycle count program is so robust and improved that PwC has approved the elimination of the annual physical inventory process. "We're paying much closer attention to inventory accuracy than ever before," says Tomaszewski. "We've also been elevating FSL's concept of' 'zone ownership' where each zone in the distribution center has a zone owner for each shift as well as the idea that every single zone must be perfect at all times. Every product in the zone must be in salable condition, and every product must be in the exact home pick location or the appropriate overflow site. Our emphasis is on training our people to be meticulous."
Accordingly, Helmac implemented a concept where the performance evaluations for zone owners are the zone audits for their assigned location. Those audits go directly to their personnel file. The zone owners also pick and ship orders.
"We're tracking accuracy, we're tracking picks per day, and we're tracking dollars shipped per day. But we don't just want to post the numbers, we're trying to find a way to turn that information into something meaningful for the distribution center employees, whether it be an element of incentive pay or something similar," says Tomaszewski.
Under Moore's direction, Helmac presently is completing with one its largest raw material vendors the formulation of a vendor-managed inventory program with a consignment component, so Helmac won't pay for the material until it's used in the manufacturing process. If the initial effort goes well, the game plan is to extend the program to three other key vendors within the next few months. "We'll be in great shape if we can get our top four vendors onto a VMI program," says Tomaszewski. "At that point, they will be taking the purchasing function out of our hands." Those top four vendors supply approximately 80 percent of the raw materials used at the plant. Since most finished goods acquired by Helmac are purchased overseas, VMI in that sector is a bit more problematic.
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