First off, let me clarify – “expediting” is not a dirty word. However, that doesn’t mean I enjoyed hearing it when I was running the show for a large distributor. In fact, I cringed whenever my team even mentioned they were expediting something.
When they said expedite, I heard:
- “We’re going rush the order and it is going to cost you way more than it should.”
- “There will be resource redirection from the expeditor to receiving, stocking, picking, packing and shipping.”
- “We’re going to ship it with a more expensive carrier to get it there on time.”
- “Our razor thin margins just got thinner.”
- “You’re in for another call with accounting to explain why our margin is so low.”
So you can see why expediting was not viewed as a positive process, but rather one that covered for mistakes on the part of the planning and operations team – never sales. They were just taking the order… Yeah right!
All of the above was true then and is still true now. Yet, there are times when expediting an order is the only way to ensure a positive customer experience and should be taken without reservations.
Here are those cases:
New ERP implementation
A new ERP implementation will reveal many shortages and overages in inventory as well as process issues that need to be addressed. This is one time where expediting is an absolute requirement as you re-balance your requirements with procurement. The first pass should be for orders in hand where inventory is not available. The second pass should be based on the MRP run requirements that are forecast-based. The order of these is imperative as you will find that the MRP requirements will adjust themselves as you gain control of the real shortages (for actual orders in house with no inventory).
If a sales rep does their job well, they will win new customers. Have they been forecasted? Maybe. Do we have inventory to support the new order? Hopefully. Is it a new item being added to a 100-line customer order? Could be. The point is that a new customer and order often comes with a promise of more to follow. This is one of the best reasons to expedite. This would only be a one-time hit on margins as you build the customer/item relationship and request a forecast.
Inventory Record Accuracy
Inaccurate counts are still the good old standby for having to expedite an order. I’m amazed that after all these years and all of the advancements in inventory systems, this is still an issue! Just the other day I called an order in for an item I needed. The sales rep said “The system shows I have 4 in stock, but if you hold on, I’ll go check. You know how accurate these computer systems are.” So, yes, he physically checked in the warehouse. Now if he is actually out and the systems show them in stock, then the MRP or order points will not react to the shortage. Once the inventory is adjusted, by cycle counting or just an inventory adjustment, the system will create an order that will need to be expedited.
You have a sales campaign and it is a huge success – you sold more than you stocked or had on order! I assume you will be expediting with your vendor in order to be able to meet this demand. Hopefully, this leads to new customers and larger sales from the campaign.
So should we expedite?
In a perfect world, the answer is simple – no! Given that we live in a less than perfect world, then expediting will help you REACT and hopefully make everything at least appear to work perfectly in the eyes of your customer – unfortunately at a cost and loss of margin!
The only positive results from expediting are if you take it as a learning experience. Expediting highlights problems within your processes. Technically, you should never have to expedite. Orders would always be accepted within the lead times provided, inventory record will be at least 99% accurate, new products will only be quoted after discussing and including procurement to ensure availability and your forecast would be reviewed and adjusted regularly.
AXIO for Distribution provides template best practice methods that will assist in implementing processes and training for your firm. Thus, minimizing and managing your expediting requirements. As I said we are not in a perfect world but with the proper solution in place, you can minimize expediting use it as a learning experience and apply the necessary corrections.