Kenco Logistics Site Visit
Memphis, Tennessee USA
May 16, 2001
Kenco’s Memphis operation for Cummins Engine is a show piece. Kenco provides loads of value-added services for Cummins including turbo-charger and engine disassembly of returns from Cummins dealers, warranty work with those dealers, refurbishing of engine parts and reshipment to plants, plus extensive kitting and packaging.
The warehouse is 650,000 square feet and has 360 employees. There are about 2,500 engine down, emergency shipments worldwide per day. At the same there are a few thousand stock orders.
The warehouse is run by Mike Rust, an ex Army colonel who is an amiable leader by example. Quality and incentive programs are emphasized. Rust’s team has picked most of the “low hanging fruit” for process improvements over the last two years. Improvements now occur on a steady incremental basis. Technology changes now offer the largest potential.
Cummins operated ten distribution centers before the consolidation. The consolidation and value-adds save them millions each year.
Kenco’s fill and accuracy rates are very high. Emergency orders are 99% filled and shipped within a maximum of 24 hours.
Kenco has lowered safety incident levels from average OSHA numbers to negligible amounts. Accuracy within this radio frequency-based operation runs 99.8% to 99.9% and is improving. Not bad when lines per order often exceed 1,000.
Shrink is almost nonexistent. Cycle counting is practiced extensively.
An area targeted for improvement is carousel picking. Walking-line kitting has proved a faster alternative. Like most carousel picks we have seen, this one is a less effective solution. Count on Rust to replace this one ASAP.
Kenco works closely with Ryder who maintains a dedicated contract carriage fleet with offices in the facility. Ryder runs 25 tractors with teams using 125 trailers servicing 32 Cummins distributor locations in North America.
Sources: A&A Primary Research, http://www.kencogroup.com/