You have finally done it! The warehouse you designed and implemented, complete with a warehouse management system (WMS) tied in to the automation and the enterprise system, works like a charm. Operators are performing their work of receiving, putaway, picking, packing and shipping � just as planned.
But something just doesn�t quite feel right. You have mapped your processes for efficiency, yet your performance reports show something that doesn�t make sense. Your reports indicate that those benchmarks cited when the project was conceived aren�t being met. And now that accountability is visiting your office!
Does this sound familiar? If so, you are not alone.
Over and over again, distributors are facing this paradox. When the projected benefits of new capital initiatives aren�t met or performance slowly deteriorates over time, managers are left wondering what needs to be done to �shake up the warehouse� and get the operation back on track.
But before jumping to conclusions about the ability of your workforce and/or supervisor to get the job done, it is useful to try to understand the cause of the performance slippage. Pointing the finger at the staff may get a temporary improvement in performance but will also likely plant the seeds for future adversarial relationships with management. A better approach is to enlist your staff in understanding what is causing the performance to be what it is.
Change Is Constant
In the ever-changing economic environment in which we live, the only thing that is constant is change. This applies to the business of warehousing and distribution. Typically, one or more of the following are in constant change:
SKU Base � New items are added, old items are retired and existing items are re-packaged for different / segmented markets.
SKU Velocity � Items change in movement and shipping patterns over time due to holidays, seasons, promotions or simply fashion.
Customer Buying Habits � Product affinity is a huge driver of sales. Salsa doesn�t sell well without tortilla chips, and jelly is forever linked to peanut butter; however, buying habits do change over time, and generic and brand name drug manufacturers know this very well.
The Competition � If you are enjoying high margins in a high-growth industry, you are the object of intense study and not by schools interested in case studies. Those studying you the most are your current and future competitors looking to take some of that market share from you. In response to competitive pressure, companies change sales plans, for example, to encourage higher or lower pieces per line item sold.
These changes bring an impact to your operation. Your peak performance is based on a number of operating assumptions, including those about SKU count, velocity, customer buying habits and the pressures of competition. When these assumptions change, the hit on warehouse performance can be dramatic.
There are a number of initiatives you can take in order to prepare for, and adapt to, the changing business environment. And the good news is, for the most part, these initiatives are not necessarily capital intensive.
Re-visit Product Slotting
One of the most beneficial programs that can be implemented in the warehouse is to re-visit the assignment of picking location and storage fixture type for the items � this is product slotting. When an item that was fast moving and picked from a high-velocity forward pallet location fades and becomes a slow moving item, there is an impact. The prime high-velocity picking location is now consumed by a slow mover, which makes picking less efficient and ties up the location for other fast moving items.
Equally disconcerting is when a slow moving item picked from shelving becomes a fast moving item due to promotion or other circumstances. When that happens, the item in the shelving will have highly inefficient replenishment as the location repeatedly empties, and order selector ergonomics will be sacrificed by picking from shelf rather than case flow lanes or pallet positions.
Other issues to examine with product re-slotting include evaluating item correlations and categories so that travel is minimized when picking highly related items in the same order.
Re-slotting is something that can be done whether or not a WMS is installed. In fact, periodic re-slotting of the warehouse is a requirement for world-class distribution. To accomplish this, it is important to capture SKU-specific movement histories and determine the quantities to hold for each storage type so that the desired service levels are maintained.
Item Placement in the Network
While item re-slotting addresses placement of the item in the best location within the warehouse, there is a macro-level of item placement that can result in inventory, space and productivity benefits. The macro-level placement of items is the selection of the correct facility for the item.
When multiple facilities are part of a distribution network, it may make sense for most items to be carried in all facilities and some items to be stored in only one or a limited number of facilities. This may be due to the item velocity (don�t carry very slow movers everywhere) or special handling constraints (some hazardous items require special storage conditions).
When an item is stored centrally or in a limited number of sites, the total inventory requirement is usually reduced. At the same time, storage space is reduced and can be used for other purposes.
One of the drawbacks, however, is that transportation cost implications need to be considered since limited placement of the item may cause the item to be farther away from the intended customer. This is sometimes mitigated when back-hauling and reverse logistics initiatives are put in place.
Improve Inventory Accuracy
The implications of inaccurate inventory are enormous. When there is more inventory than anticipated, scarce capital and storage space are tied up. When there is less inventory on hand than on the books, stock-outs occur, and customer satisfaction is likely to suffer. The solution is to improve inventory accuracy throughout the warehouse.
While cycle counting has been accepted and implemented for a long time, the details of the cycle count program are subject to adjustment. For example, an item can be counted based on numerous criteria: item movement, item value, item control codes (e.g., pharmaceutical controlled items) and frequencies (daily, weekly, monthly, quarterly or yearly). As item characteristics change over time, so too should the cycle count program for the item.
Making cycle counting part of the daily routine is critical to maintaining high inventory accuracy. These tasks can often be combined with the normal work of the warehouse. Needless to say, real-time inventory updating is also critical.
Assess Opportunities in Transportation
An area that is somewhat outside the four walls of the warehouse is transportation. As transportation costs continue to escalate, companies are looking for more creative ways to save cycle time and costs. Concepts such as zone skipping and order pooling have been around for a while; yet, only the largest of shippers have the economies of scale to take advantage of the potential savings.
Another opportunity for shippers is the use of collaborative networks for trans-portation. Several networks exist that allow shippers to tender loads and share trans-portation resources with other companies � all while lowering costs and maintaining customer service.
Implement Lean Techniques in the Warehouse
Lean techniques refer to elements of lean methodology that have been successfully used over the years to drive higher productivity and reduce cost in manufacturing. Distribution and warehousing can also take advantage of lean techniques.
While there are many elements of lean methodology, one of the most fundamental concepts is to drive out waste (and cost) wherever it exists. There are seven types of waste that must be driven out of the operation in order to achieve best operating practices:
1. Waste from overproduction
2. Waste of waiting time
3. Transportation waste
4. Processing waste
5. Inventory waste
6. Waste of motion
7. Waste from product defects/damage
While many books can be written about these wastes, a culture of continuous improvement in the organization that strives to eliminate these wastes will be best prepared to address the impact of changing business conditions.
The challenges in warehousing and distri-bution today are enormous. Changes in the business environment have been escalating in both frequency and speed, and those changes are leading to performance that is less than optimal. Fortunately, there are several methods and techniques that can be used to re-optimize warehouse performance that don�t require significant capital expenditure, yet have a direct contribution to productivity and efficiency.
A key to the success of any of these techniques continues to be the inclusion of the supervisory and hourly workforce leaders. Their understanding of the drivers of these changes and the cause/effect on the operation, provides valuable feedback to keeping the warehouse more finely tuned and helps achieve a more productive environment!
Jeff Zeiler is with the York Consulting Group, Inc., located in York, Pennsylvania. The company focuses on material and process flow, material handling technology and related information systems technology. For more information, please