‘3 golden rules’ for increased DC/warehouse efficiency…the antidotes to time
Many companies are striving for greater operational efficiency (increased throughput and labor efficiency) in their warehouse order fulfillment operations. This is not a new topic for distribution management! Yet, I continue to find, with some companies, a lack of a “refined operational excellence” focus, despite the resources (and the proven methods) available – for a very long time now.
Some companies seem to have “cherry picked” certain areas of required focus, implementing something in a conceptual way, but not in the actual execution – which would provide the improved operational metrics improvements that they may have originally sought to obtain.
And this is true despite all that has been said and written over the past several years. This makes me recall an old saying: “The best time to plant a tree was 20 years ago. The second-best time is today.”
Work Smarter, Not Harder
So, here are three golden rules to consider. These rules are pretty basic, whether you are in possession of a basic ERP system and whether or not you have a warehouse management system (WMS) module providing the data necessary to analyze your warehouse transaction activity. Your objective is to integrate these rules into a combined impact that can be transformative for DC/warehouse operations – a strategy for speed-of-flow and future distribution transaction cost avoidance.
Golden Rule No. 1 – Slotting (sometimes called inventory positioning).
This simply means identifying those SKUs that account for a high percentage of “hits” – the number of times they appear on sales orders and/or branch replenishment transfers, shipped over a specified period of time (let’s say, the past 12 months) and positioning them in your DC/warehouse where they are most accessible and ergonomically available. Some of those SKUs may be intuitive to you, others may come as somewhat of a surprise. But it’s not uncommon to find yourself with a relatively small percentage of your SKUs representing a large percentage of your order hits. (As an example: 15%–25% of your SKUs equal 50% or more of your total order hits). It’s not uncommon! “Pareto’s Law” is everywhere. [insert Paleo’s Law graph near this]
What’s the intent here? To position these SKUs in your facilities, most advantageously. It’s about positioning high-demand SKUs near each other so that picking them or putting them away (after receipt from a vendor) reduces the amount of walking, driving a forklift, or pushing a cart – travelling that is typically 60%–70% of labor costs. In other words, it reduces the need for people to move around as much. The outcome: (1) Provides a ‘critical path’ that reduces the time it takes looking for the material. Surely beats trotting all over the warehouse! (2) Helps determine which storage location to go to next (which SKU to pick next). (3) Dramatically increases “speed-of-flow.”
So, slotting represents a primary gateway – the greatest potential source of warehouse performance improvement as well as the reduction of non-value-added activities, which is nothing but waste. It’s more than just positioning a few high-sellers on some aisle endcaps!
The picture above is in effect a “high-velocity pick zone” (HVPZ) where the designated high-hit SKUs can reside. Many times, this HVPZ can be set up as a separate zone because of the high velocity of the products it contains. It can also be augmented, in this particular example, by three additional enhancements, but it’s not a prerequisite: (1) A conveyor to move the product onward (an effective goods-to-person application). (2) Flow racking that provides improved space utilization, greater ease of storage, greater visibility to product – and specific ergonomic benefits and controls. (3) The potential for more batch picking capabilities and controls.
How do we determine these high-hit SKUs? It shouldn’t really be difficult. A simple “report writer,” probably already contained in your ERP system, can capture then sort SKUs by hits activity for a specified period of time, then sort from highest to lowest.
Golden Rule No. 2 – Warehouse Worker Direction (sometimes called orchestration)
It should be the objective of every ERP/WMS system to attempt to direct warehouse workers to the right place to find a product, whether it be from a printed hard copy sales order or a pick request displaying on a RF hand-held device.
Warehouse workers want to know what to do next – what to pick next, what to put away next. This is typically accomplished through the use of “storage location IDs,” which describe the “zone/aisle/shelf/bin” where a SKU will be picked or put away.
The utilization of slotting and storage location IDs simplify the identification of where the warehouse worker should go to next. The storage location ID, depending on the technology features you possess (printed on a sales order or appearing on a RF hand-held device) provides that direction. I’ve directed and/or been witness to many implementations where the storage locations are assigned strictly based on the Hits Report. Walking and other means of travel are significantly reduced. It’s mind-blowing! In fact, newer warehouse management applications such as robotics rely heavily on this. Hey, even robots need to know where to go and what to do next!
Golden Rule No. 3 – Balancing Your Workforce (sometimes called resource balancing)
Depending on the level of the technology you possess or can readily develop, create the data (preferably in real time) that allows you to see the open order status of orders in your DC/warehouse at a chosen time. In other words, you want to know the number of picks remaining. Think about this as if you owned a grocery store: As the check-out line gets longer, you have to consider assigning more cash register personnel and baggers to keep up – in your case, reallocating your resources to reduce bottlenecks. Critical data like this is should be visible and made available to DC/warehouse management personnel.
Summary
So how do you stack up? Tired of kicking the can down the road? Consider the 3 Golden Rules. Leverage them to positively increase speed of flow, and get control of distribution operating costs. They are your antidotes to time!
Howard W. Coleman is principal at MCA Associates, a management consulting firm since 1986, works with wholesale distribution and manufacturing companies that are seeking and committed to operational excellence.He can be reached at hcoleman@mcaassociates.com.
INDUSTRIAL SUPPLY MAGAZINE
The January/February issue of Industrial Supply magazine features an in-depth cover story about MSC Industrial Supply. Plus, we're featuring articles by contributing writers Dr. Bharani Nagarathnam and Frank Hurtte, as well as interviews with numerous product and distribution industry experts.
