A Place for Everything, Everything in its Place

Being absolutely fastidious about where things go, labeling everything clearly, and getting upset when they are missing from their allotted space will quickly get you an obsessive-compulsive disorder diagnosis. But in a warehouse, all this is good, in fact, very good.

Warehouses thrive on order. They must have defined locations for the items they stock and it makes their operations productive. Such locations are picked after careful consideration and depend on various factors such as:

  • Item’s physical attributes (length, width, weight, volume, orientation, and co-location constraints). Physical dimensions determine feasibility of the location for stocking the item and co-location constraints determine if the item’s neighbors will play well with it.
  • Item’s handling attributes determine how this item will be moved to this location and later picked for shipping. Does it need a forklift, a hand-truck, or simply a cart? Can a person handle it without physical strain or does it require some kind of lifting assistance? These attributes also limit the number of locations that are suitable for the item under consideration and help determine where it will stay in the warehouse.
  • Item’s demand attributes, like the volume and velocity of demand also affect the best storage locations for the item. High velocity items are desirable to be kept in most accessible locations and so on.

But having a location defined for all items in the warehouse is simply a start. Change in item demand from season to season, discontinuation of old items and introduction of new items, changes in item packaging, changes in their handling attributes or their co-location constraints, inclusion in promotions or store clearance, and other similar changes affect the optimal item locations. These changes require can result in less-than-optimized item locations over time. As the item locations become suboptimal, they start affecting warehouse operations and efficiency.

Slotting applications ensure that item-locations in a warehouse are always optimized for their operations. Slotting is the science of placing the products inside the warehouse. In all warehouses, there are bound to be locations that are closer to the receiving or shipping docks, convenient to access or easier to reach. As the number of such locations is relatively fixed, it would make sense to utilize them for products with the highest velocities or manual touch points. Slotting applications determine the best placement of products in the warehouse based on different product attributes mentioned earlier.

Slotting applications can continuously slot the warehouse so that the routine warehouse activities of receiving, putting-away, picking, and shipping continuously result into an optimally slotted warehouse as the demand patterns change. Alternately, slotting can be run at pre-determined intervals or when seasons or demand patterns change. These slotting runs will then produce a new set of optimized item locations and a set of warehouse move tasks to execute. Some of the applications are capable of doing a cost-analysis to suggest if the cost of moves is more or less than the expected efficiency gains.

Slotting not only helps maintain operational efficiency in the warehouse, it also helps in maximizing the warehouse cube for storage. With emphasis on online retail channels that must cater to individual order fulfillment, slotting provides a substantial opportunity to retailers of all sizes to enhance their warehousing efficiency. For a more complete discussion on warehouse efficiencies, you can read this article.

 

© Vivek Sehgal, 2010, All Rights Reserved.

Want to know more about supply chain processes? How they work and what they afford? Check out my book on Enterprise Supply Chain Management at Amazon. You will find every supply chain function described in simple language that makes sense, as well as see its relationship to other functions.

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Warehousing Efficiencies: Metrics and Controls

Enhancing warehousing efficiencies can reduce costs and enhance supply chain flexibility. To do so, managers must understand how to measure and control the efficiency of the warehousing functions. This was the subject of several posts last week.

It is now available as a single downloadable article. Click here to print or download this whole article.

Alternately, you can still access the individual posts as follows:

Measuring Warehouse Efficiencies

Affecting Warehouse Efficiencies, Part 1- Labor

Affecting Warehouse Efficiencies, Part 2- Inventory

Affecting Warehouse Efficiencies, Part 3- Slotting

Affecting Warehouse Efficiencies, Part 4- Product Flow

 

© Vivek Sehgal, 2009, All Rights Reserved.

 

Affecting Warehouse Efficiencies, Part 4: Product Flow

Last week, I talked about the three main categories of warehouse efficiencies. These were operational, stocking, and fulfillment efficiencies. In this series of four posts, I am presenting the levers available to an organization to enhance these warehouse efficiencies. There are four main levers to target and affect these efficiencies. These levers being Labor, Inventory, Slotting and Product Flow. Each of the four posts discusses one of these levers and expands upon the functional capabilities that must be developed to enhance warehouse efficiency. In Part 1, the role of Labor was covered, part 2, inventory management was covered, part 3 covered slotting, and here is  final and concluding part of this discussion: Product Flow Analysis.

Flow Analysis:

Product flow analysis within the warehouse allows the warehouses to optimize the product flows through a warehouse. The objective of such an exercise may be to reduce the cost of handling within the warehouse by reducing the manual touch-points and increasing automation, determining the most efficient disposition of incoming inventory or finding cross-docking opportunities for quick pass-through. Like slotting, flow-path analysis should be conducted as part of warehouse planning to determine the best flows for product categories using demand patterns and other product attributes, some of which are discussed below. Determining optimal flow-paths and re-evaluating them as demand-patterns, product-mix, or product-attributes change ensures that the warehouse operates at its best, making most use of the available automation and other handling equipment.

  1. Product Handling Attributes: Product handling attributes determine what kind of equipment will be needed to handle the flows. Conveyable products may be easier to automate while others may require manually operated fork-lifts. Flow-path analysis considers these constraints to determine the best disposition and flow of the product within the warehouse from receiving until it is shipped.
  2. Flow-velocity Attributes: The demand and promotion attributes can affect the flow-paths to efficiently handle the products based on their flow-velocities. Fast moving products must be able to flow quickly to their stocking, staging, or shipping areas. If product is on promotion, an efficient handling within the warehouse will ensure that replenishments are most efficient and increased volumes due to promotion can be effectively handled.
  3. Inventory Consumption Policies (LIFO/FIFO) and shelf-life: The inventory consumption policies of first-in-first-out (FIFO) or last-in-first-out (LIFO) affect the flow-path decisions since they directly affect the disposition and shipping of the product based on their receiving order. Similarly, if the products have expiry-dates and must be shipped within a fixed number of days after receiving, they may be required to go to a specific area of the warehouse. These areas may be climate controlled or otherwise monitored for perishables to maintain product quality.

Improving product-flows in the warehouse directly improves the operational and fulfillment efficiencies in the warehouse. This fourth and the last part of this series concludes the discussion on the levers to drive the warehouse efficiencies.

 

© Vivek Sehgal, 2009, All Rights Reserved.

Want to know more about supply chain processes? How they work and what they afford? Check out my book on Enterprise Supply Chain Management at Amazon. You will find every supply chain function described in simple language that makes sense, as well as see its relationship to other functions.

Affecting Warehouse Efficiencies, Part 3: Slotting

Last week, I talked about the three main categories of warehouse efficiencies. These were operational, stocking, and fulfillment efficiencies. In this series of four posts, I am presenting the levers available to an organization to enhance these warehouse efficiencies. There are four main levers to target and affect these efficiencies. These levers being Labor, Inventory, Slotting and Product Flow. Each of the four posts discusses one of these levers and expands upon the functional capabilities that must be developed to enhance warehouse efficiency. In Part 1, the role of Labor was covered, part 2, inventory management was covered, today’s topic is Slotting.

Slotting:

Slotting is the science of placing the products inside the warehouse. In all warehouses, there are bound to be locations that are closer to the receiving or shipping docks, convenient to access or easier to reach. As the number of such locations is relatively fixed, it would make sense to utilize them for products with the highest velocities. Slotting is the ability to judiciously determine the best placement of products in the warehouse based on different product attributes such as their demand, planned promotions, dimensions, weight, volume, orientation, affinity, co-placement constraints, crushability, and so on. While some of these attributes are static in nature, other like the demand and planned promotions change with time. The capability to optimally slot a warehouse increases the stocking as well as operational efficiencies. At its best, it should be achieved dynamically so that the routine warehouse activities of receiving, putting-away, picking, and shipping are continuously result into an optimally slotted warehouse as the demand patterns change.

  1. Maximize Warehouse Cube: Slotting necessarily fulfills two necessary functions. The first capability consists of analyzing the products to be warehoused and determine the size, type, and number of locations that would best serve to maintain the desired inventory levels. This maximizes the warehouse cube and helps in planning the correct number of racks, carousels, active and reserve locations, floor-space, and so on.
  2. Maximize Warehouse Operations Efficiency: The second capability of the slotting function is to continuously monitor demand patterns, past and projected, and direct new receipts to most optimal locations by dynamically selecting locations based on product and demand attributes. This helps in maintaining a warehouse that is always optimally slotted for best operational efficiencies. If a slotting solution cannot provide a dynamic slotting capability, it still can add a lot of value to slot when demand patterns or product mix changes, and execute the warehouse activities to attain the optimal placement of products. In the latter case, the solutions typically provide the ability to analyze the cost of additional activities against the expected benefits of re-slotting the products.

Slotting optimization directly enhances the operational and stocking efficiencies in the warehouse. Indirectly, it may also improve the fulfillment efficiency by ensuring more accurate location records for the products in the warehouse.

In the fourth and the last part of this series, I will talk about the opportunities to enhance warehouse efficiencies through flow analysis and planning in the warehouse that is a primary lever to drive the operational efficiencies.

 

© Vivek Sehgal, 2009, All Rights Reserved.

Want to know more about supply chain processes? How they work and what they afford? Check out my book on Enterprise Supply Chain Management at Amazon. You will find every supply chain function described in simple language that makes sense, as well as see its relationship to other functions.

Affecting Warehouse Efficiencies, Part 2: Inventory

Last week, I talked about the three main categories of warehouse efficiencies. These were operational, stocking, and fulfillment efficiencies. In this series of four posts, I am presenting the levers available to an organization to enhance these warehouse efficiencies. We would be talking about the four main levers to target and affect these efficiencies. These levers being Labor, Inventory, Slotting and Product Flow. In each of the four posts, I will focus on one of these levers and expand upon the functional capabilities that must be developed to enhance warehouse efficiency. In Part 1, the role of Labor was covered, today’s topic is Inventory.

Inventory Management:

Inventories in the warehouse consist of a substantial amount of working-capital tied up in the supply chain to ensure that the demand fulfillment rates can be maintained at desirable levels. Ability to fulfill store and customer orders is central to the existence of warehouses in a supply chain, but this must be balanced against the need to reduce system-wide inventory costs. Fulfillment metrics measure this ability of the supply chains to balance the service levels against the inventory. Inventory efficiency at the warehouse balances between the conflicting requirements of high fill-rates and low inventory costs. The following capabilities can help in maintaining both.

  1. Inventory Optimization: Inventory optimization solutions provide the warehouses with the ability to compute and maintain optimal inventory levels that are sufficient enough to maintain the target fill-rates. The inventory solutions typically work by analyzing the historical variance in demand, supply, and replenishment lead-times. These solutions compute the inventory levels required for the projected demand to maintain the targeted service levels. Optimizing inventory can typically reduce inventory in the system by 10-20% while still maintaining desirable service-levels. The problem becomes more complex when the supply chains have many levels and the inventory must be computed at each stocking point of each echelon of the chain.
  2. Inventory Visibility: Inventory visibility across facilities is another primary tool that replenishment managers can use to enhance warehouse inventory-efficiency. Inventory visibility enables dynamic source-selection for fulfilling demand in the supply chain. The conventional supply chains model stores tied to a specific warehouse for replenishment. This rigid relationship forces higher inventory levels in the system because each order must be fulfilled from a pre-determined source. Inventory visibility makes it possible to source orders from alternate sources, thus allowing lower inventory levels while simultaneously maintaining comparable service-levels. Solutions integrated with logistics can also account for the cost of such changes to make the best decisions.

Better inventory management processes directly affect the fulfillment metrics of the warehouse which are primarily focused on its ability to address demand. The examples of such metrics are fill-rates, on-time fulfillment, pick and ship accuracy, and so on.

Next time, I will talk about the opportunities to enhance warehouse efficiencies through better slotting management in the warehouse that is a primary lever to drive the stocking and operational efficiencies at a warehouse.

 

© Vivek Sehgal, 2009, All Rights Reserved.

Want to know more about supply chain processes? How they work and what they afford? Check out my book on Enterprise Supply Chain Management at Amazon. You will find every supply chain function described in simple language that makes sense, as well as see its relationship to other functions.

 

Affecting Warehouse Efficiencies, Part 1: Labor

In a previous post, I talked about the three main categories of warehouse efficiencies. These were operational, stocking, and fulfillment efficiencies. In this series of four posts, I would present the levers available to an organization to enhance these warehouse efficiencies. We would be talking about the four main levers to target and affect these efficiencies. These levers being Labor, Inventory, Slotting and Flow. In each of the proposed four posts, I will focus on one of these levers and expand upon the functional capabilities that must be developed to enhance warehouse efficiency. Today’s topic is Labor.

Labor Management:

Labor is typically one of the largest recurring expenses in a warehouse. Managing labor can result into huge savings in the warehouse. Most of the warehouse management solutions provide some labor management functions but seldom do they address all the following factors affecting the labor efficiency in the warehouse.

  1. Labor Planning: Labor planning in the warehouse means projecting the labor requirements and using them to ensure that adequate labor is available to support the expected levels of warehouse activities. The labor requirements in the warehouse can vary greatly by the season and demand patterns. To accommodate such variability, warehouses typically employ a mix of permanent and temporary workers and adjust the working hours in the warehouse. While most firms forecast demand and use this data to plan their replenishments and orders, seldom is this data used to project receiving and shipping activities at the warehouses and the required labor levels. However, there is no reason to not make use of such data, since this can provide a very dependable source of labor planning activities for the warehouses. Most of the contemporary warehouse management solutions still lag in this key aspect of labor planning at the warehouses in spite of its relatively simple requirements and strong potential for providing cost savings that advance labor planning can provide. By developing a labor planning process using the projected demand data, managers can establish the total labor requirements, identify the best mix of permanent and temporary workers, as well as define working schedules in advance for all workers at a warehousing facility.
  2. Labor Optimization: Labor optimization is another function that can be leveraged to reduce warehouse labor costs. The labor optimization process models the daily task requirements at a warehouse and identifies the best resources to complete these tasks within the constraints of resource availability and resource skills. Facility specific constraints such as seniority, number of breaks, user-zones, and so on can be modeled as well, if required. The mathematical model is solved to minimize the total cost of labor to finish the tasks. Such optimization can reduce the total labor requirements up to 10% in larger facilities. Mathematical modeling to optimize supply chain objectives is not new, but most warehouse management solutions are very tactical in their labor management aspects and simply have not taken the leap into supporting such requirements. On the other hand, retailers may be blamed as well: while they routinely use workforce management solutions for managing their stores, they have ignored (the equally strong case to use) similar solutions to optimize warehouse labor.
  3. Labor Standards: Deploying labor standards in the warehouses provides another method of measuring labor efficiency against the pre-determined engineered labor standards that provide the target efficiency levels for standard warehouse activities. These engineered standards are created by firms specializing in industrial engineering practices and the labor data is provided for integration in the labor management systems at the warehouses. Most high-end warehousing solutions provide the ability to integrate such data and measure the efficacy of the labor used in the warehouses. The actual task time is computed using the task elements and its attributes with the corresponding engineered standards. Using labor standards not only provides a comparison with the best practice, but also allows a relative measurement of individual workers that can be used for training and incentive purposes.
  4. Technology & Processes: Finally, there are technology and process enhancements that can increase the labor efficiencies in the warehouses. Such technology may provide automation such as conveyors and sorters, or, directly support user tasks such as pick-to-voice and pick-to-light technologies, or, simply support a better process such as a move from paper-based picking to RF based systems. Latter can direct the user tasks dynamically, provide task-interleaving, avoid congestion, and reduce traveled distance in the warehouse, all of which add to provide better labor utilization.

Better labor management processes directly affect the operational metrics of the warehouse which are primarily focused on the number of activities performed. The examples of such metrics are number of cases received and shipped, number of picks and put-away tasks completed, units handled, dollar value of the handled merchandise, and so on.

Next time, I will talk about the opportunities to enhance warehouse efficiencies through better inventory management that is a primary lever to drive the fulfillment efficiencies at a warehouse. In the meantime, you can read more about inventory planning process here.  

 

© Vivek Sehgal, 2009, All Rights Reserved.

Want to know more about supply chain processes? How they work and what they afford? Check out my book on Enterprise Supply Chain Management at Amazon. You will find every supply chain function described in simple language that makes sense, as well as see its relationship to other functions.