4 Ways to Improve Warehouse Operations & Efficiency
A Special Series from North American Wholesale Lumber Association
Managing warehouse logistics is tricky, especially in the post-recession world, in which companies are trying to save time and money in every transaction.
The key to success for any distributor is warehouse operations efficiency. When efficiency lags, lead times suffer, orders can be misplaced, and low inventory levels can lead to stock-outs and low fill rates. A universal problem for all distributors, limited warehouse space can hinder efficiency. Simply put, as sales increase, more space is required.
To combat these challenges, measuring Key Performance Indicators (KPIs) and benchmarking against other similar companies will drive warehouse efficiencies. Best-in-class distributors have a real-time view of warehouse order status, inventory and labor and utilize technology, formal cross training of associates and measurement of their KPIs.
Each of these solutions falls into one of the following four main categories for increasing warehouse operations and efficiency.
1. Maintain a Real-Time View of Warehouse Inventory
One key to running an efficient warehouse involves maintaining a real-time view of warehouse order status, inventory and labor. Now with the use of technology, a lag from when the product is received in the warehouse to the time that it is received in our enterprise resource planning (ERP) no longer exists. Additionally, our sales team is able to see in real time what orders are being picked or have been staged for shipment.
When a change must be made to an order, we no longer have to find the original pick ticket and to see if it has already been picked, which eliminates the potential for duplicate orders.
We have achieved this real-time view using our warehouse management system (WMS). Our inside team can be confident that, if our ERP says we have an item, it is in stock and in good condition. Our operations manager is able to manage the day’s work in real-time and see what is being pulled by the employees and what their production level is that day. Each morning when he comes into work, he is able to determine what the workload is and allocate resources accordingly.
We also implemented an overnight shift to help regulate the workflow to ensure that the day shift can focus on receiving, replenishing inventory bins, and handling returns and will-calls. The night shift can then complete orders, pull add-on orders and load trucks.
This allocation of duties allows an efficient product flow throughout the day. Ever-changing customer demands dictate the need for increased flexibility in existing facilities.
2. Harness the Power of Real-Time Technology
To further support warehouse process improvement and ensure business goals are being met, gathering and analyzing real-time data helps create a more efficient warehouse. Select a WMS system that integrates seamlessly with your ERP and supply chain systems. WMS systems can help manage material handling in real time, which will maximize system throughput and performance, and provide visibility to potential logjams.
When laying out our distribution center, we made a point to keep our high turn products in the front of the warehouse and slower turn products in back, making replenishment and stock rotation easier. Training new employees on the system was easier than training new employees on all of the different SKU’s we kept in stock. A new employee could begin picking orders within a couple of days, and the order accuracy greatly improved. Our WMS system lets us compare employee performance against pre-determined standards and allows us real-time analysis of our KPI’s.
3. Organize Distribution Centers for Full Efficiency
Organizing an overcrowded distribution center and fully utilizing the space available is crucial to running an efficient warehouse. Slow or nonmoving inventory cuts into productive warehouse space. Consider options such as discounting slow moving inventory and providing extra incentives to your salespeople to sell the slow or nonmoving inventory.
Additionally, warehouse space can be taken up by returned material that still needs to be processed and either put back into inventory or destroyed. Handling these returns as they come in will free up inventory space and prevent a backlog of work. Slow moving inventory and returns are taking up space that should be used for profitable inventory.
In addition to cleaning up returns and moving off dead stock, changing the equipment to better suit your situation may be an option. At our Maryland distribution center, we are transitioning to narrow-aisle fork trucks in order to reduce the aisle sizes. By reducing the aisle size, we can increase our space for inventory by 25%.
Cross training employees on functions other than their own will help create operational readiness, while promoting teamwork across departments. At times, there is an unbalanced workflow in your organization. Having employees who can perform a number of different tasks allows you to move employees from one department to another to respond to these fluctuations.
In order to properly implement a cross-training program, you need to identify the specific critical tasks that require cross training. Additionally, you need to identify the people capable of performing the tasks. Schedule time and funds needed for training, then recognize and reward employees who have successfully gone through a cross-training program.
Cross training delivers two key benefits to your organization: better employee morale and delivering products to customers on time without glitches. Maximize profits and establish competitive advantage with cross training.
4. Track Results & Keep Evolving
Measure results and implement changes to improve your warehouse performance. The most innovative warehouse operators are drilling into their warehouse data to understand the true cost to serve each customer and fill each order type. Then, put programs in place that lead to improved gross margins.
Through the increased use of technology, we can measure order fulfillment, inventory management and warehouse performance metrics. Within order fulfillment, we measure on-time delivery percentage, fill rates percentages and order accuracy. We have a zero-error program that rewards our employees for pulling orders accurately and incentivizes the warehouse employees to do it right the first time. With WMS, we have increased our inventory accuracy and can monitor our replenishments so that we are working more efficiently, and track line items picked per hour and measure individual employee productivity.
Finally, we can benchmark what production level our different storeroom areas should be able to perform at, train our employees on what the expectations are and work with them to increase their productivity. By constantly measuring results and implementing changes, we are able to continually improve our warehouse efficiency.
Companies are expecting more from their warehouse and distribution centers operations. Real-time visibility to inventory, order status, and task statuses are expected. Increased use of available technology will provide you with visibility, better metrics, warehouse data, and improved productivity. Organizing your warehouse and changing equipment to increase the amount of usable production space will allow you to grow sales while keeping inventory onsite. Building cross-trained and cross-functional teams will allow flexibility to react to the fluctuations in business and seasonal businesses. Measure results, implement changes, analyze the data, and ultimately create a more efficient warehouse.