4 Apr 2014 To move or optimize your Distribution Center?
Companies are constantly preoccupied with reducing costs due to a more and more competitive market. Reducing inventory while maintaining a high customer service level is a necessity. To reach this objective, inventory rotation must be continuously evaluated. A new approach to increase inventory rotation can, in some cases increase warehouse capacity and even avoid expansion or relocation.
Mainly, three guiding principles to make sure you are getting the maximum of your current facility: first: make sure to maximize space utilization, second: optimize your productivity in all aspect of the operation and third: be in control of your process ie: manpower, product, orders, equipment and costs.
Maximize space utilization
One of the most important elements is the elaboration of a detailed site plan. Columns, ceiling height, different warehouse zones, and shelving are displayed on this plan. A thorough inventory of all the equipment is also compiled in this phase of the evaluation. All this information will have repercussions during the analysis of appropriate technologies for an improved warehouse layout and space utilization.
A product database containing, logistics information, inventory performance and the yearly transactions for each product is a basic tool. Following that information gathering, it is possible to get a picture of warehouse activity. In fact, Pareto’s law is often confirmed with approximately 20% of the products representing almost 80% of the space and transactions.Another advantage in doing this analysis is to examine in detail the problematic cases. For example item with inventory without transaction and in excess stock level are often a good source of space savings.
Also a good pre-slotting analysis would indicate the best storage and configuration that should also guide better space utilization. It is important to work closely with company management during this database study. The policy concerning the quantity of product to be kept in stock should be rigorously established, as well as the policy regarding additional new products and transactions.
Optimize your productivity
One of the most important costs driver is the man power used to perform all warehouse activities. From product receiving, putaway, order preparation, packing and shipping all functions should be review in detail to cut non-value activities, reduce travelling time, consolidate activities, reduce exceptions and standardize processes.
To support this important review, a good existing process mapping should be done involving, if possible, the persons doing the work, review those processes with productivity increase in mind, test the new revise process and adjust according to set goal.
Industry benchmark can guide you to review and optimize your productivity. New layout, equipment, infrastructure and technology would definitely ease the transformation process. Also the most important point is to involve employee in the process and have them involve in testing and validation. Documentation and KPI setting and monitoring would ensure the continuity.
There are no good operation, if the control over the operation is not optimum. The best support tool to ensure control for year has been WMS (Warehouse Management Systems). Product, inventory and transaction has been monitored, traced and optimised using WMS for years. Unfortunately many companies are not yet into the optimisation phase because of the amount of effort and transformation they require to make sure those systems are well integrate, configure and maintain.
A lot of challenges are also part of this optimization opportunity, to name a few, ERP full integration, customers and clients data integration, product logistics information to maintain, WMS warehouse manpower and knowledge retention, customer excess customization and many more.
Having worked in this field for more than 30 years, I would say about 50% of the relocation or expansion could have been avoid if companies would have looked at those points in detail and invest in process changes instead of brick and mortar.