How to Evaluate Your Warehouse Operations

If your warehouse challenges are similar to most other warehouse managers, you have found that labor costs are increasing and difficult to control.

The rapidly increasing cost of employee benefits is just one factor. Another common challenge is overstaffing prior to peak activity periods. This happens because it can take a week, or more, to train a new employee for the warehouse. Simply reducing headcount is rarely the correct solution. After all, you have to keep customer satisfaction high and on-time shipping is a critical component of good customer service.

Employee productivity is another important consideration. Do you have the metrics in place to know which of your warehouse employees is a superstar, and which is a dud? Do your metrics support analysis by job function? Most companies can measure how many items a warehouse employee picks, but do you know how efficient your packing and shipping personnel are? Do you measure the productivity of your receiving staff? How about replenishing items to inventory locations—how much time does that take and which of your employees is doing the best job? You have to look at people and processes. The best employees in the world can’t do a great job unless your processes are optimized for efficiency. Are paper instructions causing confusion and errors? Is your warehouse layout designed to achieve maximum productivity?

Chances are nobody has really done a deep dive into these critical areas to evaluate the people, processes and layout. It’s time to start! Often, the simplest way to begin is just to start watching and questioning the employees in each area—they frequently have excellent ideas for layout and process improvement. Also, by establishing standard performance standards for areas such as receiving, packing and shipping, you can measure how efficiently each individual employee is performing.

Simple changes can contribute to significant improvements in performance.

Everybody knows the 80 / 20 rule, which states that typically 80% of sales come from 20% of the product line. Have you placed the 20% of your products that represent the majority of your business in an easily accessible area, close to the shipping department? Determine whether the faster moving items are frequently unavailable to your warehouse picking crew. Do you have backup stock of those items? Is the backup stock intelligently located so that it’s easy to bring it to the forward picking location? Does your warehouse management system instantly communicate to your replenishment staff where the backup inventory is located and give advance warning when stock at the forward inventory location is getting low?

Do you spend too much time moving inventory around to make space for new inventory to be located in the same area as existing inventory? For example, do you move all the rubber duckies because a new shipment of water wings has arrived and you want to put them away on the rack that holds your existing inventory of water wings? Or, does your system utilize a warehouse map and automated instructions to your putaway and picking crew that allows you to store items anywhere in the warehouse, directing your putaway staff to open spaces and routing your picking staff to a variety of inventory locations? A good Warehouse Management System (WMS) will do this automatically and without paper. Using Radio Frequency Controlled (RF) bar scanning technology, physical space can be utilized with ultimate efficiency, optimizing space utilization and limiting multiple inventory movements. Your WMS will assign backup and forward inventory locations and provide paperless direction to employees, so that inventory is put away once and moved again only when being picked and moved to the shipping department.

If you don’t have a top notch WMS, you cannot achieve the possible efficiencies.

Of course, that begs the question: how can I tell if I’m buying a top notch WMS and how can I know if it’s implemented effectively?

Typically, the only way to ensure both is to retain the services of an experienced WMS provider with extensive experience in implementation and complex integration of your WMS with all the peripheral software you are using. Even the best WMS, if poorly implemented and integrated, will leave you frustrated and discouraged. Inaccuracy, duplicate (and triplicate) data entry, delay, lack of access to information for critical personnel and other problems are almost guaranteed, without the assistance of experienced experts. Genuine WMS professionals will understand not only your current requirements, but will also be able to anticipate your future trajectory and help you to achieve your potential for the long term. Will this be inexpensive? Probably not. But, the cost of not getting expert assistance is always more expensive. A top notch WMS, properly implemented and integrated ought to have an ROI of under two years. Sometimes, the return is much faster than that. You will see greater customer satisfaction because orders will be shipped on time and accurately, from merchandise that is in stock. Your customer service personnel will know in real time everything about every customer’s order. Cost and revenue information (including warehouse costs by item) will let you know where you are making money and whether particular items have hidden costs associated that make it difficult for you to assess whether those items are, in fact, profitable. Some items are perishable. What is your loss ratio? Some items are easily damaged. How often does damage occur and what are the re-shipment costs associated with that? Some items are difficult to pick and require expensive equipment. Is your expensive warehouse equipment being used productively, or is it possible that you have fulfillment equipment (e.g., conveyors of a particular size) that are over-kill for 98% of what you sell? Information. Without information, you can’t possibly make good decisions. And without a top notch WMS implemented and integrated professionally, you simply can’t have the critical information that you need.

Another benefit of a top notch WMS is that you can kiss the paper goodbye. If tasks are assigned on paper in your warehouse, you are guaranteed that mistakes and carelessness are costing you money. Honest mistakes (misreading a pick list) cost you money. Lazy mistakes (accidentally “losing” a paper pick list) cost you money. Dishonest mistakes (picking a more expensive item to fulfill an order because the warehouse employee is frustrated and angry) can cost you money—and if you don’t believe disgruntled employees do dishonest things, you may be living in an alternate universe that few of us have ever visited. Information transmitted to warehouse personnel via RF handheld bar scanning devices ensures accuracy, compiles information on productivity and ensures accuracy by incorporating self-auditing steps to ensure that the right item is picked from the right location for the right order. Paper is not your friend. Paper requires duplicate data entry to move records of completed processes to other systems, such as your accounting system.

In real estate, we all know that the key to value can be summarized in three words: location, location, location. In warehouse management, the three words to help you achieve optimal productivity are: automate, automate, automate.

Automatic conveying, packaging (bagging and boxing), labeling and shipping methodology evaluation will contribute enormously to your bottom line. Taking human decision making out of these processes will not only eliminate costly labor, but will also standardize processes to your financial advantage. By building business rules for packaging configurations of single and multiple item shipments, the most efficient packaging material, size and shape will automatically be selected, reducing damage to items and ensuring the lowest possible freight costs. Dimension and weight will be accurately included in shopping for the most cost-effective shipping method. Back charges will be avoided and costly shipping decision mistakes will be a thing of the past. Automating your labeling process alone will save you enormous amounts of cash. Labels will be created with all the necessary information, affixed in the correct location and will accurately reflect all of the information in your system relating to that order, for that item.

When you really know how productive and efficient your warehouse personnel are, you can create incentive systems to encourage even better performance.

You can reward excellent performance because you will be able to measure it accurately and in real time. Rewards (and the recognition that is inherent in a reward system) have been shown to lead to increased employee morale and longer employee retention. Keep your excellent employees happy and they will contribute to your success for many years. A side benefit of having a top notch paperless WMS that uses RF handheld equipment is that training time for new warehouse employees is virtually eliminated. All the instructions a new employee requires are displayed in the RF handheld screen in the language the employee speaks. A really good WMS can’t teach a new employee to be a safe and efficient fork lift driver, but it can do just about everything else!

In summary, the key to reducing labor expense and increasing efficiency in your warehouse is to purchase a top notch WMS from an experienced implementer and integrator. They can share best practices with you and help you design the optimal systems for your facility, products and employees.

Avectous Integrated Software can deliver these benefits. Call us. You’ll be very glad you did.

Avectous.