Keep inventory at the ready
Staging inventory is not always better than storage when supporting today's emerging distribution and manufacturing practices.
By Staff -- Modern Materials Handling, 5/15/1999
Unless you've been asleep for the past twenty years like Rip Van Winkle, you've probably heard the conventional wisdom that when it comes to staging and storage in your warehouse-less inventory means more profit.Reducing inventory levels across an enterprise is still an important goal. However, with today's focus on supply chain management, the emerging warehouse practices that are the focus of this planning issue are standing the conventional wisdom on its head. Supporting them may actually require more staging and storage in portions of a facility, as well as a mix of storage equipment, ranging from traditional pallet storage racks to automated carousels and vertical lift modules.
The new equation works as long as one of four criteria are met:
* The increase in inventory at one facility results in a net reduction in inventory across the supply chain.
* The new practice speeds the inventory through the pipeline at a higher velocity. This is especially true of crossdocking and flow-thru warehousing.
* Additional value is added to the product at each new storage and staging area through postponement, order assembly, adaptable manufacturing, and value-added service centers.
* The increased storage and staging permits you to offer a higher level of customer service, such as same-day order processing or an in-stock guarantee.
In fact, the drive to differentiate one company's offerings from another through improved customer service is a primary force behind these emerging practices, says John White III, a senior manager with Andersen Consulting in Atlanta, Georgia. "Customer service is today's mantra," says White. "That's especially true if you're trying to evolve from simply a warehouse into more of a distribution center, which tends to be where most companies are going today."
Often, that evolution will involve more than one of these practices, White adds. As an example, an automated sortation carousel and conveyor system may support a flow-thru strategy that in turn feeds a value-added service center. In this example, product arrives in one form and is shipped out later in a different and more valuable form without ever going into long-term storage.
None of these benefits just happen. They are the result of careful planning that permits you to manage and arrange your storage and staging systems in the most efficient manner.
"These emerging practices impact storage and staging because the size, mix, and type of products being stored and staged are changing all the time," says Bruce Strahan, a partner with the Progress Group, Inc., in Atlanta. "If you don't rethink the way you have designed your storage and staging areas, you won't get the full effect in the processes."
"In a traditional warehouse, fast moving items would traditionally have been stored close to the shipping dock," says Strahan. "But if you implement an order assembly or value-added strategy, you're going to create a work-in-process area between long-term storage area and the shipping dock. Now the high movers are going to be stored there."
Implement a postponement strategy, Strahan adds, and you might move raw materials closer to the shipping dock where the final step in the manufacturing process can be completed prior to shipping.
These new practices may also impact the variety of storage and staging equipment in a facility. Where yesterday you might have installed deep-lane storage and block stacking on the floor, now you might see a larger percentage of items stored in selective pallet racks or double deep pallet racks because you have fewer units of an item to store.
Crossdocking and flow-thru warehousing are two practices designed to reduce your inventory levels by moving product through the distribution center with a minimum of handling, staging, and storage.
In its purest form, crossdocked product moves from one inbound truck into an outbound truck, or from the receiving dock to the shop floor in a manufacturing environment. Staging is minimized and long-term storage is eliminated.
Lucent Technologies crossdocks 1,300 cartons-about 10% of all cartons received weekly-in this manner at a 100,000 sq ft warehouse in Mesquite, Texas. The warehouse supports an adjacent 1 million sq ft manufacturing facility and 40 subassembly shops.
At Lucent, inbound material is staged until the receipt is checked for compliance with vendor packaging specifications. Product that passes inspection is routed directly to the shop floor. Combined with a WMS to optimize putaway and storage of other material, Lucent has improved putaway efficiency by 50%.
Pure crossdocking is rare. More often, some inventory at the receiving dock will be crossdocked as is; some will be combined with other items from traditional storage; some will be stored for a few days for value-added services; and some will go into traditional storage.
Flow-thru warehousing involves product that is here today and gone tomorrow. "We're sandwiching some temporary storage space between the receiving dock and the shipping dock," says Soheil Rezai, of LRI Consultants in Atlanta. Depending on the products involved, a flow-thru strategy may range from case and pallet flow racks to carousels to various types of pick-to-light and pick-to-build picking systems.
Using storage to create value
At first glance, postponement, order assembly , adaptable manufacturing, and value-added services might appear like unrelated warehousing and manufacturing strategies. But from a staging and storage perspective, all four share a common trait: They create a work-in-process area within the warehouse with its own storage and staging requirements separate from the rest of the warehouse. "If you adopt adaptable manufacturing, you might now have a very small finished goods storage area, but a larger work-in-process area," says Soheil Rezai, of LRI. "Consequently you might have islands of storage. You might have a unit load automated storage and retrieval system (AS/RS) or storage racks for larger items, and a mini-load AS/RS or drawer storage for small items at the work center.''
Mannesmann-Rexroth, a manufacturer of hydraulic and pneumatic cylinders, adopted an adaptable manufacturing strategy at its Lexington, Kentucky facility. There, the average lot size is just 1.8 cylinders per order.
To solve this problem, Rexroth created a storage and staging area where subcomponents are gathered prior to routing to assembly by conveyor.
The system includes a stack racking system and modular drawer cabinets for storage near the production area, and two double-wide, vertical lift storage modules for staging work orders in totes.
Elsewhere, value-added services are an important component at New Balance's 230,000 sq ft distribution center in Lawrence, Mass., where boxes of athletic shoes are price ticketed for individual customers. Full cases of shoes are stored in high-bay storage racks that can hold 1.8 million pairs of shoes. High-velocity split-case shoes are stored on flow racks on a first level mezzanine, while low-velocity split-case shoes go to a second level mezzanine on static shelving.
Eliminating steps
One of the impacts of electronic commerce has been a heightened awareness of the importance of customer service, even at companies that don't offer electronic commerce. The marketplace is demanding new levels of customer service and guarantees of in-stock merchandise.
Those demands are impacting storage and staging. "If I'm going to guarantee shipment of my whole product line rather than just stock items, my inventory is going to go up," says Jim Apple, Jr., a partner with the Progress Group.
Those increased inventory levels don't have to increase costs, adds Hugh Kinney, president of LRI Consultants in Atlanta. "We have been encouraging our customers to reduce costs by eliminating staging to reduce the number of steps in the handling process," says Kinney.
And remember that none of these strategies alone is a silver bullet for your warehouse and distribution needs. But when properly implemented and supported with the right staging and storage, they can transform your warehouse and distribution center from a cost center to a profit center.
More than one way to support adaptable manufacturing
Two types of racks store bulk and large materials. Tools are stored in a vertical lift storage module. A mini-load automated storage/retrieval system feeds work-in-process to assembly. Small- and medium-sized parts are stored in modular drawers.
Storage and staging of parts for an adjacent manufacturing facility is concentrated in high-bay racks and shelving. Full pallet loads of raw materials are picked from the former while the shelving stages cases for the production lines.
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