The right stuff

By John Hill, principal, ESYNC -- Modern Materials Handling, 4/26/2006

Warehouses exist to support the error- and damage-free picking and shipping of complete orders on a timely basis. Think of this as picking the right stuff.

Error-free picking has never been more important. The Internet, for instance, has changed customer expectations.Few consumers are willing to pay a premium for order fulfillment they can obtain somewhere else if you are unwilling or unable to meet their needs. Add the pressure on the warehouse from smaller order sizes and more frequent deliveries, and you find that warehouse managers are faced with the challenge of meeting customer delivery expectations while containing or reducing costs.

Best order picking practices can help. However, it’s easy to become confused by the mix of alternatives offered for warehouse layout and design, product storage strategies and order picking.Equally difficult to decipher are the many performance rates ascribed to these alternatives, depending on the type of materials handling equipment deployed and the picking approach used, including single order, batch, cluster, bucket brigade and more.

As seasoned hands know, the actual throughput is more than a function of layout, equipment type and capacity, and picking methodology.Order profiles and sizes, inventory deployment and accessibility within the facility, travel distances and times, operator training, proficiency and attitude all play a role in determining throughput--and they all present opportunities for optimization.

Before investigating your options, it’s critical to profile current performance.Such a baseline profile will facilitate assessment of the potential for improvement and likely ROI.A good start sums all warehouse labor, equipment and facility fixed and variable expenses. Those would include depreciation during a given period. The result of that calculation is divided by the dollar value or number of orders or order lines or items shipped during the same period.Once the number (percent of sales or dollars/order or order line shipped) is calculated, the questions to be answered include:

How do we measure up against the competition?

Is our throughput up to snuff?

Are our costs in line?

What can be done to reduce costs without sacrificing performance?

What best practices apply to our environment?

An experienced manager probably has an intuitive feel for how his or her operation is doing. That is often the best barometer. However, the Council of Supply Chain Management Professionals, Georgia Tech, Georgia Southern and the Warehousing Education and Research Council have all published work on performance measurement and key performance indicators by type of operation. These are a good resource to see how your current practices measure up and to identify the processes with the most potential for improvement.