Best Practices: Warehouse 911

Getting exceptions handling right was critical to bringing a new DC up to speed

By Bob Trebilcock, Executive Editor -- Modern Materials Handling, 6/10/2009

Steve Mulaik, a partner with The Progress Group, still remembers the call for help from a leading retailer. A year or so earlier, it had constructed a new distribution center to handle their growing direct-to-consumer business.

The facility was state of the art, featuring some of the best automated materials handling equipment money could buy. On the other hand, after a two month start-up period it wasn’t meeting capacity and cost performance objectives. There was even some consideration to moving some of the volume back into the company’s old DC. The company had already thrown some of its brightest young engineers, analysts and executives at the problem. They needed help and they needed it fast. Think of it as a warehouse 911 call. 

When the consulting team was brought into the facility, they began working with the internal management team to discover and prioritize the problems and the fixes. The problems spanned equipment, systems, process and management issues.

One of the most pressing of these involved excessive errors in outbound shipments. The company puts enormous emphasis on being a market leader in customer service, so this was both an embarrassment and a major cost issue to remedy each and every instance.

A major contributor to the outbound errors was a “short picks” rate much higher than the old system. Short picks occur when a picker is sent to a pick face for a pick wave and the inventory is insufficient to fill all the needs of that wave.

“Because of the newness of the DC, exception management procedures had not been fully defined,” Mulaik says. “And if your exceptions are 3 times higher than your prior experience, then your supervisors have to work 3 times as hard as they did before.” And they were.

Yes, there were some materials handling issues to be addressed, but there were bigger, more pressing fish to fry. One of the largest issues involved attempts to resolve and react to problems rather than to analyze and eliminate the root causes.

To address the inventory inaccuracies that led to short picks, for instance, the facility hired a large staff of people to cycle count the entire warehouse every week. “But that meant pickers would continually be sent to that empty location until the inventory was done later in the week,” says Mulaik. If the shortage involved a high frequency item, then the short could be repeated in most every wave.

The fix

After analysis showed that a very large percentage of shorts were repeat shorts, the team responsible for analyzing and coming up with a new approach decided to put in place a new process to notify a supervisor whenever there was a short pick. Someone could then be sent to immediately replenish the item and update the warehouse management system (WMS). That eliminated any further short picks at that location. Combined with additional process changes aimed at reducing the root cause of the initial short, the WMS accuracy improved, cycle counting was substantially reduced, and the accuracy of the outbound packages was significantly improved. With more tweaks, training and process rigor, the customer service performance is now better than the old DC. “We get a fair number of calls from people who say that they bought the wrong equipment,” says Mulaik. “Nine out of ten times, the equipment is fine, but the system doesn’t perform to expectations until all the right processes are put in place, including good exceptions management. And getting to the right place requires problem solving approaches that rely on finding and eliminating the root causes, before you throw people at it”