Reinventing Your Warehouse or DC

Jared Hammond, continuous improvement engineering manager with Kenco Logistics, a third-party logistics provider based in Chattanooga, Tennessee, was working with a warehouse team to build cereal displays. He noticed the forklift operators had to walk to a central clerk to obtain their orders. Once they arrived, they often had to wait for the clerk—who could be on the phone or working with other employees—to hand them their orders.

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Imagining Tomorrow’s Warehouse

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The result? “People were standing around and waiting, through no fault of their own,” he says.

Hammond worked with his colleagues to make orders available to operators through a heijunka box, which is similar to an intra-office mailbox. The instructions are arranged so operators know how to pull their next job. That has reduced the time the operators spend waiting for work. It has also nearly eliminated the interruptions the clerks must handle.

This example highlights one of the many ways—some small, some not—companies can boost their bottom lines and improve customer satisfaction by mastering the fundamentals of warehouse operations, including layout and organization, docking, picking and receiving, fulfillment, and packaging. Having a solid grasp of these functions pays off, whether an organization’s goal is to improve the efficiency of day-to-day operations, or implement a warehouse management system or other upgrade.

Several years ago, Mingledorff’s, a Norcross, Georgia-based distributor of heating, ventilation, and air conditioning equipment, began using Latitude WMS from PathGuide Technologies across its 35 locations. Sean Wallace, business systems operations manager with Mingledorff’s, knew the tidier the warehouse—products labeled correctly, little or no obsolete inventory—the more streamlined the implementation process. “I’d urge the warehouse staff to get things in order,” he says.

Historically, warehousing often was considered a non-value-adding activity and ignored, says Michael Kuhl, professor and interim head, industrial and systems engineering department, Rochester Institute of Technology. Few facilities, however, can produce items on demand and ship them directly to the customer within the short lead times customers expect.

“As a result, warehousing and logistics have become increasingly important to a company’s success,” Kuhl notes.

Here are the basic areas to cover when renovating your warehouse or distribution center:

Start with the end in mind. To improve warehouse operations, management needs to understand the processes in place, the reasons for them, and how—if at all—they support their strategy and customer requirements.

“All warehouse operations should link to the organization’s goals and strategies,” says Steven Murray, lead process auditor and senior research associate with the Warehousing Education and Research Council, a professional group. “If they don’t, any other changes or investment have little chance of improving operations.”

That means every employee, including those on the warehouse front lines, should know management’s goals and customers’ needs, and how their jobs relate to them, Murray says. For instance, if the organization is striving to be a low-cost operator, warehouse employees likely will focus on eliminating steps in product handling to reduce labor expense.

As part of this analysis, management should review the organization’s portfolio of warehouses, says Dale Rogers, professor and director of the Frontier Economics Logistics Lab at Arizona State University.

One question to ask: how many large and permanent warehouses does your organization need? If a substantial percentage of your volume occurs in one quarter of each year, one or two permanent facilities, supplemented with several flexible warehouse operations, may cost-effectively meet demand.

“Would you build an entire church for Easter Sunday?” Rogers asks.

Plan the space outside the warehouse. In the past, dock space often was considered non-essential, and square footage was kept to a minimum. As the speed of many supply chains accelerates and cross-docking plays a greater role, however, this space becomes more valuable.

“Having an area large enough to conduct all dock functions minimizes chokepoints, allows for more accurate receiving and shipping, and helps maintain a safe area in which to work,” says David Rehnert, regional service center manager with C.H. Robinson, a provider of logistics services based in Eden Prairie, Minnesota.

To further boost efficiency, trucks should be assigned to receiving doors close to their designated put-away areas.

Ensure visibility to arriving and departing products. “You can’t be efficient inside the box if you don’t have the visibility, systems, and processes to manage what’s coming in and going out of the warehouse,” says Jamie Overley, CEO of East Coast Warehouse, a logistics provider based in Elizabeth, New Jersey.

“This typically requires some level of automation, as well as collaboration with suppliers, carriers, and others who interact with warehouse employees,” he adds. After all, it’s difficult to boost efficiency if warehouse employees have no idea what products are arriving, and when. Conversely, if employees are alerted to spikes in arrivals, they can arrange to have the labor and equipment needed to manage them.

While some suppliers may balk at providing advance shipment notices (ASNs), many that are shipping to big-box retailers typically already are providing ASNs for those clients.

If the current process includes labeling, the company can work with suppliers to develop a standard format. Often, employees in procurement and/or product management will need to take on the job of encouraging—if not requesting—suppliers to provide this information. Warehouse employees themselves typically aren’t in a position to ask for this from suppliers.

Scheduling appointments for outbound shipments gives warehouse employees a chance to ensure the product is available when the truck arrives. “If carriers arrive willy-nilly, items can sit on the dock, taking up room,” Murray says.

Train employees. Capable, competent employees are the backbone of an efficient warehouse. Proper training is critical.

“Some organizations have placed employees in situations where they didn’t have sufficient training and weren’t allowed time to understand procedures before being given the autonomy to operate alone,” Rehnert says.

The results often include mistakes and bottlenecks in multiple areas of the warehouse, leading to problems for customers. Robust standard operating procedures, checklists, and e-learning can reduce training time.

Limit the number of operations contained within a single warehouse. “You can’t ask a distribution center to do too many things well,” Rogers says. He uses the returns function as an example. Returned products tend to be small, but messy and time-consuming because they don’t follow a schedule, and each return may require different handling.

“The problem is that the distribution center is working hard to do its main job, and other functions, such as returns, can be distracting,” he says.

“You always want to reduce variability,” Rogers says. While things happen that introduce “lumpiness” into the process, when possible, build a warehouse and network operation that can efficiently handle disruptions.

Optimize layout and processes. The warehouse layout should, first and foremost, promote safety. This generally means incorporating designated walk areas, maintenance areas, and materials handling equipment areas.

The process used to put products away is key. “Product put-away determines the rest of the operation’s efficiency,” notes Evan Garber, CEO of EVS, a Boulder, Colorado-based provider of ERP software and consulting. One simple rule: high-volume items—”A” products or fast movers—should be located near picking and shipping operations. Items that tend to stick around a while can be located farther from the action.

Even if the processes are manual, an efficient warehouse or distribution center will be “process driven,” explains Mark Van Leeuwen, regional sales manager with PathGuide Technologies.

For instance, some companies allow employees to grab inventory from the warehouse and bring it back to their desks, perhaps to show a potential customer. While accommodating customers’ needs is paramount, any inventory changes should follow a process.

Similarly, some management teams treat their warehouses as “black holes,” and do all they can to avoid them, Van Leeuwen says. They’re missing opportunities.

“Other companies understand that if they dial in their warehouses to the rest of the organization, it becomes a competitive advantage,” he says.

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Imagining Tomorrow’s Warehouse

What might an efficient, effective warehouse look like a decade or more from now? “I expect to see fully automated warehouses, where people monitor the operations to address system anomalies,” says Michael Kuhl, professor and interim head in the industrial and systems engineering department with the Rochester Institute of Technology.

Rather than acting as storage locations, warehouses will primarily function as fully automated cross-docking facilities, and a way to optimize logistics, Kuhl says. Getting to this point will require sensing, localization, and computer vision tools, as well as machine and deep-learning techniques that let supply chain professionals understand, evaluate, and make real-time routing and processing decisions.

The future warehouse will also involve greater use of wearable and mobile technology that enables functions such as vision picking, in which workers can scan a pallet just by looking at it, predicts Gary Allen, senior vice president of supply chain excellence with Ryder Systems. Wearables tend to offer more flexibility than traditional handheld scanners or voice picking, he adds.

The Internet of Things and robots will improve inventory control. “You can achieve 99-percent inventory accuracy because you’re constantly monitoring it,” says Evan Garber, CEO of EVS.

Any deployment of smart technology needs to drive efficiency and service-level improvements. Technology for its own sake rarely offers benefits.