A distribution center is the place where many of the symptoms of an inefficient Supply Chain surface. The causes may be associated to the warehouse and its operations but sometimes they originate in other parts of the supply chain (SC). Very often, the lack of adequate software tools for the detailed analysis of the causes, makes the warehouse manager to try every day to reduce the negative effects of the symptoms.
The following articles aim to attack some of the diseases installed in the warehouse management system without considering the modern solutions proposed, complete and exhaustive.
WMS – Pressures / Problems and Solutions
Changes in the business environment caused by:
a) the new dimensions of the consumer client experience, enhanced by the mobile technology, wireless networks, and e-commerce
b) the service level requested (business with the same-day or next-day service levels continue to grow)
led to changes in the distribution centers management. The handling equipment that is used has changed and developed together with the design and inflows of the warehouse.
In earlier days, warehouse management activities were related to receiving, storage, inventory management, collection and delivery of customer orders. Today, in order to serve omni-channel (multi-channel) by cross-channel, the traditional warehouse activities were completed by consolidation (results of the scale economy) and added value (for customizing products) services such as packaging, repackaging, labeling, shelf-ready displays, kitting, postponement and Light Assembly services, ASN and invoicing.
To reflect the main pressures (problems) facing the current distribution centers we’ll show in Figures 1 a survey organized in the 2nd half of 2010 by the research firm Aberdeen Group Inc.
Figure 1: Adaptation after: Aberdeen Group, November 2010
The survey was conducted on a sample of 159 international companies that have their own distribution centers.
The problems mentioned above in the graph from Figure 1 are familiar to the logistic specialists for over 25 years, nothing new, but the solving method has been changed (increased sales do not always involve increasing storage space, etc).
Therefore, in order to reduce operating costs of the warehouse, maximize the use of its resources (space, human resources, knowledge/information) and increase customer service levels, companies have started to invest in ERP and WMS along with other systems such as SCM (Supply Chain management) and MHS (Modern Handling System). Without the integration of these systems, the visibility of the inventories (supply) in all channels and locations of the distribution and Product Flow Path Optimization are not possible to express and satisfy multi-channel demand.
Based on the above – mentioned challenges in Figure 1 we will try to present the main issues of logistics distribution centers related to “increasing sales without increasing the storage space and operational personnel ” together with practical and modern ways of solving them.
The general solution to this problem is to improve the efficiency and performance level of the warehouse resources usage (space, personnel, knowledge management / information in relation to processes, equipment and technologies).
How do we perform it?
I. Process improvement – doing more with less
II. Effective labor management
III. Using large scale mobile systems / automated data capture and / or handling of products
IV. Implementing value-added services
V. Performance Management or the organization’s ability to measure and improve their business results
The limited space of this presentation has led us to approach the solutions I + II because they cover most of the operational problems within the distribution centers.
I. Process improvement – doing more with less
A customer – driven distribution center is effective if it responds on time, complete and at a low-cost to customer requirements.
Basically, it requires synchronization of internal warehouse activities to the delivery requirements of orders. How can it be done?
I.1. End-to-end visibility in the SC or at least over the inbound, inside and outbound processes of the distribution centers
We will illustrate the importance of this concept through the visibility of the inventory and the delivery status of customer orders.
a) The visibility of stock in all locations and its transit stages.
Problem: “The Pickers did not find the product in the picking zone because of the stock-out”.
One solution is to have product search facilities, regardless of its operating status: dock/receiving, reserve zone (which replenishes the picking zone), the consignment zone or in case of integrated systems, the warehouses from the own network or the vendor’s.
For example, access to products information involved in the receiving process or transit transport (notice to warehouse from supplier by ASN) is a key factor in increasing the level of customer service (the products from the order that are not in stock can be covered by the products in the truck or in the reception area).
b) Visibility of customer orders (number, volume, quantity, lines, and stages of processing)
For example, human resource monitoring, planning and part-time or full-time allocation can not be performed efficiently and in real time without having full visibility of customer orders, correlated with inbound (dock management, receiving and storage) and outbound (picking, packing and shipping) activities.
I.2. Streamline the flow of goods, increase warehouse productivity
Companies will constantly want to improve their performance and the distribution centers are one of the main targets of a Supply Chain manager to maximize efficiency at the lowest costs. To achieve higher levels of customer service at low cost, some of the best warehouse management practices are:
a) Efficient allocation of storage space (slotting)
b) Confirmation of transactions and communication of internal operations using barcode technology, RFID and other mobile devices
c) Warehouse repartition, depending on the profile of the product, delivery orders (storage temperature, chemical composition, rotation speed, volume and weight, number of command lines, etc.) and delivery unit (cases, carton/box, pallet)
d) Correct selection of the picking method by using business rule engine
e) Effective management of inbound processes (dock management, receiving and putaway)
f) Product receiving without paper documents
g) Event Management for proper notification of a person when certain events occur (eg picking area replenishment)
h) Real-time information for any warehouse location
i) Reducing the time and storage costs through cross-docking operations
j) Correlation of picking and shipping processes for timely delivery of orders
k) Physical inventory accuracy with no interruption of the warehouse activity, etc.
Solutions to solve the problems
a) Efficient allocation of storage space (slotting). How can I improve the performance of the internal activities by slotting?
Problem: “A spring seasonal product that will have an increased picking process has a storage cell allocated statically at the end of the warehouse picking aisle and improper height for quick access. In the portfolio there are tens of thousands of products, of which several thousand have seasonal demand and will have to enter in the warehouse. How to improve the efficiency of warehouse?”
The most common problem that we encounter in a warehouse is the correct positioning of the products so that allows operators minimizing travel times in picking processes.
Briefly, we present some techniques most frequently used in order to minimize order cycle time:
1. Pareto analysis using the history order lines to identify the best selling items, items that represent 80% of the total order lines. Then reorganize storage space so that the adjacent spaces of the shipping zone to be occupied by shipping items which have the highest picking frequency.
2. Choosing and defining the correct picking method depending on the orders profile (number of orders, number of lines/order, delivery time, etc.) such as wave/batch picking, zone picking or pick and pass.
In the case of large volume orders (number and lines), the effective implementation of the storage allocation solution implies a WMS able to provide:
• re-slotting and cells consolidation based on a set of rules;
• fast collection of information for efficient strategy design of picking, slotting and shipping processes.
Take for example “Efficiency in the allocation/reallocation of storage cells”.
The graphs in Figure 2 and 3 reflect the following:
a) the process of picking is the most expensive warehouse operation and represents 50% of total operating costs (see Figure 2).
b) travel times between picking locations represent 55% of the total time of picking process, as it’s shown in Figure 3.
According to these data, increasing the efficiency of the picking process involves monitoring travel times (in order to minimize them) and storage locations (designing efficient allocation rules).
Figure 2. Warehouse cost distribution by processes (on the left); Figure 3. Distribution of order picking time (on the right)
World class distribution centers have already adopted the most advanced technology for picking. Along with printing and scanning barcodes solutions, they have introduced new technologies like “pick-to-light” and “voice recognition”.
But regardless of the used technology (from the information on paper to mobile terminals) the slotting strategy is essential for efficient allocation of goods in the warehouse.
So, warehouse slotting requires efficient allocation of space for products storage.
This allocation of storage space and storage equipments is initially based on reports issued by specialized software or EXCEL after processing the information about historical deliveries of products, seasonality, chemical composition, quantity, value and volume of products. The initial allocation of cells (slotting) is very difficult, requiring significant time and human resources. Therefore, these processes of re-slotting (reallocate storage cells) must be carried out automatically by WMS software. To perform re-slotting, WMS should enable defining the rules of re-slotting and dynamic allocation of storage cells.
Best In Class companies define their slotting strategy by associating the following information:
Forecast demand volume
Promotions and marketing plans
Changes in the profile of products, customer requirements (their orders)
Changes in the structure of the warehouse storage and handling equipment products
If the WMS implies a too high cost for applying best practices for slotting, it must at least allow you the dynamic relocation of products based on their frequency and volume of deliveries.
Why dynamic relocation? In practice it is found that customers of WMS solutions with static allocation of storage cells, rarely or never performe analyzes for re- sloting and manual relocation of goods in the warehouse. Therefore, while changes occurr in the mix of products and customers, fluctuations in demand based on seasonality, promotions, discounts, etc. lead to wrong positioning of the products and thus to inefficient processes picking. We have an automatic identification of goods position, but their picking routes are inefficient.
If the WMS includes re-slotting facilities, it provides optimal locations for storing new product (putaway process) and asks with priority in the picking lists older products now stored in sub-optimal locations.
If it requires a reduction of current storage space, WMS has to allow consolidation of products.
Based on forecast rules, promotions etc. relocation of seasonal products can be made in advance, because as a rule of time-saving in logistics warehouses, one hour of re-slotting saves 9 hours of picking.
b) Event Management for proper notification of a person when certain events occur.
Problem: “In the warehouse picking area, there are many storage cells with stock-out. Operators have picked the products from picking zone and now are desperately seeking outside of the picking area the other products in the Customer Order. What needs to be done?”
To reduce travel time (waste time) and picking time, one of the most effective methods is warehouse zoning. The most common zoning operation is to split the warehouse in picking and reserve area (area that supplies products for picking area). If a picking area is incorrectly replenished from the reserve zone, it contains empty cells, without stock, and the picking time increases or, if the product is not identified in the warehouse, customer service level decreases. To avoid these situations, we recommend the implementation of the following solutions trough the WMS.
1. Automatic notification of appropriate personnel if the stock from the picking zone cells falls below a minimum level, for example three days of sale (min-max Inventory Policy). The WMS facilitiy that can support this event is generically called “Advanced dynamic event management”. If the products are missing in the reserve zone but were supplied and are already received, the transfer is made directly from receiving area to the empty cells of the picking zone.
2. Keeping the replenishment orders of the picking zone in standby and launching them once with the picking of these products. It can effectively be applied where, because of the lack of staff, the employees perform both picking and replenishment of picking area. For example, when using the method of “Wave picking“, cell replenishment of picking area is done prior of products picking, for example “We move to the picking area all the stock required for the wave“. The general WMS facility that can support this event is called “Task interleaving dynamically“, considered to be the advanced function of “Task management“. Task management involves assigning tasks to resources (in our case the operators) on the following attributes:
• Permission, the operator is professionally certified to perform this type of activity;
• Proximity, task assignment to the operator that is closer to the place of execution of operation;
• Priority, most urgent task execution compared to the other.