F. Curtis Barry & Company Blog
Developing Plans to Improve Your Warehouse's Peak Performance
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By Curt Barry
You made it through the peak period “but it wasn’t pretty.” The additional volume revealed some serious issues in your fulfillment operation. Your people weren’t able to meet the service level standards. The facility was filled beyond capacity, became disorganized and almost impossible to move through. You used far more overtime than planned.
During the peak period or shortly afterward is the time to do a peak period assessment and address how well your fulfillment team is serving the customer and meeting or exceeding the company’s goals in terms of service levels and costs. While your most recent peak season is fresh in your mind, develop plans for operational improvement and implement before the next peak.
To digress for a minute, when you’re “in the heat of the battle” and it’s not too late, take the time to start a list of symptoms or observations for improvement. As consultants we find that being on-site during the peak is a real benefit to the assessment process later. Sometimes we have been able to make observations and recommendations to improve processing and throughput immediately.
Our focus for this article is the warehouse operation, but a similar approach can be utilized for other areas of your business. The important thing to do is to spend time evaluating your past performance and putting a plan together to correct any issues that are identified. In many cases, the process of gathering information and data pertaining to the warehouse operation identifies potential improvements by itself. Many warehouse operations are not evaluated in both a qualitative and quantitative manner and as such opportunities for improvement are never fully identified. In order to improve anything, it first has to be measured and evaluated. Be methodical in making the observations and analyzing the results.
The peak period assessment should be everyone’s priority. One aspect of any effective audit of the operation is to involve those who were intimately involved. If you don’t actively involve warehouse supervision and hourly employees in the analysis, you are missing one of the most valuable assets at your disposal. Those closest to the action usually know and understand the issues and solutions better than anyone else.
It’s impossible to detail all the things that should be reviewed in one article. However, we have focused on the major areas of concern and where you should spent your time to get the biggest benefit.
Click on Link below to read whole article
#1 How Well Did You Serve The Customer?
Quick order fulfillment time. For in stock products, most fulfillment operations have a order shipping standards of 24 to 48 hours. Most ship expedited and a high percent of orders same day as ordered. Review your order fulfillment metrics. How well did you meet your standards? Did your expedited delivery performance meet customer’s expectations?
What are the major causes of being off standard? Inventory availability or internal processing problems?
How well did the actual inventory level meet planned levels? Most fulfillment managers do not have responsibility for planning and ordering product. Additionally, reviewing the reports of the initial customer order and line item fill rates will help you understand your service levels to customers. Did you have the necessary inventory to meet your company’s initial customer order and item fill rate goals?
If you had periods of severe back order levels, how did this impact your processes? If you have an age of back orders report, what does this show in terms of customer service? Cross docking back ordered products expedites back order processing.
Evaluate shipping carrier performance. Did your package carriers meet your expectations? Review whether carrier pick ups were made on schedule. From carrier reports and your internal systems, how well did the carrier meet their days to deliver metric to your customers?
How many damage claims were noted in the returns process? Are there any condition issues (such insufficient dunnage) that can be attributed to improper handling in the warehouse?
Are there significant wrong deliveries by the vendor or address deliverability issues in your order management system?
Review types of errors beginning reported. In additional to internal operations reports and results of internal audit checks, reason for returns and customer service reports should be researched for symptoms of problems. What order accuracy rate did you attain?
Was the return rate higher than expected? Is there an overall problem above the natural return rate that certain categories of products have?
Establish from all these sources, observations and recommendations about how well you serviced the customer.
#2 Meeting Cost Per Order Objectives
One place to start in your analysis is to look at your financial performance comparing budget to actual for the five major expense categories which represent the total cost per order excluding shipping expenses. The reason for isolating shipping costs is that it distorts any comparison should you try to benchmark with other businesses.
How well did you perform against your budget for Direct Labor, Indirect Labor, Occupancy Costs, Packaging Costs and Contract Services? How was your Cost per Order impacted by your plan to budget and actual performance?
From our proprietary data base of warehouse costs, for multichannel companies with 2 or 3 line/customer orders, efficient companies have as total warehouse costs between $3.50 and $5.00 for back end fulfillment not including shipping expenses. This equates typically to 5% to 7% of net sales. Highly efficient and lower cost fulfillment operations may be under $3.00 per order. Direct labor as a percent of total costs may represent between 35% and 50% of the total cost per order.
From your shipping bills and reports, what are the major reasons for being off budget?
This top level view will give you a direction of where to focus your efforts from an expense budget perspective.
#3 Using Labor Efficiently
As you review your detail labor reports for the peak period (budget to actual performance), how well did you meet your labor budgets? If you did not meet the budget, can you attribute the variance to missed order forecasts or to lower labor productivity? What percent of your labor hours were overtime hours? How did this compare to your labor plan?
Have you established productivity standards for all key warehouse functions? How well did each key function meet the expected productivity goals? Picking, Packing, Receiving, Put away, Shipping, Returns, Replenishment, Value Added Services (e.g. kitting, personalization, etc.).
What opportunities are there to be more flexible with labor or to add shifts?
How well do employees understand the goals and get back feedback on the results?
Make sure they clear expectations that employees understand. Measure actual performance of employees and functions. Communicate and review results.
What are your conclusions regarding how labor could be used more efficiently in total and by function?
#4 Evaluate Process and Layout During Peak
Process and layout should be dealt with individually and inter-related together. From a process perspective. In performing a warehouse assessment to make recommendations for improvement, trace the flow through the warehouse from two perspectives: product flow and customer order fulfillment flow. Were there any bottlenecks or backlogs experienced? Here are a few functions to review:
Receiving process and put away. Did you meet your time standards for placing received product into a shippable status condition? On the Receiving dock, did you clear the dock of receipts every night or was there congestion that reduced receiving efficiency? Best in class companies have standards to clear the dock in 2 to 4 hours.
Warehouse inventory accuracy. For “warehouse can’t finds”, how many times did your order selectors arrive at an empty pick slot when picking? There are two potential areas: Product in the right bin/slot location (product aisle mapping) and the accuracy of the inventory quantity count.
Picking. Did you experience any delays for picking due to congestion in the aisles, inadequate inventory, picking equipment issues, unexpected order spikes, or lower overall picking productivity?
Packing. Were you able to keep packers busy with no delays from running out of work? Did you schedule packers to start their shift later than the Picking function so work is available?
Returns. We mentioned analyzing the reason codes for returns indicate any specific process issues that caused the return to occur. How can the returns process be streamlined to eliminate un-necessary or duplicate efforts? Were you able to keep up with the volume of returns coming back to the warehouse without creating an excessive backlog? Did the returns processing time meet your expected performance standard? Are customer’s being refunded or credited for returns in a timely fashion.
Layout perspective. As you trace the product flow and order flow, what problems such as aisle congestion, back tracking flow, floor space utilization, etc. have you identified?
From this step in the analysis, what changes in process and methods can improve efficiency and reduce costs?
# 5 Applying Automation
To reduce labor, what opportunities are there for applying cost effective use of material handling equipment, conveyors, envelop stuffers, box makers, voice pick, pick to light and sorters, etc.? It may benefit you to engage a consultant to study how equipment can gain improvement and gain ROI.
If you have a conveyor system, did it provide enough accumulation during peak? Did you experience any downtime?
Deter
F. Curtis Barry & Company Blog
Developing Plans to Improve Your Warehouse's Peak Performance
in
Share
.
0
.
By Curt Barry
You made it through the peak period “but it wasn’t pretty.” The additional volume revealed some serious issues in your fulfillment operation. Your people weren’t able to meet the service level standards. The facility was filled beyond capacity, became disorganized and almost impossible to move through. You used far more overtime than planned.
During the peak period or shortly afterward is the time to do a peak period assessment and address how well your fulfillment team is serving the customer and meeting or exceeding the company’s goals in terms of service levels and costs. While your most recent peak season is fresh in your mind, develop plans for operational improvement and implement before the next peak.
To digress for a minute, when you’re “in the heat of the battle” and it’s not too late, take the time to start a list of symptoms or observations for improvement. As consultants we find that being on-site during the peak is a real benefit to the assessment process later. Sometimes we have been able to make observations and recommendations to improve processing and throughput immediately.
Our focus for this article is the warehouse operation, but a similar approach can be utilized for other areas of your business. The important thing to do is to spend time evaluating your past performance and putting a plan together to correct any issues that are identified. In many cases, the process of gathering information and data pertaining to the warehouse operation identifies potential improvements by itself. Many warehouse operations are not evaluated in both a qualitative and quantitative manner and as such opportunities for improvement are never fully identified. In order to improve anything, it first has to be measured and evaluated. Be methodical in making the observations and analyzing the results.
The peak period assessment should be everyone’s priority. One aspect of any effective audit of the operation is to involve those who were intimately involved. If you don’t actively involve warehouse supervision and hourly employees in the analysis, you are missing one of the most valuable assets at your disposal. Those closest to the action usually know and understand the issues and solutions better than anyone else.
It’s impossible to detail all the things that should be reviewed in one article. However, we have focused on the major areas of concern and where you should spent your time to get the biggest benefit.
Click on Link below to read whole article
#1 How Well Did You Serve The Customer?
Quick order fulfillment time. For in stock products, most fulfillment operations have a order shipping standards of 24 to 48 hours. Most ship expedited and a high percent of orders same day as ordered. Review your order fulfillment metrics. How well did you meet your standards? Did your expedited delivery performance meet customer’s expectations?
What are the major causes of being off standard? Inventory availability or internal processing problems?
How well did the actual inventory level meet planned levels? Most fulfillment managers do not have responsibility for planning and ordering product. Additionally, reviewing the reports of the initial customer order and line item fill rates will help you understand your service levels to customers. Did you have the necessary inventory to meet your company’s initial customer order and item fill rate goals?
If you had periods of severe back order levels, how did this impact your processes? If you have an age of back orders report, what does this show in terms of customer service? Cross docking back ordered products expedites back order processing.
Evaluate shipping carrier performance. Did your package carriers meet your expectations? Review whether carrier pick ups were made on schedule. From carrier reports and your internal systems, how well did the carrier meet their days to deliver metric to your customers?
How many damage claims were noted in the returns process? Are there any condition issues (such insufficient dunnage) that can be attributed to improper handling in the warehouse?
Are there significant wrong deliveries by the vendor or address deliverability issues in your order management system?
Review types of errors beginning reported. In additional to internal operations reports and results of internal audit checks, reason for returns and customer service reports should be researched for symptoms of problems. What order accuracy rate did you attain?
Was the return rate higher than expected? Is there an overall problem above the natural return rate that certain categories of products have?
Establish from all these sources, observations and recommendations about how well you serviced the customer.
#2 Meeting Cost Per Order Objectives
One place to start in your analysis is to look at your financial performance comparing budget to actual for the five major expense categories which represent the total cost per order excluding shipping expenses. The reason for isolating shipping costs is that it distorts any comparison should you try to benchmark with other businesses.
How well did you perform against your budget for Direct Labor, Indirect Labor, Occupancy Costs, Packaging Costs and Contract Services? How was your Cost per Order impacted by your plan to budget and actual performance?
From our proprietary data base of warehouse costs, for multichannel companies with 2 or 3 line/customer orders, efficient companies have as total warehouse costs between $3.50 and $5.00 for back end fulfillment not including shipping expenses. This equates typically to 5% to 7% of net sales. Highly efficient and lower cost fulfillment operations may be under $3.00 per order. Direct labor as a percent of total costs may represent between 35% and 50% of the total cost per order.
From your shipping bills and reports, what are the major reasons for being off budget?
This top level view will give you a direction of where to focus your efforts from an expense budget perspective.
#3 Using Labor Efficiently
As you review your detail labor reports for the peak period (budget to actual performance), how well did you meet your labor budgets? If you did not meet the budget, can you attribute the variance to missed order forecasts or to lower labor productivity? What percent of your labor hours were overtime hours? How did this compare to your labor plan?
Have you established productivity standards for all key warehouse functions? How well did each key function meet the expected productivity goals? Picking, Packing, Receiving, Put away, Shipping, Returns, Replenishment, Value Added Services (e.g. kitting, personalization, etc.).
What opportunities are there to be more flexible with labor or to add shifts?
How well do employees understand the goals and get back feedback on the results?
Make sure they clear expectations that employees understand. Measure actual performance of employees and functions. Communicate and review results.
What are your conclusions regarding how labor could be used more efficiently in total and by function?
#4 Evaluate Process and Layout During Peak
Process and layout should be dealt with individually and inter-related together. From a process perspective. In performing a warehouse assessment to make recommendations for improvement, trace the flow through the warehouse from two perspectives: product flow and customer order fulfillment flow. Were there any bottlenecks or backlogs experienced? Here are a few functions to review:
Receiving process and put away. Did you meet your time standards for placing received product into a shippable status condition? On the Receiving dock, did you clear the dock of receipts every night or was there congestion that reduced receiving efficiency? Best in class companies have standards to clear the dock in 2 to 4 hours.
Warehouse inventory accuracy. For “warehouse can’t finds”, how many times did your order selectors arrive at an empty pick slot when picking? There are two potential areas: Product in the right bin/slot location (product aisle mapping) and the accuracy of the inventory quantity count.
Picking. Did you experience any delays for picking due to congestion in the aisles, inadequate inventory, picking equipment issues, unexpected order spikes, or lower overall picking productivity?
Packing. Were you able to keep packers busy with no delays from running out of work? Did you schedule packers to start their shift later than the Picking function so work is available?
Returns. We mentioned analyzing the reason codes for returns indicate any specific process issues that caused the return to occur. How can the returns process be streamlined to eliminate un-necessary or duplicate efforts? Were you able to keep up with the volume of returns coming back to the warehouse without creating an excessive backlog? Did the returns processing time meet your expected performance standard? Are customer’s being refunded or credited for returns in a timely fashion.
Layout perspective. As you trace the product flow and order flow, what problems such as aisle congestion, back tracking flow, floor space utilization, etc. have you identified?
From this step in the analysis, what changes in process and methods can improve efficiency and reduce costs?
# 5 Applying Automation
To reduce labor, what opportunities are there for applying cost effective use of material handling equipment, conveyors, envelop stuffers, box makers, voice pick, pick to light and sorters, etc.? It may benefit you to engage a consultant to study how equipment can gain improvement and gain ROI.
If you have a conveyor system, did it provide enough accumulation during peak? Did you experience any downtime?
Deter
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