Warehouse Management: Best Practice

In this section, we examine in detail the Receiving and Put-Away processes associated with a warehouse operation. Although warehouses differ in terms of size, type, function, ownership and location the fundamental processes remain.

Receiving, goods-in or in-handling is a crucial process within the warehouse. Ensuring that the correct product has been received in the right quantity and in the right condition at the right time is one of the mainstays of warehouse operation.

First we need to ensure that the supplier presents the products to the warehouse in the most appropriate way. It is normally the buyer who specifies the product and therefore may not have knowledge of the goods-receiving operation. The warehouse manager should be involved in specifying and agreeing on the packaging, items per carton, cartons per pallet, and any specific labelling required, together with the mode of transport to ensure that the products ordered are compatible with the storage facility.

One of the main challenges for a warehouse manager is to match labour hours with work content. Handling a product the least amount of time possible (labour touch points) leads to reduced labour hours and as a consequence, reduced cost.

Prior to the actual receipt a number of processes need to take place. The first step is to ensure that suppliers deliver into the warehouse when you decide, not when it suits them.

On arrival, the vehicle details need to be checked against the booking reference and the vehicle allocated a loading bay or location in the yard. Any vehicle seals need to be checked against the delivery paperwork.

Once the goods are offloaded, you need to decide whether they need to be checked before put-away. The ideal scenario is to move inbound goods directly from the loading bay to the storage area or despatch area if goods are cross docked. However, trust is an issue here and unless you are 100 per cent certain that your suppliers are totally accurate with their deliveries on every occasion, some form of checking will need to take place.

The goal of most warehouses is to increase throughput rates and reduce the amount of stock held. Cross docking is a process where products are moved directly from goods-in to the despatch bays. This replaces the need to place the product into store and any subsequent picking operation.

Cross docking needs the full support of suppliers as to how they present the product. This includes clear labelling and advance notice of arrival together with accurate, on-time delivery.

Depending on the product, there could be a requirement to record more than just the standard data such as product code, description and quantity on arrival.

It is accepted that certain products will require more stringent checking on receipt. These include high-value items, food, hazardous goods, temperature-sensitive product and pharmaceuticals. New suppliers will also fall into this category.

Many of today’s WMSs allocate product locations in advance and instruct the operator as to where to place the goods. This can be directly to the despatch area if the product is to be cross docked as discussed above, to the pick face as a form of replenishment or to a reserve or bulk-storage location.

In circumstances where there is an absence of such a system, the warehouse manager needs to calculate the optimum location for the goods and instruct the operators accordingly.

Order picking is the most costly activity within today’s warehouses. Not only is it labour intensive, but it is challenging to automate, can be difficult to plan, is prone to error and crucially has a direct impact on customer service.

In order to be productive and efficient in the picking process, a great deal of preparation needs to take place. This includes having a comprehensive under- standing of the products and their sales patterns and the data available to produce ABC analyses.

Placing products in the most appropriate location reduces travel distances and strain on operatives and as a consequence leads to improved productivity and overall cost reduction. We will discuss the warehouse pick area layout.

The majority of warehouses continue to operate with minimal automation and picker-to-goods operations prevail. There are many different ways of implementing this strategy. We will discuss the following methods:

1. Pick to order (individual order pick or discreet order pick)

2. Cluster picking (sort whilst picking)

3. Batch picking

4. Zone picking

5. Wave picking

Also known as “goods to picker”, with the goods to person approach, the warehouse operatives remain at their designated stations and the items for each order are brought to them. We will discuss this method.

The requirement for increased speed, accuracy and productivity has pointed managers towards automation as a realistic option in today’s competitive automated equipment market. A high-volume item pick operation is an area where automation can have a high impact. We will discuss:

1. Compact picking system

2. Order distribution system

3. Mini-load AS/RS systems

4. Ergonomic workstations

Robots are a common sight in manufacturing operations and on automotive production lines. However, they are rarely seen operating in warehouses. The use of robots in the picking process is also beginning to increase. These are in areas where labour is scarce or very expensive, where the tasks are reasonably straightforward or where the operation is undertaken in hazardous conditions where manual handling is deemed dangerous.

Warehouses have a number of different types of handling equipment at their disposal to undertake the picking process. These range from relatively cheap trolleys through mechanical equipment to large conveyors and automated systems. We will discuss all those in this section.

The type of storage equipment utilised within the warehouse for pick operations will vary substantially depending on the type and size of the product, the throughput envisaged and available capital. We will discuss those in this section.

In this section we will discuss the following picking methods that are currently in use in today’s warehouses:

• paper pick lists;

• pick by label;

• pick by voice;

• barcode scanning;

• radio frequency identification;

• pick by light/pick to light;

• put to light;

• automated picking.

A paper pick list will normally detail the order number, location, product code, description and quantity to be picked.

Pick lists are a series of labels on a sheet, which are printed in pick order.

The use of voice technology is gaining ground in warehouses globally, particularly for order picking, although other processes such as cycle counting, put-away and replenishment also utilise the system.

Barcodes are used to identify products, locations in the warehouse, containers (totes, cartons, pallets), serial and batch numbers.

RFID is a means of uniquely identifying an item using radio waves. Data is exchanged between tags and readers and depending on the frequency, may or may not require line of sight. Common uses in today’s world include library books, toll passes and access ID cards.

Pick to light or pick by light uses light-indicator, LED or LCD modules mounted to shelving, flow racks, pallet racks or other storage locations. This system tends to be used in conjunction with zone picking.

This system is particularly prevalent in retail store replenishment operations. The WMS will consolidate all the store orders for a particular group of stores. This might be done by region or despatch times from the distribution centre (DC). The system needs to ensure that each group of stores has similar volumes where possible.

This is quite a dilemma for warehouse managers today as they grapple with labour shortages and pressure to reduce costs yet increase accuracy, productivity and service levels.

In order to ensure a smooth and efficient picking process, we need to ensure that the right products and quantities are in the correct pick location. This is replenishment.

Many warehouses have introduced areas where value-adding services can be carried out. These are common in both dedicated and shared-user or public warehouses where third-party logistics companies are providing an all- encompassing service to their customers.

There are many support activities that occur in warehouses and are crucial to the efficient operation of the warehouse. These are, in the main, undertaken by supervisory staff, specialist teams and the housekeeping team.

This function is a major part of a company’s operation and the theories and practices are covered in many books on the subject of inventory management.

All warehouses are obligated to undertake some form of the stock count. It depends on the law of the country and accounting requirements as to how frequent and comprehensive the count is.

Security of products within the warehouse is paramount. The warehouse man- ager is responsible for the integrity of all the products under his or her care, whether they are owned or stored on behalf of other companies as a third-party contractor.

Returns processing involves the handling of product returns, transit packaging and surplus items. The processes associated with this operation include repair, reuse, refurbishment, recycling and disposal.

The order cycle time or lead time from order receipt to despatch is continually shortening and there is increased pressure on the warehouse manager to coordinate all activities to ensure that product is despatched on time and complete.

Dispatch documentation and labelling need to be completed to ensure compliance with customer requirements and government legislation. Different countries will have different requirements and these will also differ if shipments are within the country or for export.

As customers become more sophisticated, requiring accurate, secure, fast data exchange, and as the competition becomes more intense, companies need to have the information-technology tools to support the business and build reliability, speed, control and flexibility into the warehouse operation. The ability to communicate in real time is crucial in today’s fast-moving technological world.

Customers are becoming increasingly demanding and the ability to communicate via electronic data interchange, have online visibility and receive instant replies to queries is more of an expectation than a need. A WMS can be part of this solution.

When choosing the right WMS for a company you first need to fully understand the needs of the company and the key business requirements, not only today but some time into the future.

You need to understand your company strategy, ensure that your specific needs are met by selecting the solution that best matches your business objectives.

In order to be effective, a WMS needs to have a number of attributes which we discuss in this section.

This is not the type of purchase you would make through an e-auction. As with many large service offerings such as outsourcing, the likely success of the project will ultimately come down to your relationship with the people at the software vendor. Here we discuss the main aspects to look for in a partner.

In this section we will discuss the  rules that need to be followed prior to implementing the new system.

This section looks at the typical costs within a warehouse and aims to assist managers in understanding these costs, enabling them to produce budgets, calculate return on investment for particular projects and use the information for decision making, evaluating performance, activity costing and, in the case of third-party logistics service providers, charging.

The section also compares traditional costing models with activity-based costing.

The section goes on to discuss the advantages and disadvantages of cost models such as an open book, closed book and cost-plus.

The costs typically associated with a warehouse operation are discussed here.

This is a measure used to evaluate the efficiency of an investment or to compare a number of different investments. ROI is important to calculate because if an investment doesn’t have a positive ROI or if there are other opportunities with a higher ROI, then the investment should not be made.

The knowledge of the real cost of a product or service and the cost to serve specific channels and customers is very important to a company in today’s competitive market. In this section we will look at two types of costing system which are relevant to warehouse operations. These are the traditional costing method and activity- based costing.

In both internally and externally operated warehouses, costs need to be presented to customers – whether these are external customers or internal customers who have a cost attributed to their products.

This section looks at why we need to measure, what we need to measure and how we can use this information to improve our overall service to our customers.

In this section, we will discuss the various reasons why we need to measure performance and productivity within the warehouse.

We will discuss the four areas within the warehouse that we need to measure:

• reliability;

• flexibility;

• cost; and

• asset utilization.

Each company will have different priorities, a different customer base and a different method of operation. here we will discuss how to choose the right performance metrics for your company.

There are many traditional productivity measures in use in today’s warehouses. We have separated them in four groups:

• The first of these group measures are based on labour, space and equipment utilisation.

• The next group of measures looks at cost performance.
  The third group is based on productivity measures.

• The final group is based on customer service measures.

The ever-changing competitive environment resulted in the introduction of new performance metrics. We will discuss those in this section.

The traditional and new performance metrics are usually referred to as hard measures. By this we mean they are relatively easy to measure, being quantifiable and less ambiguous. Here we will discuss the soft measures that are equally important when measuring the performance of your warehouse.

Integrated performance models are a mix of actual performance data and customer perception. The data is compiled from actual performance reports and from questionnaires sent to customers on a regular basis.

This section looks at benchmarking and how it can assist you in your operation.  It is a process of comparing performance with operations of other companies, or operations within the same company, identifying high-performance or best-in-class operations and learning what it is they do that allows them to achieve that high level of performance.

The balanced scorecard, developed by Kaplan and Norton (1996), is another method of recording performance.

The scorecard looks at a number of dimensions which include finance, customer satisfaction, internal processes and staff development and innovation. Each measure will have objectives and targets which are measured against actual performance.

Measuring performance is key to running an efficient operation. However, the measures need to be SMART and aligned to the company’s strategic vision.