Running a thin, tight and efficient warehouse touches both top and bottom lines ot the Income Statement.
“There are no solutions. There are only trade-offs.”
– ― Thomas Sowell
For a company trading in physical goods, the warehouse operation is a core premise for the physical delivery and a happy customer; a paying one that is. It’s a process, people, systems, tactical (flexibility), strategy (long-term) and all-in heuristics.
We take a look at setting up a warehouse and the workings. In a nutshell, an efficient warehouse operation is premised in a few core competences and dimensions – planning, product mix, variance, stock type, equipment, flexibility, talent.
Planning
Planning starts with capacity and is done by people – at conceptual / high level. As a rule of thumb the warehouses operate most efficiently at 65-75 % capacity as anything over carries disproportionate incremental cost per unit. At best, operators should keep an eye on reasonable swinging and even extreme scenarios – e.g. anticipations stocks, seasonality, business dynamics, realistic growth prospects.
Processes
Warehousing management domain is a process one. Have a clear process view top-down to the individual process step, job sequencing, batching. Example – Flows: inbound and outbound flows are run in proximity and in similar stages – pick, pack, putaway, commission, but still in separate lines, which will preclude a single event clogging both lanes and still enable a cross dock and ultra-quick response times (think larger units in pre-pack – pallets and bulky lots). Clear floor plan and a coherent process map with flows, racks, equipment moves and control points (e.g. scanners, ramps, operators) will spare the “spaghetti“ situation.
Technology, machinery, equipment
This part of the project, has similar planning scope and frame as the facility itself. As general guidance, operations should have some spare capacity to avoid squeezes during breakdowns and peak loads (only less expensive and committing). Equipment domain: forklifts, pallet trolleys, reach stackers, scanners, charging stations, rest non-op equipment are sizeable investment after the scheduled productivity and warehouse specifics and dimensions.
Systems and digital equipment
Systems are the more strategic play, as there, the optimization and improvement take center stage. First order of business is for the WMS to be robust enough to accommodate the physical processes across operations. Second is to pipe all data feeds from suppliers, manufacturers, carriers, customers, marketplaces, and platforms. Third, AI – Artificial intelligence playground – Machine Learning algorithms for process automation, Network optimization, Dynamic Pricing, Principal Service (Product) component analysis. Now these are the building blocks of the Digital Transformation .
Stock – raison d’etre of the warehouse.
The mix of the products stored.
The broader the merchandise mix the more complex the setup, compartmentalization, specialization and flows. The rule of thumb in Supply – Demand is that variance in product and operations drives costs both on the production/service line and on the quality side. Let’s take for instance an order fulfillment warehouse stocking a mix of the larger groups of finished products with distinct differing properties – garments and footwear, electronics, perishables, refrigerated, high-value, luxury, cosmetics. The groups have their own dynamics, economic, specifics, handling. On the other hand, the spread allows for pooling of resources serving the different lines – people are cross trained and equipment has higher utilization. So back to planning and flexibility objective. Planning ahead with an eye for some spare capacity for growth goes a long way.
Stock type
Type of merchandise is also important for the putaway and commissioning layout. Highest volume and cross docks should be ultra accessible and with ultra short turnaround times. Next, the stored volumes to consider as a minimum – e.g. what safety, baseline, min / max stock levels. Slow movers are put far and high. Anticipation and seasonal stock both normally plug underused slots (“mandants”) as taken into early delivery to secure campaigns. Here a usefull capability is for the warehouse management system to be able to quickly consolidate disparate stocks for optimal picking and in-house physical consolidation and repositioning. This is handy for perishables (FIFO) or outlet goods, typically returned or out of season, and end-of-line.
For quick reference – the Economic Order Quantity (EoQ) formula (Wikipedia). This is the theoretical backup and should be interpreted in light of above conditionalities and types of stock profiles.
Despite, warehouse operations management being premised in common sense principles, numeracy, logic and industry experience, it quickly evolves into a complex endeavor with growing number of instruments set of sophisticated systems operated by qualified personnel.
UP next, we follow up with performance – cost, quality, customer care and service levels.
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