Let’s face it, warehousing of product in essence should be
relatively simple. The product is received, putaway, picked and then shipped
with an occasional count to make sure everything is in order.
However the consequence of an inefficient and ineffective
warehouse can be disastrous. Product that is built to exacting specifications
in your pristine manufacturing operation that disappears in a warehouse “black
hole” is never going to impress any customers. Bottom line, if you can’t find
the product, you can’t ship it, or if it takes longer in labor costs to find it
than the customer paid for it, then your chance of a long term profitable
business are very slim. Your business is the sum of all parts and unfortunately
the lowest common denominator usually thrives.
Nowadays many companies have a WMS or Warehouse Management
System to help them manage all the people and processes within a warehouse. While
a WMS can help control the movement and storage of materials within a warehouse
and process associated transactions, such as receiving, picking and shipping,
even when used well, there are still many “hidden costs” that can have a major
impact on the bottom line, customer satisfaction and overall business success.
Here are three “hidden costs” that can be addressed with
proper use of a WMS.
Travel time is the second most expensive variable cost, labor
being the first. It is virtually
invisible and extremely expensive if allowed to go unchecked. Just as a manager would not want to see
employees wandering around with nothing to do, equipment should not be crossing
the floor unloaded, or traveling to the far corners of the warehouse to pick
the product when the same product is available within eyesight. Three solutions
available with WMS can resolve this issue.
Slotting is the placement of products within a warehouse
facility, to maximize the use of a warehouse’s available cube space by improved
storage and picking efficiency and reductions in warehouse handling cost, by
optimizing product location and balancing workload. This strategy takes a number of factors into
consideration, such as location, dimensions, and weight, to profile and
sequence items down the pick path.
Proper slotting leads to reduced picker travel, more stable loads, fewer
accidents, and less product breakage.
Interleaving is a practice that uses WMS to assign tasks to
workers in ways that make use of each trip that they and their associated
equipment make during their work shifts.
This practice typically can eliminate 25-30% of the machine travel
associated with pallet moves.
Picking strategies are one of the easiest and more cost
effective ways to maximize productivity and improve order accuracy. This operation is also in direct connection
to customer satisfaction, as quickly and accurately processing orders is
essential to the bottom line. Batch
picking involves picking more than one order at a time. Using the WMS to help
batch orders together in different ways, allows the workers to optimize picks
and increase pick density, which reduces the number of times a picker has to travel
through any aisle. Zone picking divides the warehouse into multiple zones and
assigns workers to pick only within one zone reducing travel time. Orders are either picked and passed from zone
to zone for fulfillment or consolidated at a point before shipping. Order picking is often the most preferred
method of picking, but may not be the most effective. An order picker picks one order at a time,
following a route up and down each aisle until the entire order is picked. This method may work well in an operation
with a low number of orders, and a high number of picks per order; however,
using this method in a warehouse with a large number of smaller orders would
lead to excessive travel time.
Inventory management is a balancing act. You can’t have too much, which could lead to
shelves filled with expired or obsolete products; excessive expensive inventory
holding or a larger facility than is really needed. You don’t want too little, resulting in
product shortages, unfulfilled orders, and unhappy customers. You need just the right amount of stock. Companies can increase profitability 20-50%
through careful inventory management.
Tracking inventory is essential. Product should be tracked and recorded during
initial receipt, as bad practices at receiving only get worse later. Whether it is through the use of bar codes or
radio frequency identification (RFID), a detailed transaction history of
inventory flowing in and out of the warehouse can improve visibility and reduce
errors. Real-time data in WMS means the
system and the warehouse are never out of sync, ensuring better checks and
balances with audits and cycle counts.
Shelf life and stock rotation can also have a major “hidden
cost” implication. Warehouses need to now know where each
lot is stored and when and if the product is set to expire. Most Warehouse
Management Systems offer various controls to help control the shipping of these
products, such as LIFO, FEFO and FIFO. Without these controls product will
expire without ever being picked. The costs associated with this can be
outstanding. There is the obvious cost of the manufacturing of these obsolete
products but also expensive warehouse space has been used to house the product
and costly labor to receive and putaway the product can also be incurred with
The final area of “hidden” costs is the organization of the
warehouse itself. Cost savings in travel
time and inventory control can be lost if the warehouse is an incomprehensible
maze. The first step is to determine how
the facility will operate and develop a master strategy. Decide how space is used and think in three
dimensions; rather than expanding the footprint, perhaps there can be better
use of vertical space. Examine potential
traffic patterns and storage locations. Consider
how items will be picked, how they will be putaway, and how the stock will be
replenished. Group products into
families based on the results of this analysis, and configure the WMS to
support this plan, building in exception protocols. Lastly, plan to work and work the plan. Without regular upkeep, a well-organized
warehouse can quickly become disorganized and difficult to navigate
Remember, warehouses should never be rocket science. Having a
strong WMS will help reduce costs, increase inventory accuracy and storage
capacity, and improve customer satisfaction. This will at least allow you to
survive against your competitors. Using a strong WMS effectively to manage all
processes will help you drive out these additional “hidden costs”, giving you a
tangible advantage against your competitors.