Running Out of Room?

A growing company running an undersize, suboptimal warehouse needs to embrace growth and resist the temptation to simply throw labor at the problem. There are already a plethora of pressures being put on the warehouse by the on-demand environment that has facilitated SKU proliferation, value-added services, and more customization. On the flip side, the procurement department is buying in bulk for cost savings, creating rising congestion, inefficiencies, and safety issues. As a result, accuracy and productivity levels decline. In the end, adding labor alone will simply increase labor costs and congestion with little to no productivity increases.

When running out of room, look at other options. Do better housekeeping by reslotting your inventory, and in so doing better use the cube of your warehouse. If you pick primarily from reserve, you may need to slot the higher-velocity items into an additional pick line.

An evaluation of order profiles may suggest modifying certain carton sizes. For example, manufacturers should pack product that is ordered frequently but in smaller quantities per order in smaller cartons.

One of the first areas to address is the reserve storage area. If you’ve run out of reserve storage space, you may move pallets of slower-moving product to public storage or a leased warehouse. In this case, the inventory with the most days on hand would be shipped to the outside warehouse. A small staff for loading and unloading product will allow you to maintain control of the inspection and flow processes. Nonetheless, outside warehouses, especially if located a distance away, are often uneconomical, since transferring product between facilities costs time and money.

Insufficient throughput rates may not be related to lack of space but due to inefficient material handling operations. Smaller scale distribution systems improvements may give you the processes you need to cost-effectively stay ahead of demand.

Because small warehouses are typically manual operations, their operators need to be creative problem solvers. Installing a small amount of automation or changing your processes could do wonders for productivity rates. Semiautomatic tapers and mechanized void-fill systems will increase packing efficiencies. Scales and manifest systems may be practical options here as well. Installing gravity conveyors throughout the pick lines can increase pick rates. Pick-and-pass picking may be a natural consideration for picking up the pace with high-velocity items.

When retrofitting your system, improve your operation wisely. For example, install equipment that is cost-effectively moveable in case you do need to relocate it in the future. Powered conveyor is expensive to move because of the labor costs associated with deinstallation and reinstallation.

Despite your operational improvements and space utilization efforts, there may come a point when building a larger facility or expanding your existing facility is the right thing to do. A growing company may be able to accommodate up to five years of growth and drastically increase productivity in a well-planned facility.

Nonetheless, new facilities come at a cost and a risk. It’s important to know the operating differences between a small, manual system and a larger, more advanced system and the required steps to making the transition. The expected costs of building a new facility include a network analysis to determine the size and location of the facility; the initial purchase of the land; the cost of building construction; research and procurement of system equipment; implementation of material handling equipment and systems; the transfer of labor, office supplies, and inventory; and the time investment for the entire project. We’re talking about a multimillion-dollar capital investment. You must do your homework to make sure that such an investment is justified. Additionally, the planned and designed solution must be flexible and scalable enough to meet your future needs while achieving a return on investment.

Small warehouses are primarily run with paper pick lists and refer to routing guides on hard copies or CD. These warehouses are not prepared for the sophisticated routing guides and compliance programs required by most large customers. Midsize warehouses will potentially move to an enterprise resource planning (ERP) or mid- to lower-tier warehouse management system (WMS). This provides the necessary level of control, tracking, and compliance for label formats and shipping procedures. Small warehouses sometimes use compliance software for appropriate shipping labels and advanced shipment notices (ASNs). Larger distribution centers have more-sophisticated electronic data interchanges, and the WMS directs the carton sortation according to shipment rules and instructions.

Not all warehouse management systems are created equal. You need to investigate a number of WMS offerings and perform a gap analysis. This involves identifying the required system functionality for the new operation to support the new throughput requirements. At this point a warehouse control system (WCS), the software that sits between the WMS and the automated equipment, should be considered.

If you’re quickly growing, don’t be fraught with anxiety. You need to get your bearings and handle the growth effectively. The best steps are to implement lower-costing modifications for short-term improvements while adding labor wisely. Build a business case through data analysis and future forecasts for projected growth. And most important, use this business case to advocate distribution as a front-line business strategy so that you have the resources necessary to distribute on demand and sustain long-term growth.

Dave Gealy is a DOD improvement adviser for Cincinnati-based Forte, a distribution operations improvement firm, specializing in the planning, design, implementation, and optimization of automated distribution centers.

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