Go With the Flow

Feb 01, 2003 10:30 PM  By

When I ask the “how” question about improving product flow, my mind immediately breaks the matter into three parts (acquisition, storage and handling, and disposition), the first and third of which seem fairly irrelevant at the start. My second thought is “Improving for whom?” And immediately on the heels of that one comes another — “As expressed in what terms: dollars? Productivity? Service?”

The answers to that “how” question alone drive one into every aspect of the overall process: purchasing, manufacturing and vendors, warehousing and distribution, transportation, information systems, stores and customers, marketing, sales, and finance. Three broadly stated answers together touch on the interests of all these parties:

  • Buy right; own product for as short a time as possible; sell it before you have to pay for it.
  • Minimize product handling.
  • Maximize the use of all resources associated with your process — space, labor, equipment, cash, and time.

If you think for a minute about any one of these, it soon becomes obvious that they are highly interrelated, and that all of them bear squarely on operations within the four walls of the distribution facility. Delivering on each of these goals can be fairly complex but also very powerful.

BUY RIGHT

Initially, “buying right” might not seem to relate directly to the topic at hand. However, product flow must be a major consideration of those who determine inventory ownership and vendor requirements if the organization is to have any chance of meeting such a goal.

Only under the right circumstances can you acquire product in such a way that it flows rather than being stored. That means it arrives at its distribution point shortly before the time for its use (shipment or consumption). This practice facilitates cross-docking, minimizes holding, and increases inventory turns, which usually improves cash flow in the operation.

In addition, you should try to acquire the product under terms that enable the completion of the product’s sales and payment for its consumption prior to paying the vendor for the merchandise whenever possible. This is a major contribution that “good” (i.e., well-planned, consistent, reliable, and efficient) product flow makes to the organization as a whole. It amounts to having your inventory funded by your vendors and customers.

You can accomplish this by negotiating vendor payment terms that exceed those of your customer, by turning the inventory quickly, by eliminating all errors (they will only extend the cash-to-cash cycle and increase costs and otherwise interrupt the planning for and flow of inventory and increase returns), and by shipping on time (figure 1).

MINIMIZE PRODUCT HANDLING

In broad strokes, a major contributor to minimizing product handling is to deploy the right quantity of merchandise where and when it is needed. However, this is more a strategic than a tactical issue and a subject worthy of a longer treatment.

Minimizing handling also means that inbound product arrives in a form best suited to being handled at the destination (properly and easily identified, and unitized based on what is to be done with it). If the product is to be cross-docked, it will be packaged and marked for a cross-dock destination — usually with bar code labeling. Cross-docked product generally leaves the facility within hours of its arrival (figure 2). In the case of highly automated facilities, product may be in the facility for only seven or eight minutes and is untouched by human hands at any point. Talk about minimizing handling!

Product that needs to be ticketed and assorted for repacking with other items being shipped to the same destination may be best moved in bulk. This makes the item easiest to rework before shipping it on.

Quantity is not to be overlooked in this examination either. The merchandise that arrives at the inbound dock should usually be a quantity suited to immediate or short-term demand, not a “just-in-case” supply to be held. Some product can be purchased in quantities that match the capacity of its dedicated pick location, in which case it is moved once from the dock to the pick point. The only other handling is to pick and ship it, rather than move it from the dock to rework, then to reserve, then to a pick location, and then finally picking and shipping it.

When the product is destined for short-term storage, it should be palletized with the right height and width for its short-term storage location. This tactic maximizes space by filling the whole slot with the right-sized pallet. It also saves the labor and handling involved in restacking product when pallets are too large for the location designated for their storage.

The consequences of this approach to product handling are several. Minimal handling reduces labor cost and product loss because of damage (lost or damaged product obviously does not flow). Cutting down on handling also eliminates delays and otherwise reduces the time required to complete work aimed at serving the customer. And reducing product handling improves quality because it decreases the number of chances to make a mistake in quantity, location, or information.

In combination, these benefits of reduced handling can make it easier to consistently put away all received product within 12 to 24 hours of its arrival, making it available to be shipped to the customer immediately — a goal most warehouses should be able to attain.

SLOT CORRECTLY

Once you have decided to store the product, you must devise a plan to answer the “where?” question. This is the point at which in- and outbound product flow meet and is also a subject suitable for a much longer discussion.

Among the many considerations you need to take into account are the physical characteristics of the product (fragility, weight, cube, temperature sensitivity), its value (dollars or scarcity), its velocity (volume shipped per period), and its relationship to other products (men who order shirts in one color usually order the same shirt in one or two other colors at the same time; women often order a blouse and skirt together; wheelbarrows come in parts — when a pan is ordered, it is usually accompanied by handles and a wheel; when customers ask for literature about a particular investment, they are often interested in other opportunities that are related or similar in holdings, earnings, or some other feature).

Figure 3 forecasts fixture requirements for small items in a large and varied inventory by evaluating product cube movement history and associating the number of items with size ranges that equate to different storage fixtures. This in turn will inform a warehouse layout plan and product flow. If well done, it will result in a high degree of correlation between storage slot size and the number of items best suited to that category of slot.

Another analysis (figure 4) shows order patterns that are based on product lines and recommends juxtaposition of product lines within a warehouse layout using the relationships among orders. This scheme can then be matched to the plan for housing both reserve and pick location inventories.

OPTIMIZE WAREHOUSE TRAVEL

From the perspective of “flow,” it is appropriate to consider factors that decrease travel and labor usage. One approach is to always attempt to fill the dedicated pick location with newly arrived inbound product to minimize movement to and from reserve storage. Sophisticated receiving or inventory management software applications will do this analysis and inform the worker when this opportunity is available. This reduces both travel and handling.

Another factor is to multitask wherever possible. For instance, when products are ordered in small quantities, they are generally put away in mixed pallet loads. By evaluating the optimal travel path to complete a mixed-pallet putaway, a robust WMS application can significantly lessen the travel element in that work.

Similarly, replenishment of product from reserve to dedicated pick locations involves travel to “pick” product from reserve and to “put” product into forward pick locations. This affords two distinct opportunities to optimize travel paths.

A fourth approach is to do task interleaving. Where putaway tasks and replenishment duties require the same kind of equipment and take place in the same geography, a shared task pool can be established. When the operator completes a task, the software considers where that task ends before assigning the next task, to minimize travel for the operator. This method also has the potential to increase productive use of equipment and the operator’s time.

Taken together, these four tactics will significantly enhance the flow of product through the facility by helping ensure that all the tasks that make up the distribution process can be accomplished consistently and as scheduled.

GET HELP FROM TRANSPORT

As was the case with product acquisition, at first glance transportation may seem irrelevant or ancillary, but it is not. Ongoing pressures on the supply chain further diminish the margin for error and continue to try to wring out costs. To gain more control and limit the consequences of errors and delays, both of which seriously affect product flow, you should look to transportation for help.

Productive use of equipment is one way in which transportation affects product flow. Like the old joke about the half-glass of water, whether a trailer is half-empty or half-full depends on whom you ask. The third answer, of course, is that there may be too much trailer. No matter what your perspective, improving utilization can improve product flow.

In the same way that it is unproductive for a forklift operator to travel through the warehouse without a load, it is unproductive to have unused or partially used equipment sitting around. One can attack this problem from several directions. First, assess what equipment is idle and when. Conduct a simple tally of equipment in use by hour of the day. Another simple way to evaluate this situation is to just walk out into the yard and count idle equipment every hour. Look at every departing trailer and rank its fullness for a week or so (one-quarter, one-third, or one-half full, etc.).

If the results warrant it, test ways to change the equation. Can improved routing for outbound delivery decrease the equipment requirement without hiking costs or degrading service? Can deliveries be made at other times of the day or night? Can you entice customers to take larger quantities and fill the trailers when you make shipments? In combination, these strategies may bring surprising benefits.

Another concept along these lines is to pick up inbound product using outbound equipment that is ready to return. Every bit of the product that is shipped out is shipped in as well. Picking up inbound shipments with equipment under your control (your fleet or your contract carriers) improves control of product flow, has the potential to reduce inbound delays, eliminates “dead head” travel, and improves equipment usage.

TAP INTO CHANGE

Now that the problem of product flow has been addressed and numerous solutions proposed, it’s only fair to close with a warning. While the strategies and solutions offered above are valid and proven, they are not permanent fixes. Markets, vendors, products, and especially customers change constantly. A brief review of the factors highlighted in this article will make it clear that each of these elements will also change the fit between new demand and current product flow. Enhancing product flow needs to be part of the world of continuous improvement, not the world of the fixed solution.

May good flow (analysis) be with you always.

Ron Hounsell is vice president of software solutions at distribution consulting firm Tom Zosel Associates in Long Grove, IL. He can be reached at (847) 540-6543 or rhounsell@tzaconsulting.com.

Fig. 3 Sized to Fit

Slotting requirements for repack product (total items = 34,759)

BINS/SHELVING CASE FLOW RACK
Cube/year 0 to <=6.4 6.4 to <=19.2 >19.2 to <=480 480 to 5,000 5,000 to 10,000 >10,000
Total cube movement 33,030.3 50,755.3 377,592.7 229,386.2 68,394.0 10,375.0
Estimated bin shelves 10,355.7 3,166.5
Average items/bay 12.1 7.1 27.0 4.0 4.0 2.0
Estimated bays 2,097.0 635.0 177.6 543.0 2.8 0.5
Accumulated bays 2,097.0 2,714.0 177.6 543.0 57.0 57.5

Associating products with size ranges that equate to different storage fixtures will result in a high correlation between storage slot size and the number of items best suited to that category of slot (figure 3).