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Improving Warehouse Efficiency: Let’s Get Back to Basics
September 5, 2019 6 min read
As the logistics market accelerates its expansion, warehouses are keeping up with the pace, which is why warehouse efficiency becomes the number one priority. Business Insider has unveiled the Technavio stats forecasting the warehousing and storage market will witness a 6% global increase from 2018 to 2022. 44% of the predicted rise is expected to take place in the APAC region. Here is how Technavio sees the upcoming change.
That said, warehouse space will be extremely sought after. The news by Material Handling & Logistics says e-commerce operators alone will need “three times more space than traditional warehouse users due to greater diversity in products handled and the need to have them immediately accessible.”
This trend requires warehouses to optimize everything from warehouse layouts and implementation of advanced warehouse management systems to labor KPIs. What are the foundations for warehousing efficiency? Explore our suggestions below.
Warehouse Layout and Space Usage
First comes a well-weighed plan. Mapping warehouse efficiency comprises inside and outside warehouse layout planning, i.e. there should be no trouble with parking trucks, otherwise (off-) loading time will decline while operating costs will jump. The same goes for receiving of goods. The area must be clutter-free. Each product delivered should be inspected and put into its slot within the shortest time possible.
To reduce this hassle, many consultants advise sticking to the FAST approach. It comprises flow, accessibility, space, and throughput.
Flow is perfect when products, people, and traffic move uninterruptedly. By minimizing cross flows, reducing hands-on, and making each workstation supplied with the necessary materials, you can achieve this goal.
Accessibility is what enables you to build quick-pick areas. It is a prime concern for the warehouse with hundreds of goods with varied shelf life. When each product is accessed with the minimum effort made, the workforce and machinery navigate the warehouse without much disturbance. By arranging pallet racks in wide rows and stocking items with regard to their velocity, the interference can be significantly lowered.
I-Shaped Warehouse Construction
U-Shaped Warehouse Construction
Space is central in the FAST model. The smooth flow of goods and workforce productivity are highly dependent on them. Each detail needs considering and racking type is no exception. Thus, for a huge quantity of similar goods, a drive-through racking is a good choice. It allows loading packages from one side and taking them off from another one. If you ship a wide number of orders like candies or small parts, carton flow racking may be an option. Then shelves are loaded from the backside to the front for faster order picking. This racking type reduces labor time and floor space usage by being simple-to-rearrange and safer for products.
Using modular constructions and empty pallets, vertical racks and freestanding machinery maximizes warehouse layout efficiency and boosts its adaptability. Whenever a change occurs, reorganizing warehouse space is made painless.
Throughput is about goods flow from arrival to departure time. In warehouse efficiency planning, it is crucial to foresee how the flow changes during peak or low seasons and build a warehouse with peak demands in mind.
Here is how an optimized warehouse layout may look (the sample below is designed by Go Supply Chain Consulting).
Once a warehouse efficiency scheme is in place, test it in close-to-reality conditions. This is when it makes sense to implement a robust warehouse management software (WMS). WMSs can assist with order sequence and floating locations management, to say nothing of ongoing inventory control.
Real-Time Inventory Monitoring
When it comes to accurate inventory management, there are some errors you can’t prevent. However, it is possible to lessen the risk by sticking to the right KPIs. They give valuable insights into the effect of business operations and prompt you about what improvements should be made.
Although KPIs vary from one warehouse to another, three of them are widely used:
Days to sell inventory. Simply put, it is the time taken to convert inventory into sales. The formula for calculating it is as follows: (average inventory/cost of sales) x 365 for a year and 90 for a quarter.
Out-of-stocks. Running out of goods is a clear sign you need to enhance inventory monitoring and automate the entire inventory count cycle reducing error-prone manual work.
Return rates. Tracing the rate of goods returned along with the reasons leading to then point out the bottlenecks in the supply chain. These metrics are essential for the prevention of future returns and remaining within budget.
Setting correct KPIs is essential, but they may be of no use if you keep receiving outdated information on the inventory available. Businesses today should rely heavily on robust technology solutions to thrive and win in tough competitions. This is why an inventory management module is a must for any warehouse. It can help improve the fulfillment process, reduce operating costs, and avert frauds. On top of that, the toolkit prevents overstocking, which means extra inventory does not occupy warehouse space which could be used for high-demand goods storage.
In addition to the accurate inventory stock data, inventory management tools can help with:
Sending automatic alerts via email or mobile phones (push notifications or text messages) once sudden changes happen. They may be caused by late merchandise, inaccurate receiving quantity of goods, etc.
Making inventory predictions. This contributes greatly to accurate budget planning. The toolkit makes intelligent forecasts based on the data obtained previously and allows businesses to predict demand levels and arrange inventory management respectively.
Freight tracking is another powerful feature of the inventory management suite; however. this function can also be fulfilled by a transportation management system. When cargo is shipped from abroad, it is important to know the exact arrival time (taking into account difference in time zones) and to monitor its current shipment status.
Insightful analytics. Analytics can serve different purposes. For example, some analytics tools generate fill reports and let manufacturer and warehouse providers see if orders are filled at optimal speed or why fill rates are lower than expected. Some shows the real-time status of items being in or out of stock. Simply put, they enable businesses to stay on track.
Amazon started using a custom-built inventory management system. It is called the Inventory Performance Index. It monitors how well each merchant handles its inventory, removes unsold goods, and updates the listings when required. This way Amazon optimizes warehouse space since the inventory stored for too long decreases the merchant’s score and may impose further storage restrictions for all those with low scores.
The benefits of optimized inventory picking and warehouse slotting overlap because slotting aims to reduce picking and travel times and eliminate hindrances.
Bringing these tactics to life is not straightforward, though. If you put fast lines next to the dispatch, it only causes more congestion. What is the way out?
“…Get all the data about the products, the velocity, the cells, every cell’s activity. Put it in a spreadsheet and start to work through your A items, B items, C items. Do some analysis and data analytics. Then, depending on the number of SKUs, as it gets too complicated, too hard, you’d look to get some software tools to do the slotting. So these tools allow you to optimise the products using some sort of algorithm.”
Supply Chain & Logistics Consultant, in his interview for Logistics Bureau
The tools mentioned by John include a warehouse efficiency management system. The software can plan picking waves and suggest optimized routing by matching quickly moving items to the most suitable slots.
When implemented, it streamlines goods flow and results in more effective manpower management. This approach is called dynamic slotting based entirely on inventory demand. In other words, decisions should be made dynamically: picks placed by-product in one wave.
The WMS helping implement this dynamic approach can be hard to find, which is why businesses may consider building a custom solution to boost warehouse efficiency. If this is the case, get in touch with our supply chain engineers and discuss your current needs. For that, make use of the contact form below.