Building another warehouse would not have solved Greg Petro's challenge. Improving processes and systems in the existing facility allowed the director of distribution and facilities with Lenox Inc., a producer of fine china and kitchenware, to handle 17% more volume with 5% less labor. In the process, the direct-toconsumer shipper improved productivity more than 23%.
"Lenox is growing at such a great rate we knew we could not continue to handle our holiday season requirements," confesses Petro. He turned to consulting firm Sedlak to formulate a solution for his company's specific needs. "Sedlak worked with us through design and vendor selection so we could implement on our own with their guidance," states Petro.
In the former manual environment, Lenox could only support 2,100 SKUs in separate, disconnected pick areas serving different channels. "We had to manually combine orders that crossed channels," Petro explains. "Before implementation, it took two shifts to ship 28,000 packages daily during peak time. Now we can accommodate all 4,500 SKUs and all channels. We can process 35,000 packages daily with just one shift."
Lenox's new process includes a warehouse management system and a highly automated conveyor to move orders automatically throughout the facility. "We scan bar codes that signal diverters on the conveyor system to send orders to appropriate pick zones, including specialized areas such as gift wrapping," Petro says.
Fifty percent of Lenox's active warehouse is dedicated to pick/pack/ship activities. Fast moving products are replenished from an off-site facility six miles away. With high-bay, narrow-aisle storage, the off-site facility is much lower cost than the active warehouse.
Although the payback was obvious, Lenox's highest priority was continuing to support business growth. "We knew we would not be successful if we didn't improve ," admits Petro. "We were shipping 75% of orders next day. Now, even in peak season, we ship 95% to 99% of orders same day."
Analyzing a client's needs and priorities is a first step for Patrick Sedlak, vice president with Sedlak. He separates the work into distribution processes over time. "Measure what you need to do within the facility and map it against capacity," he directs. "If you need to handle 10,000 pallets and the facility only holds 7,000, look at alternative concepts. How can you gain capacity or the ability to flow merchandise through the facility to alleviate peaks?"
"Look at the entire business as you search for solutions," suggests Terry Harris, managing partner with supply chain consulting firm Chicago Consulting. "If you do something in one area, it affects other areas."
As he designs supply chains for large companies, Harris' focus is on procurement, warehouse networks, inventory management, transportation, warehouse operations and customer service. "All these components interact, and each affects warehouse capacity," he notes.
Ken Ackerman, president of consulting firm K.B. Ackerman Co., finds, in most cases, the full warehouse problem lies with the operator, not the building. "Few people know when their warehouse is full. In most operations, you can create a formula to reveal the percentage of space used in the warehouse," he says.
Ackerman suggests using a cubing and weighing system, such as Cubiscan from Quantronix Inc., to find the displacement cube of each product. Deduct displacement from gross cubic feet of the warehouse. Including aisles, staging area and other empty space, Ackerman suggests the warehouse may be full at 31% of cube.
If warehouse overload is affecting your ability to serve customers, consider the following suggestions from the pros:
One obvious way to free up warehouse space is to reduce the amount of inventory or improve the way it flows through the facility. "Time the receipt of goods closer to the time of use," Sedlak says.
"And look at procurement practices," urges Harris. "If you buy six months' worth of inventory, you need x amount of space. If you supply from your own plant and have flexibility, there may be no cost difference to place smaller, more frequent orders. On the other hand, the lower the value of the material stored, the more important it is to use economical transportation."
Kuehne & Nagel, a third-party logistics provider (3PL).
"What you stock influences warehouse capacity," says Harris. "You can increase capacity in a regional warehouse by stocking more SKUs in a central warehouse. In fact, keeping the expensive items upstream avoids dispersing expensive inventory."
Warehouse capacity is affected by the territory served. "Fewer warehouses mean less capacity available at a single warehouse. Conversely, you can add capacity by diminishing territory served," notes Harris.
Warehouse operation depends on mechanization, methods of processing and storage utilization — the way in which cube is used.
"You can get more productivity out of the same number of hours using technology solutions such as voice recognition and carousels," Sedlak suggests. Voice recognition frees the hands to pick and move product, helping to improve productivity and accuracy.
A company's warehouse productivity can also be affected by the warehouse management system (WMS) it uses, adds Stevens. Does it allow you to crossdock? Can you see incoming product and move it directly to outgoing orders? Does the WMS allow you to consolidate inventory, manage velocity of product and place product based on velocity? Can your WMS locate empty space in the warehouse?
Ackerman collaborated with another consultant to use hidden empty space in the client's warehouse. They deliberately buried product they knew would not be needed for a while, putting live goods in front of it. This option presupposes that you have an excellent information system for when you need to uncover the hidden product.
There are two different capacity issues — time and space, according to Harris. He asks, "Can you improve throughput in terms of orders or pounds processed per day? Do you have the space needed to store things? You have to receive inventory and put it somewhere as well as be able to process orders. Processing can be manual or mechanized. Investment in capital projects most likely will save on labor costs."
Ackerman advocates improving space utilization by switching to narrow-aisle storage. "To retrieve goods, use expensive turret trucks or much simpler articulated trucks that bend in the middle," he suggests.
Many facilities waste cube with racking that isn't high enough. "The simplest solution is taller uprights," says Ackerman. Or add mezzanines. "If you buy from a rack company, you can erect them just like pallet racks so it's not a major construction expense. We like racking systems over dock doors or bridging aisles," he adds.
Add hours or shifts
If you still can't meet customer demand, increase throughput by increasing hours of operation. "The more you use the warehouse, the greater the capacity to move freight through it," notes Ackerman. "It's a relatively cheap way to add capacity without adding capital investment."
Sedlak mentions the downside to putting more days on the calendar. "It puts pressure on management to support the seven-day week. Especially in seasonal businesses, you have to carry that extended management all year."
When Kuehne & Nagel gets a new client, engineers look at product and current use, says Stevens. "We also look at how we can continuously improve in process flow and storage methods. Are high-velocity products close to the ground for easy picking and close to outbound for order processing?" she asks.
"Avoid big open spaces," suggests Stevens. "If you have all pallet racks but not all goods are on full pallets, you're wasting space. Use different types of racking."
"If you can't stack freestanding product very high because the packaging isn't strong enough, look at the payback to using stronger packaging," adds Ackerman.
Clear the dock
The usual pinch point in a warehouse is the dock area, claims Ackerman. "The easiest, cheapest solution is running totally scheduled docks. Every truck has to have an appointment. It creates a predictable situation," he notes.
Ackerman suggests drop-and-hook as a simple solution for truckload deliveries. "Every inbound trailer is dropped in the yard. Use a jockey truck to bring the trailer to the dock to unload, then return it to the yard," he explains.
Instead of reserving a large block of space for staging, Ackerman believes companies could do more live loading. "The idea of putting it down and checking before loading is unnecessary if you can scan it," he states. "One client was performing unnecessary staging and checking. They were shipping across the street. If there were an error, it wouldn't significantly hurt the customer."
Using a third-party provider can be a critical component of the logistics solution. However, Sedlak cautions, "Do not outsource something you don't understand. Go through the analysis so you can explain your needs, educate providers on the mechanics and incorporate needed reporting processes."
Chicago Consulting www.chicago-consulting.com