Posts Tagged ‘WMS’

A recent post by Brian Neufeld of Insight Works, a manufacturing and warehouse management supplier of software add-ins for Microsoft Dynamics points out a few of the key areas where companies lose money due to inaccurate inventory – points we think worth passing along today.

One key area of waste involves, of course, the tying up of working capital.  Inaccurate counts create situations where purchasers buy more inventory than they need, tying up precious capital.  How often is it the case that misplaced inventory, or double-locations, cause confusion and increased costs?  Having 100 of something when you only need 50 is simply wasteful – but unless you know just how many you have of an item, and its precise location, it’s a mistake that’s all too easy to make.

Multiplied across enough items, in the end you’re reducing the amount of capital available for more important uses, basically a lost opportunity cost.

And then there’s inventory shrink.  According to the National Retail Federation, 1.44% of all sales are lost to inventory shrink.   Shrink does not only refer to theft and damage, but can also be a byproduct of bad counts and other tracking inaccuracies.

And then there are labor costs.  A lot of time gets lost chasing down items that aren’t there… or aren’t where a system says they are.  That lost time is compounded when others have to join the search.  And it doesn’t have to happen all the time to add up to a fair amount of lost labor efficiency chasing product.

Then there’s the cost of lost customers due to the inability to fulfill customer orders or meet their time demands, often caused by out-of-stock situations.

All these issues and more can be turned around by embracing the benefits of warehouse and inventory automation.  Paper-based systems are error-prone, labor-intensive and time-consuming.  Today’s digital solutions, consisting of software integrated with the company’s inventory, production and sales orders, and coupled with commonly available handheld bar code scanners, can make these mistakes and costly issues a thing of the past.



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mobility whseAn article from Ziff-Davis titled Big Data, Mobility, and Green IT: Innovations for Manufacturers and Distributors makes a couple good points about the value of extending your ERP system into the warehouse to create more accurate and real-time data throughout the supply chain.

In a typical warehouse we often find that most employees perform their tasks away from computer terminals.  Often, they use written instructions of data initially transcribed on paper, more often than not at the end of a day, to input data into the system.  This creates some obvious, often costly inefficiencies, like user errors and double-entry of data.  But more importantly, it can lead to decisions being made by other users that are already stale, decisions that might have been different on the purchasing and production side if current data had been available.

Today’s newer mobility technologies introduce opportunities to improve the tracking and collection of real-time, accurate data throughout the supply chain. For example, a receiving clerk can complete an ERP-integrated inspection form during actual inspection, triggering a real-time update of relevant inventory processes and records.

But mobility can have an even more subtle effect: it can help companies protect their margins through more effective costing procedures.  As Jonathan Gross of Pemeco Consulting points out, “Many manufacturers and distributors determine product pricing by applying a margin to the sum of a standard labor cost and inventory costs. The problem, of course, is that standard labor costs seldom reflect the actual value of work effort. As a result, actual margins seldom reflect intended margins. Mobile labor tracking technologies allow businesses to capture actual labor costs and improve margins.”

As well, mobile technologies can improve overall warehouse and materials management processes.  As we’ve often pointed out in the past, barcoding and RFID technologies help greatly when it comes to minimizing warehouse errors, improving order fill rates, speeding up delivery, and improving overall picking, packing and put-away.  The fact that mobile units (handhelds, or more recently, tablets like an iPad or similar device) can be used to track inventory movements allows inventory to become “real-time.” This results in better integration of the warehouse into the overall operation, and improves its visibility within the ERP system.  This kind of feedback can even have a downstream effect on JIT (just in time) improvements as well as planning, purchasing and scheduling activities.

All in all, any company with a warehouse should be investigating what today’s newer ERP systems have to offer in terms of mobile functionality.  It’s a hot area, and for good reason: it saves companies time, mistakes and money.


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3plThird-party Logistics providers (or 3PLs) have special warehouse management needs, above and beyond those of, say, the manufacturer that distributes its own products, as pointed out recently in a white paper by WMS publisher Accellos.  That’s worth remembering, the article states, when a third party logistics provider that’s looking for warehouse management software hears it biggest customer suggest they simply use what the they’re using.  Accellos’ conclusion: a 3PL’s special needs warrant looking at a product designed specifically for their logistics niche.  As a result, they highlighted Five Business Drivers a 3PL should consider when evaluating warehouse management systems for their own purposes…

  1. Inventory Integrity – To a 3PL nothing is more important than properly assigning, tracking and managing their clients’ respective inventories.  It’s even more daunting when multiple clients’ inventory share the same building.  The ability to concatenate (or ‘join’) overlapping identifiers such as item codes or pallet codes with a client ID to provide a truly unique identifier should be considered.
  2. Customer Service Enablement – A system built for the multi-client environment of a 3PL must ensure client access to their information only.  So in addition to providing real-time information on inventory, you can provide individualized client self-service features too, like custom alerts or exception reporting.
  3. Concurrent Client Logistics – This means being able to manage multiple clients within a single building, utilizing shared resources while maintaining inventory integrity and data security for each 3PL client’s workflow.
  4. Revenue Assurance – Tracking revenue producing activities from client to client, with different standards and actions, can be complex.  Clients often want to be billed in different ways for differing actions or rules.  A system dedicated to the needs of a 3PL can handle these requirements by tracking the right revenue producing actions, client by client.
  5. Beyond the Four Walls – Items outside the building should also be taken into account, like transportation and supplier management.  If you overpay to move goods in and out of the facility, your internal cost efficiencies can be compromised.  Improvement requires the management of routing rules for multiple clients that may not be included in a standard WMS package.

The takeaway for 3PLs is the need for a careful needs analysis, taking into account all the factors that make your distribution center and policies unique.  One size does not fit all, would seem to be Accellos’ overarching point, and a “purpose-built” WMS may be the better solution for the full-service 3PL.

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leading_laggingAPICS Magazine recently published an article titled “A Failure to Communicate” by Ron Crabtree, an author of five books on operational excellence.  In it, Crabtree points out a variety of both leading and trailing indicators that, when analyzed correctly and acted upon, can yield considerable improvements in a company’s fulfillment performance out of the warehouse.  The points and conclusions we’ve drawn from his article are worth sharing… and will, we believe, be of value to anyone seeking to improve warehouse performance.

In the article, the author breaks down a variety of common performance metrics used in warehousing and distribution operations.  Most warehouse performance indicators tend to be of the “trailing” nature.  That is, they reflect, usually from a financial performance perspective, what has already happened in the warehouse.  Trailing indicators include:

  • Hours worked (and hours worked per unit)
  • Invoice lines shipped per hour
  • Parts and Labor cost per line

But what if you could use your trailing (or financial) indicators as a springboard to improving warehouse performance by analyzing key “leading” indicators?  These would be the data you need to improve future performance.

Crabtree relates the experience of a retail-level consumer goods fulfillment center that was using cost per line shipped and percentage of returns as its key metrics of financial success.  But returns were unacceptably high, and a quick analysis determined this was the result of the wrong items being shipped in the first place.  This resulted in still greater costs being incurred because the company was performing a 100% audit on outbound containers to seek out the problem’s source.

Crabtree’s consultants decided to examine the underlying causes, which turned out to revolve around issues with the handheld units and location labeling.  It turned out that the warehouse was handling 25,000 different items, about double what it was sized to do.  As a result, goods were crammed into every nook and cranny.  Partly due to the excess in items stocked, bar code labeling had deteriorated over time, and upon review it was determined that handhelds were failing far too often.  The combination was stressing the system to the point of having financial (i.e., “trailing indicator”) impact on the company.

But by looking at the more “leading” indicators (such as handheld reliability, location accuracy, and quantity on hand accuracy), the team could find the root causes and begin to identify solutions.  In this case, those turned out to include creating baseline measurements for scanners by utilizing some trusted quality measures — taught by APICS — including TPM (total productive maintenance) and OEE (overall equipment effectiveness) principles.

By instituting rolling audits of unreadable locations, and a maintenance strategy based on a well-known quality and lean tool known as the Five Ss, the company brought their warehouse issues under control, resulting in a 20% reduction in cost per order line (a financial, or “trailing” indicator) and a 75% drop in wrong items shipped – needless to say, a huge money saver overall.

By utilizing these TPM and OEE indicators, “a meaningful set of metrics that directly attached the root causes for bad picking” was created, notes Crabtree.  This in turn improved workforce morale and accountability, and as the metrics went down, it served as an early warning that cost and accuracy issues were looming.

Hence, by identifying and acting upon the key “leading” indicators, the financial (“trailing”) indicators were brought into line, to the improvement of not just the warehouse’s lot, but the company’s financials as a whole.


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Directed putaway in a warehouse refers to the placement of items into storage locations based on direction, or ‘rules’, offered by warehouse management software.  Shelf locations can be advantageously directed this way to improve warehouse efficiency and labor savings in areas like shipment throughput velocity, returns processing or warranty repair.

By using business rules (or a warehouse management system that is ‘modifiable’), directed putaway can eliminate much of the guesswork on the part of a warehouse staffer, and shorten the time it takes to get new staff up to speed in the warehouse, since they don’t have to learn complicated location putaway schemes.  The system can direct putaway to bins optimally located for, say, a kitting process required before final shipping – requiring that like items be grouped together for example.

One corollary to directed putaway that we’ve found useful (we utilize this in our own WMS package, called E-Z WMS) is a form of bin reservation, whereby a user stocking shelves is directed via a handheld device that only product “X” can be placed in bin “123”.  This can be especially useful in environments that store small but expensive components, or where precise location is important for other company-determined reasons.

Sometimes, the packaging and storing requirements for a product will determine a directed putaway.  Other times, special handling requirements (e.g., refrigeration) can determine storage locations.  In lumber, putaway can be determined by species, lengths, assembly sequence or other common criteria – with the software either directing, or providing guidance to, the warehouse worker.

In the end, such models can create greater warehouse efficiencies, provide better use of critical warehouse space, create a more optimal order-filling process, and better support “mixes” of order types or special handling needs.

Using product putaway rules can often take what was a complex manual process and begin inserting some computer based logic into the system, based on your unique product, category or packaging requirements.  With primary and secondary rules, you can begin to build into your WMS a level of intelligence that lets your whole floor team do more with less – less labor, fewer steps, lower costs.  Best of all, since rules are often made to be broken, you can determine which rules to follow and when, and then build these contingencies into your system over time – provided that system is highly rules based, or allows for future modifications.

The facility for some form of directed putaway (or modification to allow it) is yet another key consideration in the management of today’s warehouse, and in the selection of the best warehouse management system for your firm’s unique requirements.


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In our prior two posts (here and here), we looked at three of the five “drivers of complexity” noted in a recent white paper from Accellos, Inc. (www.accellos.com), providers of warehouse management solutions.  We looked at how “customer compliance,” “new channels,” and “new product introductions” can cause new challenges for warehouse managers.  Today, we’ll look at the last two cited in their report.

The fourth driver was defined as Value Added Warehousing.  This is where you may do some light kitting or manufacturing… or some specialized repackaging requested by your customer (or their customer)… it may involve inspection or quality testing… or special item tagging chores.  In all cases, you need to optimize your warehouse workflow to accommodate the staging or execution of these kinds of steps.  Your route steps and your WMS software need to be able to understand, accommodate, and where possible give visibility over this kind of process flow.  And your warehouse layout and staff have to be organized and arranged in support of that workflow.

The Accellos report then lists as its fifth complexity driver an interesting one that is becoming increasingly relevant in today’s environment of elevated fuel prices and increasing shipping costs.  It’s what they’ve termed Fuel-Optimized Supply Chain.

The report cites expert calculations that show that each $10 increase in the cost of a barrel of oil translates into a 4 cent per mile increase in transport costs.  The implication is that thought must be given to pooling inventory in fewer locations…  and to placing inventory (or warehouses) closer to customer locations (and if you think the trend of increasing fuel prices will continue, then this means you).

Managing multiple warehouses, instead of one, nearly demands a warehouse management system (WMS).  WMS provides common, optimized processes across warehouses.  It provides greater (and real-time) visibility into product location and order status, when properly integrated with your ERP system.  (And properly is the operative word there.)

Finally, the report notes that technology exists today to optimize order grouping as well as shipment routings.

In summary, the report highlights the importance of companies being forward-looking and proactive about managing the coming challenges posed by their customers, their suppliers and their transport requirements.

Warehouse management systems today are, much like ERP systems, an investment in the future well-being – and growth! – of your company.  They are no longer the domain solely of the large business, and increasingly they are becoming a necessity in some form, even for the smaller distribution and warehousing operation.  Not to mention, a necessary competitive factor, and often, a crucial competitive advantage.

Do you have questions about managing your warehouse or supply chain?  We invite your inquiry.  Meanwhile, we hope our synopsis of one firm’s findings about the changing landscape in WMS has been helpful to you in your own warehouse and business planning.

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In our first post, we looked at one of five “drivers of complexity” noted in a recent white paper from Accellos, Inc. (www.accellos.com), providers of warehouse management solutions.  We looked at how “customer compliance” can cause new challenges for warehouse managers.

The second driver cited in the report driving warehouse complexity is New Channels.  As a provider of products, your channels may vary, each sometimes requiring its own distribution model and corresponding strategy.  Wholesalers and distributors for example require the ability to handle truckloads of pallets with little paperwork or compliance labeling.  Shipping to retailers can be significantly more complicated, with custom pallet configurations, labels, unique packaging characteristics, and so on.  Your picking strategies and warehouse layout need to be supportive of these unique handling characteristics.  And your software must support them too.  Picking, staging and loading are especially important in retail fulfillment.

Other channels include direct to consumer, requiring the handling of small quantities, few line items, parcel container shipping via USPS or UPS, and rapid handling of a large number of small orders.  Your warehouse must be conducive to picking lots of “each” quantities.  Staff will often need to be concentrated into smaller pick “areas.”  The ability to do real-time shipping-rate selection as an integrated part of your system is useful.  And, you’ll need a process that supports stuffing of ancillary materials into each shipment.

Other channels the report cites include spare parts and consignment customers.  Here again, each has its own demand patterns, ownership (of inventory) characteristics, and space/layout demands in your warehouse.

A third driver cited is a New Product Introduction.  How do you ensure you’ll be able to meet demand… allocate the right (not too much, not too little) warehouse space, and properly handle returns, warranty work, etc.?

Practices cited for dealing with new products in your distribution center include:

– Close collaboration with the marketing team – not usually responsible for managing inventory levels – on expected inventory, and the corresponding implications on warehouse space planning and effective order movement.

– Obtaining weight and size (dimension) information early in the process, so cartons can be properly sized and optimized, and shipping methods evaluated.  It may seem obvious, but it’s easy to forget – until it’s time to deliver.

– Don’t let poor selling new products take up valuable space for too long in your warehouse.  Excess inventory clogs warehouse space and can limit movement and ability to expedite.

Next up, we’ll look at the report’s final two complexity drivers, and what to do about them.

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