This two-part series presents scores of ideas to help furniture retailers improve facilities, processes and warehouse metrics.
I have seen it all when it comes to warehouses. The pristine, state-of-the-art purpose-built facilities. The chopped-up back rooms that remind me of Frankenstein's laboratory. Also, expansive underground caverns and dark containers jammed-packed storing who knows what with various creatures taking nest amongst the contents.
It seems like in this industry, companies for the most part will put up with their warehouse until they burst their seams. When they get to that point, usually when their business is doing well, they start to consider warehousing as a necessary part of doing business. Many furniture store owners believe that warehouses are costly storage spaces that eat away at profits and cash flow.
Not A Storage Facility
The notion that a DC (distribution center) simply costs a business is invalid. Done right, a warehouse is a place where merchandise passes through, and value is added to products and services. A warehouse is NOT intended for storage. It is a temporary facility, the purpose of which is to fulfill promises made by sales teams to customers. Without adequate warehousing, sales potential cannot be achieved.
Appropriate physical warehouse spaces and modern equipment add value, but focus must also be placed on warehouse processes and procedures. Inefficiencies, lack of coordination and poor training certainly diminish value.
“The theory of constraints is intended to help managers identify a constraint that causes work to pile up, solve problems, and enable the smother flow of value-added activities."
And, one size does not fit all when it comes to warehouses. I've seen one-level underground warehouses with millions of square feet of temperature consistent, pristine affordable space and effective docks. Depending on the situation, I might select this type of warehouse over a four-wall, costly vertical box type facility
Effectiveness & Efficiency
DCs need to be both effective and efficient. Efficiency means doing things right. Effectiveness means doing the right things at the right times. An operation might accurately receive merchandise, but at the same time take five times as long as a top performing retailer to receive, due to flawed processes. Conversely, an operation may be the fastest at onloading a container, but cause frequent damages and quantity errors.
Below are several ways warehouse operations either add or take away value.
Physical Elements That Add Value
Ample Space. Provide room and designated areas for receiving, advanced picking, inspection and preparation, plus merchandise outbound staging.
Racking. Facilities should be the maximum height allowable by local code. Air is cheap. Ground is pricey.
Layout. Design to minimize merchandise movement and time to pick.
Aisle structure. Incorporate a logical numbering sequence to minimize time for put-away and pick. Designated areas should be provided for the cross-docking of customer receiving, merchandise returns, new item store transfers, and back-up stock according to best seller ranking and turns.
Number of docks. The number of dedicated docks must be adequate for receiving freight, outgoing delivery trucks, customer pick up and trash removal... all at dock height.
Trucks. Trucks must have the ability and be reliable enough to allow for an eight to 10 hour workday per full truck.
Moving Equipment. These include pickers and purpose-built rolling carts to move merchandise efficiently.
Physical Elements That Remove Value
Ground level doors. These reduce value by requiring the repeated lifting of merchandise, damages, and excess time.
Lack of picking & prep space. This always creates a chaotic environment where the work flow is difficult to control.
Inadequate racks. These can lead to location errors, damages, and increased labor time. Usually the cheapest space is up, and poor use of vertical space adds cost.
Containers or overflow storage facilities. A make-shift solution causing difficult-to-find products, time inefficiency, added rent cost, increased likelihood of theft, and damages.
Value-Added Processes
The name of the game with process execution is to be in control of the work, as opposed to the work controlling the tasks being performed. Examples of standard processes to control work include:
Vendor scheduling. Incoming freight must be scheduled. All POs and items expected to be received must be known. This saves time and enables proper scheduling of human and equipment resources.
Pre-receiving. Bar code labels should be pre-printed and sorted. Expected merchandise should be categorized by type of stocking merchandise, customer cross dock merchandise, and display goods. This enables a better plan for put-away
Receiving. Label and scan as the merchandise is unloaded. Use packing slips if the label must be moved.
Put-away. Locate merchandise in the aisle that makes the most sense for faster future picking and minimal internal DC movement. Customer cross docking sales can be located together so orders are already grouped, and near the prep area. Fast turning best sellers that also sell together should be located together and positioned in easy-access aisle positions. Slower turning items can be located higher and further out in the DC. Showroom transfer can be in a designated area to speed the process of floor moves. All merchandise should be scanned with its exact location and with the label facing out.
Picking. Picking order (paper or digital RF scanner) should be initiated at a specific cut-off time and organized by aisle. Merchandise must be picked by location and scanned to delivery preparation areas. Either pick by order or batch-pick by line methods depending on which is quicker. Picking by order, picks one sale at a time. Batch picking by line, picks multiple sales at a time.
Delivery preparation. Once delivery receipts are generated, outgoing freight must be grouped by customer and stop, inspected, and detailed where necessary. Merchandise should be held in a location corresponding to the outgoing truck number.
Loading. After the delivery manager signs off on merchandise being loaded onto trucks, delivery crews load their own trucks in reverse stop order, usually at the end of each day, for the following day's deliveries.
Delivery. Follow delivery routing as dictated by your GPS routing system. All merchandise must be placed and set-up, trash removed, product pictures and surveys taken, and customers' sign-off finalized. Any issues should be noted.
Pick-ups. These should be scheduled so that the warehouse can pull merchandise in time for the customer's arrival, and reduce daily interruptions.
Transfers. Times, days and cutoffs should be established for work scheduling.
Reverse Logistics. Returns are placed in an inspection area within the DC for the service manager to inspect every day.
Cycle inventories. Cycle inventories should be done routinely during downtime and directed by the accounting department so they can be randomized. Exceptions representing process or scanning errors should be less than one percent.
"Waste most commonly occurs when poor processes cause interruptions. For example, if an employee is busy picking product for deliveries, and is interrupted."
Processes That Take Away Value
Labels. Printing labels after merchandise arrives is a poor practice, causing merchandise to sit around on the receiving dock for longer periods.
Scheduling. Allowing truckload freight to just show up sabotages resource planning and worker productivity. The last-minute scheduling of deliveries, transfers and pickups after cutoff times has the same effect.
Scanning. Not scanning to a picking location causes cycle inventory discrepancies and increases the chance of a wrong item being picked. No matter what the size of a warehouse, not scanning to rack locations makes coordinated picking impossible.
Routing. Manual, non-GPS, routing wastes gas, labor time, and slows turns.
Inventory. Lack of scanned cycle inventories causes problems to go unresolved as well as inventory imbalances.
"There are three types of products in a warehouse that are the least wasteful: customer inventory that is scheduled, best seller backup inventory, and new floor merchandise that is scheduled for transfer."
Necessary Technologies
• Bar coding labeling and scanning.
• GPS delivery routing.
• Merchandise management systems.
• Monitors to display incoming freight, picking notifications, customer pick up notification, customer surveys, warehouse performance metrics, radios and headsets for hands-free communications, online customer issue forms.
Warehouse Waste
The acronym, TIMWOOD, is commonly used to highlight waste areas. Here I apply it to the common types of retail distribution waste:
Transportation. They say that time is money... and it's true! The longer merchandise takes to arrive, and the longer it spends in a DC, the greater the cost. Also, the more time warehouse employees spend moving around products, the more employee labor hours are incurred to the cost of product distribution.
Inventory. There are three types of products in a warehouse that are the least wasteful: customer inventory that is scheduled, best seller backup inventory, and new floor merchandise that is scheduled for transfer. Other inventory, either unscheduled customer sales, overstock of non-best sellers, undisplayed inventory, and damaged goods, are costly in terms of dollars invested, labor and space.
Motion. Employees doing the wrong work at the wrong time is wasteful. This most commonly occurs when poor processes cause interruptions. For example, if an employee is busy picking product for deliveries, and is interrupted by a manager who asks him or her to receive unscheduled freight, both tasks are less likely to be concluded less efficiently.
Waiting. Idle time equals lost dollars. Consistent flow and good management of employee work-flow creates less idle time. It is much better to work at the same pace than to be rushed or sit around. A group of value added daily tasks should be specified to fill down time. These might be facility and equipment maintenance, customer follow up calls, cleaning, cycle inventories, and ongoing training.
Over inventory. A warehouse is not meant for long-term storage. It is a pass through temporary facility that should add value, enable distribution and increase the ability to sell more. Carrying too much inventory causes cash flow shortages, slower turns, and decreases the ability to maximize sales volume.
Over processing. Doing too much of a particular task or having too many resources assigned is wasteful. For instance, performing daily cycle inventories on the same aisles with consistent perfect results is overkill.
Defects and damages. Vendor defects and internal product damage costs time and money. It is important to track how often defects and damages occur, also where and why they occur. The first step to eliminate waste is to find it, track and eliminate it. Here are some concepts to consider to counteract waste, and add value to warehousing, distribution and operations:
Concepts To Consider
LEAN Operations: LEAN is the practice of continually looking for, and reducing non-value added activities and resources. It can be applied to product, processes and people. By eliminating things that take away value, additional value-added resources to propel the operation forward are added.
80/20 Rule: This rule states that on average, a minority of inputs produce the majority of outputs. Or, on average 80 percent of results come from 20 percent of resources. For example, most sales come from a minority of items. Most problems are caused by a small number of product items or people.
Kanban: This is Japanese for “signaling” work. It is the practice of controlling work-flow, instead of letting the work control you. Controlling chaos in a retail operation requires a specific “signal” to begin a job or function.
Kaizen: Also Japanese, Kaizen means change for the better. It is a practice of continually looking at business operations, finding challenges and opportunities, and executing actions to improve. The performance groups and consultations I enable are all based on the practice of Kaizen.
TOC: The Theory of Constraints was created by Eliyahu Goldratt. It describes how work can only flow at the speed that the constraining element can handle. All operations have a constraint that can cause work to pile up. This constraint may be a strong or weak employee or process. For instance, an excellent worker who accepts more work than she can handle may eventually become unproductive and slow down the entire operation. Or the constraint might be a weak process that causes things to grind to a standstill. Regardless, TOC is intended to help managers identify a constraint, solve problems and enable the smother flow of value-added activities.
5S: This is another LEAN concept that has its roots in Japan. Translated into English LEAN includes:
• Sort – Review waste, messy areas, and unproductive spots. Divide everything into three parts: keep, move or return, trash.
• Set – Put everything in its proper place.
• Shine – Make the area beautiful.
• Standardize – Put processes in place to keep things organized and beautiful.
• Sustain – Constantly review what is working and what is not. Commit to ongoing education and process improvement.
Next Issue: If you want to improve something, step one is to measure it. In the September/October issue of Furniture World we will introduce suggested metrics to help retailers improve warehouse and distribution management.