The following opportunities can be classified as “quick wins” in many but not all organizations.
1. Hold freight and ship on Carrier Service Days
Most LTL carriers run on certain schedules. Shipments departing on Monday may arrive at destination on Wednesday or Thursday. Tuesday shipments may arrive on Thursday or Friday. But freight leaving on Wednesdays, Thursdays and Fridays may not be delivered until Monday. An easy way to save money is to convert from moving daily LTL freight to holding the freight and moving it so that it all arrives on scheduled delivery dates. Learning your carriers’ pick up and arrival schedules is an easy way to save money on freight.
2. Consolidate freight and move larger size shipments
Moving larger shipment sizes will reduce freight costs. There are several ways of doing this. Similar to item 1 above, a shipper can plan to ship to certain locations, only on designated days of the week. Another option is to build multi stop truckload shipments whenever possible, if there are blocks of traffic going to specific areas. If you are a Quebec-based LTL shipper bringing in LTL freight from multiple locations in Ontario, consolidate your shipments in Toronto and then load them as a single shipment from Toronto to the designated area in Quebec.
3. Perform Freight Rate Benchmarking
Every shipper wants to know how their rates compare to market rates. Benchmarking allows you to pinpoint those lanes where specific rates are out of line with market levels and then take corrective action (e.g. find carriers with more competitive rates on those lanes). There are several ways of doing this. The easiest way is to contact a number of carriers and ask them to quote on your business. Truckloadrate.com http://www.truckloadrate.com/) is another option. For the modest amount of $30 per month, truckload shippers can enter origin and destination points and determine market rates and the range (e.g. minimum and maximum) of rates available.
Another more costly option is to conduct a formal benchmarking study. With benchmarking studies, always keep in mind that the market can change quickly. The only way to know precisely what rates your company can obtain in the market on any given day is to conduct a comprehensive RFP.
4. Optimize Loading
No matter which mode of transport one uses, a shipper is paying for the space occupied, the weight and the density of the products shipped. Therefore, it is critical to maximize the space occupied. To excel in this area requires knowledge of several things. It is essential to have a familiarity with all modal options - - multi axle trailers, B-Trains, LCV’s, container capacities, legal weight restrictions by state/province and equipment availabilities.
It also demands an insight into trailer/container loading opportunities. There are logistics trailers within which various sizes of pallets can be loaded. There are false floors that can be used to permit the double stacking of pallets while preventing them from being crushed. A quick win can be achieved by selecting the right type of equipment that permits the optimum type of loading for your company’s freight.
5. Manage Routing Guide Compliance
Every shipper should have some sort of routing guide. The guide should list all of the lanes, the rates charged on each lane and the names of the carriers serving the lanes in rate/service order. But freight management cannot be done on “auto pilot.” This takes time and effort; but it is time very well spent.
Compliance tracking, even if done on an Excel spreadsheet, can highlight a lack of internal discipline (by Traffic Management personnel) and/or a lack of carrier compliance (e.g. load refusals causing your dispatchers to use low ranked or unranked carriers in the routing guide). Preparing and reviewing a weekly tracking report can identify internal or external problems that are resulting in excessive expenditures on freight.
6. Implement Modal Conversions
Many shippers adopt paradigms of thinking based on historical experiences. Some of these paradigms may no longer be valid. On some lanes, intermodal service may be very competitive with truck service. Even if it is a day longer, it may be satisfactory for a particular company’s clients. Periodic market assessments, modal conversions coupled with service level agreements (SLA’s) on some lanes, may produce cost savings.
The above is excerpted from KOM Practice Leader in Transportation Dan Goodwill’s blog http://blogdg.ctl.ca/
April 20th, 2010
The focus in the backroom is to do more with less, and retailers are looking to logical layouts and space-saving strategies and equipment to help accomplish this.
According to industry figures the amount of space devoted to backrooms has steadily declined over the past several decades. In the 1970s backroom storage accounted for about 30% of a store’s square footage, but that amount has dwindled to 15% or less today.
One of the key drivers to this downsizing is just-in-time inventory management. The idea is to minimize the amount of inventory that is held as back-up stock at all points in the supply chain and to increase the frequency of store deliveries. More accurate POS data, allows operators to identify more precisely how many of each product sell each day, and then to order just enough to hold a store over a one- to three-day cycle.
Store friendly deliveries
Another goal of current supply chain thinking is to transfer as much inventory from the delivery truck directly to the sales floor rather than keep stock in the backroom. This approach is aimed at reducing handling costs.
Fifty to 60% of supply chain costs are in the last 100 meters. Traditionally, the backroom was where most of this cost occurs as received orders are broken down, sorted by aisle and then loaded on carts to be taken to the sales floor.
Today, many retailers are pushing backroom activities back into the distribution center. As store orders are picked, pallets are built so that merchandise is arranged by store aisle and merchandise adjacency - known as “store-friendly deliveries.” This strategy involves merchandise pallets that can go directly from the truck to the store’s sales floor, where they are broken down and put on the shelves. The goal is to minimize handling.
Keeping track of the hundreds of variations in store layouts that can exist even within a single chain can be mind-boggling. However, it is possible to prepare store orders at the warehouse so that most pallets are sorted by store aisle.
The trade-off, of course, is extra warehouse labor costs, but retailers still come out ahead. In fact, a “store-friendly delivery” strategy typically increases warehouse labor by 25%, but can also decrease store labor by 33%.
In terms of time this trade-off amounts to a savings of 16 seconds per case handled.
February 9th, 2010
KOM International invites your company to participate in the 2010 Productivity Benchmarking Survey. 2010 marks the 27th year KOM has undertake an annual benchmark survey for grocery retail, wholesale, and foodservice with client companies and others alike. 2010 is also the first year the survey is being extended to manufacturers.
A key benefit of participating in the benchmark survey is that the results can help your management team evaluate operational performance of warehouse facilities as compared to other industry champions; where you excel and where to improve. General survey results are shared with all participants, although individual results remain strictly confidential.
One month of data is required and typically in 2 days over the 4 week period a single resource can collect the data needed to complete the survey.
In addition to general survey results, KOM offers each participant a Confidential Personalized Productivity Report Card that details by facility…
- a grade of your facility by function relative to other participants with similar operating characteristics
- identification of possible areas for improvement
- a benchmark tool to compare previous and future productivity results to monitor progress
The 2010 survey is now ready. For a copy of the file and instructions on how to proceed please contact Denise Beamish (Email: db@komintl.com; Tel: 514-849-4000).
Will you accept KOM’s invitation, and benchmark your warehousing operation this year?
January 26th, 2010
In many North American distribution centers, it is not uncommon to have 30-50%, or higher, direct labor force with a mother tongue other than English. This can lead to difficulties training new associates who may be forced to deal with English language instructions or paperwork. Voice technology offers some benefit in this area by enabling operators to interface with the computer in their own language.
The primary advantage of voice recognition technology, however, is that it leaves a worker’s hands free to perform the intended jobs of driving a pallet jack and selecting orders. In fact in many applications, voice technology eliminates paper from the warehouse. Workers don’t carry around a lot of paper or make mistakes by reading the wrong thing.
The systems are simple. The radio devise is usually worn on a belt. In addition, the worker wears a headset with earphone and microphone. For hygienic reasons, headsets are usually dedicated to specific individual workers. These two components provide a radio link to the warehouse management system (WMS).
Once selections orders have been loaded into the system, a voice prompts the order selector to go to a specific warehouse location. On arrival, the selector verifies the location by reading back a random series of check digits posted at the selection slot. After location verification, the system issues instructions to pick a given number of cartons. When selection is complete, the worker says “ready” into the microphone or “pick zero” if the instruction was not understood completely. Those two statements can be customized by the user to make the system even easier for workers to use.
With voice systems, workers don’t have to read or fumble with paper. They don’t have to press keys on a transmitter console. Hands are free; eyes are free, so the worker focuses entirely on the picking activity. This ease of use is particularly important in hostile environments such as a freezer.
Two speech systems
Voice systems can be speaker dependent or speaker independent. The two possibilities have important differences. With a speaker dependent system, each worker develops a specific voice template before beginning to use the system. This template resides permanently in the computer so that the system will always recognize the worker’s voice and speech patterns. Speaker dependent systems are usually preferred in environments where worker accuracy is vital.
Speaker independent systems are much like other automated voice systems such as directory assistance on the telephone. With a speaker independent system, workers must be trained to understand the system rather than the system understanding the workers as in a speaker dependent system. A speaker independent system limits the number of words that a worker can use to communicate with the computer. The main disadvantage of a speaker independent system is that more time is required to use it.
Synthetic speech systems
Voice directed order selection uses synthetic speech, which can be produced in two ways. Some systems use text-to-speech technology, which results in a computer voice speaking to the worker. The other technology is digitized speech that uses a human voice to communicate with the worker and this works best in applications that utilize a limited vocabulary.
Preventing worker mistakes
While the technology is great, workers can still make mistakes. The system may tell a worker to pull five cases, and the selector may actually take only four cases. Workers also sometimes still pull product from the wrong slot. That happens most often when the selector has the verification digits memorized or reads them into the system before actually arriving at the selection slot. To keep that from happening, some warehouse operators make the verification digits hard to see from a distance. For instance, the slot identification may be on the front of the rack and the check digits may be posted somewhere back in the rack.
Two factors have a big impact on order selector productivity. The first is the slot location. If the product is easy to reach, productivity goes up. If the selector has to reach up to the picking slot, it takes more time. Reducing travel time between picking slots helps as well. The second factor involves the verification digits. The sequence should be no longer than three digits; two check digits are ideal for best productivity.
January 5th, 2010
Transportation management software applications typically consist of several related modules that cover the following tasks:
Outbound delivery network. Planning and routing of deliveries from the warehouse to the stores. This portion would interface with the warehouse’s order management system, which has information about the size and number of pallets or cartons to be delivered to each store.
Evaluation. Tracks the history of what actually happened on the delivery route in order to make improvements in the future. Information would include departure and arrival times at each store, route taken, waiting time, time to unload and reasons for any delays.
Backhaul. Schedule of backhaul pickups, what is to be picked up, schedules and the transportation costs and documentation involved.
Inbound. Database of approved third-party carriers and their rates and conditions, along with the status, location and arrival times of scheduled inbound deliveries. Inbound modules will list the contents of the load and what the delivery costs total.
Yard management. Location and contents of trailers parked in the yard and the status of the trailers.
Fleet management. Fuel cost tracking, along with data about the condition of the trucking fleet and major components like engines, tires and trailers. Module typically includes a maintenance history and dates for future scheduled maintenance.
Compliance. Drive times for operators by trip to document that they have not exceeded the prescribed daily hours.
While the major focus of the applications has been on the outbound side - route optimization and fleet management from warehouse to stores- the big potential for savings in the future will be on the inbound side.
Typically, the inbound cost of freight is buried in the price of goods, and that price can be inflated as much as 30%. The challenge is to get manufacturers to break out the freight costs separately, and that has to be done, realistically, at the time merchandise price is negotiated; otherwise vendors may grossly underestimate transportation costs.
The cost saving for the retailer or wholesaler on the inbound side comes from using the company’s own trucks to pick up merchandise or contracting with a third-party carrier to do it for less than the manufacturer charges.
A Package or a Menu
While some software vendors provide transportation management as one module within a highly integrated supply chain package, others sell specific applications, such as dock scheduling, route optimization, inbound freight and yard management.
Most transportation management software packages, even the integrated ones, are bought piecemeal. This is not necessarily a bad thing, as it allows companies to figure out exactly what they need and buy just that module.
For example, not every company needs yard management software, especially those with 30 or fewer trailers sitting around the yard at any given time.
Taking small steps also make sense because vendors often understate the costs of implementation, including the management time and effort it takes to get buy-in for new programs from many different departments.
The mix-and-match approach allows companies to select the best software for every application. Integration of individual applications into an existing supply chain management program is usually not a major problem because all vendors supply interfaces between their individual modules and those of other major software applications.
An alternative to buying a specific transportation management application for use on a company’s own computers is to buy an on-demand service like route management from a third party. These Internet-based programs are growing in popularity. The downside here is that some on-demand systems tend to be cookie-cutter and lack functionality.
While many retailers cherry-pick specific transportation applications from different vendors, there is an argument to be made for sticking with a single vendor for supply chain software. One vendor equals one set of upgrades, which is easier than depending on various sources to upgrade interfaces on a timely basis. There are also compatibility issues that companies do not need to face when they are dealing with one company’s integrated package.
Transportation decisions will have a major impact on warehouse operations and, as a result, how warehouse management software is used.
Picking to the Route
Outbound load planning, a part of the software, determines what sequence of store deliveries will result in the most efficient and cost-effective routing. This information, fed back into warehouse management software, will determine the picking sequence for store orders and even the way the warehouse is organized.
For example, if a wholesaler has large and small store orders mixed on a single delivery route, this may affect how it organizes the pick lines. The same issue comes up if non-pallet-size orders of private label products are included. The reason, in these instances, is that a small mom & pop store order will include many different items on the same pallet, as opposed to larger store orders where individual products are palletized. To complete the small orders, pickers need to range through many more aisles, which increases both time and cost.
The interface of two functions - warehouse operations and transportation management - creates an efficiency dilemma that is not easily resolved. The software program for each is set up to produce the most cost-efficient path within the application, but when the applications meet at the loading dock, management has to decide where to adjust. Should managers try to optimize transportation efficiency, even if it means higher labor costs in the warehouse, or should they sacrifice routing efficiency to hold down labor costs for picking?
The answer is that management decisions on this and many other issues need to be built into the planning process from the beginning. The key is to get to know the software very well, look at every function and demo it using your own data.
December 8th, 2009
The following questions are intended to help diagnose your need for a retrofit.
1) Is your distribution operation running close to capacity?
2) Is your ability to efficiently handle inventory increasingly compromised?
3) Are you able to handle new items as they are introduced?
4) Are your costs for forklift operators and other direct warehouse labor going up?
5) Is the length of order cycles and/or turn-around times increasing?
6) Are your dock doors overly congested?
7) Does product damage seem to be on the rise?
8) Do you have a proliferation of small orders?
9) Are there trouble spots in warehouse flow?
10) Are pick lines lengthening or becoming more convoluted over time?
If you answer yes to one or more of the above questions you may wish to review your key performance indicators to determine if they also point to the need for a retrofit.
November 24th, 2009
Facility slotting is a dynamic process. Facilities that have implemented logical slotting and that maintain it on an ongoing basis are always more productive both on direct and indirect labor.
Basic Slotting can be best described as the placement of Stock Keeping Units (SKUs) in a storage location. These locations can be on the floor, in shelving units, racks, case flow lanes, etc… These locations are usually labeled for track ability and tied into a database that has some basic information such as: SKU characteristics, quantity on hand and average sales.
Optimal slotting incorporates historical sales, inventory levels, growth, numbering, hit rates, priority, cube, weight, ergonomics, etc. This allows you to gain productivity savings on all direct labor functions (receiving, put away, replenishments, and selection). When taking basic slotting and creating an optimal slotting, we typically see a savings of at least 20% on direct labor.
The following post describes the steps taken to create an Optimal slotting.
The Optimal slotting process consists of four stages: the Preslot Stage, the Slot Refinement Stage, the Final Slotting Stage and the Slot Maintenance Stage. For most distribution centers, all these stages are needed to determine the optimal slotting system.
To begin the first or Preslot Stage, detailed analysis of each Stock Keeping Unit (SKU) must be preformed. Specifically: SKU sales (case and cube movement), inventory levels and dimensions data. The Preslot Stage can also incorporate rules to insure that unique complexities of your operations are adhered to. Examples of these complexities are: Vendor pallet heights and pallet weight, date or lot sensitive products, fire protection, chemical protection and other restrictions. Once analyzed, we then determine what the slot type should be for each item and then assign each specific item its optimal slot type. These slot types can be as small as shelving units or as large as multiple deep and multiple faced full pallet slots.
While the preslot may have yielded the optimal slot type for each item, the preslot slot types rarely fit existing warehouse layouts and equipment. Assuming we are not going to build a new Greenfield facility, we must then proceed to the second or Slot Refinement Stage. Therefore, the slot types and/or layouts must be adjusted to ensure a good fit between the assigned slot types and the slots available in the facility.
After the sum total of all the assigned slot types correctly fit the given warehouse layout, the third or Final Slotting Stage can begin. In this stage, items are assigned an actual new slot or position number that is based on a combination of criteria. These criteria ensure that the most efficient warehouse operating system possible will be put into effect - providing Optimal slotting for a given point in time.
There are two basic methods for final slotting. The first, the Customer Receiving Method, emphasizes efficiencies in customer receiving and the second, the Warehouse Shipping Method, emphasizes the efficiencies in warehouse operations. The method chosen by most companies is a compromise between these two methods and is designed to suit the specific needs of both the warehouse and the customers.
This method combines the best attributes of the first two methods. Slow and fast moving items are slotted together in one continuous pick by Family and SKU Type. Thus, a selector need not travel the entire pick line for every order. Items are then slotted by sequence (descending/ascending case height or weight) within each Family, so as to facilitate the actual stacking of items on a pallet.
The combined method tries to satisfy the requirements of customer receiving, while emphasizing efficient warehouse shipping techniques. It also reduces selection travel by segregating different types of orders.
Other guidelines to slot items within a grouping are, as follows:
- Numbering - Different numbering methods are used to optimize the productivity of all direct labor (Z-Pick, U-Pick, X-Aisle, One sided, etc.) The preferred method is dependent on your type of operation.
- Priority - Once the preferred numbering method is chosen, Items with the highest movement are slotted at “dot” positions. These positions concentrate movement and minimize the number of times an order picker will cross the aisles and walk backwards.
- Weight restrictions - Heavy items are kept at an ergonomically friendly height.
- The number of slots - This should include a minimum of 10% opens positions for introduction of new SKUs and flexibility.
When new racking is installed or a major reslot of aisles occurs you must determine at what levels to set the new rack elevations. There are multiple factors to consider for this stage:
Existing Limitations
1. Building clear height
2. Sprinkler levels
3. Maximum fork lift height
4. Vendor TIER and vendor HI
Ergonomics
1. Height of the beam in a two level pick (low enough to select product but high enough to get a pallet in the bottom position)
2. Height of the beam in a one level pick (high enough not to hit your head!)
It’s a challenge to take all the above information, tie it together and then use it to make all the necessary changes in the physical building. Creating a detailed step-by-step move plan with associated time-lines is an integral part of the re-racking, re-setting and re-slotting project.
The Final Slotting of a facility is performed for a snapshot or a specific moment in time. Past historical levels of movement and inventory can quickly change due to new items, changing sales patterns, seasonality and many other factors. As a result, the slotting must be constantly monitored and maintained, if you are to keep the warehouse at its highest operational efficiency.
Finally, the fourth or Slot Maintenance Stage would be the ongoing process of keeping the warehouse at peak operating efficiency. Reports of changes and additions to the final slotting will allow you and your employees to keep the slotting continually up-to-date.
Slot Maintenance reports are essential to pinpoint problem areas and summarize overall operations.
These reports will provide the analytical and support tools needed to easily keep your facility up-to-date. Many imprudent companies stop after completion of the final slotting stage and suffer the consequences later, when the delicate balance achieved during final slotting is degraded over time.
The overall objective of the Slot Maintenance reports is to simplify the ongoing task of maintaining a good slotting system. Slotting systems are dynamic and cannot be maintained without continuous effort.
November 3rd, 2009
More than ever companies are reducing costs to remain competitive, while keeping an eye on further improving their responsiveness to customer demand. Supply chain improvement is a way for companies to keep increasing efficiency, making it one of the last frontiers on which companies can compete to reduce cost and improve customer service levels.
Flexibility in design is critical to ongoing operational success. By accurately projecting volume growth and product variability, with an eye to ‘keeping all options open’ while providing the optimum workable solution for today’s needs means that flexibility must be built into the material handling system.
Supply chain execution demands a design that best facilitates speedy, timely, accurate delivery with an emphasis on the ‘perfect order.’ This results in distribution centers designed for velocity, with higher volume items located at the beginning of the order picking path.
For maximum efficiency such a warehouse is re-slotted on an ongoing basis. Some operations may even look at the movement, cube, and velocity of items and rearrange items on almost a weekly basis cutting travel time and keeping productivity high.
Order picking is one of the most important activities to optimize since it is the most labor intensive activity that goes on in a DC. It’s where you have the greatest opportunity for bottlenecks and pickpack slowdowns.
By re-slotting your inventory at regular intervals -locating stock items to reduce travel time and increase velocity - you can go a long way toward improving facility efficiency. If you compare an efficiently slotted warehouse with an inefficient one, you could see a 25% to 30% difference in labor productivity.
When it comes to efforts to derive further efficiencies from automated and mechanical equipment there are important considerations to be made, one of the most important considerations is building flexibility into the system.
Before forging ahead the current physical distribution infrastructure and operations must be assessed. This includes examining the existing operations as well as buildings and sites to identify constraints, capacities and opportunities. Very often an operations audit conducted prior to implementation of any new initiatives will result in significant cost savings and productivity increases.
When KOM conducts an audit 52 weeks of order flow history are analyzed to get a sense of inventory item movement over time. Information is captured on sales of units, pieces, cases and pallets in order to identify the volume and item peaks and valleys. This provides an irrefutable portrait of what kind of pressures a facility experiences during the year.
In addition to order history KOM looks at the company’s individual customer order files to see whether orders typically comprise one line item, 100 line items or 1000 line items. Most warehouses are a hybrid of two order types - large and small. You attack them differently. Large orders get picked conventionally while smaller items might get picked to totes.
Today the real gains have been made in the area of the capture, transfer and processing of information; not only in the quantity and availability, but the incredible speed at which it can be handled and responded to.
The physical materials handling equipment has had to evolve to keep pace with the speed of information capture and demand for faster order fulfillment response times.
With electronic information transfer, and particularly the accessibility offered by the internet, the consumer and business now expect total transparency regarding product availability and deliver schedules.
Business now faces orders arriving from many different sources, all electronically. Strategies have been implemented to process and re-direct these orders almost immediately to the most effective location for fulfillment.
Not only has the physical materials handling equipment evolved to keep pace with the speed of information capture and demand for faster order fulfillment cycles, but so has the communication with these devices and steps taken to integrate them into a complete system providing as much flexibility as possible.
Today, many companies are taking a second look at automated methods of receiving and selecting as a way of improving efficiencies.
If systems are designed properly and are thought through based on a thorough analysis of sound historical data then there will be flexibility built into them because flexibility is an important quality of an effective and successful design.
Most systems, however, do not have enough flexibility built into them. This is because many companies are dealing with the requirements of the day-to-day, and don’t have the time to look to the future when solving the problems of today. Not to mention that uncertainty in the direction or growth of most businesses may make it difficult to come up with firm projections. Markets, technology, competition are always changing leading some planners to argue that - “the future.. it ain’t what it used to be.”
Regardless of the reasons against built-in flexibility it’s one of the most effective ways to address changing requirements as they emerge, and emerge they will for the only real constant is change.
Flexibility can be built into your material handling system from the ground up in a number of ways by making a commitment to ensure that it is prevalent throughout the design.
For the Building: choose the right site,
- build in the column bays to provide for multiple layout options,
- build to a clear height.
For the Racking - design a structure that allows for flexibility so that you can move from single deep to double deep without changing the structure.
For the Shelving - allow for future levels of shelving units to be added to the original design.
For the Numbering System - this can be designed to accommodate item proliferation if considered up front in the design of this element of the system.
For the IT Systems - there can be an eye to growth that provides for flexibility in the design.
If the original design is done well, then a retrofit down the road is of course much easier.
A good source for companies looking to learn more about flexible material handling is The Material Handling Handbook, sponsored by the American Society of Mechanical Engineers and the International Material Management Society, published by John Wiley & Sons.
October 13th, 2009
As the supply chain moves to a leaner, demand driven model, the trend is towards less inventory in the system, in general. This is a change from the traditional model which was essentially an inventory driven supply chain. With fewer inventories in the system, we see that product assortment and the need to handle individual products in the most efficient manner possible is driving DC design. That is, the slotting requirement is now as important as inventory storage and in many cases drives the DC sizing requirement.When designing a warehouse facility for efficiency, several factors need to be considered. The goal should always be to minimize costs, both capital costs used to construct a new facility or expand an existing location, as well as on-going operating costs associated with handling product and maintaining the physical structure.
Thus “Efficient DC Design” implies the design of a warehouse to minimize annual operating costs while maintaining desired service levels. Service levels are often affected by efficiency within a warehouse operation, and thereby impacted by the design of the layout.
Assuming a conventional, case pick operation there are 3 Main factors driving efficient design: Pick Slots, Net Working Capacity (Cubic Storage), and Dock Operations. Each is examined below in more detail.
Pick slots / Rack Bay requirements: How many rack bays are needed to satisfy the types of slots required to efficiently select product for shipping?
Determining the pick slot requirements is an analytical process involving detailed data mining and evaluation. The correct application of slotting logic to the data results in an efficient DC design. The basic data needs include volume or sales history, physical product characteristics (including packaging types and case & pallet dimensions), and inventory requirements.
Assigning an efficient slot type to each unique item in the distribution center should be based on weekly shipping volumes and desired replenishment activity. The trade off in productivity is pick line length versus replenishment or restocking activity. In many distribution centers, picking productivity accounts for up to 60% of all direct labour and thus commands the greatest attention.
A pick slot can vary in size from a single carton location to a multiple pallet location, all accessible from floor level.
Once the number and type of pick slots is determined, this number is translated into the equivalent number of rack bays required. The height of the rack bays will depend greatly on the inventory levels to be held in the distribution center.
Cubic Inventory Storage: How many rack bays are needed to satisfy the cubic (ft3) inventory storage requirements, on average and at a peak? What height of building is required to efficiently store the required inventory?
The necessary storage volume is often expressed in terms of cube (ft3). The ability of a distribution center to efficiently store cube is defined as Net Working Capacity (NWC). Once pick slot requirements have been determined and converted into rack bays, the cubic inventory on hand will determine the required height of the bays, and thus the entire building size. The NWC is then calculated at varying building heights to ensure that inventory will fit overhead of the pick slots. In some designs, where inventory levels are very high, special dense storage sections may be added to the DC layout in order to minimize stacking height requirements.
It is always vital to hold inventory for a given item as close as possible to its designated pick location(s). This minimizes the amount of putaway and replenishment labour required to stock the pick slot.
The travel aisle spacing between rack bays is dictated by the mobile equipment meant to operate within a given aisle. Generally, fork lift equipment outrigger dimensions will vary with the required lift height at which product is placed in overhead reserve locations. The allowance for operators to pass easily in an aisle will determine the final aisle width. Passing is a requirement for efficiency as it prevents an operator being impeded by another from performing their function. A typical, conventional facility with a clear height range from 28′ to 35′ will have a minimum 10′6″ aisle width for single-deep pallet racking.
Dock & Dock Door Requirements: What size dock should I have? What is my optimal receiving dock depth and width? Of my shipping dock? Should the facility have separate receiving and shipping docks? How many dock doors?
Not to be underestimated is the amount of dock space required for efficient receiving, flow and shipping of product. The dock is the heart of any operation and ultimately creates needed efficiencies or, if inadequate, hazardous bottlenecks.
Again, the trade off is in building size vs. operating efficiency. The dock and dock door requirements are driven primarily by shipping or service levels, the hours of operation, and the number of days per week of operation. The more balanced the workload, the more efficient the design will be. Dock sizes can range from 50′ to 120′ in depth, depending on the amount of crossdock or product flow-through on a given operating shift, or for any required equipment such as pallet wrapping machines.
Other factors to consider in Efficient DC Design:
Location of auxillary functions such as location of building columns, battery charging, returns handling, clerical offices, etc. These items do not drive the design, but should be considered such that they integrate well and don’t interfere with the main functions of the warehouse.
Last but not least, one must consider flexibility in DC design. Given the changing landscape of supply chain management, a flexible operation is a must. Therefore, thinking ahead to consider expansion planning and ‘what if’ scenarios will enhance your DC plan. Flexibility in the equipment chosen, sizing of dock and storage areas, will allow easier transition to new operating realities as required.
The factors outlined above address a conventional warehouse operation where orders are selected onto pallet jacks and putaway and replenishment functions are performed by fork lift trucks. The principles however, are similar in non-conventional solutions. Obtaining and evaluating the right data will allow one to follow the basic steps above, and gain an understanding of the footprint required for an efficient DC design.
September 29th, 2009
In a need to shed operating costs, particularly in an environment of high volatility, companies are turning attention to their distribution networks. In the knowledge that distribution networks can offer competitive advantage in a marketplace demanding ever higher levels of customer service they’re asking how to optimize current infrastructures.
No pre-established solutions exist for what constitutes an optimal distribution network. Each operator has a unique context influential on the outcome of any investigation into exactly what their optimal network should look like.
However, the methodology employed to arrive at the answer is universal: collect the necessary information; model current network performance under a series of growth projections; model potential alternatives under the same series of projections; compare the alternatives to the current infrastructure in terms of capital and operating costs, customer service, financial sensitivity, risk, and ease of implementation. Once complete, this method provides an effective platform for building the optimal distribution network.
The first step, collecting the necessary information, is the most important. Everyone wants to avoid the “garbage in, garbage out” maxim that leads to bad decision making. Instead, all information for use in this exercise must be properly reviewed, cleansed and validated making it mission- critical to thoroughly review information needs prior to undertaking a distribution network study.
Each point in the distribution network must be mapped and characterized in terms of its logistics function. This includes the supplier base from which the operator draws its product, the company’s distribution centers and stocking points, as well as, the customers and/or company’s stores.
- 1) The suppliers each need to be described in terms of volumes shipped into the network expressed in:
- o cost of goods, pallets, pounds and cubic feet; the frequency and mode of shipment (truck load, LTL, rail cars, etc.); the lead times from supplier to distribution center site; the information exchange between your company and your suppliers.
- 2) Each facility within the distribution network should be described:
- o product in terms of current capacity; geographic position, pallets, pounds and cubic feet; SKUs variety; on-site storage capacity; the frequency and mode of shipment; the destination of shipments (i.e., direct to customer, into distribution centers or stocking points)
- o distribution centers and stocking points in terms of storage and throughput capacity (current and site maximum); number of SKUs; is it owned or leased (if leased, term of lease); geographic position; 3rd party or self-operated; service region and customer base; the frequency and mode of outbound shipments (to customer locations and inter-facility transfers).
- 3) The customers served should be described in terms of shipping volumes, geographic location, service level, particular requirements.
Compiling the above allows an operator to create a static distribution network map. The next level of analysis converts the static map into a dynamic network model making use of transactions between suppliers, distribution centers and customers. To do this:
- A sample period is chosen and all transactions occurring within that period are brought into a database to create a network model. Often, data management constraints lead companies to use an abbreviated sample period, for example 12 weeks.
- 12 months is the preferred sample period as it allows for a rigorous analysis that models seasonal distribution network peaks and valleys and eliminates errors arising from “annualizing” a model. That is, converting a short sample period and the related cost model based on annualized figures rather than actual P&L performance and operating budgets.
- All transactions for the sample period are incorporated at line level detail including:
- Each purchase order line shipped into the network;
- Each inter-facility transfer at the SKU-line level;
- Each order line shipped to a customer.
- Using the physical properties of the items and freight history, the transaction can be expressed in terms of pallets, cubic feet, pounds and shipments.
To conclude, the final aim is to project the dynamic distribution network model to a future state or design year. Too often, this step simply models using a volume growth rate assumption or set of assumptions and measures the effect on the network. However, while absolute volume growth is an important component of projecting future network requirements, other critical elements to consider include:
- New item variety - new products originate for a variety of reasons, from packaging changes to entirely new product lines. Changes in SKU variety have an important impact on network capacity.
- Alternate suppliers or supply channels - optimal network design should incorporate future planned changes to supply. This may impact geographic origin of the supply such that new infrastructure or increased capacities are required. For example, sourcing product from overseas affects not only the frequency and mode of inbound shipments, but related extended lead times and variances alter inventory positions a company takes on those products.
- New customers - the absolute volume growth must be characterized in terms of growth from both existing accounts and new accounts or customers. This latter growth may be regionally specific or dispersed along the lines of the current customer base and therefore plays a determinant role in the optimal network solution.
- New customer demands - as customers evolve and seek cost reductions and service level improvements from their own networks, demands change. It’s important to ascertain forthcoming changes in customers’ demands. For example, a supplier may deliver product directly to customer retail locations while down-the-road that customer requires product shipments to distribution centers instead, leaving the store deliveries to the customer’s own network.
Having amassed, cleansed and validated the appropriate information, the operator is ready to model the current distribution network and explore alternatives that yield a better cost-service outcome. In this way, when it comes time to recommend changes toward an optimal distribution network as a result of the study, management can be confident of a sure footing.
September 8th, 2009
Previous Posts