Supply chain volatility in the warehouse is likely not ending soon. For so many manufacturers and distributors, ongoing logistics chaos is keeping elements of fulfillment precarious. Additionally, supply chain talent is as unpredictable as procuring goods. The supply chain is also evolving into end-to-end solutions and making distribution move toward advanced technologies. Attracting and retaining top supply chain talent remains difficult as “job-hopping” and the Great Resignation continues.
In response, planning and decision making should be integrated into your network model to support changing technologies and relationships. The conversation around sustainability across the supply chain network must focus on business impact, organizational structure and talent.
The supply chain bottlenecks are a serious issue; however, as the CEO of a company that provides order picking solutions, I’ve found that focusing on efficiencies within the four walls of a warehouse or distribution center can produce better productivity and throughput. And this in turn can improve some of the supply chain concerns.
Distribution center productivity starts with order picking accuracy defined as a percent of mispicks per order. This metric tracks the accuracy of warehouse employees as they select products for orders. Warehouses can be prone to human errors. When workers pull thousands of items from shelves daily, the velocity of lost productivity can be costly. Delivering the wrong item to a customer is an expensive error, which can kill productivity and throughput because it wastes time, incurs additional delivery costs and often results in a lost customer.
Order picking operations can account for more than 50% of a facility’s operational costs. Technologies that ensure inventory count accuracy can have a direct bottom-line impact. (Disclosure: My company provides this technology.) Reducing mispicks is particularly important when employees are demanding higher wages with less training. The number of turns is not only inventory — it is employee churn in the warehouse.
When choosing an order picking solution, carefully consider your specific situation. No two warehouses or distribution centers are identical. Take into consideration any issues of workforce diversity, linguistic proficiency and ergonomic utilization. The number of SKUs and FMCGs (fast moving consumer goods) may also be an issue in potential mispicks or injury if product placement is not properly positioned.
Operations and warehouse managers should look for order picking solutions that capture KPIs that indicate the causal factors in mispicks. If an order picking vendor fails to prove their solutions are easily learned and painlessly implemented, and they cannot quantify the pace of training, I recommend to eliminate them as a contender.
Managing Change Management
Change management and user acceptance of a new device and/or process are some of the biggest challenges when implementing warehouse improvements. Seasoned users are often accustomed to the way things have always been done and are frequently change resistant. I’ve found this is particularly true when changing to new or advanced technology solutions. They may question whether the process will be harder for them. Some fear greater expectations and question if they will be able meet daily goals.
Adopting a crawl/walk/run principle when rolling out a new plan is best. Finding change champions to engage at the start of the project is the key to successful change management processes. Be upfront and open with employees before adopting and implementing new processes and technologies; in my experience this can significantly reduce the anxiousness often associated with change.
No matter what type of systems and tools are used for current warehouse operations, visibility monitoring the operation on an hourly, daily, weekly and monthly basis should be a key factor for operations leaders. When making critical decisions regarding labor, overtime, equipment and transportation, visibility must be an accurate metric because without data-driven information, best practices cannot be achieved.
Technology And Labor Optimization
There are also likely opportunities to reduce the throughput time per item. Monitoring and maintaining inventory levels to optimize space (current supply vs. projected demand vs. space available) is challenging at best. Space optimization requires sufficient storage space for current and future inventory, as well as processing, aisle and traffic spaces to effectively move materials through the warehouse. Too often, high inventory levels drive poor practices of storing materials in inappropriate warehouse spaces, which can hinder an operation, causing significant decreases in users’ productivity. The result is increased labor, which is in very short supply.
In my experience, labor optimization will almost always require some type of technology producing a significant number of analyzable data points. This data can be analyzed by tailored reporting or machine learning/AI tools. Understanding what productive users should be doing and what they are doing, along with reviewing efficiency data in real time, can help keep labor needs and costs as low as possible. Improvements in software, machine learning, IT devices, portability, battery life and communication protocols continues to enhance and improve operations.
Warehouse performance KPIs include carrying cost of inventory, inventory turnover, inventory-to-sales ratio, inventory accuracy and shrinkage, as well as order lead time. These metrics present an opportunity to evaluate the product offerings, eliminating options that fail to sell frequently or quickly. As the global supply chain remains in a state of flux, focus your distribution center operations on attracting and retaining employees and producing better accuracy, productivity and throughput. Ultimately, as the supply chain issues work through the system, the internal mechanism of your warehouse will have been optimized — driving profitability.