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MAKING "SYSTEMS"-USE and OPERATIONS MORE-PROFITABLE
For Distributors, WHOLESALERS, Manufacturers
IS YOUR WAREHOUSE SECRETLY HURTING CUSTOMER SERVICE AND PROFITS?
When the phrase "customer service capabilities" is mentioned, most distributors think of their company's ability to quickly take orders, which are then almost always filled completely from more than adequate inventory. The word "profits" almost always motivates people to think of price margins. Few people think about the impact that their warehouse can have on customer service and profits -- especially if they have an expensive software package. This article identifies the warehouse characteristics that can be hurting the cause.
Most warehouse planners and managers organize the storage of items in way that minimizes the labor effort needed to pick items; some people try to minimize both put away and picking efforts. But that kind of organization can sometimes increase the level of errors (over the level that would occur if the warehouse were organized other ways). The errors that can occur include picking a wrong quantity, as well as the obvious error of picking the wrong item. Don't store similar items right next to each other, even if separated by a metal post.
Receiving and QC
When it comes to operations in a warehouse, this is the place where many downstream problems are created. Some of the problems get caught before customers or the bottom line are impacted, but the cost of detecting and correcting them can be quite high.
Obviously, care must be paid to the handling of receipts from suppliers. But receipts from other company locations -- inter-branch transfers -- need just as much care, because of the tendency to assume that the shipping location did it right. One problem that can easily be missed is unit of measure; the u/m used by the supplier may not be the same as that on the corresponding PO. This example of a receiving-related problem can also result in not buying enough -- or too much -- on the next PO (as well promising non-existing stock to customers). When handling customer returns that came back by truck, assume that there are problems.
For distributors who perform in-bound "inspection", one way to avoid problems is to automate the process. For each item requiring inspection, generate a sheet listing the inspection steps and for each characteristic to be checked, the range of acceptance; think of it as a work order that uses pre-defined text for each step. And, for each characteristic, capture data about measurements and inspections, and especially about rejections. Inspections data should be regularly analyzed for trends -- to spot upcoming problems before they occur.
Think of this function as an integral part of receiving, not just a quick trip on a forklift or with a pallet jack or 4-wheel cart. Experience has shown that more mistakes are made in this process than most people realize. Problems sometimes occur in this function because the people putting away items are actually pickers who have been temporarily diverted from their main job and are under pressure to get back to picking (and not hurt customer service). People doing put away must be trained to record (on paper or electronically) all problems they encounter; warehouse managers must review documents annotated with problems, and computer-generated displays of reported problems.
This is the function where the greatest percentage of problems occur, even though many problems were set up by a mistake in receiving and/or put away. Regardless of how picking is done -- with paper or by RF or by VDP -- an important principle is to follow the system, even when it seems wrong. This is especially so for filling back orders. When an exception is encountered (e.g., wrong item in a slot, or a substitution must be made and is allowed), "let the system know about it" -- record the exception on the related pick ticket or report it via a keyboard or RF gun or VDP device. If pickers ignore exceptions or do what they think is right, not as directed, anarchy ensues. A mistake that should not be made but still is occurs when a picker sees an ample supply of an item, but the picket shows that a portion of the quantity ordered is backordered and not to be picked (because it is allocated to another customer).
A common problem in the shipping area is that the people who did the picking also do the QC work and/or the packing; sometimes, they load trucks, too. They don't catch their own mistakes, and shouldn't be expected to do so -- even when using RF devices. As in picking, let the system know about exceptions.
Unlike people who pick, people in this area should seldom if ever be allowed to substitute -- because they usually are not knowledgeable, or may be covering the mistakes they made when picking).
If time, manpower and packaging permit, perform a final QC check as a truck is loaded; even if the truck is doing a branch replenishment or inter-branch transfer.
Make sure that each driver is given a correct manifest -- well before the truck leaves, so he/she can check it against the cargo.
Cycle count carefully. Some distributor personnel spend a lot of time chasing down items and/or information in order to have an accurate daily cycle count. If they had chosen the right items and the right time of day -- which can be tricky, they would have spent a lot less time getting an accurate count.
And most important, do Not change system quantity data without attempting to determine why/if there was a discrepancy at count time. If time and conditions permit, recount the discrepant items -- sometimes, a recount reveals that there never was a discrepancy, just a mis-stored item.
To achieve great performance in a warehouse, offer warehouse personnel an incentive to do better than a mutually agreed upon goal; perhaps, do better than the 90th percentile of performance in the industry.
Keep the place organized and clean. Cliches that still matter: a place for everything, and everything it its place; cleanliness is next to godliness.
Take a cue from the Japanese: track the different kinds of warehouse errors, keep running graphs, and post the graphs where all personnel -- office and warehouse -- can see them. Where possible, base the incentives on data that is graphed.
Dick Friedman, the author, is a recognized expert on warehouse planning, operations, management and technology for distributors. He is anunbiased Certified Management Consultant and does NOT SELL warehouse technology or systems. Dick reduces warehouse mistakes and costs through inexpensive, quick changes which do not require technology. Call 847 256-1410 for a FREE consultation, or visit www.GenBusCon.com for more information or to send e-mail.