Better efficiency leads to lower costs
July 10, 2007
Analyzing your warehouse layout might reveal severe inefficiencies. Do you have the most frequently picked items scattered around, or are they located near the packing station? Organizing the warehouse so that the most frequently picked items are close to the packing station and the least frequently picked items farther away can cut the transit time significantly.
Photo courtesy of Combilift USA, Greensboro, N.C.
Many large warehouses for pipe and long metal products are more than 300,000 square feet, with 2,000 to 3,000 product numbers, or stock-keeping units (SKUs), and more than five miles of shelving and thousands of bin locations. This represents a daunting task for personnel involved with putting materials into storage locations and for those engaged in picking material for shipments.
The method for analyzing warehouse operations for efficiency improvements, however, applies to large and small warehouses alike.
A recent study shows that, even if they are equipped with rather sophisticated data storage systems, many warehouses have layouts that are inefficient. A quick method to determine the potential for improving productivity is to develop a scatter chart of the bin locations for the top 100 SKUs in the warehouse.
The products with the highest pick frequency represent the best sample for the scatter chart. Figure 1is a simple example of a scatter chart. Only the eight most frequently picked items are included in the illustration.
As shown, the products with the highest demand frequency are not all located near the front of the warehouse. This means that the pickers have to travel farther to pick the parts with the highest pull frequency.
The most frequently picked item, when mapped through the picking process, is shown to require a travel distance of 1,950 feet—more than a third of a mile.
A warehouse diagram shows the locations of the most frequently picked items. Creating this type of diagram is the first step in analyzing your storage layout and developing a strategy to make it more efficient. Moving the item with the highest pick frequency to the first row of storage shelves reduces the time to pick it by 85 percent.
Locating the item with the highest pick frequency closer to the packing station reduces the travel distance to 300 feet, which is an 85 percent reduction in the travel distance and translates into an approximately 85 percent reduction in pick time.
Many warehouse operations maintain an open inventory placement policy for restocking. In other words, each SKU does not have a specific warehouse location; when stock is replenished, the new stock goes into any empty location.
The justification for this is to eliminate reserving open space for each SKU, space that might not be fully used, especially as inventory reaches reorder point levels. Another justification is that it is easier to segregate different material lots to prevent intermingling.
Both of these justifications might be based on faulty premises. A recent case study has shown that warehouses typically have sufficient shelf space available to store incoming materials. Reorder points drive incoming materials in most cases, so that material can be placed in designated inventory locations, as space should be available at the discrete location for a specified SKU. The second situation implies that there is a lack of discipline to maintain segregation of different lots at a discrete location.
Open inventory placement also causes the personnel involved with the picking process to go to several different locations if the first location does not have sufficient inventory to fill the pick order. This practice increases the length of stock replenishment runs, particularly for the items with the highest pick frequency, because they are purchased more frequently, exacerbating the inefficiencies of the stock replenishment process.
It can be assumed that the primary causes for inefficiency in the picking and stock replenishment processes are the length of the pick and stocking runs and the number of stops for both picking and stocking. Both of these increase the time required for the order picking and replenishment processes.
Applying the 80/20 rule, it is safe to assume that 20 percent of the items represent 80 percent of the picking activity. These are referred to as A items. The remaining 80 percent are B and C items, with lower pick frequencies.
The items in each category with the highest pick frequency should be stocked as close as possible to the packing station. If some items require secondary operations before packing, the ideal situation would be to locate secondary operations area in close proximity to the packing station. If that is not feasible, those items requiring secondary operations should be stocked near the secondary operations area by order of pick frequency.
Figure 2illustrates one way to lay out the warehouse storage locations, with the A items nearest the packing station and the C items farther away. In this layout, dedicated storage space is allocated to each item in stock.
The amount of dedicated storage space should be established by the amount of space required to store the maximum inventory quantity. If material lot segregation is required, the number of expected lots in storage at a given time can be determined and separate shelf space allowed for each lot.
Dividing the items into three groups—those with the top 20 percent of pick frequency, the next 40 percent, and the lowest 40 percent—and arranging them accordingly can help make warehouse operations much more efficient.
Radio frequency data communications (RFDC) is another option for warehouse inventory control. Reportedly, in conjunction with real-time software and bar code readers, it can help achieve inventory accuracy of more than 99 percent.
For RFDC to be completely effective, suppliers must place bar code information on products as well as on each storage location. Most of the major suppliers do this to some extent, and many are willing to add specific information to the bar code data.
RFDC can help improve the accuracy of the data and timeliness of the transactions, and reduce the paperwork associated with the receiving process and inventory transactions. Preassigning storage locations permits the hand-held RF/bar code reader device to show the warehouse person the precise aisle and bin location to store the material.
The data the RF hand-held device collects is transmitted directly to the main computer, which can validate the product received against authorized purchase commitments by weight, count, or linear feet. RF technology can provide all of the inventory transactions, including receiving information for payables processing, updating quantities on hand, closing purchase orders for completed items, and showing backorders resulting from partial shipments, all on a real-time basis.
It also can apply material to reserved orders and make adjustments to show unassigned material available for future orders. In addition, it allows recording reasons for incoming material rejection, such as goods damaged in shipment; received quantities exceeding quantities ordered; and quality-related issues.
The RF hand-held device also can help to increase picking efficiencies and record all the inventory transactions associated with the picking and outgoing material processes through to customer invoice preparations.