Success in the marketplace often is measured in time to the customer. Yet many organizations are challenged to maintain adequate inventory levels while successfully anticipating demand. This ongoing discrepancy requires warehouse management procedures that complement the abilities of any established enterprise tools to help maximize the performance of all functional areas of a business. Inaccurate inventories, poor space utilization, inefficient shipping, an over-reliance on manual record-keeping and more can hinder a company’s ability to achieve these objectives.
Productive warehouse management can help businesses meet requirements and maintain market share in an increasingly competitive global marketplace. In order to transform warehouse management processes, the professionals involved must have an awareness of the current state of things, create a clear vision of how they want the future state to be and then define the project’s business value for all stakeholders. When done properly, this solid foundation will manage expectations, facilitate understanding among the people involved, improve team efficiency, eliminate process waste and reduce the time to benefit.
A recent case study serves as an excellent example of this exact situation. The supplier depicted, “ABC Supply,” is an industrial equipment company with multiple locations in the central and midwestern United States. The business serves the aerospace manufacturing sector as a tier two supplier.
After recently entering a period of advancement and expanded customer demands, ABC Supply leaders chose to add a new U.S. warehouse facility. Unfortunately, this hindered ABC Supply’s ability to achieve optimal performance in the face of growth. There were problems related to lack of accuracy in tracking inventory levels. Other business performance areas were limited due to inefficient space utilization and shipping processes. In addition, the organization was hindered by an over-reliance on manual record-keeping and siloed solutions.
Decision-makers at ABC Supply began by establishing a project team. The team’s primary objective was to improve the business’s legacy warehouse management practices. Because warehouses play such a critical role in the organization’s supply chain, driving this process improvement was essential.
The first order of business was to assess the current state of ABC Supply’s warehouse management processes. This involved gathering and analyzing all significant metrics and their values. Examples included inventory turns, data integrity, shipping, delivery metrics, space utilization, overtime and other key performance indicators.
By engaging in business process mapping, it became easy for the project team to identify waste and redundant data and processes in all areas of the warehouse. Their findings included the following:
- Inventory counts were handled with a combination of paper reports, index cards and standalone spreadsheets. It was a labor-intensive process, which made it difficult to see what was in stock and sometimes caused errors.
- Inadequate visibility had the potential to produce excess or obsolete inventory. This was a strain on the company and often resulted in unfulfilled orders and poor delivery performance.
- With an ineffective method of tracking inventory, pickers took longer than desired to find items to ship, which slowed down the loading process and created delays.
- With inventory housed in multiple locations, ABC Supply did not have confidence in inventory counts. When inventory was moved from one storage area to another, the team captured that information on a paper report, then input the data into a standalone system to track location transfer.
- Poor use of warehouse storage systems and racking led to needless work. For example, high-selling inventory was stored in the rear of the warehouse, which caused inefficient handling and time delays.
- With the legacy systems, warehouse-related information was managed using paper, pencil and data entry at a stationary warehouse terminal. For instance, the analysis documented the multistep process of tracking pick tickets: In the current state, a picker passed a ticket to the checker, who then processed it as needed and routed it to the stager. Then, another warehouse worker would pass the documentation to the loader. As with any cumbersome, manual record-keeping process, the chance for errors and delays was quite high.
All of these current-state problems were documented as opportunities to be addressed in the future state.
The next step was facilitating several workshops with the project team to develop the desired future state. The workshops were organized by business process flow and served to identify the gaps between the current state and industry best practices. This would make it possible to effectively design future state business processes.
Each of the warehouse business process flows was carefully mapped, including procurement, inventory handling and storage, picking, and shipping. This was a critical phase, which identified numerous opportunities to eliminate waste and improve warehouse management productivity. Also, as the design of the future state became clear, the team was better able to define and quantify the benefits that could be realized.
The business case
Even before evaluating automated solutions to address the most significant challenges, building a business case for change served as the main project driver and the foundational justification for the improved warehouse management project. All of the warehouse management process owners were involved in developing a business case for their domains of responsibility, with assignments they could confidently achieve.
The business case also was important because it was used at every major milestone to confirm that decisions and actions were aligned with project expectations. In addition, it informed the next steps of assessing an automated warehouse management system to streamline processes and address current state issues.
The project team then drew up a set of system requirements to move the organization into the desired future state. Some of the more significant requirements included the following:
- A warehouse management solution that optimizes inventory control. It was vital to be able to track inventory with bar codes and radio-frequency handheld devices. Inventory accuracy would be ensured by scanning and validating locations and product bar codes, and improved inventory accuracy would help the company diminish the quantities of required stock on hand and the carrying costs of that extra inventory while maintaining adequate stock levels to fulfill orders.
- Methods to improve data entry. Modern bar code scanners or other devices would reduce data entry errors, speed data collection, and drive timely information and integration of warehouse data into the enterprise resources planning (ERP) system.
- Real-time and enterprise-wide reporting. Being able to access real-time sales, work and purchase orders would enable inventory information to flow seamlessly between the warehouse and the ERP system.
- Improved resource usage. Integrated wireless devices would accurately direct the order-fulfillment process by ensuring that pickers travel to the correct locations. Searching for products would be eliminated and accuracy would be ensured by scanning and validating locations and quantities.
- Effective use of data. This would positively affect ABC Supply’s ability to forecast resource requirements, recognize and remedy productivity problems, track errors, and monitor customer issues.
- Integration with ERP. Automated data transfer between the warehouse and the ERP system would bring about timely and accurate data for invoicing, purchase order payment, and inventory tracking and management — with no manual keyboard data entry.
Transforming ABC Supply’s warehouse management process was achieved first and foremost with strategic planning, which involved selecting the right technology and evaluating proper fit for the business and its warehouse procedures. Key to the achievements were taking steps to identify waste in the current system and inefficiencies that were caused by poor processes or obsolete technology. Determining the desired future state and identifying weaknesses in the current state of the operation also were key steps.
After selection but before implementation, the warehouse management strategy was clearly defined. This strategy-definition phase, along with the project plan, was the single-most-critical part of ABC Supply’s transformation. Having completed this exercise, the project team was able to begin the implementation in earnest. The final phase of the project was comprised of configuration, testing and practice — ultimately leading to achievement of the desired future state goals.
Dennis Gilhooley Jr., CSCP, PMP, LSSBB, is regional director at Ultra Consultants, an independent enterprise resources planning advisory research and consulting organization. He may be contacted at firstname.lastname@example.org.