LOCATION--External. Are your warehouses in the right location to meet the service requirements of
your customers and your internal cost requirements? Distribution networks have gone through changes as
companies revise and refocus. Companies have had many, many warehouses, almost one in each
customer's backyard. They have reduced warehousing with emphasis on inventory levels. Transportation
has changed warehouse networks with the impact of negotiated rates for both truckload shipments into
warehouse sites and LTL pricing from warehouses to customers. Plus as LTL carriers have focused on
service and core customers, these have improved the transit time and delivery performance to customers
without requiring opening additional locations. Supply chain management and continuous replenishment
programs have created a new focus on servicing customers.
When was the last time you reviewed and analyzed whether your present warehouses network is correct?
Are you getting the on-time order delivery that your customers require? Are your freight and warehouse
and inventory costs consistent with your service requirements? Given the importance of warehouses to
logistics performance, your warehouse network should be reviewed at least every five years. Changes
occur in companies; only the rate of change is at issue. There have likely been changes in customers,
customer requirements, sourcing/vendors, transportation costs, products sold, and other key company
aspects not to regularly and thoroughly review your warehouses. You should analyze it with the view of
a blank sheet of paper.
Look at--
- your supply points
- lead times for supply replenishment to the warehouses; analyze the complete cycle from order placement
at suppliers through manufacturing to receipt at the warehouse
- products and product mixes
- sales requirements
- inventory needs to meet customer order/ship performance
- seasonality, sales forecasting inaccuracies or other vagaries
- transportation costs for trailer loads from supply points into the warehouse and for order shipment freight
from the warehouses to your customers
- cost for warehouses and for inventory (both for stocking and intransit)
- time required from order sending by the customer until order delivery receipt at the customer and how
much of that time is consumed by outside agents, internally or wherever before the order even appears at
the warehouse for picking and shipping
How well does your present system compare to the "optimal" system developed with your blank sheet
model, both as to service and cost?
LOCATION--Internal. How well do you have your inventory placed and managed in your warehouses?
How well does your warehouses operate?
Do you have too many orders shipped incomplete or which must be held too long in order to receive
missing inventory items? Are these distribution problems, sales forecast problems, purchasing problems,
order problems, sales personnel not knowing their customers orders plans, or other problem? Or is it a
combination of these problems, each contributing to the total problem? Are your operations in a constant
crisis/expedite situation? If so, why?
It is almost mandatory now to have a warehouse management system, which should include barcoding, for
accurate inventory information. It should be a system which helps manage the day-to-day activities and to
manage the overall performance of each warehouse. And, very importantly, it should be integrated into
the company system for orders, sales, manufacturing, purchasing and accounting.
The system should be able to quickly record incoming inventory and to place the products in the proper
area for inventory picking. It should also quickly adjust on-hand inventories as orders and picked. This
system should be integrated into the customer service/order entry system. Your inventory should now be
so accurate that you do not have to do cycle counting, except in certain very exceptional situations. And
given your situation, you may want a system which allocates and prioritizes inventory to orders or perhaps
to certain customers. The system, as orders are shipped, should also tie into customer invoicing and into
customer and transport carrier EDI systems.
It should be able to track and age inventory and should assign inventory to orders based on first in-first out.
If inventory aging is an important issue, the system should also be able to provide aging alerts to avoid
having to unnecessarily dispose of out-of-date inventory.
You should be able to somewhat easily be able to manage inventory placements, especially if inventory
items can change their A, B or C status during the year. This could occur with sales promotions,
seasonality or other factors which accelerate or decelerate the shipping priorities of items. When this
happens, the system should help "redesign" inventory placement for the new A, B and C items. Travel time
is a big waste factor for warehouse productivity; being able to reconfigure inventory placement can help
control travel time losses.
How well does your warehouse pick orders? Do orders go out on time? Does each and every warehouse
personnel perform his responsibility? How long does it take to pick orders and prepare them for shipping?
How many orders are picked per day in a regular shift? Do you need overtime to manage orders? Is this
inventory a result of order surges, lack of sufficient personnel or improper warehouse operations which
limit its output?
What about shipping orders complete? Do you have backorder problems? If so, do your customers permit
it or do they penalize you? Why do you have problems with having the correct inventory items and
quantities on hand?
LOCATION--Organization. Where does the warehouse responsibility appear and rank on your logistics
and company organization chart? Now warehouses may not be where the corporate executives have their
offices. In a way that is too bad. Warehouses are critical to the success of all customer performance and
service efforts. This is where the orders really go to be picked and shipped. And their efforts are what the
customers receives at his dock. Corporate offices do not ship orders.
In some companies, the only time they know they have a warehouse is if there are problems with customers
receiving his orders accurately, completely and ontime. In these companies, the appropriate way to resolve
the problem is to blame the warehouse. Easy, solved. You don't need a lot of executive time placed on
it; you don't need a lot of facts. But as we have discussed external and internal topics above, warehouse
performance depends on many factors. Some companies respond to symptoms and do not address the
underlying problems.
Burying the warehouse function and responsibility deep in the organization may be a sign that there is a
lack of appreciation and understanding within the company on how critical warehousing is to their success.
Or conversely, recognizing the importance of the distribution/warehouse function and its role in customer
satisfaction is a sign of a company who is aware of what customer service is about.
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