LTD Management
Logistics & Supply Chain Management Consulting Global Solutions That Work

Warehousing---Location,Location,Location

World Wide Shipping
By THOMAS CRAIG
President LTD Management
www.ltdmgmt.com

To be successful in real estate, the maxim is "location, location, location". In a way, that is the rule for warehousing success. And warehouse success is very important to customer satisfaction.

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--

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.