Sorting Through Materials Handling Decisions
What happens in the warehouse no longer stays in the warehouse. Today, optimizing materials handling equipment and processes inside the four walls starts at the top, and impacts the entire supply chain.
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Supply chain network design. Optimization. Alternative sourcing. How procurement works with physical distribution. The impact of multiple facilities on inventory. Consolidation strategies. These factors, and many more, affect distribution center operations. Optimizing inside the four walls may start far up the supply chain.
For example, once you know where your distribution centers will be located, you want to ensure you have the right amount of inventory in the right place to achieve proper service levels. “Effective network optimization can save up to 15 percent of facility and transportation costs,” says Paul Evanko, senior vice president of St. Onge Company, a supply chain consulting firm based in York, Pa. “Include inventory optimization, and you can save another five to 15 percent.”
Even packaging comes into play when making materials handling decisions. Increase your products’ value density and you can add another three to 30 percent in savings, depending on product value. Consider Hewlett-Packard (HP). When it redesigned packaging for a notebook computer, it reduced the product’s weight by eight percent and increased the number of cases per pallet by 25 percent.
Starting at the piece level, then working up to the layer and pallet levels to optimize each element of materials handling, can result in better stacking, less overhang, and less damage. It also opens up some options, such as the ability to use machine loading rather than hand-stacking.
It’s a quick descent from 10,000 feet to ground level. Decisions on where to source, or how many facilities to operate and where to locate them, play into the facilities’ basic operations and demands on their systems and processes.
For example, HP’s packaging change could add layers to a pallet, altering its storage and handling characteristics. Less pallet overhang might allow for the use of automated storage solutions, which had previously posed too much risk of damage. Storage location configuration may also need to change to accommodate larger, heavier pallet loads as more items are added to each pallet.
Similar materials handling changes might come into play on the outbound dock. More efficient trailer utilization can be a plus, but more product in the same trailer can spell higher transportation costs as a result of the shipment’s added weight and value, and greater risk in the event of a loss. And, the denser pallet load is bound to affect receiving, storage, and picking operations at the next stage in the supply chain.
Small changes can add up to major savings— or major headaches. If you want to shave a few seconds off picking operations, for instance, it’s important to look upstream and down in the process. “The last thing you want to do is improve step one and, as a result, steps two and three can’t handle the load,” notes Nathan Beene, director, logistics engineering for Kenco Logistic Services, a Chattanooga, Tenn.-based third-party logistics provider.
Companies usually consider automating their distribution facilities to address bottlenecks. “If you want to improve a bottlenecked process, you need to evaluate the process that leads up to it; don’t starve the bottleneck,” explains Beene. “If a conveyor upgrade can improve takeaway in the picking area, then look at the picking operation.
“If you can only get things to the line at a certain rate, that’s all the automation will be capable of doing,” he adds. “The systems feed off each other, so find small improvements that benefit the whole.”
What’s the true value of your investment in automation? Productivity gains, flexibility, throughput, accuracy, and increased service levels all count when considering what investments today will support near-term gains and drive long-term performance.
“You also need to shift your focus from total cost of ownership, a common way to evaluate a capital investment, to total value of ownership,” says Tony Barr, vice president of marketing and business development for Beumer Corporation, a materials handling firm providing conveying, loading, palletizing, packaging, sortation, and distribution systems.
Under the total-cost approach, productivity and throughput are considered part of the structural improvements an automation project can deliver. Then add flexibility, accuracy, and service levels, which support volume growth and margin expansion. These improvements can shorten the time frame for return on investment (ROI) and enable growth, according to Barr.
Productivity gains typically result in picking and packing labor reductions, which is commonly a major consideration in cost justification/ROI. “But a second consideration is often throughput— do more with less, maximize volume, and minimize time,” adds John Sarinick, vice president, Beumer Corp.
Space can also be an issue. Automation can help expand an existing facility’s serviceability; it can also provide flexibility. “Use sortation to allow areas in the DC to have multiple uses,” Sarinick recommends.
Another benefit of automating your distribution center can be improved accuracy— on-time and correctly filled orders— and enhanced customer service levels.
That’s the result MBS Textbooks, a Beumer customer, achieved when it turned to automation. The 100-year-old company, a division of Barnes & Noble, is the country’s largest used-textbook wholesaler. On the wholesale side of its business are campus bookstores; on the retail side, MBS is expanding into direct-to-consumer sales. A third element of its business is bookstore management systems, such as point-of-sale and inventory management.
MBS operates one 350,000-square-foot distribution center in the only home the company has known— Columbia, Mo. The facility receives 2,500 to 3,000 packages per day, and ships 3,000 cartons daily. It holds 120,000 titles in stock at any given time, and serves a 2,600-bookstore customer base.
One problem MBS faced when managing the rapid growth of direct-to-consumer sales was that the business didn’t fit the traditional wholesale fulfillment process. The retail portion (direct-to-consumer) was automated in 2000, and expanded again in 2003 to handle 1,300 orders in a dynamic batch fashion. The company undertook a third automation project in 2007 to keep up with retail segment growth. Over the past 10 years, this business has grown 300 percent.
“We needed flexibility, accuracy, and the ability to streamline internal processes,” says Mike Pitt, director of automation for MBS Textbooks.
Wholesale orders were being picked into shipping cartons, while retail orders were picked into two different colored totes. This presented a challenge in getting the right carton or tote to the picker at the right time. Part of the solution was simple: MBS started picking all orders into shipping cartons and eliminated the totes.
Cartons that contain wholesale orders proceed to a sortation line, where they can be automatically taped shut. Retail orders are removed from the carton that carries them through the sortation process, and the carton returns through the system to be loaded again with either a wholesale or retail order.
MBS sized the system to handle 20,000 items per hour and 450 processing destinations. All outbound processing destinations look alike, allowing them to process either wholesale or retail orders.
“One order can be sent to multiple processing destinations or multiple orders can be sent to one processing destination,” says Pitt. This limited the size of equipment MBS needed to purchase, he notes, and allows for future expansion. Picking to a static batch and eliminating some processes (and the number of times a product was touched) boosted productivity by 35 percent.
Applying Manufacturing Principles
Shekar Natarajan, director of supply chain operations for The Pepsi Bottling Group Inc., sees a trend toward extending manufacturing principles and efficiencies from the way a company builds its product to the way it builds orders.
“Take the work back to where it naturally belongs— in distribution,” he says. “Use manufacturing-like systems and technology to create custom orders.”
Treat labor as you would any significant asset, agrees Louis Cerny, vice president of Sedlak Management Consultants, a Cleveland-based supply chain consulting firm. “Review current labor practices, identify best practices, revise poor practices, develop and update standard operating procedures, and train associates,” he suggests. “And use the labor management module in your warehouse management system, or add the capability.”
The top 20 percent of SKUs in your facility represent 80 percent of the volume; the bottom 40 percent of SKUs comprise five percent. Walking takes up about 70 percent of picking time. Look for ways to improve performance by reducing walking time. Don’t make pickers constantly walk past slow movers to get to fast movers, or consider bringing the picks to the picker using carousels or mini-load systems.
Look Up and Down
Avoid taking a small-scope approach. “Companies often look at how they can improve one part of a process without looking upstream or downstream,” Beene notes. “You might, for example, identify a problem in getting the product to the automation. If you improve just that process, the entire system would work much better.”
Suppose you add a take-away conveyor to a picking area to speed processes. The actual picking could still constrain throughput. Improving the picking process could bring the operation closer to the conveyor’s capacity.
Beene suggests a process improvement that was implemented at one of Kenco’s distribution centers.
Pickers were using handheld scanners to record transactions in the pick area. Kenco replaced the handhelds with wrist-mounted scanners, and pickers eliminated the steps of picking up the scanner, scanning, then putting the device down to pick up the item being picked. Using the wrist scanner freed both hands to handle the product. The 1.5 seconds this saved may not sound like much, but, “depending on the volume you are picking, it can make a difference pretty fast,” Beene says. Switching picking operations to wrist-mounted scanners delivered ROI to the DC in a few weeks.
Another element of improving materials handling processes is developing and adhering to corporate best practices. Through experience, Kenco has developed procedures for receiving, picking, and other functions that become part of a baseline process to measure against. Some of these procedures can become “templates” to build with when setting up a new operation.
The Human Touch
Employee-related costs eat up a good portion of distribution center budgets. That’s why making lift truck operators and other warehouse employees more productive is crucial, says Tim Quellhorst, senior vice president of forklift manufacturer Crown Equipment Corp.
Like Beene, Quellhorst recommends optimizing the human-machine interface. For example, visibility, good controls, and operator comfort all contribute to lift truck optimization. Improved vehicle productivity and performance can help require less from the operator.
“Companies are looking for productivity, energy efficiency, and ecology, as they relate to each other,” says Quellhorst. “It’s not about achieving maximum productivity in one area that would negatively affect other areas.”
Increasingly, every tool in a warehouse contributes to knowledge management. Crown’s InfoLink fleet management system, for instance, helps ensure safety and adherence to performance standards, and optimizes equipment serviceability. These types of intelligent systems help ensure that only authorized operators are able to use specific pieces of equipment.
In addition, intelligent systems can be programmed to require safety inspections, and on-board impact sensors can help identify unsafe practices and reduce damage.
Technology improvements and operator input can boost lift-truck efficiency to higher levels. New battery technology, for example, improves lift-truck run time and reduces charging times. But in a facility maintaining a large fleet of lift-trucks, the bottleneck occurs at the charging station.
One way to break that bottleneck is to implement a “pony express” process, where operators take their lift-trucks to the charging station, then climb into a waiting lift-truck that has been charged, fully checked, and is ready to go.
To avoid congestion at the charging station, drivers are directed to take their lift-trucks out of service on a staggered schedule. If a shift starts at 7 a.m., you don’t want all the operators showing up at the charging station at the same time when all the lift-trucks are reaching a similar level of discharge. Like the legendary delivery service, there’s always a “fresh mount” available for a driver.
Show and Tell in the Warehouse
With tens of thousands of available applications, and the ability to stream live video on a smartphone, it’s time for shop floor devices to play catch up. Efficiency gains in warehouse management systems peaked about 10 years ago, says Peter Brereton, founder and chairman of TECSYS, a global warehouse management software provider.
In a warehouse, the administrative offices typically operate in English, but the warehouse floor may host a variety of languages and literacy levels. Add temporary, seasonal workers to the mix, and the challenges to maintain efficiency and accuracy rise exponentially.
In a warehouse’s contained environment, putting wireless radio-frequency devices in the hands of workers or mounted on their lift trucks to provide real-time interaction with planning and inventory control systems has solved many problems. Adding tethered and untethered scanners moves forward another step in eliminating some picking and putaway errors.
A Look at Visual Logistics
While these systems can direct warehouse workers to the proper location, then verify through a scan that they have arrived at the correct slot, errors can still creep in.
For example, when the device directs a worker to “pick one,” what does that mean? In a broken case area, it might be clear that “pick one” means one item. But, if the case isn’t open, does it mean pick one case?
Enter visual logistics. Using a Psion Teklogix Workabout Pro 3 handheld terminal with a full-VGA display, the TECSYS Visual Logistics warehouse management system sends an image to the worker to positively identify the item.
Visual logistics has helped increase throughput by 15 percent, reduce materials handling by 70 percent, cut annual physical inventory time by 50 percent, and reduce defects by 96 percent, according to TECSYS customer reports.
For one customer, North Mississippi Health System, the EliteSeries 8 Visual Logistics system increased the number of in-stock items by 47 percent without adding people, reduced mis-picks by 71 percent, increased fill rate to 99.98 percent, and achieved an $8-million annual cost reduction.
Dramatically improving graphics capabilities of shop-floor devices is only part of the story. While many applications use enhanced text displays to avoid ambiguities, a visual diagram of the pick face highlighting the picking location gives the operator a positive target. Following that with an image of the item and the number to be picked further reduces errors. Because the system is server-based and communicates in real time via radio frequency transmissions, it can even stream a five-second video showing the operator how the items picked are to be packed.
“Reducing errors results in substantial savings,” explains Brereton, “especially in fields such as healthcare, where errors carry high costs and high risks.”
People, Process, Technology
Getting smarter about materials handling means looking at people, process, and technology. Kenco’s Beene suggests looking at your current process, taking a lean approach to identify opportunities for improvement, and asking if the gains expected from a capital expenditure justify the cost. Gather your research on the issues you want to address with the capital expenditure to prove the business case.
Most importantly, don’t wait for management to approve your capital expense to start process improvement efforts. Get your processes in order to ensure a smooth transition. That way, even if the capital budget isn’t approved, you are already making gains.