Bytes…Data…Action: How Small Warehouses Compete

Smaller distribution centers and warehouses leverage information technology to operate like the big boys.

Turning data into actionable information is one key to operational excellence. In many cases, the size of a facility doesn’t affect the informational needs of warehouse and distribution center managers (see sidebar, below), says Donald J. Derewecki, executive vice president, Gross & Associates, Woodbridge, N.J.

“Their information needs are more closely related to the operation’s complexity than to the square footage,” he says. As a result, a mega-distribution center with a limited number of stockkeeping units, a pallet in/pallet out operation, and no value-added services or mandated controls would not need a highly sophisticated information system.

“However, a smaller facility with tens of thousands of SKUs, and stringent customization and inventory control requirements may need very sophisticated information systems controls,” Derewecki says.

Michael Krabbe, project manager for CIBER Enterprise Solutions (formerly DigiTerra), Cincinnati, cites the case of a distribution company serving plumbing, heating, and industrial pipe wholesalers. “Their business is challenging,” Krabbe explains. “Item dimensions vary in size and shape from very small washers to large water heaters and boilers.”

In addition, the facilities pick loose pieces, full cases, and full pallets. Bulk product such as boilers are handled by clamp truck and loaded directory on the truck rather than staged on the dock.

With four warehouses, ranging from 42,000 to 76,000 square feet, and new products being added constantly, the warehouses have no room to waste. Krabbe and his team helped the company implement warehouse and transportation management systems from Manhattan Associates, plus CIBER’s proprietary event management and visibility solution, SolidVision(TM). They also re-engineered processes to maximize results from the new technology.

With space at a premium, smaller facilities need to maximize space utilization and management effectiveness. For example, smaller facilities generally have less receiving, dock, and staging room. In addition, “while many larger warehouses have receiving doors on one side and shipping doors on another, a lot of smaller facilities don’t,” Krabbe notes. “They may have receipts and shipments going through the same doors.”

Despite the challenges, “too often smaller warehouses and distribution centers have not developed the tools they need to manage properly,” says Derewecki. Several types of tools can be used.

“Depending on the circumstances, add-on modules to the corporate ERP system may be adequate,” he says. “Custom-developed applications can be appropriate, although they may be difficult to maintain and upgrade.” Warehouse management systems, whose price in the past was out of reach for smaller operations, have become less costly “and can be seriously considered,” Derewecki says.

“A warehouse management system (WMS) helps save space in the warehouse,” Krabbe says. For example, the system can place the same item together in the same location (assuming there is no lot or expiration data sensitivity) to minimize the number of locations used by that item. A WMS can also place product that’s being put away or replenished into the smallest possible location.

Many WMS solutions also have a receipt scheduling module that can more effectively schedule use of dock doors. When a receipt is scheduled, for example, the system will know which dock door has been reserved for that time slot, and will not allow the dock area to be used during that period.

Here’s a look at how several companies with small to medium-sized distribution centers use a WMS and other information technology to streamline operations, improve productivity and service, and contain costs.

CooperVision: Sets Site on Voice

CooperVision Inc., Rochester, N.Y., ships 10,000 orders of contact lenses a day to eye-care professionals in the United States. The company has been averaging 25 to 30 percent growth each year, and that is expected to continue. “We ship a large volume of small packages, and pick a lot of lines and items,” notes Joe Stannard, vice president of logistics. With 600,000 stockkeeping units, the company needs systems that can handle complex and large transactions in its 120,000-square-foot facility.

The company’s Baan enterprise resource planning (ERP) system was implemented about two years ago. “Before that, we had legacy systems held together with rubber bands and chewing gum,” Stannard recalls. “Each factory used its own software. Today, the ERP allows us to look across the platform, improving our forecasting ability greatly. The data availability lets us know what’s going on in real time.”

Last summer, CooperVision looked at ways to increase picking efficiency in its distribution center, which has been using radio frequency technology since 1999. For assistance sorting through the various automation options, Stannard turned to Warehouse Management Consultants, a Portsmouth, N.H.-based consultancy specializing in “each” picking.

The team toured some 50 facilities to research and evaluate best-of-breed technologies such as pick-to-light, small item sorters, and warehouse management systems. They also evaluated whether or not to stay with the company’s existing paper-based system.

The winning solution was voice-directed order picking technology, Voxware’s VoiceLogistics. CooperVision uses the system with the Baan ERP and PickPro, a software package from Scottech Solutions that operates the facility’s carousel systems using order information from the ERP.

As the first step in implementation, “we identified which SKUs made sense to be picked using voice-directed technology,” Stannard says.

Implementing the new tool meant shifting from organizing products in family groupings to a random location approach. “We use check digits, a randomized two-digit number. We had to develop an in-house program to assign check digits to 40,000 locations,” he says. In addition, each location had to be labeled with the check digits, with the Universal Product Code (UPC) at each location linked to the ERP.

“That was 40,000 linkages,” Stannard says. “We thought we could do it quickly—but it took weeks.”

CooperVision conducted a pilot test of the voice-directed picking technology in November. To help gain buy-in from distribution center associates, Stannard had a home video made, featuring several order pickers who participated in the pilot. They talked about their experience and give a testimonial on how the new technology would help them do their jobs.

That, coupled with town meetings and other communications, helped CooperVision start off on a positive note and build momentum.

VoiceLogistics’ management console enables CooperVision to view order picker performance. Facility management tracks voice-directed order pickers across three shifts, looking for trends and best practices that can be used to improve operations.

The shift to voice-directed picking has nearly doubled order picking productivity. “Without voice, we were doing 140 lines an hour,” Stannard says. With voice, order picking has climbed from 155 lines an hour in early January to 277 lines an hour today. That rate is expected to increase when CooperVision implements a new small item sorter from GBI Data & Sorting Systems.

“Today, we sort to bins on a cart,” Stannard explains. “When we put in the sorter, we will pick to one big cart.” The sorter, which can sort 672 orders at one time, will enable picking to increase up to 400 lines an hour.

Stannard is also weighing the pros and cons of implementing a WMS to drive warehouse functionality. In addition, the DC will implement a new shipping manifest system, as CooperVision’s growth has maxed out the existing one.

“We’re trying to build a system that can do 20,000 orders a day in the next few years,” Stannard says. “Our strategy has been to stay away from a ‘big bang’ implementation, to develop a solid basis as we go forward rather than changing for the sake of change.”

Crown Equipment: WMS Lifts its Fortunes

Lift truck producer Crown Equipment’s 71,000-square-foot distribution center in New Bremen, Ohio, uses a warehouse management solution from Robocom Systems International to manage its 52,000 parts and ship orders to its manufacturing sites and customers, including dealers and end users.

Orders are downloaded from Crown’s mainframe, and passed to Robocom’s Inventory Management Software (RIMS), notes Jeff Buschur, the facility’s warehouse manager. “We use that information to coordinate the grouping of orders,” he says. Route coordinators determine which routes, or grouping of orders, they want to release; the parts are picked, consolidated, verified, packaged and shipped.

“The system helps us manage the orders,” Buschur says. “It gives us all the information we need to make decisions. We want to make sure we have the maximum number of picks on the warehouse floor to help level the workload.” RIMS also monitors picking productivity on a shift basis, enabling Buschur and his team to spot trends and take action.

In addition, “RIMS provides space utilization reports that we constantly review,” he says. “We try to make sure the important parts are in primary picking areas, with slow movers delegated to slower zones.” The warehouse uses the information from its WMS to reslot items several times a month.

Since the WMS was installed in Crown’s DC nine years ago, “we keep getting better results,” Buschur notes, thanks to regular upgrades. Crown recently upgraded to Version 4.3, gaining new functionality such as location sequencing.

Christian Art Gifts: Divine Planning and Productivity

A new warehouse management system has helped Christian Art Gifts Inc., Lombard, Ill., improve its planning and productivity, says company president Heinrich Johnsen. Christian Art Gifts, started in February 2003, is the newest distribution branch of its South Africa-based parent company.

Products are designed in the South African head office and are manufactured by a network of worldwide partners. Much of the manufacturing takes place in Asia. With a complex corporate structure, a seasonal business, and a 20,000-square-foot warehouse, the Lombard operation has to be highly efficient and productive.

When the company began shipping last spring, Christian Art Gifts used the Microsoft Great Plains’ ERP, but soon found that the system’s order fulfillment functionality did not deliver operational excellence.

Received orders were entered into the ERP system, which generated a picking list that was printed and used by pickers to manually process customer orders. The system did not allow picking by bar code. With 1,500 items such as books, bookmarks and journals—many of which are difficult to distinguish from other, similar products—order pickers sometimes had trouble finding the right product.

In addition, picking lists could not be tracked electronically once they had been printed, which resulted in missing picking lists. Sometimes the same list was printed twice, resulting in duplicate orders.

“We never knew where we were in terms of orders processed or waiting to be filled,” Johnsen recalls. “If we had 100 picking lists printed, we would have no knowledge of where we were during the day unless we went back and counted what was left.”

After just four months of operation, the company realized it needed a change. Johnsen considered buying advanced picking and shipping modules from Microsoft.

In addition, Associated Material Handling, which was working with Christian Art Gifts on other warehousing projects, suggested that Johnson consider the Radio Beacon warehouse management system. Of particular interest was its “Lite” version, a feature-rich WMS designed for small to mid-sized wholesale distributors.

The ability to seamlessly interface the ERP with a WMS was a concern for Johnsen. When he learned that a stable integration component (from Blue Moon Industries Inc.) already existed for Great Plains and Radio Beacon, he made the decision to implement the new WMS. Associated Material Handling financed the hardware and software.

After two weeks of installation and training, the WMS was up and running. Christian Art Gifts also implemented a wireless system that includes wireless access points, and handheld mobile computers and printers.

With the WMS updating inventory in real time, inventory control has improved significantly. Duplicated and missing picking lists are a thing of the past. In addition, Johnsen says, “we do a lot more with this system than we did with the manual system.”

The WMS has changed the way Christian Art Gifts operates its warehouse. A control panel enables warehouse management to see how many orders are in the system. Radio Beacon breaks down levels of products picked into half-hour segments, so Christian Art Gifts is able to accurately track productivity levels throughout the day. This enables them to strategically schedule staff to ensure order completion. The WMS also has improved planning, service, and order accuracy, and streamlined cycle counting, putaway and replenishment.

Realizing significant improvements in labor cost, accuracy, and efficiency by implementing a powerful system in a short time, and at low cost, Johnsen says, is “a great story for a small business.”

DC/Warehouse Information Needs

Regardless of the size of their operation, distribution center and warehouse managers need good data to operate their facilities effectively. Here’s a roundup of the types of information needed, according to Donald J. Derewecki, executive vice president, Gross & Associates, a material handling logistics firm based in Woodbridge, N.J.

Operations planning information

  • Inbound and outbound physical volumes
  • Inventory levels
  • Special services required by customers

Inventory information

  • Physical quantities by SKU
  • SKU location(s)
  • Number of days’ supply, broken out by SKU
  • Product age and product expiration by SKU/location

Order information (daily and peak hourly if applicable)

  • Number of orders
  • Number of lines
  • Number of physical units—full pallets, cases, pieces

Backlog status (inbound customer orders—cases, pieces, pallets)

Percent of completion of the day’s requirements by function (receiving, putaway, replenishment)

Order fill rates

Error rates

  • Orders found internally
  • Orders identified by customers

Labor productivity information

  • Overall throughput rates
  • Functional productivity rates

Asset utilization rates

  • Actual staff vs. “computed standard” staff requirements
  • Dock doors
  • Staging area
  • Storage locations by type

Mistakes to Avoid

When it comes to collecting and using data in the warehouse or distribution center, facilities may not have all the information they need to properly manage the warehouse operation and related business requirements, notes Donald J. Derewecki, executive vice president, Gross & Associates, Woodbridge, N.J.

“A common mistake is having to manually manipulate the data provided to turn it into useful operations information,” Derewecki says. In addition, “too many companies underestimate the amount of planning and implementation effort required for an IT project,” he says.

Because they don’t dedicate the resources required to do it right the first time, “they are forced to spend more to recover from a disaster that could have been prevented.”

Another systems challenge faced by small facilities is the inability to dedicate staff to an IT implementation.

“Smaller companies and smaller distribution centers typically split their warehousing and IT people between two jobs—their daily work and the system install,” notes Michael Krabbe, project manager for CIBER Enterprise Solutions (formerly DigiTerra), Cincinnati. “It’s very difficult and challenging to get everything done and meet the timeline” when operations staff have to get the orders out at the same time they’re serving on a systems implementation team.

Does Your WMS Offer Best-in-Class Performance?

Advanced Warehouse Management System (WMS) technology can enable you to implement best practices in your warehouse or distribution center. Simon Bragg, European Research Director of ARC Advisory Services, has put together 10 questions you can ask to determine how effective your WMS is:

  1. Can you handle multiple orders simultaneously?
  2. Does your inventory accuracy exceed 99 percent?
  3. Can you give customers a totally reliable delivery date?
  4. Does your WMS readily deliver metrics—such as units moved per man hour, cost per unit moved, age of unfulfilled orders—that you can use to improve operations?
  5. Can you smooth the workload in each section of your DC?
  6. Do you pack items to simplify tasks to be performed by your downstream partners, such as loading roll cages to match the sequence in which retailers display items on the floor?
  7. Can you—and your customers—perform single scan receiving rather than scanning each inbound item?
  8. If you have multiple facilities, does your WMS enable you to work across the network, for example, transferring customer orders from one DC to another when an out-of-stock occurs?
  9. Can you eliminate manual quality checks?
  10. Can you handle returns through the WMS?

You should be able to answer yes to most questions, ARC says. With 9 or 10 positive answers, your company is at the leading or bleeding edge of technology adoption.

Saying yes to 7 or 8 questions indicates that you’re an early adopter of the most proven warehouse management technologies.

Answer yes to between 4 and 6 questions, and you’re probably a pragmatic user of available technology. This may be accompanied by what ARC calls “fairly average supply chain performance.” With three or fewer yes answers, you have plenty of opportunity for improvement!

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