May 2005 | Commentary | Checking In

When Good Warehouses Go Bad

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"Our revenues and earnings were negatively affected by the January implementation of our new Warehouse Management System. Revenues were down approximately six percent compared to the first quarter of 2004. During the latter half of January, and through the month of February, we experienced significant difficulty in shipping customer orders. As a result, sales for the first two months of the quarter were down."

That's exactly the kind of message a CEO doesn't want to take to investors and customers. Yet that is exactly what the CEO of a uniform company was forced to say to investors recently.

Ah, the trouble caused when good warehouses go bad. I hope warehouse heads don't roll over that one.

Can you prevent a screwup like this from happening in your warehouse or distribution center? No. But you can mitigate problems by getting input on warehousing decisions from all relevant functions in your supply chain.

Letting your strategic deep-thinkers go off and make best practices and policy decisions without minute-by-minute input from the logistics realists—the folks who actually do the work—is not the best approach.

Any warehousing decisions, no matter how strategic or tactical, should be made with critical input from all related functions in your enterprise, sometimes even including your customers and suppliers.

We are all motivated to change what goes on inside the warehouse—upgrading a WMS, buying new rack or materials handling systems. Even though you are changing the internal components of your logistics network, it's what happens outside those components that's most important.

You'll find one example in Survival of the Retro-Fittest. On the surface, it appears that upgrading materials handling systems can be done without strategic impact. But as you'll see, even the shelves that you buy can move your warehouse and your enterprise in the wrong—or right—direction.

Here's another example: You're locating a new DC. It's simple—pick a dot on the map in the cheapest city. But, while that may seem like a great decision on one level, its impact extends beyond a chain link fence (see Setting Your Sites).

If warehouses are where the inventory is, and the speed of your inventory tracks to the success of your enterprise, then it makes good sense to get a broad range of input when making warehousing decisions, both tactical andstrategic.

Sure, it takes time and effort to get everyone involved. But does your CEO have time to go before your shareholders and admit that, although you were striving to improve warehouse operations, you knocked three points off your stock price?

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