Modern Warehousing: The transformation of the black box

In this battle for efficiency and profitability, the warehouse has taken centre stage. Companies are recognizing that what happens in the warehouse can make a big difference to the supply chain and to their bottom line. They are also starting to acknowledge that some of the biggest productivity gains are potentially within the walls of the warehouse. The warehouse is viewed today as much more than a storage facility.

How has the warehouse changed?

The warehouse started off as a building where goods were stored prior to distribution. Companies spent limited time analyzing warehouse efficiency and productivity. The warehouse was seen as mere black box in a much larger supply chain network. Today, companies expect warehouses to carry less stock and to be much leaner. Efficiency is the order of the day. They have recognized that excessive stock levels often masked forecasting and demand errors.  No longer.

In the modern warehouse, there is an emphasis on speed, as product flow is of great importance. One of the key objectives is to move goods at great velocity along the chain. To do this, companies are looking beyond the four walls of the warehouse for stock holding, dispatching and receiving. Of note, cross-docking is increasingly playing an import role in current warehousing strategy. According to a Maltz survey, best-in-class warehouses cross-dock an estimated 50 percent of incoming goods.

Warehouses also provide companies with opportunities to be greener. Warehouse design has been propelled to the forefront of a green movement. Green technology makes use of natural light and renewable energy. In addition, the modern warehouse is smaller and narrower, making better use of allocated space.

Warehouse functions used to be focused on execution.  Today’s warehouses often offer additional customer services, such as customization and in some cases, even light manufacturing. Warehouse management is becoming a highly specialized field, and companies are increasingly looking at third party operators (3PLs) to own and manage warehousing operations.

How has warehouse technology changed?

The warehouse is being transformed into an information hub. Technology is improving visibility in the supply chain and allowing greater opportunity for collaboration.  In the past, warehouse technology was limited to electricity. Today’s warehouses require advanced technology to deal with the increased complexity in the business. Warehouses need to handle vast amounts of data and companies are demanding increased accuracy. With companies increasingly applying lean principles in warehouses, the acceptable margin of error is getting smaller. With regards to warehouse operations, it has been acknowledged that Enterprise Resources Planning (ERP) systems have some limitations. This is particularly so when considering yard management and the growing importance of cross-docking. Today, companies are looking beyond stand alone ERP system. The implementation of Warehouse Management Systems (WMS) provides companies with increased functionality and visibility in the supply chain.

In the internet age, warehouses need to interface with customers directly. Small parcels and increased customization is commonplace. Companies like E-Bay and Amazon have spent vast amounts of money and resources to optimize their warehousing solutions for an ever more expanding and diverse customer base. Companies are demanding solutions that can adapt to the agility of the modern supply chain, where real time information is increasingly important.

Where are areas of opportunity?

Several aspects of warehousing are receiving attention, one of which is worker’s productivity and how it can be maximized. For example, workers traveling in a warehouse can be responsible for performing certain duties on their way to a specific location. Workers can be trained to be multi-skilled.  Companies can now measure the total distance traveled by employees in the warehouse.  Movements are tracked. Non-value adding activities are identified and corrective actions are taken.

Lean also needs to be considered for warehouse layout. Reconfiguration and redesigned layouts can provide real cost benefits to the organization. For example, companies can employee lean tools such as value stream mapping to evaluate the information and product flow of information in the warehouse. By better understanding the flow of information and products, companies can identify potential bottlenecks and delays in the system.

While the entire system is important, in any warehouse operation, the goods receiving area is a critical part of the operations. Companies need to evaluate processes and systems and ensure product receiving is done in the most efficient way. For example, a good benchmark for receiving goods is a maximum of two moves, but preferably one move. Companies need to constantly evaluate process metrics and determine waste in the system. In the modern warehouse, information replaces inventory. Companies need to evaluate how integrated their systems and processes are with their collaboration partners. It is critical to develop standardized processes and systems to be used by all in the supply chain.

In addition to goods receiving, companies should evaluate storage and stacking techniques.  Techniques may include making better use of overhead space. By elevating the packing space, companies can increase the overall warehouse space, without the need for additional storage space. Companies can also assess the warehouse aisle and make use of wide angle warehouse handling equipment. Companies need to assess picking techniques and identify the methods that work best for them. Picking techniques might need to be altered for seasonality and changing consumer demand.

For warehouse operations, compliance, such as labeling and documentation, is increasingly important. For example, customers such as Wall-Mart require radio frequency identification (RFID) compliance even in their emerging market operations such as China. Companies need to evaluate ways to standardize documentation and simplify processes.

For any modern day warehouse to survive, it needs to engage in a continuous improvement program. The modern day warehouse need must strike a balance between need and cost. Warehouse improvements go beyond technology, and technology is still a long way from replacing all employees in the warehouse. The modern day warehouse requires a multi skill workforce, with employees responsible for more sophisticated tasks. Gone are the days of mere stock holding and delivery.

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