Many companies strive for greater operational efficiency (increased throughput and labor efficiency) in their warehouse order fulfillment operations. This is not a new topic for distribution management! Yet, I continue to find, with some companies, a lack of a “refined operational excellence” focus, despite the resources (and the proven methods) available — for a very long time.

Some companies seem to have cherry-picked certain areas of required focus, implementing something in a conceptual way but not in the actual execution, which would provide the improved operational metric improvements that they may have originally sought to obtain.

And this is true despite all that has been said and written over the past several years. This makes me recall an old saying: “The best time to plant a tree was 20 years ago. The second-best time is today.”

So, here are three “golden rules” to consider. These rules are pretty basic, whether you own a basic enterprise resource planning (ERP) system or you have a warehouse management system (WMS) module and can provide the data necessary to analyze your warehouse transaction activity. Your objective is to integrate these rules into a combined impact that can be transformative for distribution center (DC)/warehouse operations: a strategy for speed-of-flow and future distribution transaction cost avoidance.

Golden Rule No. 1: Slotting 

Sometimes called “inventory positioning,” slotting simply means identifying those SKUs that account for a high percentage of “hits,” or the number of times they appear on sales orders or branch replenishment, and shipped over a specified period (let’s say, the past 12 months). Position them in your DC/warehouse where they are most accessible and ergonomically available. 

Some of those SKUs may be intuitive to you; others may come as somewhat of a surprise. However, it’s common to find yourself with a relatively small percentage of your SKUs representing a large percentage of your order hits. For example, 15% to 25% of your SKUs equal 50% or more of your total order hits. It’s not uncommon; Pareto’s Law is everywhere!

What’s the intent here? To position these SKUs in your facilities, most advantageously. It’s about positioning high-demand SKUs near each other so that picking them or putting them away (after receipt from a vendor) reduces the amount of walking, driving a forklift or pushing a cart. Traveling is typically 60% to 70% of labor costs. In other words, it reduces the need for people to move around as much. The outcome:

Provides a critical path that reduces the time needed to look for the material. Surely beats trotting all over the warehouse!

Helps determine which storage location to go to next (which SKU to pick next).

Dramatically increases the speed of flow.

So, slotting represents a primary gateway; the greatest potential source of warehouse performance improvement and the reduction of nonvalue-added activities, which is nothing but waste. It’s more than positioning a few high-sellers on some aisle endcaps!

The designated high-hit SKUs can reside in a high-velocity pick zone. It can often be set up as a separate zone because of the high velocity of the products it contains. Variations of this approach depend on the SKU’s physical characteristics (size and weight). It can also be augmented, in this particular example, by three additional enhancements, but it’s not a prerequisite:

1.    A conveyor to move the product onward (an effective “goods-to-person” application). 

2.    Flow racking that provides improved space use, greater ease of storage, greater visibility to product, and specific ergonomic benefits and controls.

3.    The potential for more batch-picking capabilities and controls.

So, how do we determine these high-hit SKUs? It shouldn’t be difficult. A simple report writer, probably already contained in your ERP system, can capture and then sort SKUs by “hits” activity for a specified period, then sort from highest to lowest. 

Golden Rule No. 2: Warehouse Worker Direction

It should be the objective of every ERP/WMS system to attempt to direct warehouse workers to the right place to find a product, whether it be from a printed hard copy sales order or a pick request displayed on a radio-frequency (RF) hand-held device. This is sometimes called “orchestration.” 

Warehouse workers want to know what to do next: what to pick next, what to put away next. This is typically accomplished by using storage location IDs, which describe the zone, aisle, shelf and bin —and from which a SKU will be picked or put away.

Slotting and storage location IDs simplify the identification of where the warehouse worker should go next. The storage location ID provides that direction, depending on the technology features you possess (printed on a sales order or appearing on an RF hand-held device). 

I’ve directed or witnessed many implementations where the storage locations are assigned strictly based on the Hits Report. Walking, other means of travel, etc., is significantly reduced. It’s mind-blowing! Newer warehouse management applications such as robotics rely heavily on this. Hey, even robots need to know where to go/what to do next!

Golden Rule No. 3: Balancing Your Workforce

Depending on the level of the technology you possess or can readily develop, create the data (preferably in real time) that allows you to “see” the open order status of orders in your DC/warehouse at a chosen time. In other words, you want to know the number of picks remaining. 

Think about this as if you owned a grocery store. As the checkout line gets longer, you must consider assigning more cash register personnel and baggers to keep up; i.e., reallocating your resources to reduce bottlenecks, also known as resource balancing. Critical data like this should be visible and made available to DC/warehouse management personnel.

So, how do you stack up?

Tired of kicking the can down the road? Consider the 3 Golden Rules. Leverage them to positively increase the speed of flow and get control of distribution operating costs. They are your antidotes to time!