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  • Roy Strauss

Supply Chain Profitability - Key Concepts for Warehouse Management

1. A warehouse is really a customer service center

It is essential to understand what types and levels of service the company's customers require to run an effective warehouse and meet company goals:

• One must understand how success is defined by their company to keep customers happy

• Customer service goals must be clearly defined to plan properly; one must know required service levels including:

  1. Turnover time from order receipt to delivery

  2. Special services required by customer

  3. Shipping or trucking requirements

  4. Always provide 100% accuracy

  5. Customer reporting requirements

• One must always be current and set up communication channels to get continuous feedback and updates from and to all key stakeholders via:

  1. Reporting

  2. Data updates

  3. Email

  4. Other internal company communication systems

• Should a crisis occur, a plan should be in place to best meet customer requirement prioritizing best customers first

2. A warehouse is also a profit center

Customer service goals must be accomplished within company budgets and planning and managing costs is a key to success

• There can be many excellent solutions - what are the budgetary constraints now and in the future and how can the operation perform optimally within budget guidelines using the best available solution at the lowest cost?

• How can we improve the operation to optimize ROI?

  1. To get acceptance for new innovations, provide management with:

  • The concept

  • The benefits

  • The acquisition/implementation process

  • Risk level

  • A cost benefit analysis with breakeven dates, time

• Which costs are included in the warehouse budget and when is budget approval required from others (from whom, what is the request method - formal or informal, written or verbal, etc.)

• Examine all options to reduce costs including use of space; processes and systems; equipment; staffing; IT support; inventory levels; product placement in the facility and shipping.

3. One must have a growth plan; you cannot get there if you do not know where you are going

• Most companies create a marketing growth plan and then ignore operations. One must create an operational growth plan

• Create scenarios under different growth models (provided from management) to devise a flexible, scalable operational growth plan

• The plan must include planning contingencies to react quickly to change or unanticipated events whether higher or lower than anticipated

• The plan must include monitoring systems to respond quickly to changes in growth or rate amount

4. Metrics - one must know which data and information one needs to plan and execute a successful warehouse

• One cannot manage an effective operation without having the proper data needed to plan, monitor and manage warehouse operations

• Set benchmarks for all key performance requirements (e.g., order completion percentage; orders shipped on time; employee performance; inventory accuracy; shipping accuracy, etc.) and continually measure performance vs. goals, modifying goals as required

• Determine how best to collect and analyze data and how to compensate when the data is not readily available

• Have ready access to the company IT Dept.

5. Design an effective warehousing operation

• What systems and processes do I need for each warehousing function to ensure a timely meeting of warehousing goals both now and in the future?

• What are my options for space, staff, equipment and software and how can I best combine available options for each for success?

• What resources are available to get information, affirmation, and budget approval?

• Be sure the plan can succeed with the present management team/staff

• Who in upper management can one enlist to get support when needed?

6. Space and Layout - Can Make or Break Your Plan and/or Your Budget

• Determine how much space is required and in what shape to support the warehousing operation properly now and in the future based on the systems you plan to use and the service level goals, now and in the future. This will be based on the operational growth plan.

• Design the optimal layout to support the operation within budget and within the constraints of the facility for both present and future operations optimizing both use of available space capacity and flow.

• Know how to best grow the operation as the company moves from startup space requirements to full capacity

• Determine alternate options if constraints will not allow your plan to work

7. Equipment and Staff

• Effective production requires a balance of staff and equipment in the context of budget; one must determine the optimal balance

• Research to determine proper ratios of managers, supervisors, and workers -- do they vary in different warehousing areas? -- experiment after initial implementation

• Write operational procedures for all functions to ensure use of "best practice" throughout and train all staff and reinforce to use "best practice"

• Equipment decisions must be made for automated, semi-automated, or manual equipment. Decisions are to be made based on how to best achieve speed and accuracy for optimal customer service vs. cost and ROI

• The solution must provide optimal customer service during the busiest times or you can fail the company's customers when they need you the most

8. Required Software to be Successful

• Warehouse management - software must support all warehousing operations at required levels of automation and sophistication with the means to communicate to all staff throughout the company based on individual data and information needs with comprehensive reporting systems

• Performance - one must be able to monitor/manage all key metrics to run a successful operation (see "Metrics", #4 above)

• Product movement and inventory management systems/software - required to determine optimal storage and order picking systems and modules to product placement within


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