Productivity improvements are based on increases in output per hour. A company can’t improve warehouse productivity to the maximum extent possible if it doesn’t understand the places where time is being lost. So, what are the main sources of productivity losses in the warehouse? Here is how I think about it:
The chart above contains so many ideas, it could serve as an outline for a book. But for today, let me just provide some high-level comments about some of these points.
- Productivity is not the only distribution goal companies pursue; improvements in service and quality are equally (and sometimes more) important. At times there are tradeoffs between these goals, but often less than companies realize. This is because mistakes are far more costly than most companies understand.
- Achieving operational excellence requires not just understanding the places where you are losing productivity, but also having the ability to measure those losses. Some of these value-destroying productivity buckets are relatively easy to measure, others are very difficult to quantify.
- The very best warehouse layouts are those that minimize touches. Practices like flow through and cross docking are great examples. To accomplish this, a company needs to think about the entire flow of a product through the supply chain and how to collaborate with key suppliers, logistics service providers, and customers.
- Companies can spend hundreds of millions of dollars automating large distribution centers (DCs). Automation can absolutely improve the productivity of a DC, but there are also high risks associated with static automation. Static automation includes things like conveyors and other automation systems that are very difficult to remove from a warehouse that is no longer needed. However, new forms of flexible automation have emerged that greatly reduce the risks of automation.
- A company’s risks associated with static automation, or the ability to engage in practices like flow through, depend greatly on the size of the company and its postion in the extended value chain. The further downstream a company is in a value chain – think of retailers – the easier it is for them to minimize touches via supplier collaboration and justify costly automation. Also, a large company has a much greater ability to shift work upstream to its suppliers than a small company.
- The efficacy of unit load material handling is based on the interactive performance of packaging, pallets, and material handling equipment.
- It is not just material handling and warehouse design that are critical; supply chain software and automatic identification hardware are also important. Companies need to stay informed of developments in these areas. Managers need to be power users of supply chain software and intelligent generators and consumers of business intelligence.
- Industrial engineers have a key role to play. They can be used to help set fair labor standards, simulate warehouse layouts, and design ergonomic and safe warehouse practices.