Achieving Fast Payback from Warehouse Optimization

I had the pleasure of attending Manhattan Associates’ user conference last month. This conference included a number of presentations by Manhattan’s customers, partners, and employees. I considered the presentation by Howard Turner to be highly informative and full of practical insights that Logistics Viewpoints readers would find interesting and applicable to their own business.

Howard and others at his company, a tier 1 automotive parts supplier (“Tier 1 Auto”), made a decision to move forward with a supply chain transformation project that would utilize Manhattan Associates’ systems to support its warehouse operations. Tier 1 Auto’s planned warehouse system footprint included Manhattan WMS (WMOS) as well as labor management and slotting optimization to be implemented across several global sites. The internal complexities surrounding the WMOS pilot project delayed subsequent steps in the implementation process and threatened the overall project’s time to value. In response, Tier 1 Auto evaluated the project schedule, its steps, and the sources of potential productivity improvements. They determined that with some added effort, the labor management system (LMS) and slotting optimization software could be implemented independently from the core WMS system. This flexibility offered the opportunity to achieve some small wins that could jumpstart positive momentum, reinforce the project’s value to the company, and speed up the payback for the project as a whole.

Labor ManagLMS Slotting Savingsement Provides Savings
The Tier 1 Auto team decided to accelerate the installation of LMS at two sites and slotting at two others prior to the completion of the WMS pilot project. The sites chosen for LMS were between 300,000 and 600,000 square-feet and staffed by 250 to 500 employees.  A consulting company was hired to assist in the evaluation of labor processes and the establishment of labor standards for numerous direct and indirect tasks. To obtain additional savings in the future, Tier 1 Auto acquired smartphone applications to allow their industrial engineers to internally develop warehouse task time studies for use in subsequent LMS implementations.  The deployments took about 6 months to complete.  For each site, the company achieved approximately 15 percent improvement in receiving metrics and a 25 percent improvement in shipping metrics, with estimated long term efficiency gains of up to 35 percent.  Annual savings amounted to $700,000 at site 1 and $800,000 at site 2. They’re also planning to expand LMS engineered standards to additional processes and locations within the warehouses. This is expected to provide additional savings.

Slotting Optimization Provides Instant ROI
Tier 1 Auto chose to implement slotting optimization at two sites. One site was a 200,000 square-foot heavy duty parts center and the other was a 500,000 square-foot site that managed smaller replacement parts and utilized warehouse automation. At the time, both sites utilized legacy WMS. The slotting optimization process involved minor reconfiguration of the facilities in preparation for a new season based on demand forecasts and historical data. The parameters included item movement history, item and slot attributes, and item movement forecasts. The implementations took approximately three months to complete. The goal of the slotting projects was to realize short term labor cost reductions. This was achieved with a one year payback period for these projects.

Conclusion
Tier 1 Auto understood that the WMS solution was the central software system to its supply chain transformation project. When presented with chronological set-backs, management did not think statically. Instead, they thought creatively and evaluated the project interdependencies and overall objectives. They determined that fast-tracking LMS and slotting optimization prior to WMS implementation would accelerate productivity improvements, speed up the project’s payback, deliver positive momentum, and provide the team with exposure to Manhattan Associates products.