Building Your Distribution Center with Vision and a Solid Foundation
By John T. Phelan, Jr., P.E., TriFactor
Noted business philosopher, Joel Barker once wrote, “Vision without action is a dream. Action without Vision is simply passing the time. Action with Vision is making a positive difference.” So what does this have to do with effectively managing a warehouse or distribution center? The answer is simple; everything.
As a material handling systems integrator, I get the fortunate luxury of being able to see many different business operations spread across multiple industries. Although the products are different, the goals are typically very similar – receive, store, pick, pack & ship as quickly and efficiently as possible. Additionally, the challenges among many of these businesses are extremely alike. Over time, the companies that grow profitably are those that have established a Vision and an associated plan to achieve that Vision. Those businesses that only address the short term and recurring issues either plateau or lose marketshare.
Establishing the Vision
For Distribution Center managers, creating the Vision, or at least a rough understanding of the Vision, should not be a daunting task. It first starts with understanding the market that is served and the sales channel used to serve that market. That’s right, the Vision must be customer focused and not internally focused. For example, a customer focused Vision in the health care supply industry using a Direct to Consumer sales channel might include 100% Order Accuracy or Zero-Defect Shipments. On the other hand, a non-customer focused Vision might include 100% Inventory Accuracy, unless of course an improperly accounted inventory negatively affects the customer more than it does the inventory manager (I doubt it). Again, the Vision must be in line with the demands of the market. Here are possible standards to consider:
- Fastest Lead Time in the Industry (1 Hour, 1 Day, 1 Week, 1 Month, Whatever is Fastest)
- Lowest Cost Per Unit Shipped in the Industry
- 100% Real Time Order Tracking
- 100% Order Accuracy
- 100% Zero Defect Shipments
Now that the Vision is established, a plan must be put in motion so it becomes more than a dream, but rather a reality. Since 99% of businesses are constrained by a limited budget, patience is the leading virtue in attaining the Vision. In fact, it is often understood that the Vision will never be attained, but should always be driven towards nonetheless.
Just like planning the construction of a building or a bridge, a significant amount of attention must be paid toward laying a solid foundation. The foundation of an effectively operating warehouse, big or small, is the processes. Once the processes are in place and as organized as possible, often times the automation come next. In our comparison to building construction, we have associated the foundation to the processes and the walls to the automation. The mortar that ties the walls and the foundation together should be a robust Warehouse Controls System (WCS).
By robust, I mean one that not only manages the daily activities such as inventory control, order fulfillment and shipping, but also is able to communicate real-time through multiple protocols to both higher level ERP/WMS systems (if applicable) as well as lower level equipment controls such as PLCs or HMIs.
The reason why this is so important is because it is the gift that keeps on giving with respect to achieving a return on investment. Typically, businesses do not start out with the size and complexity of systems like Wal-Mart or Amazon.com. Most of the time, the warehouse is operated using primarily manual processes with limited software to manage the efficiency. As the customer base grows, challenges emerge. Keeping an accurate inventory becomes increasingly difficult. Increased order volume results in more labor in the order picking process, causing a lot of personnel traffic in a congested space, and preparing completed orders for shipping through multiple carriers can be overwhelming.
When growing businesses start feeling these types of pain, they often turn to automation that might remedy the immediate problem. However, that remedy might not help facilitate the resolution of issues further down the road. This is why it is recommended to start streamlining manual processes using a Warehouse Control System that has modules associated with all of the business functions that a completely automated distribution center would need, but don’t have to be applied until the specific functional need exists. We recommend WCS early in the streamlining process because eliminating waste associated with manual processes will provide better return on investment than going straight to automation and equipment.
As an example of the efficiencies gained by implementing a WCS while still using manual or limited automation processes, through the core components of inventory managements, order management and shipping management, warehouse operators will reap in some of the following benefits:
Inventory Management Processes
Utilizing Advanced Ship Notices (ASNs) from vendors in order to plan for receipt from vendors ahead of time can reduce check in time, improve in-stock accuracy, reduce shrinkage and allow for crossdocking items that are backordered.
Directed putaway for warehouse operators based on the WCS slotting routines is another way to manage the location of the inventory effectively so that downstream tasks are as efficient as possible. By storing items in locations that match their pick velocities, the order picking process is significantly improved. Higher velocity items are stored at the easiest & closest locations while slower items are not taking up premium real estate within the warehouse.
Another WCS operation within inventory management that improves downstream processes is putaway by multiple pick methods. Since SKUs can be picked either in eaches, cases, or full pallets, a WCS that understands the inventory level not only for the specific SKU in total, but also the SKU levels in the different storage medium that matches the various pick methods. For example, if a case of items is received and the inventory level in the “each” pick operation for that item is low compared to the inventory level of that same item in bulk storage, the operator should be directed to replenish the “each” picking operation instead of defaulting to bulk storage.
Additionally, a WCS controlled replenishment process allows the operators to define low level thresholds for eaches, cases, and pallets in order to reduce the amount of shorted orders or to reduce the labor required for order pickers to stop what they are doing and pull from bulk storage to fill orders. Also, a WCS inventory management system can direct operators to top off certain SKUs in their pick locations based on the upcoming wave of orders that will be dropped to the picking operation.
Finally, a robust WCS inventory management system can improve the inventory accuracy through multiple types of cycle counting as well as physical inventory without using spreadsheets or cumbersome paper files. The system would allow inventory managers to cycle count by day, month, quarter, etc. as well as by SKU or location in the warehouse.
Even in an order picking process using basic paper to fulfill orders, a WCS that manages the waves of orders to be picked and thereby control the printing of the pick tickets will provide dramatic improvements in productivity and performance. The WCS should understand the SKUs to be picked in the wave and will balance the work load for the order pickers appropriately. Whether grouping orders by specific attributes such as shipping methods, delivery zones, order types or location of picking zones, the WCS will assign the most efficient order picking instructions to the operators. This is a far superior alternative to simply downloading the orders for the shift, printing out the pick tickets and then distributing the tickets to the order pickers in a random fashion.
An effective order management module in a WCS would also provide picking cartonization; that is, allowing order pickers to pick directly to the appropriate shipper (carton). This reduces the double handling of SKUs from tote to shipper which is clearly more efficient. The system recommends the proper shipper based on user defined criteria. Those criteria might be customer directed or simply economically based so that the shipping costs are kept to a minimum.
Typical WCS shipping management modules provide multi-carrier support, especially for parcel shipping, including USPS, DHL, FedEx, and UPS. This support includes supplying carrier compliant documentation, automatically uploading shipping manifests to the carriers, and email shipping notifications to customers with appropriate tracking information.
Additionally, the WCS shipping management capabilities also include address validation prior to processing the carrier compliant labels and documents. This prevents misdirected shipments which could negatively impact the customer’s experience. Also, if there is not a preferred shipping method, the WCS will reach out to all carriers for their rates and determine the most economical means that are still within the appropriate lead time requirements.
Implementing a WCS in a manual distribution operation with some basic supporting equipment such as a server and handheld devices that either capture information or display instructions and simply pass data back and forth to operators is relatively inexpensive, probably between $30K and $60K. Since the typical warehouse operator’s fully burdened cost is typically around $20K to $30K, the WCS would pay for itself extremely quickly in labor savings alone, not to mention the potential improved customer experience.
Foundation is in place, now build on it…
Furthermore, now that the WCS is in place and the manual processes are as streamlined as possible, the foundation for introducing automation and other material handling equipment is also well positioned. The three major functional areas of a distribution center: inventory control, order fulfillment and shipping, can now be integrated with automation and other material handling technologies fairly easily since the WCS that provides decision points is already established. It just needs to be adjusted to communicate with some of the automation and machine controls as opposed to handheld devices or displays. Here are some automation building blocks to add to the WCS foundation over time as the business might require:
Inventory Management Processes
If receiving SKUs by the case, a truck unloader can be located in or near the truck with operators pulling cases and throwing them onto the conveyor. The conveyor could have an in-line scanner that reads the bar code, sends the information to the WCS and the WCS then automatically places the item in inventory and then starts routing and tracking the case. The conveyor can sort the case to the various storage locations of the warehouse or if the product is a backordered item, it can route the case directly to the shipping area, thereby effectively crossdocking the item.
Of course, if receiving by the pallet load, there might be an extra step or two. If the pallet is a rainbow pallet, that is, it has multiple SKUs, more than likely the pallet should be broken down with the cases placed on the receiving conveyor and routed appropriately. If the pallet is a single SKU, the WCS might direct the forklift operator to a putaway location either in bulk storage or as replenishment to the forward pick area where the full pallet picking is accomplished, depending on inventory level in each location.
These inventory management functions at the receiving docks leverage the ASN capability, slotting and SKU allocation planning algorithms of the WCS so that the decisions made during the receiving, putaway and replenishment processes maximize efficiency, improve lead times and better serve the customer.
Probably the greatest area of growth using automation integrated to the WCS is in the order fulfillment process. As previously mentioned, when distribution centers start out, they typically pick to paper using pick sheets generated at the start of the work shift. A lot of times, the pickers take these sheets and along with a cart, travel from storage location to storage location picking items for eventual packing and shipping. If this manual process is efficient, there might be some batch picking process integrated with an order consolidation station. But nonetheless, these processes reach a point of diminishing returns as the volume increases.
When the orders grow and become more complicated, a pick module is often introduced into the operation. The pick module can be single or multiple levels and includes at least one take-away conveyor traveling the distance of the storage locations within the module. These storage locations might be either shelving, carton flow rack or pallet flow and they are dependent on the order profile of the SKUs being stored in the module. By integrating with a WCS, paper picking can be migrated to a more accurate and faster means of picking, such as Pick to Light or Voice Picking. These methods keep the hands of the order pickers free while directing them to the appropriate pick location and can also verify quantities picked.
In addition to integrating with more complex picking technologies, the WCS can also direct the picking methodology. The picking methodology may be zone, batch, or wave picking or any combination of the three, further stretching the efficiency of the order picking process.
After orders are picked and sent downstream for packing and shipping using the conveyor system, an inline scale can be integrated so that real time auditing or automatic weight tolerance checking can be accomplished. This is done by scanning and tracking the tote or carton into the scale and comparing the actual weight by the weight that the WCS says it should be since the WCS knows the contents of the tote or carton. If there is a tote or carton out of the user-defined threshold, the tote gets diverted to a QC station for further verification or reconciliation.
Since the WCS is directing one of the most manual processes in the distribution center, order picking, and also capturing the real time pick data and weight verification information, a huge host of information can be provided in the form of performance reports. These reports can measure worker productivity, error rates, and also establish benchmarks for future growth considerations.
By using a multi-carrier label print and apply machine inline with the conveyor, a box can be labeled as it is inducted into the conveyor system and routed throughout the processes, including order picking, auditing, and shipping. These automatic labelers take the place of an operator manually printing and slapping labels at the same time, providing a more consistent location and properly aligned label, which can be critical when it gets scanned prior to various decision points throughout the system.
Furthermore, when using a shipping sorter, after a carton is diverted to the appropriate shipping lane, a divert confirmation signal can be sent to the WCS so that the manifests can be generated and the shipping notifications produced.
Create the Vision, Lay the Foundation and Grow Slowly
Often quoted, Steven Covey’s second habit tells effective people to begin each day, task or project with a clear vision of the desired destination and then continue by flexing the proactive muscles to make things happen. Those in charge of distribution centers and warehouses should take heed to this habit by defining the customer-focused Vision of the operation, laying the foundation of that Vision by streamlining processes, building the walls by effectively using automation and integrated material handling systems and tying it all together by implementing a robust and modular WCS. As to be expected, everything cannot be done at once. Growth should be slow, deliberate and well thought out. Every capital project that supports the Vision should still provide a decent return on investment.