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Warehouses and Distribution Centers: The Supply Chain’s New Efficiency Experts?

October 18th, 2012

I’ve had a number of conversations this week with leaders focusing on improvements in supply chain management, specifically in a warehousing operation.  This reminded me of a supplychainbrain.com article from some time back that featured one our our long-running customers and made the argument that companies should think about their warehouse/distribution center floor for some low hanging fruit performance improvements.   Warehouses and distribution centers are mission critical components of the overall supply chain, but seem to get very little attention when it comes to process improvement.  This is a mistake as a careful analysis would likely show things like:

  • High or unpredictable cost of operations
  • Poor use of space
  • High cost of stock levels
  • High resource levels needed to sustain customer order shipments, or, worse, a complete inability to consistently meet customer expectations

Download 3PL brief

this short Executive Brief that discusses the importance of CI for companies whose business success is a clear function of effective and efficient warehouse and distribution operations – namely 3PLs.  Relevant reading even if you’re not a 3PL, but have warehousing and distribution operations

Now, what can you do about it.  A focused effort to analyze the underlying processes, not the activities, of the warehousing operation may provide a cost-effective answer.  Structured process improvement approaches, when applied correctly, can make a dramatic positive impact to these operations. At a high level, the goal is to understand the core processes, identify to the highest value performance gaps, and then design and implement right-fit improvements. Where might focus be directed?

  • Poor warehouse layout & design?
  • Warehouse process flows are not well defined and therefore the warehouse is cluttered and disorganized, possibly dangerous?
  • High cost due to excess Inventories?
  • Lack of basic WMS functionality?
  • Poor stock and location controls -Can’t find stock for customer orders?
  • Picking productivity poor which is driving additional labour costs?
  • Overtime requirements just be meet basic SLA terms?
  • Stock loss is an everyday occurrence ?
  • Poor people productivity?
  • No visible floor controls for Input and output product flows?

In the article Charlie Jacobs discussed how APL Logistics (a long time Qualtec client) rolled out a simple but effective lean based continuous improvement  program that made improvements in several of these areas, saving one customer over $1M. That alone should raise some eyebrows!

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