Improving Competitiveness through your Warehouse
• Best-in-class warehouse operations are significantly more productive than those with industry average levels of performance according to the Warehouse Education and Research Council’s (WERC) Warehouse Manager’s Guide to Benchmarking.
• Up to 60% of a warehouse operative’s time in put away, retrieval, kitting and order picking tasks is spent travelling from one place to another, often empty-handed.
• Work processes and procedures that do not undergo constant revision and streamlining are routinely found to have 30%+ of non-value added and totally avoidable tasks such as waiting, talking on the phone or looking for tools and information.
These are astonishing figures and the time when they can be overlooked as a reservoir of untapped potential is now most definitely over. When business is expanding and the challenge is to keep up with demand it is understandable that the primary focus might be elsewhere. However, when the economy is tight and competition is fierce it is essential to get everything you can out of everything that you have got. Given that recent WERC surveys of warehouse operations across all sectors indicate that only about 20% warehouse operations are achieving best practice scores against the most significant performance measures, it is clear that there is a major opportunity to be exploited in warehouse operations.
Let’s just do a quick and dirty, back-of-the envelope exercise based around the above facts to get a feel for what we are talking about here. Let’s say that you are running a medium to small sized warehouse operation with 20 operatives in a manufacturing or distribution environment. This will mean that you have a wage bill, depending on your location, of somewhere in the region of e1 million to e1.2 million.
If you could find a way to move just your most critical processes from average to best-of-class on the scale of operational best practice, minimise travel time overall and eliminate dead-leg travel, while at the same time streamlining processes and eliminating non value added and avoidable tasks and you had a way to measure the results effectively, what do you think your level of overall performance improvement might be?
It has been demonstrated that the simple act of moving from an unmeasured to a measured work environment in warehouse operations can yield a 10% productivity improvement. Add to that, the additional improvements mentioned above and I should think that an improvement in labour productivity of 20% to 25% would by no means be an unreasonable aspiration, particularly if you are starting from an unmeasured situation. Aggregated over three years this level of improvement could lead to savings that come to a total of a between e600k and e900k. This is an extraordinary amount of money to be leaving on the floor in a small operation and something that cannot be ignored. Bear in mind also that this is just the labour saving. Other business benefits will also accrue by making these changes including improvements in accuracy, visibility, performance and quality. Clearly, undertaking these types of operational improvements and moving to a measured work environment will have a dramatic impact on the bottom line, and very importantly also the top line of business performance. What would it take to achieve this level of improvement – in other words, what would you have to do to get from where you are to where you want to be?
Inevitably it would take some up-front investment. In this case we are primarily talking about investment of time and commitment, some money – not too much relative to the benefits – and plenty of focused effort and determination sustained over a period of 8 to 12 weeks to bed in the changes. Here’s the high level roadmap;
• First step is to establish the start point. That is to say, where you are now on the scale of best practice and where you want to get to. This enables you to determine the potential for top line and bottom line business benefits that you could achieve in moving up the scale so that you can judge whether it is worth the time and effort to pursue.
• Second step is to decide exactly what needs to be done and in what order – in other words,
prioritization. Then you need to build a plan, assign the required resources and set up a small team with a mandate and sponsorship to deliver the required results in a specified period of time.
• Third step is to put the plan into action and manage the change and improvement through
to completion. In a mid sized operation this will generally take 8 to 12 weeks minimum provided there is strong support and sponsorship from management.
• Final step is to monitor the key performance measures and metrics and provide on-going
support to the operation over a sustained period to embed the improvements on a permanent basis. For this you need a simple and effective productivity measurement system to capture the data and produce the metrics.
Therefore, if you have the requisite commitment AND you want get yourself started on the road to operational best practice, cost reduction and performance improvement now is the ideal time to take action as the economy shows clear signs of bottoming out. This will go a long way putting your warehouse operations in the top league of performance for competitiveness and productivity in preparation for recovery.
Patrick Daly is Managing Director of Alba Consulting a specialised logistics and supply chain consultancy based in Dublin that has helped many Fortune 500 companies around the world improve performance and achieve excellence in warehousing and logistics operations around the world.
Tel: 01 415 1252 Mobile: 086 811 6030