Diverse Targets For Warehouse Cost Reduction
I recently took a step back and tried to determine what type of company would use our warehouse consulting services. We try to help businesses with their warehousing needs by providing a variety of consulting services. Our goal is to help businesses cope with these challenging economic times by making recommendations for controlling their operating costs. My focus was on developing a list of potential businesses that might need assistance. In the past, our client base consisted of the companies you would traditionally think of as direct to customer and business to business entities. I thought a good place to start would be to research recent past warehousing clients.
A sample of the large variety of recent businesses that used us to help in their warehouse operation or requested information on our consulting service offerings looks like this:
- One of the world’s largest pharmaceutical companies used us to help strategize on the fulfillment of their sales and collateral materials.
- A government- run laboratory that manages the operation of a particle accelerator needed help organizing their five storage facilities and the storage of parts and equipment used in experiments and maintaining their accelerator.
- A restaurant supply company that manufactured, among other things, pizza trays and dish covers wanted assistance in refining their fulfillment operation.
- A manufacturer/packager of nuts is looking for a way to increase storage capacity.
- A large state-run university is looking for help in consolidating their storage facilities.
- A campus and online medical college needed assistance in finding an outsourced partner to fulfill orders for textbooks for correspondence courses.
- A regional hospital is redefining the use of their warehouse and is looking for layout help.
- A large third party logistics company is looking for “best practice” implementation in their warehouses supplying “Just In Time” computer components.
- A multichannel company providing supplies to the pet industry and groomers is moving to a larger facility.
- A book publisher asked for help in improving their warehouse operation and inventory control processes.
I started looking for one common denominator between all of these businesses and quickly realized what it was — that most businesses in the country have some connection to a warehousing function and overall supply chain issues. Since most of these, if not all of these, companies face similar issues; it would seem that we all need to focus on finding ways to reduce costs.
In the past, most of our emphasis to reduce supply chain costs was with those multichannel companies that we traditionally considered as “major” players with warehouse and supply chain issues. We now realize that there are a significant number of “non-traditional” businesses as well that impact or are impacted by the costs of their supply chain.
I think my takeaway from this revelation is that – if we want to help improve the supply chain in the US, as well as address the current economic issues facing businesses – F. Curtis Barry & Company needs to look at almost every company and industry in the US to see how we might increase efficiency and reduce costs in the warehouse. No matter what industry you are in, it should be in all of our best interests to look for ways to lower costs and improve service in warehousing anywhere we can.
Bob Betke is vice president of F. Curtis Barry & Company, a multichannel operations and fulfillment consulting firm with expertise in multichannel systems, warehouse, call center, inventory, and benchmarking; Learn more online at: http://www.fcbco.com
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Natural Solutions’ 2009 Summary
As there has been so much negativity in the press about the economy and business failures in 2009, F. Curtis Barry & Company would like to focus on some of the positive aspects of last year. This is the first in a series of blogs that will highlight clients and vendors in the multi-channel retail space and their successes in 2009.
In a recent phone conversation with Tyce McIntosh, President of Natural Solutions, a multichannel order management system provider, we had a chance to discuss and focus in on a number of accomplishments they had in 2009.
From a Natural Solutions’ viewpoint they have viewed the economic time that we experienced in 2009 as an opportunity to do general housekeeping within their application for enhancements that may not necessarily generate new business but make the application better for their customers. Tyce sited the following examples of some of the initiatives they completed in order to enhance the Natural Order application:
- Updated the user and technical document
- Modifications to the daily procedures to improve the throughput
- Performance tuning
- Internal staff training
- Customer visits to review operational procedures
- Taking on new vendor alliances that don’t necessarily have end user contracts.
Tyce also sited that this economic slow down allowed for some of their customers to take on new projects that, under normal busy times, they would not have had the time nor staff to engage in. One customer Tyce sited is Dinn Brothers Trophy, that with the economic slow down it allowed them to be able to devote the time and personnel to the implementation project. He stated that in busier times the resources would not have been as easily accessible. This allowed the implementation of Natural Order at Dinn Brothers to be completed within the time frame that they had established.
Additionally, Tyce said their existing customers look for alternate methods of generating new business; an example of this is Natural Solution’s new partner Taurus Software. Taurus’s business intelligence tool, Manage Metrix, will allow Tyce’s customers to better understand their business metrics and improve upon them.
I asked Tyce what some of the enhancements to Natural Order are planned for 2010. Tyce was kind enough to share the following examples:
- Completion of the Credit Card Compliancy to the latest standards
- Expanded personalization module
- Expanded continuity module
- New vendor interfaces
- Taurus Software, Manage Metrix, data integration project
- Mid size ecommerce supplier
- Expansion on Midco’s interface
In a time when our economy was severely down, positive things can still emerge!
Paul Sobota is vice president of F. Curtis Barry & Company, a multichannel operations and fulfillment consulting firm with expertise in multichannel systems, warehouse, call center, inventory, and benchmarking; Learn more online at: http://www.fcbco.com
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Does Your Order Management System Need To Be Replaced?
Coming out of 2009 there seems to be some positive momentum from this past holiday season with a 2.9% increase over 2008; some of our clients experienced results above their 2009 plan. Because of the tough economic times over the last couple of years; most companies have not invested heavily in the infrastructure of their business with new software technology – even if the need was there.
Now is the best time to asses your current systems infrastructure. Were you able to meet the demands of this past holiday season and meet your service levels of customer satisfaction? Did you have the right inventory to meet demand at the right times? Was your inventory forecasting accurate enough to get the inventory in time to meet your customer’s needs?
Does your current order management system have the functionality needed for future growth? Is it flexible enough to meet the changing needs of your marketing department? What challenges will you face this year to get new functionality added to meet the demands of the business? What system functionality or business processes do you need or want to change?
You should look back now on all of the exceptions that you had this past holiday season – whatever they may have been – and determine how you will over come these this year. It is time you asses your business processes and order management systems as well as prioritize what needs to be enhanced or replaced in order to better prepare you for 2010 and the upcoming holiday season.
Don’t hesitate to contact Jeff Barry at jbarry@fcbco.com or 804-740-8743 if you want to discuss your system needs and projects.
Paul Sobota is vice president of F. Curtis Barry & Company, a multichannel operations and fulfillment consulting firm with expertise in multichannel systems, warehouse, call center, inventory, and benchmarking; Learn more online at: http://www.fcbco.com
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Healthcare Projects on the Rise
Over the past few months, we have noticed a new trend occurring in the type of clients contacting us about our warehousing and fulfillment consulting services. We typically consult to Business to Consumer (catalog, Retail, E-Commerce), or Business to Business companies. More recently, in addition to completing a fulfillment assignment for one of the largest pharmaceutical companies in the world, we have been contacted by regional hospital chains, medical device companies, a vitamin supplier, a medical college providing correspondence courses and others in the healthcare field.
Over 26 years of providing consulting services to hundreds of warehouses around the world, this is the highest concentration of contacts we have received from this vertical. The common theme for almost every one of these assignments or inquiries has been the desire to control and reduce costs. They are looking for ways to increase productivity, improve layout and space utilization, increase service levels to their customers, and to increase control over their inventory. By focusing on these areas, there is a good chance that costs can be reduced. Most other businesses have realized over the years, that warehousing and fulfillment can be viewed as a competitive advantage rather than a cost center only.
With all the attention focused on the healthcare debate, it is encouraging to me to see a segment of this industry trying to “bend the curve” relating to cost. I hope this is a sign of more to come and more companies in this arena contact us and others for advice on how to reduce costs.
If we can help you evaluate and cut costs will improving your productivity and space utilization in your warehouse, don’t hesitate to contact us.
Bob Betke is vice president of F. Curtis Barry & Company, a multichannel operations and fulfillment consulting firm with expertise in multichannel systems, warehouse, call center, inventory, and benchmarking; Learn more online at: http://www.fcbco.com
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Post Holiday Warehouse Assessment
It may seem like an odd time to review your warehouse operation just after coming out of the Holiday crush, but it is the perfect time to dissect what worked and what didn’t during the peak season. A systematic review of the warehousing and fulfillment functions can yield big savings for the upcoming year, as well as prep your operations, staff and warehouse for Holiday 2010.
Ask yourself the following questions to see if there are areas that you can focus on to improve your bottom line this year:
- How well did you meet your expected productivity rates during the peak? If your rates fell below plan or expectations, was there something that caused it to happen? Conduct a meeting with the warehouse workers involved to pick their brains as to what can help improve productivity and what stood in the way of meeting their goals.
- Did you meet your service level goals for order turnaround, accuracy, and fill rates? If you failed in these areas, the impact on your customers and their lifetime value can be significantly eroded. If you had issues meeting your service expectations, try to determine if the issues centered around productivity, inventory management, or system support factors.
- If you hired temporary or seasonal warehouse help for the peak, how well did they perform? Are there any training issues you might address in order to correct any deficiencies you noticed in their performance?
- What was the general condition of the warehouse during the rush in terms of overall organization, cleanliness, and compliance with established policies and procedures? If you had trouble keeping the warehouse condition up to an acceptable level, investigate the causes and provide correction for next year. You can’t afford to become slack on warehouse conditions during peak. If you do, it is usually a contributing factor to many negative issues arising during peak.
- Did your system (software) give you the support you needed? Were schedules met and performance levels maintained during peak?
Taking the time to ask a few follow-up post season questions can lay the groundwork for a more productive warehouse in the coming year. If you need advice or would like to discuss how we can assist you in conducting a warehouse assessment, give us a call at 804-740-8743 or email Jeff Barry at jbarry@fcbco.com.
Bob Betke is vice president of F. Curtis Barry & Company, a multichannel operations and fulfillment consulting firm with expertise in multichannel systems, warehouse, call center, inventory, and benchmarking; Learn more online at: http://www.fcbco.com
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Changing Your Warehouse’s Culture
On one of our recent warehouse projects, something struck me that I knew existed but always seemed to lurk in the background. This particular project brought it to the forefront. It is a simple observation but one that can cause havoc in an organization. What I observed was the staking out of territory to the point that the sum of the parts was far less than the whole.
It is human nature to want to protect your turf and do what is best for your area of the operation. When we look at the warehouse function and the multitude of other functional areas that impact or are impacted by fulfillment, it is frightening to think that the “silo” mentality is as strong as it is. With all of the external issues a company faces today, the last thing you need are internal conflicts that are aimed at sub optimizing the profit potential of the whole business.
There are many ways that this phenomenon manifests itself. One way is the approach that is based on the supposition that everyone else needs to change the way they handle their jobs and everything would be all right. Looking inward to see where improvements can be made is a tough process. It is much easier to look for ways that others can change. This attitude will never result in effective change taking place that can improve your business.
A second approach we see involves the desire to make changes in one part of the operation without consideration for the entire business organization. Making changes to save $1 in the warehouse and cost $2 in shipping is probably not a good decision. It is necessary to look at the big picture to see what impact the change might have on others. In this way you are able to make the best decision for the business.
A variation on the above theme occurs when there is not one individual looking out for the good of the entire enterprise. Someone needs to drive the change process from a corporate level who views the maximization of the enterprise as the key driver for change. Forcing change is difficult enough but to get someone to agree to make a change that might negatively affect their operation for the good of the overall business is a real task. It takes a leader to make the tough calls that can benefit the big picture at the expense of some parts of the business.
One aspect that makes change difficult is the way in which employees are recognized and rewarded. The old adage says be careful what you ask for, because you might get it. People will do what they think will be rewarded. If you have preached cost control for years in the warehouse and then all of a sudden expect them to come up with ideas that might increase warehouse costs but reduce overall expenses, you may have a long wait.
Getting staff in sync with the corporate good is tough but well worth it in the long run. Changing culture is not easy but if you suffer from the “silo” mentality, you are missing out on potential opportunities.
Bob Betke is vice president of F. Curtis Barry & Company, a multichannel operations and fulfillment consulting firm with expertise in multichannel systems, warehouse, call center, inventory, and benchmarking; Learn more online at: http://www.fcbco.com
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Establishing and Running a Hot Pick Zone in Your Warehouse
The idea that all items are created equal just does not fly when you are slotting SKUs in the warehouse. An often overlooked attribute of SKUs is their sales velocity. This simply refers to the number of physical shipping units of each SKU that are sold and shipped daily, weekly, monthly or annually.
It is very surprising when we work with warehouses and discover that they do not know how well each of their items sells. This is fundamental information required of every efficiently run warehouse. The old 80 – 20 relationship applies in most cases where 20% of your SKUs represent 80% of your sales. This ratio may change from company to company, but invariably, a small number of your SKUs represent a significant part of your total sales.
By identifying those SKUs that sell faster than others, the slotting process begins to make sense. Locating faster selling items closer to the packing and shipping area saves time in many conventional operations. The extreme utilization of the 80-20 rule is to identify those few items at the top of the velocity list and treat them differently. One way to treat these very fast sellers differently is to consider a “Hot Pick “concept.
The idea behind the “Hot Pick” concept is to segregate those very fast selling items and locate them in the most advantageous position possible relative to picking and packing and providing them with the slotting space required to minimize the replenishment dilemma of very fast selling items. This area can be fixtured with a variety of storage media from shelving to flow rack to flow through pallet rack based on the cubic velocity (cube of the item x the number of items sold in a defined time period) of the SKU. This time period is a reflection of the desired replenishment frequency of the SKU.
In many warehouses, this area is somewhat fixed with the SKUs assigned there and changes only when the person in charge of slotting realizes that a change is required. This works with attention from the assigned individual to keep it current to reflect changes in sales velocity.
Some sophisticated warehouses employ a more dynamic process where the items assigned to this area change with each warehouse wave of orders processed. It requires system support to identify unit sales demand by wave and select the highest demand items to be located in the “Hot Pick” area. These items can change with each wave processed. Usually the inventory placed in the pick slot equals the wave demand and is emptied after each wave.
Whether you use a basic or more complex version of the concept, you can reduce picker travel time and increase overall warehouse efficiency if you consider and evaluate the potential of the “Hot Pick” concept. Start small and let it grow to the level that still cost justifies the separate pick area.
Bob Betke is vice president of F. Curtis Barry & Company, a multichannel operations and fulfillment consulting firm with expertise in multichannel systems, warehouse, call center, inventory, and benchmarking; Learn more online at: http://www.fcbco.com
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Warehouse Capacity Improvement
Probably the most frequent lament heard from our warehouse clients is the “I am running out of space in the warehouse”. Unless you are that rare company that has control over your forecasting and inventory management functions, you have probably said the same thing.
The first reaction from the warehouse is that you have too much inventory. Although it is easy to dismiss this as typical whining, there usually is some basis to the complaint. Take a quick look at the aging of your inventory and apply the true carrying costs of that aged segment to determine if it makes sense to consider some type of liquidation to reduce inventory levels. Having said that, let’s take a look at some ideas that might increase the storage capacity in your warehouse.
There are the obvious issues of overall layout design and space utilization that affect the storage capacity along with the selection of appropriate storage media. After you achieve an effective layout, it is time to look for the fine tuning that can add to capacity. The following list represents several potential options or issues to consider.
- Rack over doors – Most receiving dock doors are spaced far enough apart to permit rack to be erected that spans the door openings. These racks can provide several levels of product storage above the clear height of the door opening. Many companies use this pallet rack storage for pallet or packaging material inventory storage.
- Tunnels in Rack – In warehouses where pallet rack is utilized, a missed opportunity exist if rack “tunnels” are not used over main or cross aisles. Most warehouses try to align rows of rack on either side of a main or cross aisle. The area above these aisles is wasted unless racking is installed that bridges the aisle between the ends of rows of rack. Even allowing clearance for lift truck traffic, it is possible to add two or three levels of pallet storage on these”tunnels”.
- One area to review is the width of existing aisles in the warehouse. Most material handling equipment is designed with a minimum aisle width or turning radius associated with that particular style. Make sure that you have not overdesigned the aisle width and waste potential storage space. In larger warehouses with many aisles of racking, a small decrease in each aisle width can add additional rack bays for storage. Make sure you don’t go too far in making them too narrow and causing other operational issues.
- After you establish the layout and location characteristics, the next job is to make sure you utilize all of the potential space in each location. We see instances where one or two cases stored in a location designed for a full pallet. It is necessary to have a variety of location sizes to accommodate the variety of storage needs on a product by product basis. Another waste of space occurs in picking areas where only the front portion of the pick slot is utilized with empty space left behind. The slotting process should take care of this, but we see it a lot in many warehouses. Make sure the pick slot is designed to fit the cubic velocity of the SKU. It is impossible to attain 100% of capacity on a daily basis but the higher % you can maintain in established locations, the more space you will have available.
- Although they can be costly to install in some cases, the option of installing a mezzanine makes sense in some situations. If you can find the right use for this type space, you can double the footprint of the warehouse where you install the mezzanine. Issues such as beneficial use and the cost per square foot of space in your area will determine the potential use.
- One of the key ratios to consider in developing space saving ideas is the ratio of aisle space to storage space. One way to reduce the ratio is to block stack pallets of product on the floor and stack them two or three levels high. It requires enough inventory of the same SKU and product that can be stacked without damage. Floor stacking pallets four or five deep is not uncommon in operations with high stackable inventory per SKU. This ability to deep stack pallets with few aisles manages the space ratio to your advantage.
Theses are a few ideas to consider but by no means a complete list. The key is to objectively look for opportunities with an open mind.
Bob Betke is vice president of F. Curtis Barry & Company, a multichannel operations and fulfillment consulting firm with expertise in multichannel systems, warehouse, call center, inventory, and benchmarking; Learn more online at: http://www.fcbco.com
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Improve Warehouse Productivity by Measuring and Posting Numbers
A common theme we run into daily as we work with warehouse operations around the country is how to reduce labor costs. Labor usually makes up 50% or more of the total cost of operating a warehouse when you consider direct and indirect labor, occupancy costs, and packaging materials. Given this high cost, it is no wonder that it is one of the first issues raised during an operations assessment.
The old adage of working smarter not harder still applies today, but the actualization of that adage is becoming more difficult. In many companies, the responsibility of coming up with “smarter” ideas falls to management. You can imagine how that works.
Some organizations formalize a process that involves the people actually doing the work in coming up with better ways to run the warehouse. This is a better idea but still requires management time to facilitate and guide the process to develop meaningful ideas. What about an alternative?
It is common knowledge that most people want to know what is expected of them and how well they are doing. Surprising though, very few warehouses take advantage of this human trait. How many of you record and post performance results for the operation visibly so that everyone in the warehouse knows what productivity level has been reached?
The process does not have to be a complicated one that requires a lot of resources to manage it. Sometimes, simpler is better. If you are able to measure the overall warehouse in terms that you use such as total man hours and orders processed, you can use this process. If you measure to a more detailed level, you have to decide what will work best for you as motivation – is it the warehouse, function, or individual level of posting that will get the best results?
Most warehouses that start to post results and corresponding goals or standards see increases in overall productivity. These increases come as a result of individuals knowing how they are doing as individuals or as a unit and wanting to get better. It is not uncommon to see increases in overall productivity of 10 -15% using this concept.
How many of you would like to gain a 10% improvement in productivity without a lot of management intervention? If you aren’t measuring and posting results, it might be time to think about it.
Bob Betke is a vice president at F. Curtis Barry & Company, a multichannel operations and fulfillment consulting firm with expertise in multichannel systems, warehouse, call center, inventory, and benchmarking; Learn more online at: http://www.fcbco.com
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Online Sales Taxes Now Valid in Three States
In this past Sunday’s (10.18.09) Parade Magazine, which is read by millions, an article caught my eye on Internet Sales Tax – “States Push for Online Sales Taxes”. This has been a recurring threat that has now taken a step forward. The States of New York, Rhode Island and North Carolina are now requiring retailers to collect sales tax on all online purchases. What a way to inform the consumers in these states that they will now have to pay taxes on all of their online purchases regardless of the company having nexus in these states or not.
Consumers will now have to compare merchandise price + sales tax + shipping and processing charges, that also may be taxed in their state, to determine if they will make an online purchase or not. This is bad news in this economy where retailers are in need of all sales they can garner, especially during this crucial fourth quarter. Another way to inhibit people from buying.
Collecting sales taxes from multiple states and jurisdictions will cost businesses the expense of purchasing expensive sales tax software and integrating it in to their websites and order management systems as well as state tax reports monthly. This may be too costly for some companies and may force them out of business.
What will this do to the US Supreme Court ruling that only required businesses that had nexus (physical presence) in a state to collect sales tax?
What are your thoughts? Is the pressure increasing in your state with the budget shortfalls?
Paul Sobota is a Vice President with F. Curtis Barry & Company, a multichannel operations and fulfillment consulting firm with expertise in multichannel systems, warehouse, call center, inventory, and benchmarking; learn more online at: http://www.fcbco.com.
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