1. Labor
2. Facilities
3. Workflow and procedures
4. Systems

Labor is incontestably the most expensive area on your profit and loss statement relating to fulfillment, so it’s important to get the most for your payroll dollar. Labor, in turn, consists of four areas, the first two of which can be easily quantified; the others are more difficult to quantify but should not be ignored.

Productivity. Simply a measure of the number of work units processed in a given amount of time, either by employee or by department. Work units can be orders, shipments, lines, etc. as appropriate for each fulfillment function.

Cost of labor. Can be divided into “Direct” labor—the part of your labor force directly involved in physically moving merchandise, accounting for a full 50 percent of overall fulfillment costs—and Indirect labor—clerical workers, managers, supervisors, administrative staff, security, etc.—-accounting for about 17 percent of overall fulfillment costs. Both have to be evaluated in the assessment process. The relationship of labor cost and labor productivity is critical to understanding where to place your emphasis.

Turnover and training: The effect of your turnover rate is difficult to quantify, but rest assured, it is real. The turnover rate itself can be derived from a simple calculation, and should not be overlooked. If your work force changes frequently, productivity is likely to suffer, as group after group of new employees work through the learning curve to reach full competence. In addition, the cost of hiring—screening, drug testing, training, etc.—is escalating. By contrast, a stable work force that knows the system and processes can continually work toward new efficiencies. Ask yourself what you can do to reduce the turnover rate. How efficient is your training process? Are training procedures documented? Are there enough training materials and manuals on hand? All these factors will make a difference in the effectiveness of your training efforts. 

Local labor market: Your local labor pool will also affect productivity and costs in a way that is likewise hard to measure but nevertheless real. A low unemployment rate may mean that in order to hire the quality of worker who can achieve the productivity levels you desire, you will have to pay higher wages (thereby increasing labor costs, already a hefty chunk of the cost column). A higher unemployment rate may have the opposite effect. The local economy is largely beyond your control, yet it can have a profound influence on your operations—all the more reason to get a handle on those factors that you control. 

Facilities should be examined to determine whether you have enough space and whether you are using the space you have efficiently and cost effectively. Components include: 

The cube: Focus cube utilization on Storage, Picking and Packing, areas which together typically account for 70 to 80 percent of warehouse space. Are you using the whole “cube” (square footage and height) effectively? An assessment gives you the ability to maximize the use of existing facilities before spending money and effort to add resources, so that any future justifications for expenditures will be valid and generate an accurate Return on Investment. 

Costs: Typically, occupancy costs (lease or depreciation costs of building and equipment, utilities, maintenance, taxes and insurance) amount to 18 to 22 percent of the total fulfillment dollar. Beyond that, there are many ways, such as calculating the occupancy cost per order or call, to map your facility’s costs and compare the results to other companies. 

Seasonality: Your warehouse will operate differently in peak and off-peak seasons; take both into consideration. In fact, the frenetic activity of peak season is a good time for assessment; you’ll see whether your space is sufficient and whether your systems hold up. Whenever you perform your assessment, keep peak-season needs in mind. 

Housekeeping/Maintenance: Cost of occupancy goes up as housekeeping standards go down. Congestion, inadequate lighting, floors in poor condition and lack of proper maintenance will slow work and put your work force at risk of costly accidents that drain profits. Dirty conditions can affect products, resulting in costly returns, and also adversely affect the operation of bar coding equipment, automated conveyances, and mechanical sorting devices. Besides, the attitude, productivity, morale and retention of your work force will be higher in a tidy workplace. 

Workflow and Procedures are often the easiest areas in which to make improvements. Your goal is to minimize the number of times a product is handled, and the number of steps your crew has to take to move the product through the facility. Providing the potential to match future needs is critical. 

Flow charts: Develop one detailing how product moves from receiving and returns through replenishment, and a second detailing how orders move from pick ticket generation to shipment. As you trace the movement of goods through the facility, take note of how its layout helps, or hinders, workflow. Consider if departmental workflows contradict each other; whether you are using conveyors where you should, employing the right material handling equipment, and have the best storage methods for your product. Work paths should minimize travel time and merchandise movement. Departments should be situated logically in relation to one another to minimize travel between them. 

Slotting systems: Your slotting program will determine how efficiently your staff can pick. The goal should be to ensure product is available when the picker reaches the pick slot while managing the number of replenishments needed. Proper slotting is a key to effective replenishment. The ideal slotting system gives you flexibility. You should re-profile your primary pick slots as part of a dynamic, ongoing process. 

Packaging materials: Failure to keep enough materials on hand, right at the work station, for the warehouse crew to do their jobs (e.g., shipping cartons, dunnage, gift wrap, taping, picking tote boxes, etc.) will mean productivity suffers while workers lose valuable time gathering materials or waiting for them to be delivered. 

Quality control: Identifying errors early saves money; cost of an undetected error is typically $25 to $50. Don’t rely just on returns from customers to gauge your accuracy or quality performance. Make sure you are measuring and reporting internal quality checks and taking action as needed. The assessment should review both incoming and outgoing quality. Vendor compliance manuals should be reviewed as well. 

Systems should provide the functionality and flexibility you need, supporting efforts to maximize space and labor efficiency. In most warehouse operations, the three key areas of concern are slotting, replenishment, and location control. Basic warehouse management system (WMS) functionality should include: 

Inventory management is the most important WMS function. It should track product by SKU, quantity, location and transactions against the location, and ensure inventory accuracy. 

Bar coding will not only significantly improve the accuracy of inventory transactions; but also will help you track productivity in four-walls inventory tracking (receiving, stock put away, pick, pack and ship) and productivity by individual, activity and/or department. It can dramatically reduce paperwork. 

Replenishment: Your WMS should control bulk-to-forward movement of goods, through minimum and maximum inventory triggers. It should also monitor demand quantity in waves of pick tickets, to make sure sufficient quantities are in the forward pick location. Look for opportunities to cross-dock back orders. 

Pick ticket selection: The WMS should enable you to print and sort pick tickets in a variety of ways, depending on order priorities and resource availability. 

Pack verification: You should be able to scan items to check accuracy before shipping. 

Tracking: Your WMS should track orders throughout the fulfillment process and integrate order status to your customer service department. 

Returns: Your WMS should minimize steps for processing returns to keep costs low. 

It is critical that all systems communicate with each other as needed and use common data as much as possible to maximize operations efficiency and productivity.

These four areas and the details within are where all warehouse assessments should begin and focus on. When evaluating these areas take note and talk with your employees that are affected and work daily in these areas to get a true sense of the issues and potential solutions. Listen to your employees and ask for their recommendations, you just might be surprised with the solutions that they come up with to improve the issue.

If you get to a point where you need assistance, don’t hesitate to contact us at any time to discuss your findings and what you need help with. Contact Jeff Barry via email or call him directly at 804-264-8040.

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We recently had the opportunity to have a presentation by Deposco of their ShipForce warehouse management system on demand software solution. Deposco was established in 2004 and has financial backing by The Albermarle Group and UPS Strategic Enterprise Fund. In addition to ShipForce, Deposco also offers an Inventory Management System (StockForce), a Supply Chain Management system (Mobile WorkForce) as well as Business Intelligence (BI) to support on-demand user support of key warehouse metrics.

ShipForce offers all of the standard warehouse management system functionality including: receiving by advance shipping notice (ASN), purchase order or blind, quality verification, put away (directed or user enabled), replenishment, pick selection options, pack verification, inventory adjustments, etc. These functions are performed in conjunction with radio frequency (RF) to guide the user to perform the given task.

What you gain with a SaaS model is reduced need for additional Information Technology staff to maintain another application, the cost of additional equipment to support both a test and a production environment and the cost of license and maintenance fees associated with purchasing the application.

ShipForce has integration points from the client’s ERP application for sales orders, purchase orders, return merchandise authorization (RMA), item master, locations, and additional master type data.  And standard integrations from ShipForce up to the client’s ERP system for shipment details, inventory synchronization, and in process fulfillment status as needed. These data integrations can be sent and received in a number of different ways including: web services, FTP, flat files, HTTP, direct database connections or direct upload into a user integration point.

What you can look forward to gain with a warehouse management system like ShipForce is a reduction in labor force through more efficient automated processes; elimination of manual data entry through the use of RF technology. Reduced shipping errors with the use of pack verification and an integrated manifesting system. Ability to reduce inventory write offs as all inventory locations and their contents are controlled systemically and all inventory movement is guided via the RF.  And finally because of better control and management of what inventory is in the warehouse and where should lead to reduction in overall inventory and increased inventory turns.

Deposco’s ShipForce is SAS 70 type II certified and its audit controls of activities, processes and safeguards were developed by members of the American Institute of Certified Public Accounts (AICPA).  Deposco’s application complies with Sarbanes-Oxley for public companies need for compliance to these standards and it is also PCI DSS certified.

With any SaaS software model you need to be sure that the software you will be utilizing is housed in a secure environment that has redundancy for fail over for everything from a generator for power to multiple sources into the building for supporting WAN. Redundancy is key here to be sure that you have sufficient and timely rollover to protect your company in the event of a failure at the vendor’s location. In addition to this failover protection you will also need to be sure you get validated transaction through put and at what connection speed to the SaaS vendor’s location.  The larger the transaction volume the larger the communication connection will need to be.

So as you embark on your next warehouse management system selection remember that there are many options out there and a SaaS model is certainly one to consider!

If you are planning or currently in the middle of a warehouse management system, ERP, or order management system project and are feeling overwhelmed – don’t hesitate to contact a consulting firm that has successfully completed dozens of systems projects a year. F. Curtis Barry & Company is always available to discuss your project and how we would approach your unique situation. Call Jeff Barry at 804-264-8040 or email him at jbarry@fcbco.com.

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Although the industry has evolved over the years and employs many levels of automation and technology, a common theme is the need to address these timeless objectives. In working with companies who are addressing these issues, there is another common thread. That is a return to the basic processes in the warehouse.

As with issues staying the same, most warehouse functions and processes have remained relatively the same over the years. The application of technology or automation may have changed the way the function or process is achieved, but the objective and overall functional process itself remain the same.

With the ongoing commonality of warehouse functions among companies, we have found that almost every warehouse can enjoy benefits by addressing the basic operating infrastructure and processes in place today. One of the best ways to evaluate your basic warehouse needs is to have an independent warehouse assessment conducted.

The warehouse  assessment process enables you to identify areas where you can improve operational performance. The five basic components of the warehouse assessment are:

1. Walkthrough and observations of the operation

2. Data gathering of necessary information and metrics

3. Interviews with key staff members

4. Report analysis to determine current productivity and service levels

5. External benchmarking to look for areas of potential improvement

Walkthrough. One of the first steps in the assessment is to take time to walk through the facility and observe general operating conditions and effectiveness of the processes being used. This is not a detailed analysis, but developing overall impressions can guide the more detailed steps of the assessment to be completed later. Many times, the initial walkthrough and observations help focus and direct the assessment process. After you have seen enough facilities, it is possible to form initial opinions as to the current level of productivity and service very quickly. The general cleanliness of the facility, employee attitude and morale, overall work pace, information posting for employees, congestion, appropriate use of automation, bar code applications, space and cube utilization, etc. are all issues that can be observed during the walkthrough that can provide clues as to the appropriate focus for the assessment. Using all of the tools available can provide valuable information for the direction of the detailed assessment.

Data gathering. The assessment will involve some new research, but chances are you’ve already been collecting a lot of the data for other purposes. Designing an assessment is a matter of putting it all together. Most assessments are a combination of research analysis, report review and on-site fact-finding. The first step is to gather all the research you already have and collect any that you are missing. It is always necessary to establish expectations or standards as the baseline for any comparisons. Measurement against these standards identifies areas where expectations are not being met and action is required.

Staff interviews. Another important step is to talk to those staff members directly involved in the activity being assessed. Interview key management staff to gauge their perspective on the operation and any future plans for growth, product changes, or planned process changes. Then talk to the workers on the floor doing the work in the warehouse. If anyone knows where the problems and opportunities lie, it is the people who live with the issues day in and day out. Don’t miss this important resource; they are many times the best source for information.

Report analysis. Among the types of reports you should consider are basic internal operations performance reports, including service levels such as order shipping accuracy, order turnaround time, etc.; receiving; quality assurance; stock putaway; returns; inventory control; replenishment; and picking, packing and shipping. Examining these reports can help reveal which departments are reaching desired levels and which ones need some attention. The reports usually will include information relating to budgets or expectations compared to actual results in key areas of the business, covering productivity as well as service metrics.

Benchmarking is important. Your assessment should compare your desired standards of service and productivity with your actual performance. Comparing your own figures—both actual and goals—to that of other catalog and multi-channel marketing companies can help you evaluate your performance, too. Just be careful to compare “apples to apples” and pick companies that are as much like yours as possible. External comparisons can lead you to certain areas or processes within your operation that are candidates for further study. But remember that you cannot take someone else’s standards or performance expectations and make them your own; there are always too many differences in operations to do this. Our opinion is that it is always better to compare your results against yourself and against a set of standards or expectations over an established time period. This permits the identification of trends as well as snapshot evaluations. It is really desirable to combine both internal and external benchmarks to evaluate where you stand.

It is also very important to make sure you measure activities and costs that are relevant and actionable. Reviewing true productivity metrics in terms of work units and man-hours is better than looking at a percent to sales measure. The percent measure is dramatically affected by price points and labor market conditions, which usually are out of the operation’s control. Emphasis should be placed on comparable benchmarks, which can lead to some action steps by the operations group.

Look for our blog next month about what the four critical areas to concentrate on during the warehouse assessment…

If you are looking for some assistance in conducting a warehouse assessment then you need a consulting firm with the experience and knowledge base that can make quick but thorough work and actionable detailed recommendations to immediately begin implementing. F. Curtis Barry & Company has conducted warehouse assessments for dozens of clients a year and would be more than happy to discuss with you how we would approach assessing your warehouse. Call Jeff Barry at 804-264-8040 or email him at jbarry@fcbco.com to talk today.

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If you are considering a move, the following thoughts might help save some time and headaches during the move itself.

1. Make sure you have researched all of the applicable building codes for the area you are moving to. Determine what information and the level of detail that is required to obtain the necessary permits to outfit and occupy the warehouse.
2. Most warehouses require some type of sprinkler protection. Investigate what the requirements are for the overall facility, mezzanine areas, pallet rack storage areas, and any other work areas in the warehouse. If changes are required, make sure there is adequate flow and pressure to meet the codes.
3. Most areas have varying policies when it comes to determining when you can occupy the space. Some will allow the storage of materials and product as long as no order processing activity takes place; while others ban all storage or use of the space until all work is completed and permits issued.
4. One issue that seems to come up often is the need for routes of egress for emergency evacuation, if needed. Make sure the code requirements are understood and met when the warehouse layout is being developed.
5. If you plan on staying in operation during the move, and most companies do, this presents significant issues to overcome. Make sure you get a realistic estimate of the amount of time required to move inventory and any equipment to be reused from the current warehouse.
6. Take into consideration small issues such as purchase order information for product that is on the way to your warehouse during the move, changing the address for returns or trucking pickups, mailing address changes, etc. that can fall through the crack but cause major time consuming issues if not addressed.
7. Since most people involved in the move will have full time jobs to do while moving, make sure you allocate enough management time to oversee the move on both ends.
8. This is a good time to think about getting rid of aged or dead inventory and not move it to the new space. Allocate time and focus on doing this before the move.
9. Decide whether you are going to try to take an inventory count while you move. Although this may sound like a good idea, since you will be handling the entire inventory, think twice before you try to take inventory on-the-fly. It will take a lot longer than you think and will slow down the move.
10. It may cost you more to reuse all of your existing equipment and storage media in the new space (while staying in business during your move) rather than purchasing a segment of the total equipment required to get started in the new space. Look at the big picture and the feasibility of doing this before deciding.
11. A safe planning bet is to double the time you think it will take, and then be pessimistic as to meeting that schedule. Things will go wrong and happen not as planned; so you might as well provide a buffer to take care of them.

Having pointed out a few hurdles to get over when moving, a well thought out plan and constant monitoring of progress against the plan will make the move go as efficiently as possible. Remember that many steps will be dependent on others being completed; so the sequence of steps as well as the completion of required steps has to be considered also.

Define the detailed steps to be performed in a master plan, assign accountabilities to those involved, and establish realistic timelines to complete the steps to make sure the move is completed as planned.

Bob Betke is vice president of F. Curtis Barry & Company, a warehouse, systems, and inventory consulting firm with expertise in direct, retail, wholesale and manufacturing. Learn more online at: http://www.fcbco.com

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I usually put together a few observations occurring in that first few minutes that can be a good indication of what to expect when the detailed operations assessment is underway.

These are some actual situations I have encountered recently during the first quick walk around:

1. In a 25 foot clear stacking height warehouse, only the bottom10 feet were utilized for storage.
2. Pick slots were all the same size.
3. Locations were not clearly numbered in a logical schema.
4. Pallets and boxes were found in the aisles.
5. The “dust factor” on product was significant.
6. Employees work pace was slow.
7. Pick slot replenishments were taking place while picking was going on.
8. Product was backed up on the receiving dock and the returns area.
9. There was a lot of trash and debris between racks and behind pallets.
10. Food wrappings and cups were found on the floor.
11. Break rooms or cafeteria areas were a mess.
12. Pack stations were cluttered and disorganized.
13. Pickers were picking one order at a time while walking the entire pick line.
14. Packers were walking to find the right packaging materials for their orders.
15. Warehouse staff were being held up and delayed due to congestion and interference.

Most people point out that warehousing is not “rocket science”. This is true, but if you run an inefficient warehouse operation with some or all of the symptoms above; satisfying your customers and having them return to buy again can be as difficult as landing a man on the moon.

Take a look at your warehouse to see what condition you are in and develop a plan to correct it. Remember that the key requirements to running a good warehouse are a common sense approach, discipline in making sure procedures are followed, structure to make it possible to change, and a positive environment where employees want to succeed.

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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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:

1. One of the world’s largest pharmaceutical companies used us to help strategize on the fulfillment of their sales and collateral materials.
2. 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.
3. A restaurant supply company that manufactured, among other things, pizza trays and dish covers wanted assistance in refining their fulfillment operation.
4. A manufacturer/packager of nuts is looking for a way to increase storage capacity.
5. A large state-run university is looking for help in consolidating their storage facilities.
6. A campus and online medical college needed assistance in finding an outsourced partner to fulfill orders for textbooks for correspondence courses.
7. A regional hospital is redefining the use of their warehouse and is looking for layout help.
8. A large third party logistics company is looking for “best practice” implementation in their warehouses supplying “Just In Time” computer components.
9. A multichannel company providing supplies to the pet industry and groomers is moving to a larger facility.
10. 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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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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Ask yourself the following questions to see if there are areas that you can focus on to improve your bottom line this year:

1. 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.
2. 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.
3. 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?
4. 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.
5. 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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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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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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