Tired of being average? Move the warehouse performance needle!

For our fifth and final post about Aberdeen Group’s report “On-Time and Under Budget, Maximizing Profits with Efficient Warehouse Management,” the team at Ryzex and Psion Teklogix will move beyond the findings around Best-in-Class warehouse management to discuss Aberdeen’s recommendations for making a lagging operation good, and a good one great! Don’t forget, you can download the entire Aberdeen Report here.

Based on its research, Aberdeen recommends three areas for improvement of an Industry Laggard (see our second post for definitions of Laggard and other categories…):

1. Implement cycle counting.  Physical inventories lead to more than an 8% discrepancy between records and actual stock on hand, a significant area for improvement in expense management.  Initial forays into cycle counting do not need to match Best-in-Class WMS process control, workflow integration and calibration with product velocity — even a simple, organized, systematic batch-oriented approach geared to not disrupt ongoing operations will deliver improvement — but without an integrated approach efficiency improvements will be less and the final reconciliation will need to be manual.

2. Enable centralized warehouse process direction.  Aberdeen’s studies show that centralization leads to significant improvements in warehouse organization.  According to Aberdeen, “When everyone is running from the same playbook, it should be no surprise that results follow:  2.52% higher inventory accuracy and 3.31% higher on-time and complete deliveries…” to name but two improvements.

3. Provide additional training resources.  Organizations that make resources for processes and technologies available to staff report a 3% advantage in pick accuracy and a 4% advantage in on-time shipment versus peers.  This training doesn’t have to break the bank:  Aberdeen suggests that less mature operations start by collecting and distributing best practices, documenting home-grown applications and distilling the documentation for commercial applications.

For those that already fall into the Industry Average category in terms of performance, Aberdeen makes the following recommendations:

1. Improve supplier and customer collaboration.  Better upstream communication will lead to improved planning around inventory moves and increased accuracy in projecting ability to fulfill actual and expected orders.  Improved downstream collaboration, on the other hand, can help customers to better plan operations, such as scheduling production around inbound material or lining up distribution to retail outlets.  Quantifiable ROI includes a 3% higher inventory accuracy level based on supplier collaboration, and a 3.2% improvement in on-time and complete deliveries based on customer collaboration.

2. Implement ELS.  For mature operations, additional gains are possible beyond grassroots best practices by leveraging Engineered Labor Standards.  In addition to improvements noted in our earlier posts, Aberdeen found that organizations tapping ELS have an average 2.4% improvement in the number of on-time shipments.

3. Enable real-time communication and confirmation.  According to Aberdeen, “Mobile technologies that provide a direct, continuous connection between warehouse workers and the WMS provide direction for order fulfillment properties, allow for real-time confirmation, and reduce the potential for inaccuracy inherent in the manual entry of data…”  ROI includes a 3.2% improvement in picking accuracy, 6.16% higher level of inventory accuracy, and a 39% faster order turn-around (2.13 days versus 3.49 days) compared to organizations that don’t leverage mobile devices.

Even Best-in-Class organizations have room for improvement.  Aberdeen suggests a focus on the following:

1. Optimize inventory location.  Slotting provides a way for more sophisticated organizations to strategically locate inventory in optimal fashion based on customized criteria, such as SKU velocity.  Advanced versions can even leverage historical data to move beyond static velocity, predicting expected velocity based on seasonality or other patterns.  Slotting ROI includes a 50% improvement in order turnaround (1.6 days versus 3.2 days), a 1.5% improvement in pick accuracy and a 4.2% improvement in on-time and complete deliveries.

2. Increase focus on labor management.  Top performing organizations focus on continuous improvement, requiring ongoing data collection, analysis and supporting initiatives (process changes, training, new technology, etc.).  Companies that have implemented a Labor Management System, for instance, report a 31% lower average backlog (order delays carried from one day to the next), and a 32% quicker turnaround.

3. Implement dynamic task assignment.  While the design of picking tours to minimize worker travel may be a good first step, Aberdeen finds that more sophisticated organizations rely on task interleaving, which allows for dynamic assignment of both picking and put-away tasks on the same trip.  By increasing the number of tasks completed while minimizing worker travel, companies enjoy a 2.9% edge in on-time and complete deliveries, and better performance against budget (an average of 0.7% below budget versus peers who average 1.87% over budget).

This concludes our look at Aberdeen’s fascinating report about improvements in warehouse efficiency.  We’ve only just scratched the surface, and you can download your own copy here. And as always, Ryzex and Psion Teklogix offer a variety of services, technology and educations resources to help with your own efficiency assessment and improvement. Just contact info@ryzex.com for more information.

Product Spotlight: Psion Teklogix Workabout Pro 3 Equip your employees with tools that ensure maximum productivity and success. Warehouses and distribution centers use the Workabout Pro 3 to manage inventory and orders, wirelessly and in real-time, accelerate picking and stacking and reduce data collection errors and operating costs. Learn more about the Workabout Pro 3 in our knowledge center.

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