Spaced out are you making the most of your shrinking space--werc sheet (may-june2013)v41


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Are you making the most of your (shrinking) space? Tanel says that most companies do consider adding space. “However,” he says, “it is sometimes necessary to review the presently occupied facilities to determine if one can increase productivity by changing the physical and spatial relationships between operations,” he explains. According to Thomas Tanel, president of CATTAN Services, before you can consider making any changes in your current mode of operation, you have to thoroughly understand how your warehouse runs.

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Spaced out are you making the most of your shrinking space--werc sheet (may-june2013)v41

  1. 1. Refocus, Renew Safety Culture Initiatives Create environment where individuals accept personal responsibility for their safety and their co-workers, too. A ccording to the OSHA Pocket Guide, “Warehousing,” more than 145,000 people work in over 7,000 warehouses, and are exposed to a wide variety of potential hazards. Among the potential hazards that confront warehouse workers: unsafe use of forklifts; improper stacking of products; failure to use proper personal protective equipment; failure to follow proper lockout/tagout procedures; inadequate fire safety provisions; and repetitive motion injuries. However, most disturbing is the statement that the fatal injury rate for …the fatal injury the warehousing industry is higher than rate for the the national average for all industries. Further, addressing those individuwarehousing als who focus on safety program costs industry is higher vs. the potential savings these programs than the national can achieve, an APL Logistics white paper, “Warehouse Upgrades That Pay,” average for all reveals, “your payment for workers’ industries. comp claims might represent as little as 20 percent of what those claims-related injuries actually cost your company.” It cites a Liberty Mutual survey where nearly 40 percent of the respondents report that for each dollar in direct costs they spent on injuries, they spent anywhere from $3 to $5 on indirect costs such as lost productivity and time spent training a replacement. Bottom line: If you have a profit of just one percent, you’ll need to earn an extra $100,000 in revenue, according to the white paper, to offset every $1,000 workers comp injury your employees incur. continued on page 2 Information for Members of the Warehousing Education and Research Council maY –June 2013 In this issue... It’s Who and What You Know 5 Today’s logistics professionals have more challenges than ever—here’s how to face them. Publications from WERC Consider adding these pubs to your continuous improvement arsenal. 8 WERCouncil Circle of Acclaim 2012–2013 Recipients 9 2013 WERC Conference a Success The first highlights from Dallas. 10 Spaced Out Are you making the most of your (shrinking) space? S candinavian Internet PC and electronics retailer Komplett recently faced a dilemma that many companies face these days with its DC: Big growth had led to a facility that was bursting at the seams. And like many others in the same situation, expanding the current facility wasn’t an option, so Komplett had to find another solution. For more than a decade, the company had filled orders manually. This worked until SKU proliferation led to offerings of more than 10,000. Rather than focus on more storage, Komplett looked to increase its operational efficiencies. The company weighed a variety of options and ended up selecting an automated storage and fulfillment system by Swisslog, called AutoStore, which the company also provides in North America. Since implementation, Komplett has added storage density and now can handle double the throughput it managed prior and did it with its existing labor force. Komplett is not alone in the increasingly common continued on page 6 Conference Highlights, pg. 10
  2. 2. faciliti e s Spaced Out continued from page 1 problem of rapid growth with no option for additional space. How companies come to this place is varied and so are the solutions to their problems, but there are some common guidelines that can be applied in most cases. Why the storage shortage? response times,” says CATTAN Services Group’s Thomas Tanel, president. One segment that is particularly hard hit in this area is processed and frozen foods. “This is an area that has experienced huge growth over the past 10 years,” says Leber. “Space is a real premium for this segment right now.” What happens to many companies is the need to manage tradeoffs, says Tanel. “You have to balance transportation, inventory control, warehousing and customer service,” he explains. Castaldi adds that many companies are left feeling torn between traditional warehouse space and distribution space. “If your goal is to pack the most into a space, you’re looking to maximize your warehousing,” he says. “If you are looking to get the most out quickly, you’re talking about distribution. It’s a battle of realities for most companies.” Komplett’s issue was the one that causes the majority of space issues today: growth. Chris Castaldi, manager of business development at Carlstadt, NJ, based W H Systems, says that SKU proliferation is behind much of what companies grapple with these days. “Companies just face more offerings and diversification than ever before,” he says. “For instance, you’ve got a retailer who goes direct to consumer with very seasonal items. As it grows on the Internet, the company can no longer control what people buy and when. So the product is being ordered year round rather than seasonally, which means the company must now keep the product in stock at all times.” The addition of e-commerce to traditional retail It would seem that when faced with space conoften puts company’s space availability over the top as straints the knee-jerk reaction would be to add more well. “This leaves companies with more SKUs to make up space via an expansion or a new facility. But for most their sales, but their sales revenue remains the same,” companies, that’s not the number-one choice. says Swisslog’s Bill Leber, director of business developWhy not? It all comes down to capital. According to ment. “The result is needed space but that can be cost Leber, “capital investment casts a long shadow. You have prohibitive.” to buy land, a building, and new equipment. British fashion You need to be very sure about your business “You have to balance retailer River Island needs for a long time to come if you are going transportation, found itself in just this to make that choice.” inventory control, situation. When it added in e-commerce warehousing and to its traditional storecustomer service.” fronts, the added Tom Tanel volume put a strain on its DC. Rather than investing valuable capital into additional space, the company sought out high-density storage solutions, which opened up some 5,000 SKU locations. There’s also the challenge of higher volumes of orders. “With an ambiguous and volatile business environment where sales are expected to or will grow, preparing the product offering for sale becomes more complicated as the corresponding need for distribution to operate with higher throughput volume demands and shorter order cycle When more isn’t more 6 / May–June 2013
  3. 3. Space Management Guidelines at a Glance Tanel says that most companies do consider adding space. “However,” he says, “it is sometimes necessary to review the presently occupied facilities to determine if one can increase productivity by changing the physical and spatial relationships between operations,” he explains. Which usually brings a company back to that big capital investment. “It’s not only looking at the structure investment, but also the internal operating systems managing material flows,” says Tanel. “Each of these systems comes with an added cost, and depending on how advanced the facility is, the costs can be very high.” In addition to the costs, says Castaldi, there are other factors that can make adding space unattractive. “There are often limitations on labor, tax laws and land, all of which play into how attractive or unattractive a location may be for building,” he explains. “So you need to ask: do you need more space or do you need more efficiency?” More often than not, the answer is efficiency. How to gain space efficiency Leber says that even if a company is not crunched for space, most DCs have areas where they can improve in space efficiency. “Most companies don’t use what they have efficiently—they don’t look in the right places,” he says. To figure out the proper space utilization, Castaldi recommends looking at processes first. “Why do you need the extra space?” he asks. “What brought you here?” Tanel recommends conducting a thorough space survey. He’s designed a system for doing that, which includes the following columns across the top: Available at present (sq. ft. and attainable height) According to Thomas Tanel, president of CATTAN Services, before you can consider making any changes in your current mode of operation, you have to thoroughly understand how your warehouse runs. To do this, you have to do the following: Understand your company’s business by quantifying present requirements and forecasting future growth potential. Know your square feet requirements by: 1. Function 2. Material flow 3. SKU volume and velocity 4. Inbound/outbound throughput characteristics Establish true priorities by employing Pareto’s Principle and ABC Concept to basic warehouse flow patterns. Employ aisle layout and allowance that maximizes movement efficiency and maximizes available floor space and cube loss. Design your space plan for the rule, not the exceptions, for smooth, efficient, quick, and direct in-out material and work flow. Ensure accurate location, proper identification and good illumination of all SKUs in storage. Plan storage space for easy inventory rotation to permit FIFO or LIFO inventory valuation control. Review material handling and storage equipment compatibility, adequacy and reliability in space plan analysis. Develop standard pack and unit load hierarchy for all SKUs material handling efficiency and material location storage philosophy. Needed at present (sq. ft. and required height) Future needs (sq. ft. and required height) for 1-2 years and 4-5 years The operational activities that are measured against this include: Receiving and inbound Staging and processing Put-away and storage Value-added services Picking and replenishment Shipping and outbound Offices and miscellaneous After going through the facility space survey, Tanel recommends companies ascertain whether they have properly slotted the DC. “If so, it should optimize your space utilization and minimize the time and effort required to efficiently receive and store incoming products,” he says. “This determines the most efficient placement of products and improves the speed and accuracy of picking and replenishment. Each DC is unique, so proper slotting depends on factors such as your distinct product, movement and storage characteristics, product seasonality, turnover, promotions, and sales or usage projections.” Castaldi recommends that you have a leader to spearhead the assessment process. “You need someone who can bring everyone together and figure it all out,” he says. “This might be a consultant or it might be someone from within.” The assessment team should include people who buy, people involved in processing, and people who set future plans for the company, according to Castaldi. “You have to pull all the information together and understand why and when you ran out of space,” he says. continued on page 8 / May–June 2013 7
  4. 4. Spaced Out continued from page 7 Upon assessment, many companies will learn that they’ve grown up piecemeal and have added small bits and pieces over the years, says Leber. “This happens because it’s Upon assessment, impossible to just shut down and reorganize a DC,” he explains. many companies “So companies end up adding in will learn that new equipment and processes here they’ve grown up and there and you become fairly piecemeal and have inefficient compared to a new comprehensive integrated facility.” added small bits Once all the operations have and pieces over the been assessed, a company needs to put a plan of action into place. years.” Options for improved space utilizaBill Leber tion include right-sizing locations through improved slotting; using un- and under-utilized space like floor-to-truss and closer pallet beams. Get rid of obsolete inventory that might be clogging up shelves. There are also higher tech storage density solutions available, like those from Swisslog. “All of our products use space better than manual operations,” says Leber. “You can go higher and use full vertical space as well as bring goods to people rather than the other way around, freeing up the travel path.” Castaldi’s W H Systems works as a systems integrator, helping companies source products and bring it all together via software. “We take measure of where a company is and has been and help them figure out where they can make improvements in their operations’ efficiency,” he explains. “Most people have reached a point of diminishing returns when they come to us.” Even when not feeling space constrained, most companies probably can do better with the space they have, says Tanel. “I guarantee that a thorough assessment of your facility will turn up a few surprises,” he says. “And the biggest surprise is going to be this: “You are not effectively using space.” Chris Castaldi, W H Systems, Bill Leber, Swisslog, Thomas Tanel, CATTAN Services Group, Publications from 2013 DC Measures WERC members can download the newest report on warehouse metrics for NO CHARGE. Go to the WERC home page and click on the link you’ll find there. You might also consider adding these pubs to your benchmarking and continuous improvement arsenal: Warehouse and Fulfillment Benchmark Best Practices Learn about qualitative warehousing best practices. Helps identify process strengths and weaknesses in an organization so a roadmap for improvement efforts can be crafted. Warehouse Manager’s Guide to Benchmarking Read about the different kinds of benchmarking, why it’s important to benchmark, how to choose the right metrics, how to analyze your company’s performance and techniques for communicating to get the results you need. 2nd Edition, 2010 8 / May–June 2013