THOUGHT LEADERS FOR MANUFACTURING & SUPPLY CHAIN
ARC INSIGHTS
By Simon Bragg
These 10 questions identify weak
warehouse ma...
ARC Insights, Page 2
©2003 • ARC • 3 Allied Drive • Dedham, MA 02026 USA • 781-471-1000 • ARCweb.com
3. Do You Give Custom...
ARC Insights, Page 3
©2003 • ARC • 3 Allied Drive • Dedham, MA 02026 USA • 781-471-1000 • ARCweb.com
vanced DCs enable pos...
ARC Insights, Page 4
©2003 • ARC • 3 Allied Drive • Dedham, MA 02026 USA • 781-471-1000 • ARCweb.com
accurate data. Howeve...
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ARC’s Top 10 Best Practices in WMS

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ARC’s Top 10 Best Practices in WMS
Efficient warehouses are clean, well-ordered with written, available standard
operating procedures that reflect the actual operation of the
warehouse. Moreover, sophisticated Warehouse
Management System (WMS) technology now enables
best practices. Here are our top 10 questions to determine
if your WMS delivers best in class
performance. The best companies in your industry
should answer “Yes” to most questions.
These 10 questions identify weak
warehouse management practices
and processes. Each “YES” indicates
you have achieved a degree of
operational excellence.

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ARC’s Top 10 Best Practices in WMS

  1. 1. THOUGHT LEADERS FOR MANUFACTURING & SUPPLY CHAIN ARC INSIGHTS By Simon Bragg These 10 questions identify weak warehouse management practices and processes. Each “YES” indicates you have achieved a degree of operational excellence. INSIGHT# 2003-05E JANUARY 30, 2003 ARC’s Top 10 Best Practices in WMS Keywords WMS, OpX, Supply Chain Summary Efficient warehouses are clean, well-ordered with written, available stan- dard operating procedures that reflect the actual operation of the warehouse. Moreover, sophisticated Warehouse Management System (WMS) technology now enables best practices. Here are our top 10 questions to de- termine if your WMS delivers best in class performance. The best companies in your industry should answer “Yes” to most questions. 1. Can You Handle Multiple Orders Simultaneously? Operators can only tackle one order at a time in paper-managed ware- houses. About two-thirds of medium sized (10,000 m2) warehouses and about one-third of large (70,000 m2) warehouses are still paper-based. Im- proving productivity, by minimizing travel time in the warehouse, requires sophisticated pick strategies such as task interleaving, wave or 2-phase picking that are too complex to manage on paper. Radio Frequency (RF) and bar coding systems let operators handle multiple orders together. Less than 1 percent of warehouses use voice-directed picking, which improves productivity of hard to handle items, but may reduce inventory accuracy. 2. Does Your Inventory Accuracy Exceed 99%? All warehouses should achieve 99 percent bin-level accuracy. The top 10 percent achieve around 99.95 percent accuracy. Regular cycle counting is the first step. Initially, the system should determines cycle counting sam- pling frequencies from a pareto analysis of each SKU’s volume value. Next, the system should help managers focus on error-prone SKU’s. Better algo- rithms request a count when the bin is easy to count, e.g. instantly after picking if the slot is empty or has just a couple of items. However, to achieve 99.95 percent accuracy, the strategy changes because everything needs to be right. Since a SKU can be in the wrong bin, it is then better to count by aisle.
  2. 2. ARC Insights, Page 2 ©2003 • ARC • 3 Allied Drive • Dedham, MA 02026 USA • 781-471-1000 • ARCweb.com 3. Do You Give Customers a Totally Reliable Delivery Date? For same-day or one-day delivery promises, batch integration once or twice a day between the WMS and ERP systems cannot support reliable order promises. For this, WMS and ERP inventory data must be only minutes out of sync. Particularly sophisticated is the ability for sales staff to modify de- livery promises given warehouse capacity and transportation constraints. 4. Can Your Numbers Identify Changes that Most Impact Performance? At most managers’ fingertips should be basic metrics such as units moved per man hour, orders unfulfilled on time, the age of unfulfilled orders, and costs per unit moved. Comparing results by strategy shift or operator en- ables managers to continuously find better strategies, e.g. adjacent slotting of items that move together, operator assignments, or pick sequences. 5. Can You Smooth the Workload on Each Section in the DC? Poor practice overloads one section of a Distribution Center (DC), while another stands idle. Managers should plan, monitor, and balance the work- load in every section. Monitoring is common. Most warehouses with significant automated material handling enable managers to picture, in near real-time, the loads on every section, showing which operator re- assignments will balance workloads. Planning is less common. About one-fifth of large US warehouses use en- gineered labor standards, basically time and motion data, to calculate the time each task should take for comparison with the actual time taken. Usu- ally, these standards determine operators’ bonus payments, but using this data to better plan daily labor requirements also lets managers set a target completion time for an activity, such as a pick wave, and calculate the re- quired labor resources. 6. Do You Pack Items to Simplify Downstream Partner Tasks? Poor practice views warehouses as inventory stores. Good practice brings upstream and downstream activities into the DC. Carrier compliance label- ing, export documentation, and correct cartonization simplifies transport partners’ activities. Better still is sophisticated sortation, e.g. loading trucks in unloading order, even loading roll cages to match the sequence retailers display items along an aisle. Some US retailers demand that DCs select the correct destination and carrier from the load’s weight or volume. Ad-
  3. 3. ARC Insights, Page 3 ©2003 • ARC • 3 Allied Drive • Dedham, MA 02026 USA • 781-471-1000 • ARCweb.com vanced DCs enable postponement manufacturing, adding features, options, and customization of core products with e.g. country kits. 7. Can You and Your Customers Do Single Scan Receiving? Poor receiving practice scans each inbound item. Best practice scans one tag, which contains or points to information about the whole consignment. Often, single scan receiving is enabled by RFID devices or bar codes and Advanced Ship Notices (ASN) between customers and suppliers. Small suppliers should be provided with downloadable copies of labels that they affix to the consignment. 8. Can Each Warehouse Manager Support Colleagues Across Your Multi-site Distribution Network? Poor practice views warehouses as stand-alone entities. Good practice en- ables each manager to view inventory status across all DC’s in the network. Customers should be able to check order status information in near real time, delayed by only a few minutes. Better still is the ability to identify problems and alert managers, within minutes, across the network if there is, for instance, a stock-out. In principle, customer orders can be transferred to neighboring DC’s. Good systems do not inundate managers with alerts, but filter them and send appropriate alerts to the right managers. Great systems, of which there are only a few, include rules or agents that auto- matically execute and perform experienced managers’ actions, for instance rescheduling pick-waves based on early or late arriving trucks. 9. Have You Eliminated Manual Quality Checks? Poor warehouses require manual quality checks; good ones have, justifia- bly, eliminated a non-value adding process. There are two ways to eliminate manual quality checks. First, create a completely reliable opera- tion, and the system should support sampling strategies that more frequently sample error prone processes. For each sample, the system should drive operators through the checking procedure. The system should also make clear at what point the operation is reliable and when the quality check adds no additional value. Second, if the cost of errors is far greater than the value of the items, then the process should be automated. Automated weight checks are common in pharmaceuticals, and will be adopted in other industries. This requires
  4. 4. ARC Insights, Page 4 ©2003 • ARC • 3 Allied Drive • Dedham, MA 02026 USA • 781-471-1000 • ARCweb.com accurate data. However, in some industries such as semiconductors, the items are insufficiently heavy and different for this approach to work. 10. Is the Supply Chain Capable of Being Reversed? In Europe, the ability to track and return packaging is, thanks to legislation, a necessity. Failure can result in $30,000 fines. Usually goods return to a specialized, often outsourced, centre. For such returns, poor practice dou- ble ships items first to an outbound warehouse for onward movement to the returns warehouse. Best practice requires the customer to gain authori- zation. Via a portal, the receiver steps though a workflow that categorizes the problem such as damaged packaging or product, wrong quantity, or a quality problem. This can be an up-selling opportunity. Then the receiver is told where to send it, and uses their PC printer to print a bar code label containing disposition instructions for inbound receiving and shipping to an address. Recommendations Now that you’ve taken the test, how many times did you answer yes? The scoring reflects ARC’s impression, based on conversations with manufac- turers, consultants, and suppliers, as to where most warehouses are today. • If you scored under 3, the good news is that there are many opportu- nity to improve performance and the profitability of your company. • A score of between 4 and 6 reflects, we believe, pragmatic use of avail- able technology, and perhaps fairly average supply chain performance. • Scoring 7 or 8 reflects early adoption of the most proven warehouse management technologies. Moving to the next level takes care, as those technologies are not yet fully proven. • A score of 9 or 10 indicates your company is at the leading, probably the bleeding, edge of technology adoption. Please help us improve our deliverables to you – take our survey linked to this transmittal e-mail or at www.arcweb.com/myarc in the Client Area. For further information, contact your account manager or the author at sbragg@arcweb.com Recommended circulation: All EAS clients. ARC Insights are published and copyrighted by ARC Advisory Group. The information is proprietary to ARC and no part of it may be reproduced without prior permission from ARC.

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