Warehouse ManageMent for Wholesale Distributors


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Warehouse ManageMent for Wholesale Distributors

  1. 1. Warehouse Managementfor Wholesale DistributorsThe Adaptive Supply Chain NetworkSAP White PaperSAP for Wholesale Distribution
  2. 2. CONTENT^ 4 Executive Summary^ 5 The Evolving Supply Chain Network 5 Move Beyond Supply- Driven Efficiencies^ 6 Adaptive Supply Chain Networks^ 7 Beyond Push Versus Pull 7 Tools and Technology for Today’s Supply Chain^ 8 Warehouse Management Business Processes 8 Inbound Processing 8 Appointment Scheduling 8 Yard Management 9 Receiving 9 Cross-Docking 9 Replenishment10 Outbound Processing10 Wave Management10 Picking and Packing10 Inventory11 Slotting12 Enhancements to Functionality and Utility12 Value-Added Services12 Data-Collection Technologies12 Analytics12 Preconfigured Analytics12 Warehouse Stock Analytics12 Warehouse Workload History12 For More Information
  3. 3. EXECUTIVE SUMMARYFinding Order in ChaosFor wholesale distribution companies, An ASCN is the catalyst to enhancesupply chain management has risen financial position and improve supplyfrom the fast-paced warehouse envi- chain economics. Without an ASCN,ronment to the top of the CEO’s agen- the potential for growth is limited toda. Responding to the demands of a improving linear processes and opti­highly competitive global environment, mizing single points within the network.traditional linear supply chains are These benefits rarely, if ever, affect theevolving into complex global ecosys- ecosystem as a whole. However, atems that are highly responsive to wholesale distribution CEO is con-customer requirements. cerned with strategies for improving the ecosystem.“Pull,” or demand-driven, environ-ments, working in conjunction with This white paper describes how antraditional “push” environments, are adaptive fulfillment network, which isknown as adaptive supply chain net- part of a larger ASCN, deals with sup-works (ASCNs). In an ASCN, all ply chain execution processes thatstakeholders in the supply chain, both reside in distribution centers but impactwithin and outside the enterprise, share the larger ecosystem of an ASCN.knowledge, make collaborative deci-sions, and sense and respond immedi-ately to changing conditions. MultipleASCNs, including those outside acompany’s sphere of influence, mustwork together to create an ecosystem.Two key functions, planning and exe­cution, make up the ASCN. Not sur-prisingly, within these two seeminglydifferent business processes is a com-mon goal: profitability. When organiza-tions seek to change planning and exe-cution processes merely to cut costswithout considering the effects on theother parts of the business, they mayignore the economics of the larger sup-ply chain or give it less importance.An ASCN provides the framework fromwhich a level of economic responsive-ness can be realized. Within the con-text of a fully integrated enterpriseresource planning system, an ASCNcan lead to more efficient operationsand profitable growth.4 SAP White Paper – Warehouse Management for Wholesale Distributors
  4. 4. The Evolving Supply Chain NetworkThe Ultimate Source of DemandFor wholesale distribution companies, differentiator for achieving profitablesingle-channel supply chains are no growth. The best-performing com­longer the norm. Today’s supply chains panies integrate innovation into thehave become increasingly complex, heart of their business processes.crossing geographical and culturalboundaries in a matter of moments, Move Beyond Supply-Drivenwith products flowing in numerous Efficienciesdirections. Organizations may chooseto outsource all or portions of the sup- A number of supply chain executionply chain. Therefore, quickly adapting components are changing rapidly.to changes is no longer an exception For example, there are continuingbut simply “business as usual.” Maxi- pressures to reduce overall supplymum visibility into the entire supply chain costs in ways that must be inno-chain is absolutely essential to turn vative but tempered by profitability.real-world, real-time information into a Today’s market conditions demandcompetitive advantage. close adherence to the “perfect order” in which the right products are deliv-Driving the rapid evolution of today’s ered to customers on time and in goodsupply chains are two factors. First, condition. At the same time, profitcompanies exist in a global, networked margins must be protected.business climate. Because businesspartners are now around the world as Companies must move beyond supply-well as down the road, staying compe­ ­ t driven efficiencies. Today’s preferreditive and becoming faster, smarter, and business model is fast becoming amore productive are more complicated “pull,” or demand-driven, environment.than ever. In a business climate that The ultimate source of demand is thedemands an immediate response to customer. Profitability can be realizedcontinuous business changes and the by monitoring both the product velocityrequirements of customers and share- of consumption and the rate of return.holders, many companies are focusing Supply chains need to be balancedon core competencies and partnering on the basis of a new set of “push”to fill in the gaps. In these partnerships, and pull dynamics. Organizations mustcollaboration, outsourcing, and infor­ anticipate customers’ requirements andmation sharing become critical success improve responsiveness to theirfactors. demands by bringing high-quality, value-added products to market fasterSecond, companies need innovation than the competition. The businessto remain profitable – moving beyond processes supporting distribution oper-cost reduction toward innovation ations need to be adaptable. Innovationand profitable growth. The velocity of that takes into account customerchange in customer needs and trends expectations can yield a profitable andmakes innovation a key competitive responsive supply chain network. SAP White Paper – Warehouse Management for Wholesale Distributors 5
  5. 5. Adaptive Supply Chain NetworksRising to the Challenge of Market DynamicsTo meet the challenges of rapidly Companies need the ability to do thechanging market dynamics, wholesale following:distribution companies must transform • Synchronize supply with demandtraditional linear supply chains and by balancing push and pull networktheir sequential processes into virtual planning in order to replenish andcommunities or ecosystems – that is, produce supply on the basis of actualinto adaptive supply chain networks demand(ASCNs). These networks are com­ • Sense and respond with an ASCNmunities of customer-centric compa- in which distribution, transportation,nies that thrive by intelligently adjusting and logistics are driven and integrat-to changing market conditions. Such ed into real-time planning processescompanies share knowledge, quickly • Enable network-wide visibility, collab-seize new market opportunities, and oration, and analytics across theproactively respond to shorter and less extended supply chainpredictable product life cycles. Theseactions help companies and their part- Despite these requirements, most ofners avoid supply chain problems. today’s best-practice supply chain processes do not provide this flexibilityAdaptive supply chain networks enable because they are based on a sequen-all participants – customers, suppliers, tial plan-execute model. The goal ofand logistics providers – to sense planning and then executing on thechanges in demand and supply con­ plan has its natural limitations. Unfor­ditions as they occur and to share the tunately, planning occurs in an abstractcritical knowledge needed to respond world that is detached from the turbu-intelligently. The result is a supply chain lent world of execution, both physicallynetwork that not only is demand driven and in timing, and the result is often abut is able to leverage its assets to mismatch between these two worlds.influence demand wherever appropri- However, when things change in theate. This requires a dynamic synchro­ real world, an ASCN has the ability tonization of demand-driven planning, sense these changes, enabling com­logistics, and network execution based panies to respond with timely and intel-on real-time information. ligent actions.6 SAP White Paper – Warehouse Management for Wholesale Distributors
  6. 6. Beyond Push Versus PullAn Adaptive Fulfillment NetworkSuccess in supply chain network part­ ers, the effect of which is to nexecution requires integrated planning reduce or eliminate expensive emer-and execution that is put in place gency orders, out-of-stock problems,before, not after, the fact. An adaptive and disrupted processes.fulfillment network, which is part of thelarger adaptive supply chain network, Although pull systems have significantprovides the flexibility to incorporate advantages, there are situations whereboth push and pull models for supply they must be combined with push, orchain execution. forecast-based, systems. Because an adaptive fulfillment network providesIn the traditional push model, a whole- a higher degree of global visibility andsaler determines stocking and replen- performance management, there isishment levels, and schedules are flexibility to use both or either of theset in advance of sales. This approach models to best meet current supplyrelies on sophisticated planning tools, chain planning and execution require-such as distribution requirements plan- ments. With heightened awareness ofning systems, to time-phase the move- actual production, inventory, opera-ment of products through the distribu- tions, and consumption events, com­tion channel. The objective is to panies can respond accordingly.forward-allocate as little inventory aspractical while satisfying customer ser- An adaptive fulfillment network pro-vice goals. vides the ability to track and trace to meet or exceed consumers’ growingTools and Technology for Today’s demands and fulfillment expectations. ItSupply Chain also provides inclusive, real-time views of inventory across multiple systemsWhile distribution requirements plan- and enables supply chain managers toning and the push model have their rapidly implement a new course ofplace, today’s tools and technology action to respond to unanticipatedallow actual demand to initiate the changes in business processes, chan-process and pull products into the nels, or interactions with suppliers.distribution network. Replenishmentactivities are based on actual demandrather than just a forecast. By makingvarious efficiencies possible, such assmaller manufacturing and replenish-ment quantities, this approach helpscompanies realize lower inventory lev-els and lower losses due to obsoles-cence. It also enables companies toreduce or eliminate barriers betweencustomers, suppliers, and trading SAP White Paper – Warehouse Management for Wholesale Distributors 7
  7. 7. Warehouse ManagementBusiness ProcessesAchieving Industry-Leading CapabilitiesFor an adaptive fulfillment network to of hours a driver can work. They also Yard Managementsucceed, warehouse staff need to redefined the way the time is calculat- Warehouse management systemsmanage warehouse activities, including ed. For example, unload times are now (WMSs) have expanded beyond theinbound and outbound processing, considered part of a driver’s available traditional four walls of the warehousefacility management and storage, physi- day, even though he or she is not phys- to include interactions with the entirecal inventory, and cross-docking, both ically driving – which reduces a driver’s ecosystem. For example, yard manage-planned and opportunistic. Successful availability. ment has become the vital link betweencompanies take advantage of new data point-to-point transportation and localcollection technologies, such as radio- When there are no controls determin- delivery operations. Organizationsfrequency (RF) scanning, voice recog­ ing when carriers arrive at a port, rail bring yard management into play whennition, and workload-balancing tools, to yard, or other distribution facility, the the transportation or distribution groupmake processes more efficient. result is long lines with wait times that completes the planning, and the physi- can stretch into hours. This situation cal assets of warehouse managementInbound Processing negatively impacts the carrier, the driv- interact with transportation er, the loading/unloading facility, and management.Effective warehouse management, the general public that has to put upfrequently supported by specialized with traffic congestion. By creating an Today’s adaptive fulfillment networkwarehouse management software appointment schedule, lines can be mandates a collaborative approach tosolutions, includes the following shortened and workload planning can tendering profitable loads in a capacity-inbound processes: be managed more effectively. constrained environment. Yard manage-• Appointment scheduling ment helps carriers manage the• Yard management HOS changes have another major appointment process at distribution• Receiving impact: they are forcing shippers and centers to direct the physical move-• Cross-docking carriers to collaborate in new ways. It ment of filled trailers for inbound pro-• Replenishment is no longer viable for a shipper to cessing and empty trailers for out- demand that a trailer arrive at a specific bound processing. Carriers are not theAppointment Scheduling time and then ignore it for hours at the only beneficiaries. In a wholesale distri-Appointment scheduling enables com- carrier’s expense. And when a carrier bution environment, operations person-panies to provide transportation carri- promises that a trailer will arrive at the nel can use visibility in the yard to bal-ers with a predefined time to arrive at shipper’s facility at a certain time, the ance priorities. A spike in demand fromthe warehouse facility. Detailed infor- carrier must keep that promise. Now, a customer may trigger a change in themation can also be provided, such as these two groups that have historically timing of several deliveries. In addition,specifying that the carrier deliver the been in conflict must work together. the visibility of product across all yardstrailer to a specific dock door or leave it (including off-site peak-season overflowin a staging area to be unloaded as HOS regulations and the constantly lots) can greatly improve the profitabili-business needs require. rising costs of shipping mandate that ty of a given product. shippers and carriers collaborate toEffective appointment scheduling took optimize their business processes. For yard management, an adaptive ful-on a new urgency when the U.S. Fed- Appointment scheduling is the first link fillment network offers the followingeral Motor Carrier Safety Administra- in the optimized process. Shippers are benefits:tion enacted hours-of-service (HOS) providing carriers with realistic, mutual-regulation changes in October 2005. ly agreed-upon time frames, and, inThese HOS modifications effectively turn, carriers are providing shipperscreated an immediate 8% decrease in with more capacity.carrier capacity by limiting the number8 SAP White Paper – Warehouse Management for Wholesale Distributors
  8. 8. • Improved relationship between carri- cate goods movements within the Incorrect minimum or maximum quanti- ers and shippers warehouse, optimizing the goods flow ties or poorly located products destroy• Increased asset utilization for from inbound to outbound and shorten- productivity. If the maximum is set too capa­ ity-constrained trailers c ing routes within the warehouse. This low, there will be as many associates• Enhanced visibility for business pro- accelerates the flow of goods and refilling locations as there are associ- cess owners outside the distribution avoids unnecessary storage of goods ates picking. This is a very inefficient facility in the warehouse. and expensive operation. If the mini-• Better dock utilization, resulting in mum is set too high, then full-case higher throughput rates When properly executed, cross- replenishment may not fit in the loca-• Decreased labor costs docking can reduce labor costs, tion. If replenishment tasks are not increase the throughput velocity of a completed on time, then the order fillReceiving facility, and improve customer service. rate will drop. As the active-pickingThe receiving process includes all It can eliminate interim storage needs locations remain empty, the continualthe steps that occur when a facility and reduce warehouse execution tasks. processing of outbound orders will cre-receives the goods – ranging from pro- Cross-docking can also provide more ate a less-than-satisfactory experiencecessing advanced shipping notifications effective and efficient warehouse for the customer, as well as a massive(ASNs) to processing goods receipt. operations management in terms of backlog of orders that may not getThe ASN 856 standard is key to capacity and scheduling. shipped on time. Conversely, if replen-streamlining inbound receiving process- ishment tasks are completed ahead ofing as this electronic record contains Replenishment schedule, the resulting backlog of prod-both order and SKU details, including One of the greatest challenges for ucts to be shipped will become a bot-quantity, associated with a unique bar- any high-volume facility is the timing of tleneck that could require overtime tocode identifier. The receiving process replenishments. Replenishment is the complete the tasks and clean up theitself can be enhanced by using RF act of keeping the picking locations area – also not a profitable situation.devices, resulting in greater inventory filled with enough products to meetaccuracy and reduced labor costs. demand. This is both an art and a sci- As the integration point betweenThese devices not only collect data but ence. The science entails using mini- inbound processing and outbound pro-also inform the user of any potential mum and maximum quantities for a giv- cessing, replenishment makes opera-errors. en location, as well as periodic velocity tional efficiency and customer-centric analysis by slotting (discussed below). effectiveness possible. For example,With proof of delivery, the goods recipi- The art is in timing the completion of on the basis of what works best for aent informs the sender that the delivery the tasks and managing the workforce company, the warehouse can be opti-has been completed as planned – that throughout this process. mized to accommodate predeterminedis, the right material has been delivered shipping processes. Conversely, anundamaged and in the correct quantity. A WMS enables companies to make optimal warehouse arrangement can beProof of delivery also triggers an decisions about outbound processes implemented first, and then shippinginvoice to be sent from the sender to while carrying out inbound processes. processes can be based on the physi-the recipient. Replenishing forward-pick locations is a cal location of the goods. very important process in any distribu-Cross-Docking tion facility and is an example of howWith cross-docking, inbound goods can inbound processing works in concertbe directed straight from goods receipt with outbound processing.to goods issue without going into stor-age. Cross-docking eliminates dupli- SAP White Paper – Warehouse Management for Wholesale Distributors 9
  9. 9. Outbound Processing A WMS needs to keep this task as Inventory transparent to the consumer as pos­Outbound processing includes the sible. Does the customer care if the A successfully deployed WMS can turnfollowing processes associated with product came from a pallet, case, or inventory into a strategic, competitivepreparing and shipping goods to their broken-case area? The answer is no. advantage. A perpetual or continuousdestination: However, in an efficiently run ware- inventory can be created to keep book• Wave management house facility, it does matter how and inventory continuously in agreement• Picking and packing from where the product is picked. with stock on hand within specified time periods. And reconciliationWave Management The balance of meeting customer between book inventory and stock onThe goal of wave management is to expectations and running a profitable hand can be accomplished as often asmeet customers’ requirements in the operation can be best measured by after each transaction.most cost-effective, efficient manner order-pick accuracy. Shipping ordersby grouping and sequencing customer that are missing products, when clearly Cycle counting based on SKU velocityorders, minimizing labor, and maximiz- the expectation is to “ship complete,” is one method of creating a perpetualing efficiencies. For example, if a com- can destroy the faith of the customer. inventory. Because a count is beingpany is trying to achieve 100% utiliza- This can lead to expensive and unnec- conducted daily or even more frequent-tion from a large private fleet of trucks, essary back-order situations that could ly, the annual physical inventoryit may want outbound shipments deliv- be avoided through proper processing. becomes a historical reference. Beforeered to the dock on the basis of trans- a perpetual inventory process is imple-portation schedules. In this case, A WMS can assist in selecting in the mented, corporate auditors shouldreplenishment and picking are planned right shipping carton for packing. It is in approve the processes involved. Byfor transportation efficiency. On the the best interest of the customer and certifying the counting process, theother hand, if customer orders are the shipper alike to make this decision auditors assure the CEO and CFO thatreceived from catalog and online sales correctly. If a carton is the wrong size, the inventory is accurate.and arrive throughout the day, transpor- damage can occur. A carton that is tootation schedules should be arranged small can cause the contents to bearound systematic and periodic order exposed beyond the design of the cor-picking and fulfillment. rugated box. A carton that is too large can use expensive packing materialsA WMS must be flexible enough to that expose the contents to potentialallow configuration and changes to the damage and erode profit margins. Inreplenishment processes to reflect addition to the potential of a customer’schanging business needs. It should claim, the carrier may reject analso enable replenishment tasks to be in-transit damage claim if the carrier’sinterleaved with other warehouse tasks, customer service agent determinessuch as picking and packing. that the packing materials are inappro- priate for a particular shipment. ThePicking and Packing bottom line is that customers, businessTo the customer, the most visible result partners, and internal operations allof any fulfillment operation is the com- benefit from effective and efficient pick-pleted order with the right product, in ing and packing.the right quantity, and at the right time.Therefore, the accuracy of picking andpacking is paramount.10 SAP White Paper – Warehouse Management for Wholesale Distributors
  10. 10. Although it is not mandatory, the best The goal of slotting is to make the facil-opportunity for converting to a perpetu- ity more efficient. Relocating slow-al inventory usually occurs during con- moving items out of an optimal pickversion or upgrade to a new WMS. zone can increase throughput. PlacingDuring conversion, a physical inventory products in a larger location or increas-is taken not only to compare actual ing pick faces (the presentation of anstock on hand with the system of item to an employee) can reducerecord and book the variance but also replenishment requirements and ensureto create a baseline. The baseline is that production plans can be met. Acompared with daily counts. Once the company can breathe life into a fullyauditors are satisfied that the daily depreciated asset, such as an oldercounts are accurate, there is no longer distribution center, by finding through-a need for annual physical counts put capacity and increased efficienciesbecause perpetual counts are correct. that were not thought possible. All of these opportunities depend on theThis approach to inventory control proper placement of products throughprovides the following benefits: slotting.• Increased inventory accuracy• Reduced labor costs by eliminating annual physical counts, which can add up to hundreds of full-time equiv- alents per facility and often encroach into overtime costs• Decreased capital investments in products with less days-on-hand inventory• Enhanced compliance with govern- ment mandates and regulationsSlottingSlotting is designed to achieve faster,more-efficient order fulfillment. It sup-ports the optimization of warehouselayout and product-placement strate-gies, reduces travel times, and boostsmaterial handling and space utilization. SAP White Paper – Warehouse Management for Wholesale Distributors 11
  11. 11. Enhancements to Functionalityand UtilityMaking Warehouse ManagementProcesses More EfficientValue-Added Services An advanced WMS integrates with Warehouse Stock Analytics material handling equipment (MHE). In Warehouse stock analytics enable anA value-added service is an operation a complex distribution facility, material immediate overview of goods andperformed on materials to enhance handling should be automated, includ- movements within a warehouse. Fortheir value, worth, functionality, or use- ing inbound conveyors, replenishment example, a company can analyze thefulness. Typically, value-added services conveyors, pick-to-light systems, auto- slowest-moving or fastest-movingare performed by workers in work mated guided vehicles, and sorting materials for a given warehouse. Obso-centers or during normal warehouse equipment and A-frames. lete parts can also be analyzed by val-activities. Value-added services enable ue in both a graphical format and apostponement strategies, in which In general, there is significant interface more detailed report.finishing steps of the manufacturing complexity and inherent instability whenprocess are performed at a late stage MHE controls decision processes. Giv- Warehouse Workload Historyin the process chain. Examples include en this situation, the best practice is to A successfully deployed WMS pro-assembly, kitting, tagging, or price turn decision making over to the WMS. vides invaluable insight into warehousemarking. The WMS creates tasks, sends them workload. With this insight, the history to the MHE, and receives confirmations of incoming sales orders can be ana-Data-Collection Technologies back from the MHE. lyzed as can the outbound delivery quantities (sales and shipments) andData-collection technologies, such as Analytics line items. This can enable better laborRF, enable warehouse staff to use performance and improved customerbar-code readers, handheld terminals, Organizations expect their WMS to satisfaction.and other mobile devices to capture provide analytical functionality. Thedata on the spot, enhancing both accu- technology is used for both business Workload history functionality facili-racy and productivity. RF devices can and technical monitoring and reporting. tates the analysis of goods receiptsbe linked directly to a WMS without and goods issues by month. Themiddleware for seamless, immediate Preconfigured Analytics receipts/issues variance by monthdata exchange. Hardware-independent Business monitoring and reporting can be analyzed and, if necessary,technology allows the use of devices functionalities include the analysis of space utilization can be modified.from a variety of vendors, and easy- stock shuffles at different locationsto-understand screens can be tailored and stock movements across locations. For More Informationto individual roles. Cross-location movement can be ana- lyzed by action type and cycle time. To learn how SAP® software solutionsAn advanced WMS can accommodate can address the needs of a wholesalevoice-recognition systems. These sys- The analytics from a WMS help a com- distribution company, call your SAPtems use speech recognition and pany to make better process decisions representative today or visit us on thespeech synthesis to translate data to based on insights from across the Web at www.sap.com/wholesale.and from a host computer. Voice com- adaptive fulfillment network. The data ismands eliminate manual data entry and more accurate than with manual datathe need for paper lists or handheld ter- entry, and the flow of goods can beminals and provide gains in speed and analyzed within and across locations.efficiency over manual methods. The real-time awareness and increased business visibility lead to increased revenue.12 SAP White Paper – Warehouse Management for Wholesale Distributors
  12. 12. 50 090 088 (08/06)©2008 by SAP AG.All rights reserved. SAP, R/3, xApps, xApp, SAP NetWeaver, Duet,PartnerEdge, ByDesign, SAP Business ByDesign, and other SAP productsand services mentioned herein as well as their respective logos aretrademarks or registered trademarks of SAP AG in Germany and in severalother countries all over the world. All other product and service namesmentioned are the trademarks of their respective companies. Data containedin this document serves informational purposes only. National productspecifications may vary.These materials are subject to change without notice. These materialsare provided by SAP AG and its affiliated companies (“SAP Group”) forinformational purposes only, without representation or warranty of any kind,and SAP Group shall not be liable for errors or omissions with respect to ­the materials. The only warranties for SAP Group products and services arethose that are set forth in the express warranty statements accompanying ­such products and services, if any. Nothing herein should be construed asconstituting an additional warranty. www.sap.com /contactsap