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  1. 1. Warehouse OrganizationImpacts to the Process Flow Metrics 1
  2. 2. Warehouse OrganizationA typical warehouse is segmented into various departments. Each department performs specific activities. Each department has an upstream supplier and a downstream customer. Each department is dependent on the other departments. No one department operates in a vacuum. 2
  3. 3. The Major Warehouse Departments Inbound ProcessesReceiving: ~10% of warehouse operating costs Orderly receipt of all product and materials into the warehouse Verify the quality, quantity, and accuracy of incoming product Disperse product to down stream departments Can be argued this is the most important activity in the operation…why?Put-away (Stocking): ~15% of warehouse operating costs Stock and log product into storage locations 3
  4. 4. The Major Warehouse Departments Outbound ProcessesPicking: ~50-55% of warehouse operating costs Pick product from storage locationsSorting: ~5-10% of warehouse operating costs Build orders from batched pickingPacking: ~5-10% of warehouse operating costs Final package and boxing of product prior to shippingShipping: <5% of warehouse operating costs Palletizing, loading and prepping orders for shipmentOther: ~5-10% of warehouse operating costs Quality, Inventory Control, Returns, Maintenance 4
  5. 5. Warehouse OrganizationA typical warehouse is composed of the following departments:Core Processing Departments Support DepartmentsReceiving G&A (General and Administrative) Stocking Picking/Order Pulling Quality Control/QA Sorting Packing Inventory Control Returns Maintenance Shipping impact 5
  6. 6. Impacts to Process FlowDepending on your business model: “Order today/ship today” Or “Order today ship tomorrow”How you process your work: Sequential based on ship time, order size, etc… Sequential based on order size or types and number of processesFlow is regulated by limitations. What are the bottlenecks in your operation thatimpede or limit speed of flow or amount of volume passing through your system? Metrics 6
  7. 7. Warehouse Metrics Why do we have metrics? What purpose do they serve? Metrics provide direction to our daily activities, establish expectations, define our boundaries, and push us to strive for continuous improvement. You can’t improve what you don’t measure Where do our metrics come from?Metrics are generally derived from our goals and objectives, which aregiven to us from higher levels in the organization (CEO…) If you are performing activities that do not support your metrics you are most likely working/focusing on the wrong things. 7
  8. 8. Warehouse Metrics Some examples….Cost per Unit (CPU)Associate TurnoverCycle TimeQC (Error Free Rate, Errors per thousand/million, etc…)Order Fill RateSafety (IFR, Lost Time, etc…) 8
  9. 9. Warehouse Metrics Some examples….Service Level Agreements Contracts between outsourcing companies and clients Usually long term Established during the initial consulting Is the most vital aspect of a contract between a client and the service level provider Covers all of the specifications for the performance of the service provider Used to manage vendor performance Can you think of others? 9
  10. 10. Warehouse Metrics Developing Performance Metrics1. Involve the people responsible for doing the work2. Identify the critical work processes and customer requirements3. Develop measurements for the critical work process or critical results4. Establish performance goals, standards, or benchmarks 10
  11. 11. Warehouse Metrics Developing Performance MetricsThe establishment of performance goals can be specified when they are definedwithin three primary levels:1. Objectives: Broad, general areas of review. Generally reflect the end goals based on the mission of a function.2. Criteria: Specific areas of accomplishment that satisfy major divisions of responsibility within a function.3. Measures: Metrics designed to drive improvement and characterize progress made under each criteria. They are specific quantifiable goals based on individual expected work output. 11
  12. 12. Warehouse Metrics Developing Performance Metrics SMART The SMART test is used to provide quick reference to determine the quality of a particular performance metric:S = Specific: clear and focused to avoid misinterpretation. Should include measure assumptions and definitions and be easily interpretedM = Measurable: can be quantified and compared to other data. Should allow for meaningful statistical analysis. Avoid “yes/no” measures.A = Attainable: achievable, reasonable, and credible under a given set of conditionsR = Realistic: fits into the organization’s constraints and is cost-effectiveT = Timely: doable within the time frame given Receive 12