Monday, July 7, 2014

More Efficient Operational Processes

More efficient warehouse operations.  If only.  Is it possible?  If it were, there would likely be less labor costs relative to increased production.  Less costs and less production is clearly a down cycle in the business as is more costs and less production.  Ideally you want less costs and more production. 

Automation is the key.  But, automate what, how?

For most manufacturers and wholesale distributors the key often revolves around inventory levels, processing and handling.  Inventory tends to have the greatest Return On Investment (ROI).  Inventory management is somewhat like upgrading your kitchen in your house remodel.  The kitchen remodel generally returns the most on investment.  Other upgrades make living more comfortable, but Kitchens have one of the better paybacks.

Increased accuracy in order and pick/pack/ship processing due to warehouse layout optimization, receiving efficiencies including barcoding and scanning, automated put-aways and cycle counting are just a few examples that can contribute to more efficient operations.

Most businesses that have survived the economic fluctuations are running fairly well and have probably automated at least some and likely much of their facilities.  Warehouse Management Systems (WMS) are the key to the automation.  Unfortunately these systems are not always fully implemented.  Sometimes the implementation plan was a phased approach, but never completed.  Sometimes the organization had a loss of faith in the promised return.  The causes are many, a bad match between sales and purchasing, lack of education, or lack of funds to fully implement the solution. 

WMS systems are great, but they do have to match the business model.  Typically the greatest efficiency in WMS comes from a fully integrated solution that is part of the native Enterprise Resource Planning (ERP) solution.  However, if the ERP solution is not a good match, the WMS module will tend to exacerbate the problems.

A thorough review of business operations makes sense before purchasing or upgrading your WMS solution. 

Are there plans and budget available to outfit workers with wireless equipment, barcode scanners, printers, and other tools?  The benefits of WMS will be limited without the corresponding equipment.  Automating labor collection and reporting is another benefit of WMS systems.  A phased-in approach is a valid model as long as the implementation is completed.

How much paper is involved with the current processing of orders, receiving and counting?  How will a WMS system reduce this overhead?  Will your people be convinced?  What is the baseline and what metrics are needed to gauge the project success?  Without an electronic system how can workloads be optimized?  How much time and effort is needed to check orders? 

How much does the administrative overhead affect your profitability?

Achievable goals include year over year decreases in labor costs relative to production, order, pick and shipment rates of 99% accuracy.  To enable these accuracy levels organizations will typically need to implement bin management in their WMS system, real-time paperless receiving and put-aways, automated picking and cycle counting.  Manual systems require a significant amount of administrative overhead and paperwork which contributes to inaccuracies. These inaccuracies increase if batch, lot or serial number processing is involved. 

High accuracy rates are not the end goal, efficiency is.  High accuracy rates are what enables business to concentrate on real operational efficiency improvements. 

To get started, businesses need to conduct a business process review including evaluation of the incumbent and competitive ERP software including WMS systems, including any upgrades to their current systems.  This is only a start, but it is an important an unavoidable step in the right direction.

Buy-in at all levels in the organization is an important component to not be forgotten

Owners and/or management cannot just decide one day to push out a whole new way of doing business without proper training and education.  From the shop floor, warehouse, to the back office, management and top level personnel, everyone needs to understand that the change will help them to do what they do more efficiently and productively.  Set the expectations and gain consensus on the outcome. 

This is a real test for the leadership in the organization.  

How is your organization dealing with change, leadership and inventory challenges? 

Dolvin Consulting works with your team to identify and remediate the causes of inefficiency in your organization.  Contact us today to see how we can help. 

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