Editor's note: Last year, the Council of Supply Chain Management Professionals (CSCMP) commissioned a seminar series titled "Fundamentals of Supply Chain Management" to an overwhelming response. This month, we launch a new column in DC VELOCITY addressing that topic, written by the developers of the CSCMP series, Art Van Bodegraven and Ken Ackerman. Both are long-time practitioners, consultants and educators. Ackerman, who is head of The Ackerman Co., is past president of the council. Van Bodegraven, a partner at The Progress Group, is also chairman of The Supply Chain Group. Despite their long industry experience, they claim that neither is as crotchety as Walter Matthau or George Burns in "The Sunshine Boys." Reader comments on the column are welcome.
Warehousing, some wags have suggested, is the second oldest profession. Pick up the Book of Genesis, and you'll find a description of warehouses used to store food against an imminent famine. Yet despite this long history, just a few years ago, some leading thinkers in logistics were predicting the demise of the warehouse.
They were wrong. Today, we're using more warehouse space than ever before. Maybe we've moved from pallet-in/pallet-out storage and movement to a world of cross-docking and perfect order fulfillment at the piece level. But the basics remain very much the same as they've always been.
Warehousing, at its core, is about only a couple of things the management of space and the management of time. Let's start with space. What's the right balance? In general, too much space is preferable to too little, although too much can lead to bad habits.
Not surprisingly, too little is often a solution favored by top management. Some believe that "there's always room for one more." Yet when warehouse capacity has been reached, material gets placed in aisles, in staging areas, on docks, and in locations designed for other products. Accuracy suffers, efficiency drops, and performance plummets ultimately dragging customer service down to levels that would make a Russian bureaucrat blush.
The temptation to overfill a facility is particularly great when the focus is on warehousing (storage) instead of distribution (movement). The "storage" mentality is driven by the effort to fill the building to its maximum capacity. Today's reality is that space utilization is only one part of the cost/service equation, and that effective movement in and out typically trumps the added cost of the space needed to accommodate that activity.
A rule of thumb in a distribution center is that available storage capacity must be calculated with aisle, staging and other non-storage space subtracted from total building capacity. A facility is "full," from a practical standpoint, when it reaches 80 to 85 percent of available storage capacity and that presumes that the available space has been configured correctly for the mix of storage modes, such as floor stack, pallet rack and flow rack.
One key to effective space use lies in effective space planning repeated analysis of products and flows for dynamic layout of the facility and its storage (and order selection) modes. It's a little like painting the Golden Gate Bridge when you've finished, it's time to start over. But, without practical layouts, exquisite understanding of slotting, and discipline in putaway and replenishment, warehouse operations and cost and service can unravel pretty quickly.
It's about time
The other key component in warehousing is time. More and more, time demands drive what we do in warehousing measured by order fulfillment time, pick lines per hour, or dock-to-stock time. To some extent, we can approach time imperatives through better technology application and through process redesign. But, often, managing time in the warehouse is about managing people.
Time study as an engineering discipline is often misunderstood and misapplied. It has often been parodied, as in The Tramp's losing race against the assembly line in Charlie Chaplin's 1936 classic "Modern Times." And there's no doubt that observation of work and time is challenging in warehouses because people are in constant motion and are spread throughout the facility. But it's important to know how long tasks and jobs take. Supervisors need to know in order to assign crews and to assess performance. Managers need to know to meet budgets. Third-party service providers need to know to establish fees for services provided.
Right now, only a minority of warehouse operators have really good measurement and related time-based management. Nonetheless, there's hope for those organizations that want to get more precise and serious about managing time. Today's workers are less likely than their predecessors to react negatively to time study, standard setting and performance reporting; and few will resist once they gain familiarity with the underlying processes.
Accelerating work processes does not mean trading off quality for quantity, however. The two are not necessarily trade-offs, just as high customer service levels and low inventories are not necessarily incompatible. Productivity measures comprise both velocity and quality.
This subject of metrics deserves a separate discussion. Until that time, let us propose that active, rigorous metrics are hallmarks of acceptable warehousing. Exceptional warehouses tend to have metrics that match up with business goals and exceptional performance against metrics targets.
The strongest link
When all else is said and done, the warehouse is not an island. It supports (or should support) the overall corporate mission. The way a warehouse is managed will reflect goals and priorities, whether they are growth, superior service, cost reduction or increased volumes.
The warehouse manager will be judged by how well he or she aligns the organization, the associates and their performance with corporate objectives. Not only is the warehouse, or distribution center, intimately connected with corporate performance, it is the link between production and customers a dynamic player in creating supply chain success.