Inside Logistics

Materials Handling: Warehouse fundamentals can reveal cost savings

The fundamental principles of warehousing are still as valid today as they were fifty years ago


September 16, 2014
by Dave Luton

Dave Luton

Dave Luton

In spite of all the hype about this new material handling system, or that new software, the fundamental principles of warehousing are still as valid today as they were fifty years ago. However, it seems warehouse managers often do not have the time to rediscover them.

While the old technique of management by walking around has been superseded by much more efficient techniques, it still has utility in uncovering cost savings opportunities. This is particularly true with the rapid business changes many warehouses are undergoing to support emerging logistics practices such as e-commerce. Certainly order sizes are not getting bigger; in fact, they are often shrinking considerably.

Let’s re-examine a number of these warehousing cost savings constants in a changing world.

The first is improving forecasting accuracy. This touches every dimension of warehousing, from inventory and related storage needs to material handling. With the tendency to SKU proliferation because of mass customization, it is more important than ever. If you do not forecast all you can do is react, and you will lose efficiencies for both storage and handling.

Today, with the added pressure of time compression because of the need to ship it now, we often do not have the time to reduce costs by batching and combining orders.

Next is reducing the times an item is handled. Costs and the time needed to ship an item mount every time an object is handled. With e-commerce’s smaller order sizes, the cost of order selection and packing can greatly increase, particularly as much of the packaging today is designed for larger order quantities. With the market demand for free shipping and ship same day, there is an already commercial pressure on profit margins.

Reduction of travel distance is another key cost reduction objective. While generally viewed in the horizontal dimensions of length and width; an argument can be made to include the height dimension. The order selection ideal remains knee- to shoulder-height; anything outside this reduces efficiency. While random storage is viewed as the most efficient for improved cube space utilization it, comes at the cost of lowered labour efficiency. While improved cube usage reduces horizontal travel distances, elevating vertically is 75 percent slower than horizontal travel.

To help reduce travel distances a couple of other strategies can complement the basic objective. The first is to limit the empty travel distance by reducing the amount of unloaded deadheading by traveling loaded both ways. Too often a vehicle is tasked with only one job, such as receiving. Thus once it picks up a unit load it must travel to the putaway location, returning empty to the unloading location. Half its travel distance is wasted by being empty. This can be counteracted by such strategies as having shipping and receiving on the same dock face, allowing a receiving putaway lift truck to be used for unit load order selection on its return.

Further efficiency gains can be achieved by reducing the workflow variation so equipment and workers are kept steadily employed.

Another overlooked sector is a complete rethink of product packaging needs. Most of today’s packaging is designed for ultimate use in retail stores, whereas the future is in e-commerce. Using conventional retail packaging for an e-commerce application often means the product must be uncased before it is picked for an e-commerce customer.

To eliminate this cost and the cost of unnecessary packaging, consider placing part of your inventory loose in bulk bins for easy order selection. Items often have to be repacked anyway, and this permits the use of more efficiently sized shipping boxes.

The impact of a safe, clean, uncluttered workplace is often overlooked from a productivity standpoint. Basically, it allows the workers to undertake their tasks without worrying about distractions and therefore they can concentrate on the task at hand. This should be viewed as a fundamental necessary condition for a productive workforce and if not available, it results in a loss of productivity.

Finally, there is the impact of setting and measuring efficiency targets. In simple terms, just the establishment and measurement of efficiency targets will result in a 10 percent increase in productivity. Further increases can be expected in the setting and monitoring of more sophisticated standards.

Cost savings in the warehouse can often be achieved by using relatively basic measures that were known to warehouse management before all the sophisticated equipment and systems of today were established. Rediscovering them sometimes can yield a positive return with relatively limited investment.

Dave Luton is a consultant in the greater Toronto area. dluton@cogeco.ca

From the July-August 2014 Print Edition