– Supply Chain Insight –

Challenged by capacity constraints? You’re definitely not alone…

Supply Chain Operations & Finance

capacity constraints

We took a quick survey recently of our Linkedin followers, and members of various supply chain groups that we’re a part of, to get a pulse of what challenges were top of mind amongst warehousing and distribution leaders going into the 2021 holiday season. 

Much like the 2020 holiday season, warehousing and distribution professionals were faced with some unique challenges due to the on-going COVID-19 pandemic, as has been the case since early 2020.   Pandemic aside, when it comes to the holiday rush, however, there are three unique challenges that warehousing and distribution professionals commonly have to deal with year over year.

  1. Profitably scaling throughput
  2. Managing capacity constraints
  3. Maintaining best practices

Now, of course, with any of these three common challenges, they don’t come out of nowhere just for the holidays.  Typically, they are present year-round and are just amplified when demand increases, order patterns change, or adversity hits.

From experience, all three of these challenges are tied together in one way or another.  For instance, if you have trouble maintaining best practices as workload increases, it’s likely going to have implications on your ability to scale your throughput and effectively manage capacity utilization. However, while profitably scaling throughput is not necessarily something that is felt at the operational level, capacity constraints are felt immediately and are highly visible, not just in terms of the effect on productivity but also on product integrity and even the safety of floor personnel.  

This is why we don’t find it surprising at all that over half (53%) of survey respondents suggested that managing capacity constraints was their biggest challenge heading into the holiday season.

Whether it’s active SKU growth reducing available pick fronts, or an increase in shipping volume overloading storage reserves, managing capacity constraints as the operation changes is critically important but it’s not always the easiest thing to do without the right tools.

See also:  Fishbone Friday – lack of storage capacity in the warehouse

If you’re reading this and happen to share the sentiments of the majority who took part in our short survey, the good news is that there’s likely more available capacity in your operation than you think.

It all begins with an evaluation of your layout and available space.  When we conduct a strategic opportunity assessment prior to implementing our fulfilment optimization system, SKUStream, we’re looking for opportunities to reduce waste in the operation, and one of the most camouflaged areas of waste is capacity.

Here’s an example of a recent opportunity assessment that we did for a leading grocery retailer that was hard-pressed for storage capacity, even prior to the holiday season.

Upon an initial review of the operational data and current slotting, we found that over 33% of active SKUs (nearly 1,000) in a particular area of the facility were slotted in a slot type that was too big.  This assessment was even based on rules and parameters set by the operators, so it was probably even a bit conservative. 

Now, the operation was set up this way.  The operators knew they were oversizing some of the slots (maybe not to this extent) but the reasoning was to reduce forklift labor, including pick slot replenishments, putaways, letdowns, etc. 

This is sound reasoning, but with a couple of caveats.

  1. You have enough space to not place needless constraints on your operation
  2. You are not needlessly elongating your pick path

While both caveats are important to monitor, there comes a time in every operation where space constraints will occur and this type of evaluation is needed to assess the remaining life of the facility or, in this case, the ability for the site to handle peak season demands.

In the example above, what we noticed was that, although moving some of the afflicted items into smaller slot types would increase forklift labor, by focusing first on slower moving items, the increase was negligible.

Additionally, if the site is nearing the end of its lifetime, this type of analysis can point to a few creative solutions that can be used to delay significant CapEx.   I highlighted an example of this in my last post, which you can read here.

If you are consistently challenged by capacity constraints, either throughout the year or just during your peak season, I’d recommend a no-obligation strategic opportunity assessment.  Using 4-8 weeks of operational data and our SKUStream system, the assessment can not only isolate and quantify areas of potential improvement, but it will also provide an actionable roadmap for immediate execution so that you can get to work right away.

When it comes to our strategic opportunity assessments, I usually like to sum the benefits up with the following quote:

The price of light is less than the cost of darkness

Arthur C. Nielsen, Market Researcher & Founder of Nielsen Corporation

Click here to learn more about our Strategic Opportunity Assessments and how your operation can benefit

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