– Supply Chain Insight –
How can I optimize my warehouse operations for maximum efficiency and cost savings?
To many warehousing and distribution leaders, this is the million-dollar question.
It’s the question that commonly stands between the average and the best-in-class – and to be fair, this question, if solved and sustained, is worth considerably more than a million dollars to most over time.
Now, as you read this, don’t think the answer to your question is anywhere in this blog post, because it’s not. Nor should it be.
While everyone is asking the same question, the answer is unique to you, your network, and your distribution operations.
What I can tell you is that, fortunately, the answer you’re looking for is hiding in plain sight.
It’s hiding underneath the surface of your day-to-day responsibilities, in YOUR operational data.
Yes, the same data your management systems have been generating and archiving for years.
Don’t blame your management system, though. It wasn’t created to optimize your operation; it was created to manage it. It’s not inherently looking to steer you away from your status quo, and unfortunately, your status quo is likely costing you a lot of unnecessary time and money.
So, the answer to your million-dollar question is in your operational data. Where do you start?
Let’s take a step back and look at the most important (and sometimes undervalued) indirect labor processes to your operation. A process that’s performed numerous times a day and has an influence on every direct labor function on the warehouse floor and even on your operating capacity and facility lifetime. I am, of course, talking about slotting.
In best-in-class organizations, slotting and slotting optimization is typically its own department with specialized personnel and tools; however, in the average network, slotting is still just one of many daily responsibilities of select members of an inventory control team and is sometimes greatly undervalued.
How undervalued? Well, that’s where your data comes in.
In the average Strategic Opportunity Assessment that we do, leveraging our fulfillment optimization system, SKUStream, we find that – in a typical high-volume operation, only about 40-50% of items are slotted in their most productive slot type. By the way, this is only considering current rack options.
The other 50-60% fall into one of two sub-optimal categories: too big or too small
That is to say the item is slotted in a slot type that is too big or too small.
Here are the implications of both on your leading performance indicators. These indicators are what influence your efficiency and, ultimately, your labor costs.
To simplify, every active item within your distribution operation requires resources from each one of these labor categories. Slotting optimization is the process of minimizing this resource demand within your unique constraints. Minimize the resources being allocated to each item, and your costs will go down.
It’s a simple concept but the execution is not so simple because there are just so many variables at play.
That’s where a fulfillment optimization system comes in. It takes your operational data daily and provides a comprehensive evaluation of all leading performance indicators and where you can save money by making better slotting decisions. It also does this proactively as soon as new items hit the dock so they can be slotted optimally right away.
In essence, it challenges your status quo instead of just managing it.
Back to your million-dollar question…
While your specific answer is hidden in your operational data, the average Strategic Opportunity Assessment that we do uncovers between $350,000 and $550,000 in operational savings per site, per year. Leveraging SKUStream daily, these savings can even be achieved without distribution to the operation.
As you can see, the answer to your million-dollar question is hiding in plain sight.
The only question is: are you going to take action?
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Categories: Distribution Center Design, Engineered Slotting, Process Optimization, Warehouse Optimization,