What makes a warehouse operation better? Efficiency.
It sounds so simple, but before we can even begin to improve efficiency, we need to establish what that means for each organisation and then work out how to measure it.
What does warehousing efficiency mean to you?
To begin, you need to undertake some kind of audit. Hopefully your warehouse space has already been audited, but if not, here are some things to consider. It’s important to measure inventory and safety as well as efficiency.
When exploring efficiency make sure you look at:
- Layout and flow – remember to talk to warehousing employees about where they experience bottlenecks or problem areas. An efficient warehouse will use a layout based on sales volume. This means that the fastest moving (most popular) items are placed closest to the receiving and shipping points in your warehouse so that they can be found and processed faster than less popular items
- Capacity and throughput – capacity establisheshow much space is available for storage, inventory prep, and order fulfilment while throughput measures the actual number of units being processed through your warehouse space, whether during the actual inventory process or as the daily work of filling orders
- Safety and maintenance – these often neglected areas of audit can really improve efficiency if you have equipment that breaks down or isn’t performing effectively – because those things nearly always happen when the warehouse is under pressure, so deadlines will be missed. Pallet storage has also really changed the focus in this area, as vertical warehousing has led to new approaches to safety and new forms of kit that need to be mastered and used safely.
Sometimes making changes in these three key areas can be enough to really improve efficiency – and without these three areas being optimised, you’ll never get the best out of your space or your people. But they are never going to be enough, in themselves, to get to optimum performance.
Defining warehouse efficiency goals
The next stage is to define goals for your warehouse space. These will depend on your mission which is probably something like “using space labour and equipment efficiently to meet customer need and create profit”. Based on your mission – which could equally be to ‘efficiently resource a major client’ or for a subsidiary unit, ’to act as an efficient back-up to a major distribution base’, you can set goals such as:
- Reducing errors – minimising errors allows for better productivity, a happier workforce and a more contented client
- Establishing realistic targets – sometimes our audits lead to us creating unrealistic targets that just can’t be met. This results in employee demoralisation and organisation-wide frustration, so revising those goals can be a great way to increase achievable efficiency
- Checking your team scope and scale – if you have too few people, or too many, inadequate training or gaps in your chain of command, it may be time to look at who you recruit and how you resource them to do their jobs.
Now you’ve got information and goals, you can work on efficiency in a more meaningful fashion.
Efficiency from KPIs
It’s obvious, isn’t it? But so many warehouse spaces have Key Performance Indicators (KPIs) that were established when the unit was set up and haven’t been revised since then. New ways of working with KPIs to improve efficiency include:
Where you have pickers and packers, consider creating KPIs for the number of order lines picked per hour (or day, or week), the accuracy of picking over a day or week, the number of orders processed per hour, day or week, and for shippers you can look at the time taken for each order, the quality percentage of each order and the number of complaints received that are shipper generated (eg address fails, packaging fails – anything that is really in the control of the shipper, not the result of third party or unavoidable error like weather or logistics delays or courier damage)
To keep improving efficiency, work from your initial audit data and then regularly (ideally monthly) update that data so that your warehouse team know how they are doing, how, and why, the KPIs are changing and so you can provide better information and training if required to keep efficiency gains increasing.
Look at your fulfilment performance
Many things affect both your efficiency and how happy your clients are. For example:
- The time and cost of transportation can massively affect your customer experience – while transportation time may not be entirely in your control, monitoring these areas can help you see where performance can be improved, maybe by providing extra resources ‘rush scheduling’ which happens, for example, over holiday weekends when many people shop online for last minute holiday items.
- Checking your cost per order is the central way of defining your warehouse efficiency – whether you have thousands of orders to fulfil every day, or large orders for a small number of repeat clients, you can still establish the average cost of picking, packing and shipping because this is a great way of checking efficiency, particularly of your workforce.
- A warehouse space’s fulfilment accuracy rate is also central to efficiency – it’s a really simple equation, found by dividing the number of accurately fulfilled orders by the total number of orders. The Japanese Kaizen system, which aims to create continuous improvement from small, constantly reviewed changes,is one common example of an efficiency improvement practice. Kaizen relies on team cooperation rather than top down changes to achieve these improvements so that ownership of the efficiency is in the hands of those who are actually undertaking the tasks.
Inventory accuracy as an efficiency measure
Without inventory accuracy, KPIs are meaningless. If pickers can’t find the right item, they can’t get it packed and shippers can’t get it out of the warehouse space – there’s no point improving workflow, safety and efficiency in processes if the products aren’t in the right place at the right time! Most companies now use some form of computerised inventory process, but that is only as good as the warehouse employees who operate it and may be compromised if inflow and return items aren’t well processed – for example if received goods are stuck on pallet storage instead of in the pick bins, they may be theoretically in the warehouse, but not available for distribution.
In summary, once you’ve checked your warehouse layout, defined efficiency for your operation, and created KPIs, you’re well on the way to improving fulfilment performance.