Welcome to Session 205

Using Metrics to Drive Warehouse

Performance Improvement
Presented Sponsored by:
by:

John M. Hill
© 2011 Material Handling Industry®. Copyright claimed as to audiovisual works of
seminar sessions and sound recordings of seminar sessions. All rights reserved.
WE’VE HAD QUITE A RIDE!

2011 FORECAST: 11 to 12% GROWTH

READY FOR THE TURNAROUND?

NAVIGATING THE
SUPPLY CHAIN
JUNGLE
WE’VE GOT THE TOOLS!
Network & Process Optimization
--- right environment

Material Handling & Controls

--- right condition

Automatic ID & Data Capture

--- right material

Supply Chain Execution Systems

--- right time
HOW DO YOU GET THERE?
"Would you tell me please,
which way I ought to go
from here?" "That depends
a good deal on where you
want to get to," said the
cat. "I don't much care
where," said Alice. "Then it
doesn't matter which way
you go," said the cat.
ROADMAP TO EXCELLENCE
Profile & Measure Current Performance
Establish Target Performance Metrics
Define Trading Partner Needs
Map Processes, Material & Data Flows
Identify Gaps & Opportunities
Define Structural & Functional Needs
Examine Alternatives to Close the Gaps
Put a Value on Potential Incremental Gains
Match Likely Costs & Benefits
Prepare Roadmap & Action Plan
Launch Initiative
WHAT WOULD MOM SAY?
WHAT WOULD MOM SAY?
CONGESTION
9 Does the facility resemble an LA freeway at rush hour?
9 Are pickers delayed while waiting for others in the same area?
9 How about slotting & activity scheduling? Spread the fast movers
across a wider pick front.
CLEAN, WELL - LIGHTED SHIP
9 Are work areas clean or cluttered? What about lighting?
9 Are storage, staging & pick locations well & logically marked?
9 What about the temperature? Too cold? Too hot?
THE DIRTY FINGER TEST
While walking through the storage or picking areas closest to the
shipping docks, drag a finger across the tops of the stored pallets,
cases or items and check that finger every ten feet. The quicker it
becomes dirty, the greater the problem with improper storage of
slow moving materials.
WHAT WOULD MOM SAY?
GOLDEN ZONING
9 Are pick locations positioned at or near picker waist height?
9 SKU profiling can help with deployment of fast movers in the
“golden zone”.
DOCKS
9 Do you use proper dock plates, levelers, trailer wheel chocks &
restraints that engage the impact guard on trailers to prevent
movement?
9 When lift trucks fall from docks, injuries can be serious & sometimes
fatal. Don’t skimp on the busiest & most dangerous part of the
warehouse!
PEOPLE
9 What’s the mood? Do managers know team members by name &
greet them accordingly?
9 Do workers receive regular feedback on targets & actual results?
HORSES FOR COURSES
Should we go with an AS/RS or
vertical or horizontal carousels?
Which conveyor / sortation
systems should we consider?
What about robotic picking?
Can we use our ERP for
warehouse management?
What about SaaS WMS?
Is RFID ready?
HORSES FOR COURSES
It’s critical that you take the
time to describe
the track & define
performance
requirements
before picking
the horses to
run the race.
WHO PLAYS GOLF WITHOUT A SCORECARD?
PROFILING
FACILITY LAYOUT PRODUCT PROFILE
• Size: Usable Sq. Feet, Height •Number of SKU’s
• Material & Data Flow Diagrams •Classifications; e.g., Hazardous
MOVEMENT •ABC Percentages
• Lift Trucks, Pallet Jacks CONSIDERATIONS
• Conveyor, AGVs, Other •Shelf Life, Lot & Date Codes
STORAGE LOCATIONS •Serial Numbers
• Bulk, Pallet Rack & Flow Rack •Seasonal Issues, Other
• Bins/Shelving DATA COLLECTION
• AS/RS, Mini-Load, Carousels •Radio Data Terminals
SYSTEMS •Bar Code Scanners, RFID, Voice
• Types, Applications, Interfaces •Other Terminals
PROFILING
ACTIVITIES
RECEIPTS / HOUR / DAY
• Trucks/Railcar/Other
• Orders/Lines/Items
• Pallets/Cartons/Rolls/Other
PICKS / HOUR / DAY
• Orders/Lines/Items
• Cartons/Pallets/Other
SHIPMENTS
• Trucks/Rail/Courier/Other
RESOURCES
• Supervisory
• Receiving Operators
• Pickers / Packers / Checkers
• Replenishment Operators
• Shipping Personnel
• Inventory Control
• Expeditors
• Data Entry / Indirect
• Other
PROFILING
Collect receipt, order & item history
Profile transaction volume by task type
• Receipts by handling unit, material type
• Orders by handling unit, ship method, client
• SKU volume & daily activity by handling unit
Profile transaction volume by labor expended
Audit and validate results with users
ABC ANALYSIS
TOTAL
CATEGORY # OF SKU’S % OF SKU’S % PIECES SHIPPED
PIECES
A+ 36 58,665 0.9% 10.1%
A 822 397,758 20.7% 68.8%
B 867 80,594 21.8% 13.9%
C 869 31,973 21.9% 5.5%
D 1381 9,021 34.7% 1.6%
TOTALS 3,975 578,011 100% 100%
C 16% A+ 2%
A+ 10%
B 14%

A
68%

SKU’s (%) Pieces (%)

ACTIVITY PROFILE
Velocity Curve - Total Pieces
100%
– Cum % Pieces
90%
90% of Picking / 37% of SKUs
80%
80% of Picking Activity / 22% of SKUs
70%
% of Pieces

60%
50%
40%
30%
20%
10%
0%
0% 5% 11% 16% 21% 27% 32% 37% 43% 48% 53% 59% 64% 69% 75% 80% 85% 91% 96%

% of SKU's
ACTIVITY PROFILE
Order Picking Productivity
60 8,000

7,000
50
6,000
40
5,000

30 4,000

3,000
20
Labor
2,000
Orders
10
1,000
Lines/Person/Hr
Lines Orders

January Through November

ESTABLISH KPI’S
Order Fill Rates
Order Cycle Times
Lines & Orders/Person/Hour
Errors
Damage
Inventory Accuracy
Days on Hand
Cost / Order
Cost as % of Saleses
ESTABLISH KPI’S
INTERNAL KPI's CUSTOMER KPI's
• Perfect Orders • Profitability
• On-Time Deliveries • Sales Volume
• Inventory Accuracy • Growth Potential
• Credit / Payment History
• Inventory Carrying Cost
• Shared Strategic Vision
• Inventory Turns
• Return Rate
• Order Cycle Time
• Customer Viability
• Order Entry Accuracy • Order Frequency
• Workforce Utilization • Loyalty
• Shipping Accuracy • Cost to Serve
• Order Fill Rate • Competitive Pressure
• Customer Satisfaction • Hassle to Serve
ORDER FULFILLMENT
MEASURE CALCULATION TODAY FUTURE VALUE
Orders On-Time
On-Time Delivery Total Orders Shipped
% % $

Orders Filled Complete

Order Fill Rate Total Orders Shipped
% % $

Error-Free Orders
Order Accuracy Total Orders Shipped
% % $

Error-Free Lines
Line Accuracy Total Lines Shipped
% % $

Actual Ship Date Minus

Order Cycle Time Customer Order Date
Hrs Hrs $

Perfect Order Perfect Deliveries

% % $
Completion Total Orders Shipped
INVENTORY MANAGEMENT
MEASURE CALCULATION TODAY FUTURE VALUE
Actual Qty per SKU
Inventory Accuracy System Reported Qty % % $

Total Damage $$$

Damaged Inventory Inventory Value (Cost)
% % $

Avg. Month Inventory $

Days On Hand Avg. Daily Sales/Month
Days Days $

Avg. Occupied Sq. Ft.

Storage Utilization Total Storage Capacity
% % $

Total Dock to Stock Hrs

Dock to Stock Time Total Receipts
Hrs Hrs $

Receipt Entry Time -

Inventory Visibility Physical Receipt Time
Hrs Hrs $
 WAREHOUSE PERFORMANCE

MEASURE CALCULATION TODAY FUTURE VALUE

Orders Picked/Packed
Orders per Hour Total Whse Labor Hrs
Ord/Hr Ord/Hr $

Lines Picked/Packed
Lines per Hour Total Whse Labor Hrs
Lines/Hr Lines/Hr $

Items Picked/Packed
Items per Hour Total Whse Labor Hrs
Items/Hr Items/Hr $

Total Warehouse Cost

Cost per Order Total Orders Shipped
$/Order $/Order $

Total Warehouse Cost

Cost as % of Sales Total Orders Shipped
% % $
METRICS TRADE-OFF’S
Order
METRIC / Orders On Time Order
Cycle Damage
IMPACT /Hour Delivery Accuracy
Time
Orders /
Hour
On Time
Delivery
Order Cycle
Time
Order
Accuracy

Damage
BENCHMARKING RESOURCES
www.aberdeen.com
The Extended Warehouse Benchmark Report

www.cscmp.org
Multiple Process Standards & Metrics Reports, Annual
State of Logistics Report
www.establishinc.com
Cost, Service, Transportation Rate & 3PL
Benchmarks

www2.isye.gatech.edu/ideas/
System-Based Self-Assessment of Warehouse Operations
BENCHMARKING RESOURCES
www.mhia.org/search/Holistic+Metrics
Improving Order Execution Performance: A
Holistic View of Metrics Across Plant & Warehouse
www.supplychainmetric.com
Supply Chain Metric A Comprehensive Look at Performance Metrics,
Definitions & Calculations
www.supplychainconsortium.com
Benchmarking Services for Manufacturers,
Distributors & Retailers
www.supply-chain.org
Supply-Chain Benchmarking with SCOR and
SCORmark
www.werc.org
Multiple Reports, Publications & Tools including
Warehouse Manager’s Guide to Benchmarking
ESTABLISH KPI TARGETS
MEASURE CALCULATION CURRENT TARGET
On-Time Delivery Total Orders On Time /
Total Orders Shipped 87% 95%
Order Accuracy Errorless Orders /
Total Orders Shipped 92% 98%
Order Cycle Time Actual Ship Date -
Customer Order Date 12 Hrs 8 Hrs
Inventory Accuracy Actual Qty. by SKU /
Reported Qty. by SKU 96% 99%
Damaged Inventory Total Damage $$$ /
Total Inventory Value .75% .50%
Days on Hand Avg. Inventory Value ($) /
Average Daily Sales $ 50 Days 42 Days
Storage Utilization Avg. Inventory Sq. Ft. /
Storage Capacity Sq. Ft. 78% 85%
Orders per Hour Orders Picked & Packed /
Total Whse. Labor Hrs 15/Hr 20/Hr
Lines per Hour Total Lines Picked /
Total Whse. Labor Hrs 40/Hr 54/Hr
Cost per Order Total Warehouse Costs /
Total Orders $4.26 $3.62
Cost % of Sales Total Warehouse Costs /
Total Revenue 3.1% 2.7%
YOU HAVE
THE
METRICS,
NOW
WHAT?
THE BEST TECHNOLOGY
INSTALLED IN
OPERATIONS WITH ILL-
CONCEIVED MATERIAL
FLOWS & PROCESSES
WILL ONLY ENABLE
USERS TO DO THINGS
BADLY - - - FASTER!
 MATERIAL

DATA
Receiving Flow
REFINE INFRASTRUCTURE
Use order & SKU activity profiles to
deploy or ‘slot’ inventory based upon
historical & anticipated volume.
Improve Space Utilization
Reduce Travel Times
Golden
Zone {
Increase Pick Rates & Throughput
Optimize Replenishment Activity
Reduce Damage
Improve Safety
01 02 03 04

Simplify Retail Restocking

 ISSUES SOLUTIONS
Travel between locations Bring location to operator
Location searching Use WMS, lights, RFID or voice
Pick tour set-up Sequence via WMS
Case & item picking Assess alternate storage modes
Checking & verifying Bar code, voice or RFID
Counting Prepackage or weigh
Replenishment Dynamic via WMS
Congestion Spread fast movers
Operator idle time WMS task management
REFINE INFRASTRUCTURE
INFORMATION SYSTEMS

SYNCHRONIZE MATERIAL & DATA FLOW

WE’VE GOT THE TOOLS!
MULTI-
MODAL
SOLUTIONS
WE’VE GOT THE TOOLS!
WMS manage
inventory, space,
equipment & labor in
real time to optimize the
flow of materials & data
from receiving &
putaway to light
assembly, order
picking, value-added
processing & shipment.
USE KPI’S TO DEVELOP YOUR ROI
Measure Calculation Current Target Value
Total Orders On Time /
On-Time Delivery Total Orders Shipped 87% 95% $250,000
Errorless Orders /
Order Accuracy Total Orders Shipped 92% 98% See above
Actual Ship Date -
Order Cycle Time Customer Order Date 12 Hrs 8 Hrs $100,000
Actual Qty. by SKU /
Inventory Accuracy Reported Qty. by SKU 96% 99% See above
Total Damage $$$ /
Damaged Inventory Total Inventory Value .75% .50% $100,000
Avg. Inventory Value ($) /
Days on Hand Average Daily Sales $ 50 Days 42 Days $1 Million
Avg. Inventory Sq. Ft. /
Storage Utilization Storage Capacity Sq. Ft. 78% 85% $100,000
Orders Picked & Packed /
Orders per Hour Total Whse. Labor Hrs 15/Hr 20/Hr $864,000
Total Lines Picked /
Lines per Hour Total Whse. Labor Hrs 40/Hr 54/Hr See above
Total Warehouse Costs /
Cost per Order Total Orders 4.26 $3.62 See above
Total Warehouse Costs /
Cost % of Sales Total Revenue 3.1% 2.7% See above
Annual Savings $2.4 Million
Probable Cost $1.8 Million
RETURN ON ASSETS IMPACT
100
100
+3 Improved fill, increased sales
Sales 46.35
45 10% cut in transportation &
outside warehousing costs
56.65
55 Gross Margin
6.425
7.1
5
5.675
6.43
7.125
COGS
Net Profit / 6.24%
6.9%
5.5%
5%
6.24%
6.9%
13.5
15
33.5
35
32.1
33.5 103
100 Net Profit +45%
Variable Expense Margin
Expenses Sales 11.3%
14.5%
12.5%
10%
18.6
20
Return on
Fixed Expense 50%
103
100
X Assets
Taxes
14
15
Sales / 2.1
2.06
2
Inventory 25
24
Asset
8 Current Assets 49
50 Turnover
Receivables 25 Total Assets
2 Other Fixed Assets 7% Inventory reduction
Warehousing is like
riding a bicycle –
keep moving
forward or you’ll fall
down!
 For More Information:

Speaker: jmhill@transystems.com
Home Page: www.transystems.com
PROMAT Booth 2043

HAVE A GREAT SHOW!

© 2010 TranSystems. All rights reserved.