Growing SKU Base and Limited Warehouse Space – 10 ways to reduce your order picking and replenishment costs
I have been privileged to talk with some of the United States leading food and beverage companies regarding the impact of a growing SKU base / demand on their current logistics / warehouse network and on the surface the answer seems relatively simple – “Get rid of your slow movers.” However upon further investigation everyone of those companies has come to the same conclusion – they would like to reduce their SKU base and eliminate a lot of their slow moving items, but when it comes to analyzing where these SKU’s come from they find out that most are from their 20 top customers which account for 80% of their sales. This brings me to another interesting point and that age old adage – “Sales versus Operations” or “Revenue Generator versus cost” – Let me guess who will win that argument, and yes I am a salesman.
I recently spoke with a leading refrigerated third party provider who indicated that the cost of building a facility has more than doubled over the last 10 years – a very expensive option
- Add Steel / Increase pick path length
This is the second most expensive option since the travel component usually represents on average 80% of an order selectors time. Consider a company which has 70 order selectors and you now increase the linear footage of the pick path by 10% to accommodate new items / SKU’s. This means that all of those 70 operators could potentially have to travel 10% longer in order to fill customer orders. This has the effect of lowering case rates and increasing the cost per case picked in/out the warehouse
Utilize the vertical cube of the bay / upright
This represents the least expensive options as the current pick path length is the same in
most cases and you are utilizing your existing 4 walls.
- Don’t Move! – If a growing SKU base is inevitable either through organic growth or acquisition then hold off on expanding your current facility or moving to a new facility – “those 4 walls do have gold in them” Let me explain what I mean – most warehouses are structured so that fast moving SKU’s are in the low level pick slots for easy access (6 foot). High level order picking vehicles can give you the pick slots however they can be very cumbersome and unsafe (especially for intensive order picking at the lower levels) and you are limited with the number of pallets that can be handled at any one time.
This makes them cost prohibitive from a “cost per case” standpoint. Consider other advanced material equipment solutions that give you the capability to slot items up to 10 feet within a 96” bay (33-100% increase in pick faces) and access those items both safely and efficiently while maintaining the speed of a regular pallet truck for fast moving picks / items.
- If you are committed to moving or expanding your current warehouse – look for opportunities to reduce the amount of steel / racking required to store these items from the outset– Compare different types of material handling equipment solutions and their impact on slotting and the overall pick path length required to store these items - You will be surprised when you look at how many items you can now slot within an 8 foot x 10 foot high bay versus an 8 foot x 6 foot high bay and how this impacts the current pick path length. You’ll be even more surprised as to how many less uprights you need to store these items and how this will reduce your capital expenditure budget.
- Reduce your pick path length – Compare the linear footage that can be saved by implementing a 10 foot pick system versus a conventional 6 foot pick system. The ability to create an additional 33-100% pick slots per upright will enable you to condense your pick path and dramatically reduce your travel time which can represent up to 80% of the total pick time.
- Review the size of your freezer and cooler especially for new construction. A smaller travel path can often mean a smaller footprint which can have major financial implications on the size of a new freezer / cooler and other ongoing operating costs.
- Review your current slotting strategies to see if the number of “split picks” in your operations can be reduced - A “telling sign” of a lack of space and growing SKU base is the existence of split picks in an operation especially for fast / medium movers. Any time a full pallet pick location dedicated for a fast / medium mover is split in half to create additional pick faces will usually result in an increase in the number of replenishment moves and higher labor costs– Consider other advance materials handling equipment solutions which allow you to increase the size of the location for fast /medium movers and (create full pallet pick slots) as well as slot slower moving items higher in the 6-10 foot range.
- Minimize the amount of Pallet “re-profiling” at the dock – The existence of “split picks” will often mean that additional labor cost will need to be incurred at the dock to break down pallets so that they can be put away into smaller locations – an unnecessary labor cost. This can often be minimized by slotting fast / medium movers as full pallet pick slots in the 0 to 6 foot range and slotting slow moving items in the 6-10 foot range.
- Reduce the number of “short orders” or “outages” and their associated costs by minimizing the number of “split picks” in your operations - By slotting slower and slowest movers higher in the second and third level pick slots means that the fast mover pick slots (80-90% of sales) can be larger and hold more cases. The benefit simply is less outages which means order pickers don’t have to wait, backtrack or even worse backorder product just because it is simply out of reach in reserve.
- Reduce the number of lost time accidents and their associated costs by rethinking the behavioral aspects of the order picking process – The cost of a lost time accident can be huge especially in an industry where margins are tight and companies are working “pennies on the dollar.” For example a company which is operating on a 2% margin will need to sell $2,500,000 worth of product in order to recoup the loss associated with a $50,000 workers compensation claim / injury. Instead of putting pressure on order selectors and expecting them to go to their physical extremes to access cases with the same methodologies try re-thinking the slotting / storage / MH equipment processes and adapt the working environment to make it easier for the operator. This can be done in a number of ways – for example – provide a piece of equipment that enables operators to be elevated automatically at the touch of a button for better case access as opposed to the alternative – “manually climbing on trucks / batteries” Or Provide a piece of equipment that protects the confines of the operator’s body at all times during the pick operation – and avoid those costly ankle / hand injuries.
- Reduce the amount of product damage by making it easier for operators to access product - This can be done using a variety of techniques – the ones I like are bringing the product to the face of the rack system through better slotting techniques and through advanced materials handling equipment that enable operators to be automatically elevated at the touch of a button to prevent having to step on product or push product in/out of the back of pick slots.
- Evaluate alternative layouts and scenarios using a real-time simulation to determine pick path distances/ cases per man hour and staffing requirements.
Helpful Link: http://www.atlet.com/node/1319
Atlet Inc. has been distributing quality and innovative products designed to reduce warehousing costs in
Tim Blackwell
Cost Reduction Specialist
Atlet Inc.
(800) 351-5525
info@atletusa.com
Atlet, Inc. is an international material handling equipment manufacturer providing innovative custom designed solutions and support dedicated to reducing costs and delivering a competitive edge to our clients.
1384 Mitchell Blvd., Schaumburg, IL 60193
(800) 351-5525 www.atletusa.com
