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The Warehouse Handbook 1
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4 The Price: `500/Warehouse Handbook
Cover Photo: Glimpses of DIESL’s warehouses and related operations from across the country. Information contained in this book has been obtained or collated by Hamburg Media Private Limited from sources believed to be reliable. However, neither Hamburg Media nor its own/contributing authors guarantees the accuracy or the completeness of any information published herein and neither Hamburg Media nor its own/contributing authors shall be responsible for any errors, omissions, in this information or damages arising out of this information. The work is published with the understanding that Hamburg Media and its own/ contributing authors are supplying information but are not attempting to render any professional services. If such services are required, the assistance of an appopriate professional must be sought. The copyright and all other rights of the material in this book are owned by Hamburg Media Private Limited and cannot be reproduced without permission of the company. All requests for licensing, reprints and other usage of material from this book should be addressed to DVV Media India. We will review your request, and provide you with an approval or rejection as soon as we have evaluated the request. CopyrightŠ 2011 Hamburg Media Private Limited. All rights reserved. Printed at SAP Print Solutions Pvt. Ltd., 8, Laxmi Industrial Estate, Lower Parel, Mumbai - 400 027, India Published by Jacob Joseph Puthenparambil on behalf of Hamburg Media Private Limited
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Warehouse hand book
Foreword With this edition, Log.india presents the third edition of The Warehouse Handbook. Working on these editions has been informative as well as a pleasure for me, as i have learnt so much more about the industry in which i work. Unfortunately, even as i write dark clouds have appeared on the country’s economic horizon and the media is awash with stories about the stuttering economy and the paralysis that appears to have gripped decision making and reforms in the country. The india growth story seems to have taken a body blow, with gloom and mutterings of doom all around. Europe appears set in crisis-mode too, with fears that greece may fall out of the Euro zone; that would roil the global economy and only depress markets further. is there a silver lining in these dark clouds? it is sometimes said that after a slowdown, there could be a boom. analysts have often remarked that industry should use the period of economic stagnation for reinvention and improvement. Logistics is a sunrise sector of the indian economy and will figure prominently in any economic revival in the country. The Warehouse Handbook deals with several crucial facets of warehouses and their operations which are pivotal to the robustness of any supply chain. as a matter of fact, with the bumper grain harvest, warehouses are back in the news again as there aren’t too many of them around for storage of grain! our Warehouse Handbook could well be the basis of new thought processes about the construction and running of such facilities. in this edition, we have added a chapter on cold chains, that much-neglected segment of indian infrastructure. Here i must thank our indefatigable writers whose acumen, deep knowledge, willingness to share it with our readers and ability to meet our stiff deadlines has made this book possible! Read and imbibe!
Pamela Cheema Editor - Special Projects
Pamela Cheema Editor-Special Projects
The Warehouse Handbook 7
About the Authors
c o n t e n t s Get The Design Right!.................................................. 16 By Vineet Kanaujia
Case Study .................................................................... 26 By DIESL
Installing A Warehouse Management System ....... 28 By Padmini Pagadala and Steve Mulaik
Mastering Challenges.................................................. 42 By Rajkiran Kanagala
Interview ....................................................................... 50 By Log.India Team
Benchmarking: Key To World-Class Performance ...... 52 By Hemant Moharir
Case Study .................................................................... 67 By Donracks
Measuring Warehouse Performance ..........................68 By Vineet Kanaujia
Leveraging People Power............................................. 76 By S Kumar
Case Study .................................................................... 83 By Donracks
Cold Chains: Neglected Infrastructure ........................84 By Purvin Patel
Case Study .................................................................... 91 By Swisslog
10 The Warehouse Handbook
Measuring Warehouse ....68 Performance
Get The Design Right! ........... 16 For years warehouses were equated with godowns, but with globalization a tectonic shift in perception has occurred and they are now being devised as vast, state-of-the-art work places.
Warehouses are critical to supply chain efficiency, hence calibrating their performance is crucial to any supply chain. Human ResouRces
Installing A Warehouse Management System .........28 For decades India’s warehouses have just been bleak, unsophisticated godowns. With India being widely perceived as an emerging global market, there’s a need to upgrade these warehouses into hi-tech work places.
Maslow’s Hierarchy of Needs (original five-stage model)
Self-actualisation Personal growth and filfilment Estreem needs Achievement, status, responsibility, reputation Belongingness and Love needs Family, affection, relationships, workgroup etc. Safety needs Protection, security, order, law, limits, stability, etc. Biological and Physiological needs Basic life needs, air, food, drink, shelter, wrmth, sex, sleep etc.
Mastering Challenges..........42 As operating realities can be difficult in India, an in-depth knowledge of such situational difficulties is required to enable an organization to maximize its profits, minimize its costs and provide the desired level of customer satisfaction.
Benchmarking ..............52 Key To World-Class Performance Benchmarking enables warehousing efficiency and this can be achieved by identifying, understanding and adapting outstanding features and processes of other organizations in one’s own warehouse.
are employed in different industries. Maslow’s Hierarchy of Needs Theory Maslow’s hierarchy of the ‘need’ theory which discusses how physiological needs i.e., thirst, hunger and sleep, are then followed by other needs, namely the security need, social need, the esteem need and finally the self actualization need, can be observed at work at various stages in different industries. While many of the small manufacturing and engineering companies which pay minimum wages are striving to meet the physiological needs and security needs of their employees and are slowly graduating to address their social needs, the high paymasters in the IT and ITES industries are striving to focus largely on social and self-esteem needs. The terms and conditions of employment and the compensation poli-
cies and strategies are formulated on the basis of this theory, either knowingly or unknowingly and consciously or unconsciously.
XXXX xxxappropriate location Leveraging People ........... 76 for a warehouse Herz Berg 2 factor (Hygiene and Motiva- is determined by Power tion) Theory the location of While small players are striving to maintain the hygiene needs of their employees, like providing basic major suppliers Human Resource is an working conditions, good Management canteen facilities, basic and customers, transportationfeature and medical etc., the high the volume of essential offacilities, industry today, pay- masters are addressing the motivational needs product. especially in alike faltering of their employees, providing economy. high incentive programmes, fast track career growth programmes, etc. The understanding is that ensuring the hygiene factors helps in achieving regular targets, while the motivational factors help in excelling beyond 100 percent.
Herz Berg 2 factor (Hygiene and Motivation) Theory
Cold Chains: Neglected ....84 Infrastructure Dissatisfaction and Demotivation
Employees not dissatisfied, but not motivated
Positive satisfaction and motovation
Cold chains should have been a Hygiene Motivator prominent feature of India’s agrarian Factors Factors economy, but instead they have been pushed to the margins in an economy which is in dire need of such critical infrastructure. The Warehouse Handbook |
The Warehouse Handbook 11
1
IndoSpace is the pioneer modernofindustrial and logistics IndoSpace is theofpioneer modern industrial andreal logisticsCOMPETITIVE real ADVANTAGES COMPETITIVE ADVANTAGES estate development in India. Our experienced team of industrial estate development in India. Our experienced team of industrial ■ ESTABLISHED LAND BANK ■ ESTABLISHED LAND BANK and logistics real estate service customers and logistics real professionals estate professionals service customers ■ FINANCIAL STRENGTH ■ FINANCIAL STRENGTH spanningspanning all of India. all of India. ■ NATIONWIDE DEVELOPMENT CAPABILITIES ■ NATIONWIDE DEVELOPMENT CAPABILITIES IndoSpace’s mission ismission to use is ourtobest across India IndoSpace’s use practices our best practices across India ■ TURN-KEY INDUSTRIAL REAL ESTATE ■ TURN-KEY INDUSTRIAL REAL SOLUTIONS ESTATE SOLUTIONS in order to raise the bar on logistic park development – from in order to raise the bar on logistic park development – from ■ LOCAL■EXPERIENCE LOCAL EXPERIENCE inception inception to completion. Efficient design maintenance will to completion. Efficientand design and maintenance will ■ GLOBAL DESIGN, DESIGN, DEVELOPMENT AND ■ GLOBAL DEVELOPMENT AND play a keyplay roleain reduction of operation costs for costs tenants. key role in reduction of operation for tenants.
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warehouse design
get The design right! Warehouses are no longer dreary godowns. With fast paced economic changes, they have metamorphosed into sophisticated working spaces notes Vineet Kanaujia.
F
VineeT Kanaujia Vice PresidentMarketing, Safexpress Pvt. Ltd.
16 The Warehouse Handbook
or many decades warehouses in India have been equated with the tired concept of godowns, with the common belief that these logistics hubs are merely confined to stocking goods. However, with the rapid liberalization of the economy over the past two decades and changing customer demands, warehousing has undergone a tectonic change—at least as far as corporate India is concerned. Today these commercial buildings do not simply store products, but are equipped to receive goods, segregate as well as prepare for shipments, distribution, order picking, with multiple value-added services like labeling, shrink wrapping, reverse logistics, etc. The importance of efficient and effective warehousing to the overall enterprise supply chain becomes all the more evident when placed within the context of the booming logistics market in India. According to various recent studies, the domestic logistics sector is
estimated to be worth around US$110 billion, accounting for about 10 percent of the gross domestic product. Frost and Sullivan expects this market to post a consistent annual growth rate of nearly eight-nine percent over this decade, and record revenues of approximately US$ 190-200 billion by 2020; this growth will be driven by key manufacturing industries such as the automotive industry, engineering, pharmaceuticals, food processing and the textile industry. Warehousing is a crucial component of the Indian economy as it accounts for 20 percent of India’s logistics industry. Against this backdrop, the concept of warehouse design has undergone a significant evolution in recent years. Merely building four walls and a roof will no longer constitute sound warehouse design—at least for those enterprises serious about delivering the right quantity and quality of products or services at the right price to the right customer.
Source: Author
Design Specifications Warehouse designing is similar to developing a property, but it is done in accordance with certain specifications, both technological and design-oriented. Incorporating aspects such as flooring, height, storage space, material handling equipment, construction standards,
green warehousing concepts, and dock-door proportions to transfer goods in varying sizes is vital for good warehouse design. The key determinants of designing a warehouse are as follows: n Location: The location of the warehouse should be
Warehouse designing is similar to developing a property, but it is done in accordance with certain specifications.
The Warehouse Handbook 17
Source: Handbook Author 18 The Warehouse
warehouse design
based on the enterprise’s overall logistical requirements, since wrong location could well lead to poor portfolio space utilization, low rentals and lack of network. The appropriate location for a warehouse is determined by the location of major suppliers and customers, the volume of product moving to or from sourcing partners and customers, the service levels required, transportation rates and product characteristics. Also, local factors like access to and cost of labor, land and buildings, infrastructure with regard to transportation, information technology and communications as well as tax incentives will play a major role in deciding the location. n Dock planning: While doing site planning, other aspects such as location of loading dock, traffic flow from the streets into the premises and traffic flow within the premises, need to be considered. As far as the docking itself is concerned, one can go in for either central docking or separated docking. A street access guide should be drawn up, with the traffic within the premises ideally moving counter-clockwise. The space in front of the docks—including place for parking of trucks, the apron area and space for manoeuvreing the trucks—should be intelligently planned too. In the event of paucity of space, a saw-tooth arrangement of docks can be an alternative design. In designing a dock, warehouse managers should also factor in the plant floor operations and truck dimensions. In the case of a refrigerated dock, one should ensure the provision of an ante-room with high-speed doors, proper sealing and insulation to prevent infiltration of air in the warehouse. Again, the design of the loading area should be based on the regular dimensions of container trucks.
Wrong location could well lead to poor portfolio space utilization, low rentals and lack of network.
The Warehouse Handbook 19
Source: Author
warehouse design
In case of construction, warehouse planners should chalk out their strategy on the basis of what is to be stored: hazardous or non-hazardous goods.
20 The Warehouse Handbook
The number of dock positions would be subject to peak time workload, the number of trucks likely to be loaded at a given time, etc. Ultimately, warehouse planners need to keep in mind the fact that an efficiently planned docking system will ensure significant savings in loading time, higher productivity, reduced costs, better energy efficiency, safety of workers, all of which will translate into enhanced customer experience. n Product Attributes: Product attributes include weight and dimensions, shelf life, packaging, temperature, requirements pertaining to lot control, and hazardous material requirements. For example, in case of construction, warehouse planners should chalk out their strategy on the basis of what is to be stored: hazardous or non-hazardous goods. Overall, one can identify product types in terms of the following characteristics: n Seasonality (in either consumption or production). n Variability in demand. n The economics of manufacturing. n Promotional and marketing campaigns. n Service requirements. n Customization and product variations. If an organization deals in products with seasonal variations, then warehouse resources must be able to scale up and draw down swiftly in given geographical locations. On the other hand, products which have extremely high time-sensitive service needs (for instance, equipment for hospital emergency rooms), require fast-response facilities with quick access to transportation modes. Similarly, many automobile manufacturers have located so-called ‘inbound’ warehouses adjacent to their manufacturing plants so that
warehouse design
Source: Author
sub-assemblies and other components can be assembled and placed swiftly into production lines. n How products are received: The efficiency of both inbound operations (dock-to-stock cycle time) and space utilization/storage is significantly dependant on how goods are received. To optimize efficiency in inbound activities, the warehouse should ideally receive material in an immediately storable conveyance (e.g. pallet, box, case). n Nature of customer orders: Before determining layout, equipment selection and business process requirements, warehouse managers need to factor in the types and volumes of orders that are processed, as well as the number of stock-keeping units (SKUs) in warehouses. One should also match storage equipment selection to product characteristics, volume, and any other unique criteria, such as security, lot control, temperature control, etc. The equipment to be selected should include elevating docks, dock loaders, truck restraints, seals and shelters, and high-speed doors for refrigerated docks. n Environmental factors: There is also a need for supply chain executives to carefully evaluate existing business processes and adopt preventive measures with regard to the safety of their warehouses against environmental risks. During the selection of processes, enterprises should also take into account the threat of collapse of adjacent buildings, whether the concerned location is flood prone, seismic activities, whether the location falls in an aircraft’s flight path, etc. Also, warehouses should be designed carefully keeping in mind certain significant factors which could adversely affect its architecture, like local weather conditions, etc.
The Role Of Automation It has been now well established that information technology can be a major enabler of supply chain efficiency, which includes the performance of warehouses. Tools such as RFID tagging, ‘put-to-light sorting’, electronic data interchange (EDI), cross-docking, voice-picking systems, warehousing flow simulation tools, AS/RS (Automatic Storage and Retrieval Systems) and Warehouse Management Systems (WMS), have contributed significantly towards efficient tracking and the management of inventory, thus reducing warehousing costs. To put the potential of warehouse automation in India in its correct perspective, the domestic logistics technology market is poised to register an annual
One should also match storage equipment selection to product characteristics.
The Warehouse Handbook 21
Supply chain stakeholders can also reduce the cost of operating warehouses, if they implement energy efficiency strategies with regard to lighting and roofing, among other factors.
22 The Warehouse Handbook
growth rate of 19.8 percent over the next three years, reaching $600 million by 2015. The sector is driven by demand from retail, logistics and the manufacturing sectors, as well as by government promotion. However, a word of caution: the automation of processes such as receiving, storage/locating and order filling may become a critical constraint, particularly in case there is considerable variation in demand (e.g., seasonality), a change in product characteristics or a change in the product mix. Energy Efficiency Supply chain stakeholders can also reduce the cost of operating warehouses, if they implement energy efficiency strategies with regard to lighting and roofing, among other factors. When deciding on lighting in a warehouse ask two questions: How much light is really required in the warehouse, and where is it actually needed? Automated facilities, like automated trolleys and robotic forklifts, require far less lighting than a fully staffed warehouse. In deciding about lighting, one must remember that, for instance, a clerk’s workstation at a corporate office needs different lighting from a warehouse floor. One aspect that energy-conscious warehouse managers should weigh is whether to go in for fluorescent high-bay fixtures or high-intensity discharge (HID) fixtures. Many of the former type of products available in the market are now aimed at industrial applications. Unlike HID fixtures, their fluorescent counterparts turn on immediately, eliminating the warm-up time of HID lighting. This long warm-up cycle, experts say, is
Source: DIESL
warehouse design
Another way to achieve energy efficiency in warehouses is by painting walls white, and setting up windows and skylights to introduce natural light.
24 The Warehouse Handbook
Source: http://www.gennybeans.com/insight/
often the cause for leaving HID lamps on even when light isn’t required. Also, dimmers and motion sensors improve light efficiency in both these systems, thus offering a handy way to quickly reduce light output, without having to touch the fixture, and without costing a bomb. They enable warehouse operators to keep the light on, but reduce output. Motion sensors also extend lamp life. Another way to achieve energy efficiency in ware-
houses is by painting walls white, and setting up windows and skylights to introduce natural light. Thermal glasses in skylights can help in maintaining climate control. Apart from lighting, roofs can also be one of the biggest sources of energy inefficiency at warehouses. The roofs of most such facilities have a notorious capacity for absorbing solar heat. While a warehouse’s
warehouse design
capacity to soak up heat may be an advantage for some facilities in winter, it unfortunately translates into wasted money overall. Depending on the purpose of their warehouses, companies could deploy cool roof technologies to cut down on energy costs. Cool roof systems have two essential properties: a high thermal emittance, which means they radiate a large percentage of the energy they absorb back into the sky and high solar reflectance, which entails reduced absorption of energy from the sun. Irrespective of the climate, cool roof technologies can be really beneficial for warehouses with refrigerated storage, since these facilities require consistent year-round cooling. Various studies have shown that cool roof technologies can enhance energy efficiency in these facilities by 5percent-10 percent. Dry storage warehouses generally do not have refrigeration throughout the year, but still need consistent temperature. In these conditions, cool roof systems can contribute an even bigger percentage to cost savings. In the case of buildings which lack air conditioning, cool roof systems make the warehouse more comfortable for workers. Other Energy Saving Options While substantially reducing costs with respect to roofs and lighting, there are other options that warehouse executives can exercise to further cut back on costs and HVAC (heating, ventilation and air conditioning) technology is one such important choice. Energy efficiency can be improved significantly by using a desiccant wheel to dry the air before it enters the HVAC system. Nearly 30 percent to 50 percent of
total air conditioning energy goes towards removing moisture from incoming air. As the desiccant wheel spins, it soaks in moisture, drying the air before it enters the facility, thus facilitating faster cooling, since dry air is easier to cool than moist air. Another method to reduce air conditioning expenses is deployment of ice storage systems which freeze water at night when off-peak electricity rates are in effect. During the day a refrigerant circulates through the coils in the ice and then into the air conditioning setup. Oversized ceiling fans also help in reducing cooling costs. This is especially relevant in the case of buildings vulnerable to stratification, where hot air settles on top and cold air settles at bottom. In such cases, ceiling fans keep the temperature even by stirring the air.
Cool roof technologies can be really beneficial for warehouses with refrigerated storage, since these facilities require consistent year-round cooling.
Use Insulation Warehouse managers can also cut down on their energy bills (read, heating and cooling costs) by installing more insulation. The most opportune time to install insulation is when the warehouse is being constructed, renovated or during roof replacement. If the roof is going to be covered, one can apply a moisture barrier over the current membrane, followed by installation of new insulation and the new membrane. Another method to add insulation to a roof is a spray-polyurethane roof. Eventually, those in charge of designing warehouses need to remember the role of these logistics hubs as unit-economic-cost businesses, rather than cost-plus businesses. Only then can they achieve the objectives of maximizing utilization with regard to space, equipment, labor, and ensure accessibility and protection of all materials. The Warehouse Handbook 25
case study 1
Warehousing Efficiency T
he following are two case studies presented by DIESL which indicate how it took care of the warehousing of one of its client›s products and the monthly sale of products of the second client. Introduction: The client is an illustrious Indian FMCG major. It ranks among India›s most valuable (company) brands. Other than FMCG, the client is into businesses ranging from retail to personal care. DIESL looked after their FMCG warehousing. Challenge: l The order execution time taken was a major bottleneck and posed a challenge for DIESL. l The mix-up of product batches was also a big challenge as food products need to follow FIFO very strictly. l Since most of the company›s products come in the category of food, controlling consumption by labour at the warehouse is a consistent challenge. l Order execution time increased and due to this, transport vehicles could not make frequent turnaround trips. l High attrition of manpower. Solutions Provided Batch Mix-up: The following steps were taken to reduce the batch mix-up: (a) All stocks were controlled by bin cards. (b) Each batch material had a bin card. (c) The bin cards had unique numbers. (d) Bin card numbers with location identification were assigned at the time of receipt itself. (e) When the pick list was generated, the DEO was assigned a bin card number with a location for picking. (f) The picker/supervisor would pick up material from the respective location with the respective bin card.
n
26 The Warehouse Handbook
Consumption by labour at the warehouse: To control this, DIESL took the following steps: (a) Munching zones were created with snacks (other than the company›s brand). (b) Whoever was hungry approached the munching zone to eat snacks. (c) Patrolling cards were kept in every zone and corner of the warehouse. (d) One security guard would patrol the interior of the warehouse and he would sign the patrolling card with the time and date of patrolling. (e) If any pilferage was found, the security guard would bring it to the notice of the warehouse manager.
n
Order Execution Time: The major challenge was to reduce the time taken in various processes and the following steps were taken in order to decrease operational time: (a) The entire warehouse (an area of 1.25 lakh sq. ft) was divided into zones and 54 zones were created. (b) The products were categorized according to the respective sub-categories and they were assigned to various zones, for example, A1 to A9 : Category A, B1 to B4: Category B. (c) These zones with the different product categories were displayed in the warehouse on a white board. (d) The picking team and supervisors were trained carefully. Since DIESL was providing the location and bin card no. for every product to pick, the picking time was reduced to a larger extent. A supervisor would be assigned to check and load the vehicle and the picker would be assigned to another pick list. As the teams were separate, the mismatch in picking was also drastically reduced. This has reduced execution/loading time and ensured on-time execution.
n
High Attrition: DIESL engaged labourers on a monthly basis and faced the problems of absenteeism and attrition. Subsequently, we changed this to hiring on a per truck basis model. Good performers were motivated by recognizing their performance with awards (customer service award, star performer award, spotlight award etc.). Due to these measures, the level of attrition was controlled.
n
Final Outcome l With the implementation of such solutions, the productivity of manpower as well as diverse processes increased. By introducing the above processes, accountability, ownership and operational efficiencies improved immeasurably. l Issues related to FIFO and vehicle detention declined markedly. Highlight of the case The entire process adopted by DIESL helped in reducing the time of loading from three hours to one and a half hours by just using a combined knowledge pool and a solution based approach. Testimonial
DIESL has received the following testimonial as an evaluation report from its client for the DIESL Bangalore warehouse operations: We like DIESL’s strong processes and attempts made by its top management in addressing issues that may arise. Also the improvement done by DIESL in the daily IRA—inventory count and the IMF control has helped us in locating stocks faster. This has resulted in fewer customer complaints and improved the turnaround time.
Case study provided by DIESL
case study 2
Increasing Productivity with Kaizen Introduction: The client, Anchor, is one of the largest manufacturers in the world of electrical switches and accessories. It was established more than 40 years ago with one crystal clear vision in mind - to produce quality and not just products. They have diversified their product base over the years and today cater to almost all household electrical needs. With strategic alliances and technological collaborations with world leaders for its products, their technological strength is today at par with the best in the world. The client manufactures over 3,000 products under 20 major product groups and caters to the core sectors of the Indian economy viz., the electrical and electronics industry. The wide network of their employees with over 7,000 people, 10,000 dealers and more than 3,00,000 retail outlets, enables the company to promptly serve its customers and provide them with suitable products, systems and services efficiently and at competitive prices. Challenge: l Anchor was facing a problem in keeping a record of the total monthly sale of its products. l The process was time consuming owing to the nature of the goods and the processes involved. l At times when the goods arrived in bulk, their proper placement and other formalities posed a challenge to the company. l The goods were kept initially without any specific set-up, which in turn, affected the productivity of the entire procedure.
Solutions Provided: l Kaizen–meaning ‘continuous improvement,’ was adopted by DIESL. This activity had some specific rules to increase productivity; some of the main highlights were that goods were kept in an ascending manner and a proper mat code was provided for all the goods. The proper mat code made it much easier to identify the required product without wasting much time. It also helped tremendously in maintaining a monthly record of goods. l The available warehouse space was properly utilized. Specific areas were demarcated for excess stock that entered the warehouse.
* Inspection colors Inspected Ok (ready for GRN) Under inspection (Pre GRN stage) Hold
Kaizen Activity Process: The Kaizen activity was implemented to maintain smooth functioning of warehouse operations as per the client’s requirement; a proper colour codification was used. The colour codes were as follows: Green, Yellow, Black, Blue, White, Pink, Brown, Purple, Grey, Orange, Light Green, Light Blue. These standard colour codes were used for different products.
DIESL’s decision to assign proper mat codes helped Anchor in quicker identification of required products. The system also aided in accurate recording of goods.
--- BLUE --- YELLOW --- RED.
The entire warehouse was divided into different sections. Each section was reserved for a particular colour (material); which helped in time management and ensured accuracy of the entire project. Final Outcome: With the implementation of the ‘Kaizen Activity’ the productivity of manpower and the process increased. Highlight of the case
* A/B/C Classification wise identification colors A B C
-------
PINK ORANGE YELLOW
* Over Stock / Shortage identification colors Over Stock --- BLUE Shortage --- RED
Testimonial
DIESL has implemented Kaizen activity in almost all the locations of Anchor in a short span of time for which they have received appreciation from Japanese experts too. DIESL has delivered more commitment than expected and taken complete ownership, while implementing KAIZEN activity. This has drastically increased Anchor’s warehouse productivity and also helped the company to nullify its various discrepancies. In addition, Anchor likes DIESL’s pro-active approach of presenting its KPIs to the company at regular monthly and quarterly intervals. DIESL’s MIS is an essential tool for the company, and is used by it in its planning and decision making processes to meet diverse business objectives. DIESL delivers a well-coordinated MIS, which helps the company to share important information with other cross functions at the right time, for effective and strategic decisions—V.K Bhaskar Rao, DGM-Logistics, Anchor Electricals Pvt. Ltd. Case study provided by DIESL
The Warehouse Handbook 27
Warehouse ManageMent systeMs
Installing a Warehouse Management system India’s godowns must be transformed into hi-tech warehouses. Padmini Pagadala and Steve Mulaik discuss how.
T
steve MulaIk Partner, The Progress Group
28 The Warehouse Handbook
oday most warehouses in India are small, equipped with cheap labor, and not yet expected to provide world class levels of service. In most warehouses, the information systems used to operate each site are quite simple. Most places use the warehousing module in an ERP package (like SAP or Oracle) that lets them receive quantities of material against a purchase order (PO), create a paper bill of lading for an order that lists the quantities of each SKU needed by a customer, and that is about it. What goes on between receiving and shipping the SKUs is left to the imagiPadMInI Pagadala nation and devices that the General Manager warehouse manager and TPG Consulting Pvt. Ltd.
his staff can conjure up, using nothing more than pencils and paper. This works up to a point. For many companies, the small godown model spreads expensive inventory across too many sites; fill rates are hard to keep up. The volumes shipped from any one facility are growing noticeably, and wages are increasing too. Labor costs are now a significant expense that corporates are insisting should be tightly straitjacketed. Domestic companies are also competing with MNCs who see India as a good future market. MNCs are building world-class facilities which provide world-class services to their Indian customers. The age-old Indian godown must change to keep up with these trends. Changing Times Partly, the facilities need to get bigger and taller so that the precious land on which they are built can be better utilized. But even more importantly, new operat-
Warehouse ManageMent systeMs
Some New Terminology A modern warehouse requires a modern vocabulary. There are several new terms that need to be explained before this material makes much sense to the reader. A modern warehouse with a WMS system looks quite different from one which is run by paper and pen. First of all, many of the warehouse workers will be equipped with a `50,000 wireless computer which they will use to accomplish their work. This might seem like an outrageous proposal at first, but as we show later, it is paid for by better labor utilization and more effective warehousing, especially in large-scale operations. The next big change is the introduction of barcodes. Locations such as dock doors, staging areas, and storage locations will have barcoded signs or labels attached to them. These are known as location barcodes. As a product is moved from place to place within the modern warehouse, the warehouse associates will scan these barcodes to record where that product is located. The merchandise itself will also be barcoded –not ev-
Source: http://www.ruggedtabletpc.com
ing techniques need to be introduced in these sites to make them more effective and more efficient. Process changes such as systems-directed putaway, RF picking, picking multiple orders at a time, Electronic Data Interface-assisted (EDI) receiving and shipping, labor standards, etc. need to be implemented. All of these are dependent on a warehouse management system (WMS), rather than pen and paper, to control what is going on inside the warehouse. This chapter aims to give the reader an overview of what a Warehouse Management System is, why you would want one, and where to get one.
ery unit, but “chunks� of merchandise will have unique, but temporary barcode labels applied to them at the time of receipt. These labels cost about a rupee each and are called license plates. In most warehouses, a license plate(LP) is applied at the time of receipt of one carton on a pallet. The operator then tells the system how many units or cartons of each SKU is located on that pallet. This can be accomplished by manual key entry or by scanning if the suppliers have barcoded their cartons. As this pallet moves through the facility, the operator will scan the pallet license plate and then the location where the merchandise is being staged. Each of these moves is logged in the WMS database in what is called the WMS transaction history file. This means that later you can go back and look in this file to see where the product went, who moved it and when did it move. A warehouse management system (WMS) gets its
Becoming Best-in-Class requires the right productivity equipment
The Warehouse Handbook 29
Warehouse ManageMent systeMs
name because of two overarching features. Firstly, it can tell associates what they should do next. This is called system directed functionality. For example, after a forklift operator puts a pallet away into the rack, the system tells him where the next pallet is located at the dock that needs to be put away. System directed functionality helps keep the operator busy. He doesn’t have to ask his supervisors “What do I do now?” Secondly, a WMS can ensure that the work gets done correctly. We call this system assisted or system verification functionality. For example, to make sure the picker picks the correct product, the WMS can insist that he or she scan the location barcode where he or she makes the pick. If the location is not known to hold that product, we can warn the operator and not let him proceed further until he scans the correct location. System assisted functionality not only improves the quality of work done in the warehouse, it also allows the warehouse manager to introduce
hx2 warmring Source: httplxeportal.compresalesProduct%20PicturesSCANNERSindex.html
30 The Warehouse Handbook
more sophisticated and more efficient ways of doing work such as picking for multiple orders at once or zoned storage. Without a WMS, these methods would result in too much time being wasted and too many mistakes. In the US, most grocery stores do not keep all the stock of an item where a customer can actually grab it. They will only keep a few units of each SKU on the shelf. The rest is retained in the storeroom at the back of the store. This allows more products to be displayed and keeps the aisles shorter which cuts down on the time it takes customers to shop in the store. Soon after a customer takes merchandise off a shelf, a clerk will replenish that shelf with additional stock of that same SKU from the back. This same replenishment concept is used in modern warehouses. A small amount of each SKU (usually enough to satisfy a day or two of sales) is located in a forward pick area near the outbound dock, and all orders are picked from this small area. As a product gets depleted, additional cases of that SKU get brought
Warehouse ManageMent systeMs
up from the reserve area automatically by the WMS. This might seem strange to do in a small facility, but in a 200,000 sq. ft. warehouse it can save an incredible amount of labor. Functions Of Warehouse Management System The function of a warehouse management system, as observed by the warehouse associate, follows the flow of merchandise in and out of the building. These
functions are summarized in the tables below. At each step of the process, the system verifies that the warehouse worker performed the task correctly. In certain instances the WMS will also tell the operator what to do next. Inbound Functionality The following describes the inbound functionality that most WMS products can support:
Source: Swisslog
Inbound Func- What does it do? tional Area Pre-Receiving
Used to interact with suppliers and trucking companies to accept electronic information about what is coming to the warehouse and to record the delivery or pick-up appointments. This functionality replaces the big paper appointment books most warehouses use to keep track of what is coming into the facility.
Receiving
Used to capture information about each (PO, SKU,LP,Qty) received from a truck. Inventory is tracked using barcode license plates in receiving. Pallets and even cartons get “license plates” that are linked to information about what are on those pallets or in those cartons. The system knows the location of every license plate, too. One of the greatest improvements in productivity and throughput is to receive goods using carton level ASNs. Receiving associates scan the unique barcode label applied by the supplier to each carton and the system automatically updates the inventory and selects a putaway location for the merchandise.
Quality Control
Used to step a warehouse associate through a series of quality checks tied to a particular category of merchandise, based on the quality of the vendor who has supplied that merchandise. This is usually done for a sample of each purchase order (PO) line. Once the sample “passes”, the rest of that line can be allocated to orders and/or putaway.
Inbound Value Added Services
Sometimes products must be processed in some fashion (e.g. rebagged, price ticketed, etc.) before they are put away. These screens can be sophisticated and lead a warehouse associate through the processing step by step, or they can be simple and just tell the operator what needs to be done and then let him confirm that it is completed.
Putaway
Used to determine where a piece of newly received merchandise should be placed in the warehouse and then requires that the warehouse associate scan the product and the location where he or she put it to make sure it was placed there properly.
The Warehouse Handbook 31
Warehouse ManageMent systeMs
Outbound Functionality The outbound features in a WMS provide a whole new menu of operating alternatives to a warehouse manager. Firms usually purchase a WMS more for these than the inbound side. Diverse Features WMS packages have other features that can be used to manage the warehouse better. These are used mainly
by the managers and supervisors of the facility. A WMS is usually justified in a variety of ways. The most common is labor savings. Many Indian businessmen are incredulous at this statement because labor rates are low in India relative to the West. Many ask “How can a WMS be justified on labor savings in the United States and then also in India where operators make 1/10th the working wage?” There are two reasons. First of all, Indian warehouses (especially paper based ones) are much
Outbound Functional Area
What does it do?
Wave Planning
This is a new concept. Wave planning lets managers choose a subset of customer orders not yet shipped, to process together. For example, a manager might only want the orders from stores located on the Eastern side of India because they will ride together on one truck. Wave planning lets the manager indicate which orders need to ride together on the same truck. It also lets him control when those orders are allocated inventory and when picking of those orders may start.
Replenishment
Replenishment functionality consists of the logic that decides when to bring up more of a given SKU to the forward pick area and the screens used by the associates to pick and deliver that merchandise to the forward pick area.
Picking
With a WMS there are many different “pick mediums” other than paper. You can use paper, labels, barcode scanners, and some systems let you use voice. You also can employ new ‘pick methods’ that can drastically reduce the walking time, e.g. multi-order picking or batch picking.
Outbound Value Added Services
After merchandise is picked, sometimes that merchandise needs to be processed in some way before it is shipped out, e.g. labeled or kitted. The Value Added Service (VAS) functionality in the WMS provides the warehouse associate the information he needs to do this work and requires him to confirm when the work is done.
Packing / Checking
Orders involving a few small pieces need to be placed into a box, checked, and then packed before shipment. Larger orders consisting of multiple cartons need to be ‘checked’ to make sure they are complete. Both of these are accomplished via packing / checking screens in the WMS. These screens require the warehouse associate to scan all the items or carton barcodes tied to an order to confirm that all of an order is present before loading may commence.
Loading / Shipping
Once the truck is at the door, warehouse associates will start loading cartons onto that truck. To confirm that they have loaded all the merchandise destined for that truck, they may scan each carton individually or they will scan the LP of the pallets carrying merchandise destined for that truck. (The WMS knows what cartons are on each pallet so it assumes all those cartons were loaded. ) Once all the merchandise is on the truck the bill of lading is produced and given to the driver and the truck ‘departed’ in the system.
The list above of WMS features is greatly abbreviated. For a more comprehensive list visit: http://www.theprogressgroup.com/publications/faswmtop.html
32 The Warehouse Handbook
Warehouse ManageMent systeMs
Other Functional Areas
What does it do?
Task Management
This lets the supervisor declare what types of tasks each person may work on and which types should be processed first by an individual.
Cycle Counting
The cycle counting functionality in these systems is composed of logic that decides which locations need to be cycle counted each day and then the functionality to actually execute the cycle count using RF terminals usually. There are many variations on cycle counting.
Physical Inventory
Like cycle counting, the functionality for physical inventories has two parts. There is the logic that creates all the count tasks and then the screens that are used to execute all counts.
Inventory History
This functionality lets managers look up what was done using the WMS by any individual or at any location, or with any SKU at any given time in the past. It is a great tool for researching inventory discrepancies or finding lost merchandise.
Productivity Reporting
All systems provide functionality that will let managers see the productivity of their employees from an activity perspective (i.e. # of Units / Workday). This is all that is needed if operators are kept in one area of the warehouse all day, but some systems also support labor standards so that the manager can see the productivity from an efficiency perspective, i.e. Units / Man hour .
less efficient than their Western counterparts; there are more people to save. Second, the price of a WMS appears to be lower in India than in the West. Fixing The ‘Too Many People’ Problem Our firm conducts time studies of warehouse workers in Western countries as well as India. The graph below compares the average cases per man hour for unloading and palletizing products at an Indian retailer with the average cases per man hour for the same work at a US retailer. We see this sort of discrepancy in many warehouses on the subcontinent. We refer to it as the “too many people” problem. One way the WMS pays for itself is it provides data that managers can use to track how much labor is being spent where. Once they start getting this sort of information, they begin asking questions that lead to
Unloading Cases / Mhr 250
235
200
One way the WMS pays for itself is it provides data that managers can use to track how much labor is being spent where. Once they start getting this sort of information, they begin asking questions that lead to labor reduction.
150 100 50
67
India Retailer
US Retailer
labor reduction. Sometimes it is as simple as just making an arbitrary cut. In other instances, there is process redesign that needs to precede the reduction, but it would never happen were it not for the data provided by the WMS, motivating management to act. The Warehouse Handbook 33
Warehouse ManageMent systeMs
Many warehouse managers in India don’t realize how much time is wasted by employees trying to find out what it is that they should do next. With a WMS, most jobs (but not all) can become system directed.
Awaiting Orders System directed functionality is another source of further reduction in labor. Many warehouse managers in India don’t realize how much time is wasted by employees trying to find out what it is that they should do next. With a WMS, most jobs (but not all) can become system directed. The employees no longer have to wait around for instructions or someone else to tell them what to do further. This can spell significant savings. The graph below shows the percentage of time we observed employees waiting around for work in system directed and non-system directed tasks at one Indian warehouse. (This warehouse used a WMS, but didn’t use system directed functionality for everything.)The
red bars correspond to system directed tasks. The blue bars are the non-system directed tasks where a supervisor had to instruct the operators what to do. Notice how much more time is lost in the non-system directed activities. This is another source of payback with WMS products–especially in India, where meteoric growth means supervision is often not as experienced as it is in other countries. With a WMS you can convert a lot of activities such as putaway, moves, picking, replenishment, cycle counting, staging, and even loading to system directed. This will greatly cut back on the wait time. This isn’t always well understood by firms who install WMS products, but it is critical to getting payback from these systems in India.
% Time Spent Waiting for Work 45.0%
45 40
40.0%
35
34%
30 25 20
18.0%
15 10
7.0%
5
4.9%
6.0%
Picking
Put to Store
0 Unloading
34 The Warehouse Handbook
Palletizing
Receiving
Staging
Loading
Warehouse ManageMent systeMs
New Efficient Methods Probably, the most common ways in which WMS products pay for themselves is through the new operating methods that they enable. Computers make new operating practices feasible that are impossible to execute with
pen and paper. Most of these techniques impact outbound labor productivity, but a few also impact inbound. The table below lists some of the biggest payback items. There are many more than just these, too. Unfortunately, not all techniques apply to every business. It requires a bit
Opportunity
What does it do?
System Directed Putaway
In warehouses that are full or in warehouses where you want to keep product ordered together near each other, letting the system choose the putaway location can save the putaway operator time driving around looking for an empty location. Another advantage of this approach is that you can “zone” the locations, so the ones that are closest to the dock door or closest to the forward pick area can be used only for fast movers while the those that are farther away from the dock or forward pick area are used for the slow movers. This saves putaway and replenishment time.
Forward Pick Areas
In most ERP-run warehouses all the stock of a given item is located together or very close together. With a WMS you can build a forward pick area and reduce the travel time significantly.
Multi-Order Picking
Instead of walking through the pick area for each order, why not walk through once for two or four orders. This is possible if you have a WMS.
Random Active Locations
Instead of having a fixed pick location for an SKU, you let the replenishment operator place the case or pallet in any available empty location within the forward pick area. This drastically cuts down on replenishment labor especially in piece picking operations.
Flow Thru Processing
In certain businesses like fashion retail, you can save a tremendous amount of putaway, replenishment, and picking labor using a concept known as Flow-thru. As merchandise is received it is not taken and put away, instead it is allocated to orders immediately and portions are taken to order-specific staging locations bypassing putaway, replenishment, and picking.
Vendor Chargebacks
While not yet common in India, we know this is coming. The WMS can keep track of mistakes in supplier shipments and some WMS products can provide a mechanism for generating a bill or a charge that will be applied to the payment on that PO. In the US, retailers commonly recoup 0.3 percent to 1 percent in product cost through this technique.
Opportunity
What does it do?
ASN Receiving
In many sites today, when a product gets received 50 percent of the time can be spent opening up the box, checking to see which SKU is inside, counting, etc. If you have a good vendor whom you trust, you can have them apply license plates to their cartons at their warehouses and then send you an EDI transaction, telling you what is in each license plate. All the receiving person has to do is scan the box. This can cut receiving labor easily in half.
Vendor Quality Based Inspection
You can save labor in receiving by using the vendor based inspection criteria in most WMS products. This functionality controls how much of a given vendor’s shipment you need to open and inspect based on the history of that vendor. If the vendor is good, you open very little of that vendor’s merchandise. If the vendor is not so good, you open, check and count more merchandise in the shipment.
Computers make new operating practices feasible that are impossible to execute with pen and paper. Most of these techniques impact outbound labor productivity, but a few also impact inbound.
The Warehouse Handbook 35
Warehouse ManageMent systeMs
Opportunity
What does it do?
Batch picking
In some industries the percentage of customers is small and they order many of the same SKUs. Instead of picking each customer’s order separately, the requirements can be batched together. In this way, staging locations are set up for each order near the dock. The picker goes to the pick face and picks the total quantity needed for ALL the orders and then doles it out. This is common when case picking.
Cycle Counting
Using the cycle counting features of most WMS products, auditors will usually allow you to avoid having to shut down one to two days each year to perform a physical inventory. This can be important to MNC operations in India or growing public companies with global aspirations that comply with GAAP accounting principals.
Average Inventory Accuracy (based on cases assigned)
75% Accuracy
% Inventory
100%
50% 25%
e2 00 hA 0 ug us t2 00 11 th 0 Oc t. 20 6t h D 00 ec .2 00 3r dJ 0 an .2 28 00 th 1 Fe b. 20 25 01 th Ap ril 20 01
00 0
Jun
il 2
16 t
21
st
pr hA
26 t
1s
tM
ar ch
20
00
0%
4 Weeks Ending
of analysis and effort to determine which are appropriate to include in your business case for a new WMS. Improved Service Quality It is often cited that after a WMS replaces a paper based system, a DC’s inventory accuracy and picking accuracy improve. How much really improves depends on how bad it was earlier. 36 The Warehouse Handbook
For example, as shown in the chart to the right, in 1999 a Mexican grocery store chain suffered from terrible inventory accuracy (<40 percent). After implementing a modern WMS with RF scanning, inventory accuracy improved to 99 percent+.1 What this is worth can be interpreted in many ways. Some will claim that inventory investment will go down with better accuracy and there is some evidence of this seen in various WMS case studies. For example, the Mexican retailer above saw inventory days on hand go down 24 percent. Others may argue that sales will go up as there will be fewer lost sales, but for any of this to be significant you need very poor inventory accuracy to begin with. Another area of service improvement will be outbound order accuracy. A firm should expect 99.5 percent or better with a WMS. The value of this also needs to be determined based on the current order accuracy, the cost of achieving it today, and what your customers expect. This analysis should also consider the possibility of vendor chargeback savings. While vendor chargebacks are not yet common in the Indian marketplace they will be eventually. The difference between 99 percent and 99.5 percent is not only 0.5 percent in lost sales it also will likely cost 0.5 percent to one percent of sales in additional penalties! That can equate to a lot of money in larger businesses that can easily pay for the system. It is clear that service to customers will improve with a WMS. How significant this is needs to be deterNow the authors have seen paper-based operations where inventory accuracy is at least this good, but have never witnessed a WMS site with terrible inventory accuracy (<80 percent). For this reason, a WMS may be something of a sufficient cause for good inventory accuracy, but it is not the only path there.
1
Warehouse ManageMent systeMs
mined, but not ignored, in the Return On Investment (ROI) analysis for the system. How Do You Purchase A WMS? To really gain a proper payback on a WMS you need a plan. Do not start by calling WMS vendors. Instead, the most successful projects start with an Operating Vision for the future. This vision is developed by visiting other warehouses, talking to other professionals in your field, hiring consultants, etc. This vision should take into consideration all the various ways a new WMS will allow you to operate. It should include a future layout for the building and a narrative that describes how each major process in the warehouse will work. Once a vision is complete for the new facility, compose a detailed ROI Analysis for a new system. You should measure the cost of different operations today using available financial data or maybe even time studies. Then make some estimates for what labor will be involved in the future for each process step and what the value of improved customer service and inventory accuracy will be in the future. It is really critical that you consider the ROI of the system before you go looking for a WMS. We have seen many WMS projects spend hundreds of man hours of research and lakhs of rupees on vendor evaluations only to get stopped dead in the CFO’s office when he asks “What are we going to get out of this?” Make sure the journey is worth it before you undertake it. When figuring the cost of a new system you can use the following in India as rules of thumb: Compose a Request for Information that explains the most important features in your ROI that you are looking for and then ask vendors to: n Supply basic information about similar sites,
Cost Component
Per Unit `Lakh
Req’d
WMS Software Per User
0.25
TBD
RF Terminals
0.4
TBD
Thin Client Terminals
0.2
TBD
WMS Computer Hardware
25
1
Interface to ERP
24
1
Testing - Your Internal Team
6 Ppl
* 4 months
WMS Vendor Services
32.5
1
Project Mgr - Your Own Training Team - Your own
8 months full time 4 Ppl
* 3 months
n Explain how they can comply with the key requirements, n Outline their support services available in India.
Invite four or five vendors who have worked in your industry to submit their responses. Bring them in to present. After meeting them, choose three to bid on the project. Compose a Request for Proposal document that outlines what you are looking for in detail. Make sure to provide a common pricing sheet for vendors to list their costs. Ask them to list costs for hardware, the software, and most important of all the installation services they will provide. During negotiations it is critical that you work out the cost of any future, unforeseen services such as programming cost / man hour, designer time / man hour, etc. Too many firms get wrapped up in negotiating the cost of the software and then get flummoxed once modifications are discovered and have to be developed. Keeping this one fact in mind will pay for the entire cost of the new equipment. Guaranteed. India is changing. The godowns of yesterday must change to keep up with the warehouses of today. Expenses aside, a modern WMS is an important tool in improving the productivity and customer service of the warehouse of the future. The Warehouse Handbook 37
Imprint Feature
Indiaâ&#x20AC;&#x2122;s No.1 Entrance Automations & Loading Bay Equipment Company Gandhi Automations Pvt Ltd offers Complete Solution for Loading Bay
38 The Warehouse Handbook
G
andhi automations Pvt Ltd provides a total and customized solution for the loading bay which is the most neglected area in any warehousing unit. The engineers, technicians and the team at GAPL have a deep thorough knowledge of warehousing and logistics movement in industries. We take into consideration the need of our customers and accordingly provide the best solution as per the specific need of a particular company. Our approach in this is consultative rather than acting as mere vendors for our clients. This would include the placement of automated doors at strategic places, the number of dock levelers required, the number of material handling equipment necessary for the area, etc which would best fit into the work place layout. This consultancy is value added because the concept is unbiased; the client understands the convenience and necessity of our product. One cannot circumvent automation in the loading bay area. Loading Bay Equipment Comprises of the Following: Dock Leveler / Scissor Lift. Automatic Doors. Dock Shelter.
l l l
dock Leveler: Perfect Balance of Power and Performance An electro-hydraulic dock-leveler is not simply “a bridge for connecting a vehicle”. Frequently, the important characteristic that this tool needs is undervalued in order to guarantee an efficient working environment to comply with the safety in work regulations. Since the invention of the hydraulic dock-leveler, very poor design improvement has been implemented by manufacturers of the traditional types, and the result is old concept products with poor characteristics with respect to safety at work and during installation. Gandhi Automations offers CAMPISA dock-levelers which have been manufactured since 1975. In 1983 a completely different concept was applied to satisfy different customer needs, offering new advantages and often cheaper costs.
The most advanced concept of the CAMPISA dock-leveler is to have the whole drive unit contained in a wall box, which is installed on a wall inside the warehouse at eye level. This allows for easy and economical maintenance, without the necessity to maneuver under the platform or inside the pit, where traditional power packs and controls are usually installed which is a dangerous, dirty and uncomfortable operation. A wide study of previously installed power units motivated us to design the MULTIPLE CONSOLLE. Depending on the type of installation it can hydraulically power several docklevelers with only one CONSOLLE (drive unit), each dock-leveler controlled separately by its own control pad. They can also work simultaneously. With these solutions we have dramatically economized and have practically eliminated any repair intervention for several years by optimizing the function of the single parts. Further dramatic economies are obtained by reducing the electric mains supply points to one per CONSOLLE instead of one per dock-leveler. The reduction is about 65% in dock-leveler installations and about 75% in dock-leveler and powered sectional door installations. This reduction normally results in important economies when installing the mains distribution box. Consequently by reducing the number of motors there is a dramatic saving on electricity costs, as the global mains power engagement is radically reduced. scissor Lift: Effective solutions For most Lifting Problems One of the main objectives of Gandhi Automations is to provide the highest quality possible for products introduced to the market. India’s No.1 Entrance Automations and Loading Bay Equipment Company, Gandhi Automations, Offers the wide range of Bolzoni Auramo lift tables, with their usual safety and reliability features which provide an effective solution to most lifting problems. The safety of the operator during the use of our lift tables is paramount. Our tables comply with the European safety of machinery standards EN 292. Machinery Directive 98/37/EC and safety requirements for lift tables EN 1570. All models include:
The Warehouse Handbook 39
l Aluminium safety bar, stopping descent of the platform on contact with obstructions. l Safety clearance between scissors to prevent trapping during operations. l Safety check valve to stop the lift table lowering in the unlikely event of a hose break . l Protection against overloading. l Low voltage control box with up-down buttons and emergency stop. l Maintenance props(for safe maintenance operation). l Removable lifting eyes to facilitate handling and lift table installation.
We have a wide range of tables and options available to meet different requirements. Due to our wide experience we are able to provide customized solutions. automatic industrial overhead doors: the ideal solution For all industrial needs l Best use of transit openings. l Weather resistant. l Maximum safety.
Ditec overhead doors offered by Gandhi Automations Pvt. Ltd. ensure better use of inside space as the side runners vertically move the door along the wall and parallel to the ceiling. The doors are installed above the opening, thus ensuring a better use of the transit opening. Their compact size leaves more available space both inside and outside the premises. As these doors slide vertically, stopping in the proximity of the ceiling, they blend in with the architectural features of the building. Their compact size ensures more available space both inside and outside the premises. The doors are also easy and practical to use, especially if the original Ditec motors are used.
These doors provide more environmental control; heat insulation and soundproofing ensured by heat-insulated panels improve working conditions on the premises and ensure energy savings. The panels can also be manufactured with the addition of practical portholes or full aluminum sections featuring polycarbonate or unbreakable glass panels, wire meshing or air grilles. They add value to the premises and meet all requirements—the design and different solutions offered ensure the door is aesthetically pleasing and perfectly suited to any architectural environment—from modern and traditional industrial buildings to fine commercial buildings. The doors can meet any industrial and commercial requirement and add value to the building in which they are installed. These doors are built to ensure the highest ease and flexibility of use which, in turn, ensures a quick, hassle free and accurate replacement of old doors. Reliability—all products are affixed with a CE mark and have been awarded ISO 9001 – Vision 2000 and IQ NET certifications ensuring optimum quality. dock shelter: Cutting off the inside Environment From the outside Cutting off the inside environment from the outside, it is not only useful to human working conditions, but also avoiding waste means saving energy, ecological safeguard, protection of goods and greater working efficiency. Gandhi Automations offers complete range of Dock shelters from CAMPISA, for every kind of use and environment. Campisa dock shelters protect the internal heated environment from external cold conditions, the chilled ones from external heat, and from rain, wind, snow and dust. Strong and of good quality, the different models are designed to resist docking of vehicles, reducing their impact in different ways: with retractable structures able to absorb the strokes (standard retractable dock shelters, with polyurethane stuffing) (cushion dock shelters); closing against the vehicle, as the patented INFLATABLE DOCK SHELTER can grant.
Types of Campisa Dockshelters Retractable Dock Shelters
40 The Warehouse Handbook
Cushion Dock Shelters
Inflatable Dock Shelters
A Multifaceted Company DIESL has a repertoire of services which extends beyond that of the average logistics provider in the diverse solutions it provides its clients. Drive India Enterprise Solutions Limited (DIESL), a leading integrated logistics service provider in the country, has roots in the formidable legacy of the TATA Group, which is widely recognized as one of the most illustrious and respected companies in the world with a track record worthy of emulation. DIESL is jointly owned by TATA industries Ltd. and TATA International Ltd. (50:50). With the entry of DIESL, the TATA Group has expanded its vision and now provides companies with end-to-end logistics solutions. Wide Range DIESL provides a plethora of logistics services which includes warehousing, distribution, international logistics, kitting, packaging, telecom trading, project logistics and value-added services like cash management and e-trade. Pan-India Reach DIESL has more than 180 warehousing and distribution facilities across the country spanning an excess of five and a half million sq.ft. across 28 states. It caters to 85 percent of the country’s
districts and connects more than 7,000 towns. The company is privileged to work with more than 100 high profile brands across diverse industries, which include both Tata and non-Tata companies. Technology And Visibility DIESL has roped in Tata Consultancy Services (TCS) as its technology partner to provide integrated technology applications and world-class systems to facilitate end-to-end solutions for its clients. The company has established a national LAN/WAN and uses MPLS, Vsat and VPN at all its facilities. It has also implemented WIMac and Connect (DIESL’s customized WMS and DMS) that are benchmarked with the best systems internationally. DIESL’s customized IT solutions bring in much-needed visibility as well as operational efficiency for its vast clientele. Differentiated Services Consignment Sales: With this model, DIESL assists its customers in establishing their operations across India, without being compelled to go through the longwinded and tortuous processes of creating networks of their own. DIESL can be appointed as the Consignment Stock Agent which enables the client to easily stock-transfer its material to any DIESL warehouse across the country. DIESL uses its VAT registration and sells the material to its client’s end-user. Thus the inventory remains in the books of the client and the client remains the legal owner of the stock till it is sold. DIESL offers this as a separate line of business in its SAP system and gives its clients complete IT solutions without them having to invest in it. The company also allows its customers to save their investment on cash management service arrangements to collect money from all over India, as DIESL can collect the money on behalf of its clients and transfer it to them on a periodical basis. Trading: DIESL has offered its clients trading for the last five years. The company sources products from vendors locally and internationally for its customers. These products are booked on DIESL’s accounts and are then distributed by them in India through various channels like wholesalers, distributors, retail stores, corporate tie-ups, e-trading solutions, etc. These innovations, along with DIESL’s strong pan-India reach and distribution network, ensure the speedy launch of new products in the market. With these special services, DIESL enables its customers to achieve low inventory, low investment, less stock-outs and increased sales.
DIESL Bangalore multi-client warehouse facility.
Value-Added Services: The vision of DIESL extends beyond the standard aspirations of most logistics organizations as it offers services that add real value to your business activities. Services like kitting, repackaging and stickering, VAT management, yard or site management, octroi-related services, bunker houses, leased containers, providing Material Handling Equipment, security escort services and track and trace are a few examples of the value-added services given to DIESL customers.
The Warehouse Handbook | 41
Network optimizatioN
mastering Challenges Network optimization is a challenge, but needs to be addressed for a robust supply chain notes Rajkiran Kanagala
T
rajkiraN kaNagala National Head – Business Development, TCI Group
42 The Warehouse Handbook
he increased volatility of the economy and changing tax reforms have forced companies to respond to fluctuating demands of business. This, in turn, has disrupted the supply chain of most companies. There is a need for a dynamic and synchronized supply chain in a business environment where there is a free flow of goods and information, both between internal and external business partners. This supply chain should also be flexible enough to respond easily to change. Supply chain optimization is a formidable task in India, given the complexities involved and the difficulties associated with core, primary issues like infrastructure, complex tax structures, regional variations, etc. Thus an in-depth knowledge of operating realities is required, along with innovative approaches to optimization. The supply chain and logistics network of a company consists of locations—suppliers, plants, warehouses, customers—and the transportation of the product between them. Network optimization seeks to maximize
a company’s profits or minimize costs, while providing the desired level of customer service, subject to relevant constraints, policies and other intangible considerations. Delivering Service At Lowest Costs The exhibit outlines some of the key questions that a company should consider when optimizing its India supply chain network. In order to optimize the supply chain network of a company, the following processes need to be analyzed: 1) Supply chain strategy design. 2) Strategic sourcing or inbound logistics. 3) Distribution network design. 4) Transportation. 5) Reverse logistics. 6) GST network modeling. Supply chain strategy design: At the extremes a supply chain can either be efficient (low cost), or responsive (excess or more expensive
Network optimizatioN
Transportation
Supplier
Manufacturer
Who are the key raw material suppliers from a net landed cost perspective?
What is the tradeoffs between tax and logistics on the manufacturing footprint?
What are the incremental costs and risks incurred by closing certain lanes?
What is the optional distribution footprint-number, location and configuration of warehouse?
What is the impact of closing certain manufacturing plants on the overall cost?
How does centralized distribution affect transportation costs?
What is the impact of CST/VAT on the warehousing set up?
What is the optimal production footprint: assignment of products, number/capacity of lines at each plant?
How do service level requirements impact the transportation footprint?
What is the optional mode of shipment of RMS from their suppliers? What are the costbenefit trade-offs of imports versus domestic purchase?
Post tax sunset, is it beneficial to move manufacturing to a non-fiscal benefit area for logistics reasons?
What are the net in-transit holding costs and average intransit inventory in the supply chain?
Warehousing
What are the average inventory levels across the supply chain? To what extent is a reduction in inventory achievable by moving to a centralized distribution system?
Network optimization seeks to maximize a companyâ&#x20AC;&#x2122;s profits or minimize costs, while providing the desired level of customer service.
Is it beneficial to outsource warehousing to a third pary provider?
Collaborative Technology, end to end Supply Chain Visibility, eRp Standardisation Business process Reengineering
TCiâ&#x20AC;&#x201D;SCS SupplyChain 5 Forces Model Supply Chain Cost
Supply Chain STRaTegy
Supplier Base
Taxation VaT/gST
capacity). The optimal supply chain is somewhere inbetween, with the right mix. While designing its supply chain network a firm needs to consider the following factors: n A comprehensive market study. n Network should be designed keeping laws and regulations in mind. n From time-to-time carry out audits to analyze the current scenario. n Identifying outsourcing opportunities and partnering with 3PLs and 4PLs. The typical questions that are asked in supply chain
Modes of Transport
Source: Author
Responsive planning process with Reduced Cycle Time
Responsiveness To Customer
Source: Author
The Warehouse Handbook 43
Network optimizatioN
Traditional Model
Milk Run Model Factory
Supplier-A
Supplier-A
Factory Supplier-B Supplier-B
Warehouse low Frequency Big lot high inventory
Source: Author
44 The Warehouse Handbook
Source: Author
Supplier-C
strategy design are: n Are the supply chain networks i.e, logistics hubs, distribution centers, warehouses and other facilities, located in the right places with the right missions? n Is the flow of goods through the networks efficient with regard to costs, speed, accuracy? n Are customers satisfied—even delighted—with the company’s services? n Is information flow timely and actionable? As real time as necessary? Does it support decisions? n Is the supply chain organization comprehensive (from buy to sell)? Is it collaborative with other business functions and trading partners? n Is the supply chain organization agile and adaptive? Is supply chain excellence on the executive agenda? The sub-activities of any supply chain can be optimized individually as explained below: Strategic sourcing or inbound logistics: While design-
Supplier-C
high Frequency Small lot low inventory
ing its inbound logistics model a company should study the following premises. The inbound logistics network of the company can be optimized in the following manner: n Network planning: Identification of process work flows and improvements, designing the most efficient and effective inbound processes (milk routing, JIT (Just in Time)/JIS (Just in Sequence), cross docking, VMI (Vendor Managed Inventory) identification and evaluation of other choices for sourcing regions. Example: Rather than implementing the traditional model, the milk run model can be implemented, where instead of each supplier sending a vehicle every time to a factory to supply raw material, one vehicle visits each supplier on a daily basis, picks up deliveries and supplies it to the factory within a fixed time period. This fulfills the raw material need . n Proper material inventory management through VMI (Vendor managed inventory) system man-
Network optimizatioN
agement, spend analysis and cost reduction. Buyer-supplier collaboration: This comprises of the supplier relationship management, supplier evaluation and selection, supplier risk sharing, supplier integration assessment and roadmap, supplier classificationâ&#x20AC;&#x201C;partner, transactional, etc. n Material inventory management: VMI management , spend analysis , cost reduction. n Buyer-supplier collaboration: Supplier relationship management, supplier evaluation and selection, supplier risk sharing, supplier integration assessment and roadmap, supplier classification â&#x20AC;&#x201C; partner, transactional etc.
Cross Dock Model
Case Study: Business challenge A company partnered its LSP (Logistics Service Provider) to design its inbound logistics model while ensuring part-wise/ SKU-wise information flow to all its
Supplier-A
Supplier-B
Supplier-A
Cross Dock
Sub Route-1
Supplier-C Supplier-A
Sub Route-2
Sub Route-3
n
Supplier-C
Supplier-B
Supplier-C
Supplier-B Source: Author
Cross Dock Model Alerts OEM Production Planning
LSP Control Center Pickup Schedule
Pickup Schedule
Dessemination of Data, SKU, Date, Plant wise
Arrival Updation Dock wise on Window Timing
GPS Tracking
Plant
Send Vehicle for Milk Run
Source: Author
Suppliers
Cross Dock Network Scheduled Pickup, ASN & Receipts of Material at X Dock
SKU wise Manifest
Stock in, Inspection, Plant wise unloading segregation, Dispatch as per unloading dock timing
The Warehouse Handbook 45
Network optimizatioN
stakeholdersâ&#x20AC;&#x201D; OEMs (Original Equipment Manufacturers) (buyers/ logistics), suppliers and its own team (cross dock / plant team). Distribution network optimization: The critical element of any supply chain is its distribution network. The distribution network of a company should be designed in such a way that it can minimize cost by providing the right goods, in the right quantity at the right place and the right time. Some key factors must be taken into account while designing an optimized distribution network, as it is one of the most critical elements of any supply chain: 1. Location of customers, plant, suppliers. 2. DC and depot locations.
Costs (Rs)
The distribution network of a company should be designed in such a way that it can minimize cost by providing the right goods, in the right quantity at the right place and time.
Number of Warehouses Transportation Costs l Inbound l Delivery
inventory Costs Warehousing Costs Total Costs Source: Author
46 The Warehouse Handbook
3. Transportation and fulfillment capabilities. 4. Government regulation or deregulation. 5. Events in the economy. Key Questions How should one optimize the network? Has enough thought been given to: n Fleet optimization. n Route optimization. n Contract optimization. n Warehouse and Distribution Center locations. n Number of warehouses and their capacity. n What are the changes required in the network to get the most benefit out of GST norms? n What should be outsourced? n What should be the configuration and strategy of each DC? n How will customers order from each DC and how will each DC be replenished? n How should shipments be scheduled? n Which transportation methods should be used? The main components in distribution network design 1. Warehousing : Designing and implementing warehouse design which would include warehouse type selection and its layout; warehouse operation optimization, storage layout, palletization, stacking methods, equipment selection, WMS evaluation, selection and implementation. 2. Location strategy: Evaluating existing structures and greenfield sites, utilities, fix-up cost, support services, community desirable and incentive packages.
Network optimizatioN
3. Own implementation v/s outsourcing decision : Assessing a firm’s need for outsourcing logistics services and selecting the right 3PL.
First Discussion on GST
TIME LINE
Transportation: Optimizing transportation operations will add value to the bottom line. It basically involves: n Network planning: Load and mode analysis and fleet and route optimization. The design should incorporate changes which will be inevitable in the economy after the implementation of GST. n Transportation vendor management: Transport vendor selection, based on vendor evaluation and their performance.
Three Stage network Modeling l
Ready
l
Set
l
l l
Further Clarification on GST
l
GST Implemented
Go
l l l
Assess GST Impact Data collection Analyse the “As Is“ Structure Develop “what—if” scenarios Develop a holistic network model for each scenario Interpret govt. announcements Select the best solution Detailed modeling of the solution Implementation (if within the scope) Source: Author
Intrastate vs. interstate procurement of goods. Manufacturing and warehousing locations. n In-house vs. contract manufacturing. n Direct selling vs. stock transfer. n
Reverse logistics: This is a complex function that can grievously affect company profits. A company derives reverse logistics efficiency through proven processes and disciplines. Returnables: Optimizing the manner in which goods are returned to suppliers. Returns and warranty management: Optimizing the flow of goods from customers. Handling GST The implementation of the Goods and Services Tax will bring about changes in the way manufacturing, warehousing and distribution are carried out in India, and companies will have to restructure their supply chain strategies to overlook tax boundaries. Some of the key decisions which will be required to re-engineer the supply chain process post GST will be: n Should one outsource services?
n
Case Study 1 Network designing for a market leader in tiles, sanitary ware, glass manufacturing equipment Project Background The client had two manufacturing units in Gujarat and Haryana with a combined capacity of 180 MT. The client also had a vast distribution network of around 1,000 dealers, 5,000 sub dealers, 20 depots and showrooms across India and used the roadways as its major mode of transport. The client was exploring opportunities to optimize logistics costs, while maintaining the optimum service level for its distributions in the south and west regions of the country. The Warehouse Handbook 47
Network optimizatioN
Network optimization, if implemented correctly, can achieve supply chain cost reductions.
Solution n Closely analyzed the sales and dealer network supported by each depot and recognized the distribution overlaps, while identifying synergies. n Proposed an optimum number of depots, ascertained by proximity to dealers, closeness to rail and coastal shipping and taxation impact on distribution. n Proposed the right mix of transportation modes for each depot to streamline the primary distribution network. n After implementation of solutions, there was a 14 percent reduction in overall costs (including primary transportation, warehousing, inventory), backed by a reduction in the number of depots. Case Study 2 Establishing logistics networks for a prominent automobile major when it entered the Indian market Project Background: The client was one of the worldâ&#x20AC;&#x2122;s prominent commercial vehicle makers and had sold over half a million trucks all round the world. As India is considered an attractive destination for future business, the client was planning to set up its commercial business in the country. Since the commercial vehicle supply chain network is one of the most complex in the country, the client partnered with a logistics ser-
48 The Warehouse Handbook
vice provider to help them formulate a smooth entry into the country. Solution n Analyzed and developed a logistics strategy for inbound logistics, outbound logistics for finished vehicles, after sales operations, and global sales logistics, including sea routes. n Planned the entire transportation network taking into account the complexity of the geography of the country, infrastructure, taxation and above all, the speed of change. n Devised a warehousing strategy, beginning with site selection to development of SOPs (Standard Operating Procedure) and SLAs (Service Level Agreements) for warehouse operations. n Formulated an emergency concept for the security of supplies. In conclusion, network optimization while remaining an important buzz word in the logistics sphere is seen as a method to achieve supply chain cost reductions, which if implemented correctly, one does actually achieve. More importantly, it eliminates wastage from the system, which, in turn, reflects in better customer service. However, the dissonance between sales and delivery, infrastructural bottlenecks, changing customer preferences and the non-implementation of GST, often combine to make supply chain network optimization a challenge.
I n t e r v I e w
Poised For Demand
Sameer Gandhi Director, Gandhi Automations
How has the last year been for the automation door industry in India? Where do you think it is moving this year? Entrance Automations and Loading Bay Equipment is closely allied to the construction industry. The construction industry is one of the fastest growing sectors in India and comes with a promising future. The sector will escalate to new heights with construction activities taking place in different Indian cities at phenomenal speed. Government policies, expenditure in infrastructure and regeneration projects will provide the growth impetus. As the national economy grows, social and financial demand for infrastructural updates will increase. With talks on India needing to raise infrastructure spending to ten percent of GDP there will be an improvement in the Indian economy. This will result in an accelerated demand for goods movement and create opportunities for suppliers of goods-handling products and services of all types. We, at Gandhi Automations, are poised to meet the rising demands for our products. With GST and FDI in retail in the news regularly, the demand for automated warehousing will be high. What role will Gandhi Automation play in the warehousing industry? The introduction of GST will encourage logistics and 3PL service providers to invest hugely in the economy, as the scope of manufacturers to distribute and store goods will be widened with no consideration for state boundaries. Automating warehouse operations can be an attractive supply chain option for many businesses, offering the benefits of low-staffing requirements, efficient logistics operations and accurate service delivery. Warehouse automation also helps in reducing costs, improving productivity and accuracy. Most of our products enable warehouses to achieve the status of stateof-the-art facilities. Could you explain the service procedure you follow for clients? This also includes the training procedure for
50 The Warehouse Handbook
Interview provided by the company.
installations and service staff. For us at Gandhi Automations, customer service starts from the first contact made with the client progressing from conceptualization, design, through production and installation. It does not stop when the product has been commissioned and handed over to the customer. We are available on a toll free number as well as have a full-fledged customer support team that functions round the clock, attending to any customer call. We have 23 branches all across the country enabling our personnel to reach our customers promptly. Our engineers have expertise in installing entrance automations and loading bay equipment. Many of them have been trained at our principal companies. In addition, we offer in-house as well as on-site training before a new recruit is sent out independently on a call. Please share your experience with some of your principals in the last few years. We have been fortunate to be associated with market leaders specializing in the manufacturing of Entrance Automations and Loading Bay Equipment be it Ditec, Campisa, Overhead Door Corporation, Anteo, etc., they are all specialists and market leaders in their respective regions. We have been exclusive distributors for more than 12 reputed European and North American manufacturers for almost 15 years now. Could you discuss any product inductions that you may have in the future? Every automated warehouse is complete only if it comprises of Dock Levelers, Dock Shelters, Sectional Overhead Doors, High Speed Doors and Motorised Rolling Shutters. We have now added tail lifts to our range of products . Tail lifts are mechanical material lifting devices that are permanently fitted to the rear of vehicles. The products to be transported can be loaded and offloaded easily and safely by the lifting and lowering of the platform. Tail lifts can be attached to distribution vehicles to enhance supply chain performance.
Benchmarking
Benchmarking: key To Worldclass Performance Benchmarking is being introduced in warehouse management for greater efficiency, customer satisfaction and to enable warehousing to become a world-class operation stresses Hemant Moharir.
R
hemanT moharir Industry Consultant
52 The Warehouse Handbook
ecently I was with one of my clients, a leading company in consumer products. When asked about their current performance data, I was shown a twenty-odd point measurement system being followed with so many sub-headings that it actually ran into pages. In addition, they have a separate audit team whose job is to move around the country for quarterly audits and submit the report to the Head Office. After a taxing half-hour presentation just on metrics, the question was “How do we compare with the best-in-class?”While the answer is not the subject matter of this article, I realized that warehouse performance is really a ‘management’ subject now. Warehousing as an operation is evolving from the cost-centric–static-storage approach to more dynamic customer-service-centric operations. Obviously, a typical “Commercial” or “Delivery” department is no lon-
ger permitted to operate a warehouse. In fact, the trend to outsource to expert 3PLs is encouraged, although this sentiment is still not very strong in India. With supply chain management concepts now being actually put into practice, warehousing operations become central to logistics efficiency and in turn, customer satisfaction. It is, therefore, not surprising that people look at ‘warehouse management’ as a separate sphere of management in SCM. That it is finally getting attention also underscores the introduction of performance management metrics and benchmarking into supply chain management. A lot of research work is underway in supply chain metrics and benchmarking, so much so that one gets lost in volumes of data (a lot of it irrelevant!). But one fact emerges very strongly that warehouse performance management as also its metrics actually
Benchmarking
drive delivery performance. In this article while going through some basic concepts of performance metrics and benchmarking, we shall try and analyze how we can use, adapt and adopt these concepts. WHAT GETS “MEASURED” GETS “MANAGED” A performance measurement system (PMS) gives an organization a platform to evaluate where it stands and also helps identify opportunities for improvement. It helps maintain accountability on one hand and also facilitates benchmarking, which we will discuss in detail. There is substantial HR research on the PMS and Key Performance Indicators (KPI), emphasizing the fact that a pragmatic KPI design actually brings about changes in employee behavior and ultimately helps a company orient itself to deliver. However, sometimes the PMS becomes a job in itself, with line supervisors fighting against time to submit the PMS report on time at the cost of key KPIs. So what are the guiding principles of an effective PMS? Some of the key features of effective metrics are given below: EFFECTIVE METRICS: IS IT GOOD ENOUGH? n Influence and accountability: Measures which can be directly influenced by the logistics department (personnel). Often, it is observed that sales turnover figures are part of the metrics of some DCs. While these figures may be required for external benchmarking in a similar industry, it need not be a part of operational efficiency for a warehouse manager. n Alignment with business and supply chain: As the main cornerstone of SCM philosophy, one should
ensure that local maxima is not at the cost of global optima. It should not lead to a silo mentality. n Holistic: While designing a PMS, one tends to slice metrics down to the point where they do not really reflect the true picture, for example, Order Picking Time = Within Two Hours of Order Receipt; when one can actually wait to bunch orders, since outbound logistics is scheduled only at the end of the day. These KPIs place unnecessary pressure on the ground staff, without helping overall efficiency. A more practical KPI, for instance, could be the number of orders dispatched the same day. n Simple-Easy to measure: The objective of the PMS is also to align operational staff with the objectives of the company. If it is difficult for them to understand their own KPIs without an elaborate MIS report, it loses its significance and over a period of time it becomes one more tiresome office ritual. n Timeliness: This should be measurable within a reasonable period of time. A suitable and functional WMS helps a lot in this matter. n Sensitive: The PMS must be sensitive to underlying changes in business performance and it should be moderated to focus on what is important for the business. If costs are out of control, no matter if it is misunderstood, the focus should be on cost, even at the cost of service levels and vice versa. n Benchmarkable: It is important to have some main KPIs which are measured across companies in that particular industry segment, for example in auto spares, there could be KPIs on inventory turnover, which is one of the critical parameters monitored across the segment. The Warehouse Handbook 53
Benchmarking
Some Typical PMS Metrics Much effort is being made worldwide to bring about standardization in SCM/warehousing processes. However, due to the variety of warehousing operations, it will take some time before we have standard templates for different segments. Some typical metrics are summarized below to serve as a basis for further discussion on benchmarking. As warehousing is basically a service operation, the primary KPIs will depict the following typical equation: Operating Efficiency =
Output (Service Levels-Time/Quality) Input (Cost/Manpower/Resources)
Source: Adapted from Metric Definitions: WERC 2007
With the above principal definition, there are many ways in which key metrics are classified. One such typical classification is as explained below. Customer Service Level metrics
Productivity/Internal Efficiency Metrics
1. 2. 3. 4.
1. 2. 3. 4.
5. 6. 7. 8.
On-time shipments On-time delivery Line/order Fill rate Order Cycle Time (Time between order placement and dispatch) Order Picking Accuracy Percentage of orders shipped complete Percentage of orders sent damage free Percentage of orders with correct invoice
Cost metrics 1. Inventory : DOS(Days of Storage) 2. Distribution Cost per Unit Shipped 3. Inventory Shrinkage as % of Total Inventory
54 The Warehouse Handbook
5. 6. 7. 8. 9.
Cases shipped per person Line shipped per person Pallets shipped per person Back orders as percentage of total orders Warehouse capacity utilization Equipment capacity utilization Honeycomb percentage (actual cube utilization/total warehouse cube positions) Inventory count accuracy Warehouse Damage (as a percentage of cases or units)
4. Distribution Cost as % of sales. 5. Average value of backorders as % of sales
This gives one such set and one can use a combination of various metrics to determine the need of an individual business. Example: For an FMCG company there were combined KPIs as follows. For a particular time period, 1. Volume of Goods moved/Area of the warehouse. 2. Perfect (On Time In Full) Delivery Percentage. There was a benchmarking survey undertaken by Warehouse Research and Education Council (WERC), US. The interesting data is shown in table number1. The top 12 most popular metrics used for performance evaluation in 2011 along with a comparative rank in 2009 and 2010.This is based on a survey conducted among 600 members of WERC, in the report published recently by WERC Watch Spring 2011. To sum up, there are many metrics available and one can understand and apply the ones which are in line with overall business objectives. Benchmarking: The Logical Next Step Having an elaborate well-thought out PMS is just a starting point. The objective is to improve and be the best in the industry. How does the PMS get converted into a competitive edge? The benchmarking process addresses that need. In simple words, benchmarking is a relative assessment of oneâ&#x20AC;&#x2122;s performance with another, either internally within the organization or externally among the comparable peer group. Some of definitions of benchmarking are as follows: The American Productivity and Quality Center provides a comprehensive definition of benchmarking as the process of:
Benchmarking
n C omparing
practices and results with the best organisations in the world and then adapting the key features of those practices to one’s own organisation. n Accelerating organizational learning, customer-driven quality and continuous improvement. n Helping organizations identify breakthrough, by comparing their processes with those of the organizations recognized as being the best. n Helping organizations learn from one another, whether it be in business, health care, government or education. Another definition reads like this: Benchmarking is the process of improving performance by continuously identifying, understanding, and adapting outstanding practices and processes found inside and outside the organisation. Benchmarking (seeks) to improve only given business process by exploiting “best practices” rather than merely measuring best performance. Studying best practices provides the greatest opportunity for gaining a strategic, operational, and financial advantage. As explained above, it is actually a process and not an activity which is conducted periodically like reviews. It is rather a process by which you find performance gaps and also understand how the other organizations are better on those parameters. This enables you to set your operations on the improvement roadmap to become a best-in-class warehouse. So this needs to be a continuous exercise and has to be carried out periodically to maintain a competitive edge.
Table 1: Top 12 Most Popular Measures Used- 2011 Metric/ Metric Category
2010 Rank
2009 Rank
1. On-time Shipments - Customer
1
1
2. Average Warehouse Capacity UsedCapacity
4
7
3. Order Picking Accuracy- Quality
2
3
4. Peak Warehouse Capacity Used- Capacity
9
-
5.Dock-To-Stock Cycle Time, in HoursInbound Operations
6
6
6. Internal Order Cycle Time- Customer
10
8
7. Total Order Cycle Time- Customer
-
12
8. Lines Picked and Shipped Per HourOutbound Operations
11
11
9. Lines Received and Put Away Per HourInbound Operations
-
-
10.Percent Of Supplier Orders Received Damage Free- Inbound Operations
-
10
11.Fill Rates-Line- Outbound Operations
3
4
12. Annual Workforce Turnover- Employee
8
—
Source: WERC-watch-spring-2011
Benchmarking: Internal V/S External Benchmarking could be internal within an organization among a group of warehouses or it could be external across organizations where business characteristics are comparable, for example, for an FMCG warehouse, the closest warehouse one could compare with would be a retail or a pharmaceutical warehouse. In the US and Europe there are industry forums and independent bodies like academic institutions, which publish benchmarking surveys periodically, where one could get a better perspective for one’s own sector. The Warehouse Handbook 55
Benchmarking
As compared to external benchmarking, internal benchmarking could be a good starting point and a lot can be achieved with this important step. The best part is availability of information across business units and this is actually the most critical input to any benchmarking process. Further discovery of some best practices could be much faster than the conventional discovery process. The advantage of internal benchmarking is also to develop a culture of learning and innovation spurred by internal competition. A company that can demonstrate healthy rivalry between divisions will experience innovation at all levels. This is especially applicable to
will
India, where warehouse industry bodies are not yet very active. It is these initiatives which will help companies at least initiate their improvement processes. The exhibit below shows an example of a Best-Practice Comparison chart across warehouses. Examples Of Benchmarking Surveys There are a lot of supply chain benchmarking activities carried out by independent industry bodies, independent consultants or academic institutions in mature markets. A few examples are shown(See pg. nos.57, 58 &59).
Example of Best-Practice Comparison Chart Order Management Best-Practice Comparison Across Warehouses Best-Practice 5 4 3 2 1 0
Order Receipt & Entry
Order Verification
Order Confirmation
Order Processing
Transaction Monitoring
Order Management Processes Warehouse 1 Source: Suppl y Chain Management Review : January/ February 2005
56 The Warehouse Handbook
Warehouse 2
Warehouse 3
Payment Training of Processing customer service Reps/Acct. Managers
Warehouse 4
Benchmarking
Warehouse Education Research Council (WERC, US) Annual Benchmarking study : This is an annual activity conducted by WERC for its members with DC velocity, a magazine in collaboration with academic institutions and Supply Chain Visions , a consulting firm which publishes information for its participants and other users. Every year a study is launched and member organizations are asked to provide data, which is then analyzed and presented to various organizations. The on-going goal of this study is to help practitioners with the following: n Provide a benchmark of key measures according to industry and type of business. n Gain a better understanding of how performance of key measures has changed over time. n Link key measures to various demographics to help companies better compare themselves to organizations similar to their own. Some exhibits are demonstrated as examples as follows:
Quintile Performance Classifications for Metrics The exhibit below shows the high level metrics data for all the warehouses classified in five classes from column 2(Major Opportunity-bottom 20% ) g column 6(Best in Class-top 20%) and also Column 7 which gives the actual median of all the warehouses (See table 2). Apart from this they also publish data on individual operations as shown in the example below. Operations Metrics (Inbound) As in Table No.3 on operational metrics (see page 58) there are many other parameters, like financial metrics, perfect order metrics and various other metrics which are used to classify warehouses to depict the range from basic to best-in-class performers. In addition, the report also provides interesting analysis across operations, industry segments and various other parameters, which gives the reader a very good framework to understand warehouse performance in perspective.
Table 2: Quintile Performance Classifications For Metrics Metrics
Major Opportunity
Disadvantage
Typical
Advantage
Best-In-Class Median
CUSTOMER METRICS * Percent On-Time Shipments
Less than 94 %
>=94% and <97%
>=97% and <98.9%
>=98.9% and <99.70%
>=99.70%
98%
Order Picking Accuracy (Percent by Order)
Less than 98 %
>=98% and <99%
>=99% and <99.5%
>=99.5% and <99.9%
>=99.9%
99.20%
Order Cycle Time (Average Time From Order Placement to Shipment)
>=60 hours
>=36 and <60
>=24 and <36
>=8 and<24
Less than 8
24 hours
Percent Lost Sales (Percent of SKUs Stocked Out)
>=5%
>=3% and <5%
>=1.08% and <3%
>= 0.14% and < 1.08 %
less than 0.14%
2%
Percent Backorders (Backorders as a percent of total)
>=10%
>=5% and <10%
>=2.12 % and < 5%
>= 0.484% and <2.12%
Less than 0.484%
4%
Source: DC Metrics 2007 WERC Watch Spring
The Warehouse Handbook 57
Benchmarking
Table 3: Operations Metrics (Inbound) Operation Metrics
Major Opportunity Disadvantage
Typical
Advantage
Best-in-Class Median
Source: DC Metrics 2007 WERC Watch Spring
Inbound Metrics Dock-to-stock cycle time, in Hours
>= 24
>= 13.6 and < 24 >= 7.196 and < 13.6
>= 4 and < 7.196
Less than 4
11.5 Hours
Supplier Orders Received per Hour
>=24
>= 10 and < 24
>= 4.7 and < 10
>= 2.02 and < 4.7
Less than 2.02
8 per Hour
Lines Received and Put- Less than 8 away per Hour
>= 8 and < 15
>= 15 and < 25
>= 25 and < 60
>= 60
20 Lines per Hour
% of Supplier Orders Received With Correct Documents
Less than 85%
>= 85% and <95%
>= 95% and <98%
>= 98% and <99%
>= 99%
96.10%
% of Supplier Orders Received Damage Free
Less than 95%
>= 95% and <98%
>= 98% and <98.68%
>= 98.68% and <9.9%
>= 99%
98%
% of Supplier Orders Received on Time
Less than 85%
>= 85% and <91.4%
>= 91.4% and <95%
>= 95% and <98%
>= 98%
95%
Productivity
Safety 3
3
Warehouse Order Cycle Time
5 4.5 4 3.5 3 2.5 2 1.5 1 0.5 0
Storage Density
2
4
Inventory Accuracy
3 4
Dock to Stock Time
Current World Class Shipping Accuracy
Source: Warehouse Performance Gap Analysis: Dr Edward Frazelle ‘ World Class Warehousing.’
58 The Warehouse Handbook
There are many other institutes which offer similar studies like the Cranefield University in UK along with the Chartered Institute of Logistics and Transport (CILT). Aberdeen has also published The Warehouse Productivity Benchmark Report. In his book, “World Class Warehousing”, Dr Edward Frazelle gives a radar chart which could be used, where each edge denotes a world-class performance on 1-5 scale and one can rank performance with the help of the chart to understand one’s position vis-a-vis world class performance. Online Benchmarking There are some tools available on the internet too, like the iDEAs-W, developed by the Georgia Institute of Technolgy. iDEAs-W is a tool devised to help
Benchmarking
warehouse managers understand and benchmark the performance of their warehouses. The iDEAs tool is a free service provided by the Keck Virtual Factory Lab at the Georgia Institute of Technology and is accessed by logging on to http://www2.isye.gatech.edu/ideas/. The tool is based on the generic performance model of warehousing developed by Hackman and produces a system efficiency estimate by considering several warehouse resources and warehouse services. The tool uses a mathematical technique, called data envelopment analysis, to determine a relative efficiency by comparing the performance of a single warehouse to the best possible performance, estimated by comparing with a set of peer warehouses.
Exhibit-1: Qualitative Benchmark Information Suggested minimum Process Standard 4.0 Deliver (Main Process Section) 4.1 Order Management (Process Sub Category) 4.1.1 Order receipt and entry
n C apability to receive and pro-
n P roduct priced accurately at time of
n O rders entered into single data-
n U se of EDI and/or Web-enabled order
cess customer orders by phone, fax, email, and EDI base for all operators at a given region (Europe, Asia Pacific, etc)
n P rice lists updated regularly
for manual price confirmation
n W eb-based order entry for
select trading partners
order entry including adjustments for configurations management to allow remote order entry, configuration management, order-status updates, etc
n O nline order entry systems have multi-
language and currency capabilities
n L inkage to point-of-sale systems in the
case of retailers to create releases as target inventory levels are met
n Export orders check for de-
mand parties
n K ey performance indicator: 98 %
Quantitative Or Qualitative Benchmarking? While the above surveys give mostly quantitative information, it is also important to benchmark processes and look at the qualitative aspect of how processes
Typical Best Practice Process
data accuracy at order level
Process Attribute
n O utbound transportation options
and pricing included at order entry
n A utomated cross-sell/up-sell capability
Descriptions of Suggested Minimum Standard for the Process Attribute
Source: Council of Supply Chain Management Professionals “Logistics and Supply Chain Process Standard”
Source: Author
deliver KPIs. Supply Chain Process Performance Standards, published recently by CSCMP, offer opportunities for comparisons of actual best practices. Developed to enable organizations to evaluate their own logistics and supply chain processes, these standards leverage the SCOR (Supply Chain Operations Reference), model by adopting the SCOR framework for studying supply chain processes. The standards break down SCOR’s plan, source, make, deliver, return, and enable processes into more than 200 “process attri-
Descriptions of Typical Best Practices for the Process Attribute
The Warehouse Handbook 59
Benchmarking
butes.â&#x20AC;? By assessing these attributes, a company can determine likely minimum practice standards, as well as what is considered a typical best practice. The enclosed (exhibit-1, page no. 59 ) showcases an example. This framework gives one a clear understanding of the process and techniques aspect. This qualitative input, along with the quantitative data as explained earlier, only completes the picture. In recent years American Productivity and Quality Centre (APQC) has come out with the Open Standards Benchmarking Collaborative research. Launched in 2004, this is built using the widely adopted APQC Process Classification Framework with over 1,200 stan-
Exhibit-2: Equipment Benchmarking Hand pushed trucks
Benchmarking: For Conceiving A New Facility While there is no doubt that process plays the most important role in delivering performance, it is also important that it is complemented by suitable equipment, building infrastructure and technology. Therefore, it is also important to have the benchmarking data regarding these parameters especially, for a country like India, where organized modern warehousing is still evolving
Exhibit-3: Infrastructure Benchmarking
High level order picking crane
50%
Flow rack (for cartons or totes)
% of Respondents
Picking Equipment
Source: Cranfield University, School of Management
Bin Shelving Storage drawers Horizontal carousals Vertical carousals Miniload AS/RS Automated dispensing (e.g: A-frame) Pick-To-Tote (or carton) conveyor
Layer Picker
60 The Warehouse Handbook
0% 10% 20% 30% 40% 50% 60% 70%
40% 30% 20% 10%
Pick-to-Belt Conveyor Sortation Conveyor
Source: Cranfield University, School of Management
Powered pallet truck/ low level order picking truck Counterbalance forklift truck or reach truck High level order picking truck
dardized measures spanning people, processes, and technology. Open Standards utilizes APQCâ&#x20AC;&#x2122;s sevenstep validation process to ensure the highest level of accuracy of data and provides participants with detailed reports across various peer groups. These are just some examples of the research going on in this area and there are multiple organisations and research bodies which are working in the area of benchmarking.
Case Picking Item Picking
0%
< 10 m
10 m +
15 m +
20 m +
Clear Operating Height (m)
25 m +
Benchmarking
and many modern facilities are being planned and are under implementation. A few exhibits from UK and US benchmarking surveys are enclosed as examples. (See Exhibit 2, 3, 4 & 5).
Exhibit-4: Communication Technology Benchmarking Paper Optical characters
Benchmarking Methodology Having visited all the relevant information, now let us try and understand the process to apply learning. Briefly, a step-by-step approach is suggested as given below. (Adapted from WERC: Guide for warehouse managers for benchmarking). Given below is the step-by-step methodology followed by various tables illustrating the same.
Vehicle mounted radio data terminal
Source: Cranfield University, School of Management
Handheld radio data terminal PDAâ&#x20AC;&#x2122;s Bar code scanning Voice headsets Pick-To-Light RFID tags In Place Planned Not Planned
0%
20%
40%
60%
80%
% of Respondents
Exhibit-5: Technology Benchmarking: A Closer Look Strategy and Management Practices
Source: APQP, US
Q: Which of the following technologies anf technology-based systems has your site implemented or is your site planning to implement to support your logistics processes? (a) Enterprise Resource Planning (ERP) Software
28.90%
42.10%
28.90%
(b) Advanced Planning and Scheduling (APS) Software
36.80%
26.30%
36.80%
(c) Transportation Management Stems (TMS)
55.30%
(d) Warehouse Management Systems (WMS)
33.30%
43.60%
23.10%
(e)Bar Coding
28.20%
46.20%
25.60%
(f) Network Planning Optimization Tools
47.20%
62.20% 20% 0%
13.25
19.40%
(g) Distribution Requirements Planning (DRP) Software Do not plan to implement
Implemented
40%
Plan to implement
31.60%
33.30%
16.20% 21.60% 60% 80% 100%
Step-1: Set the objectives: Look at the alignment with the company strategy and/or the current pain area and set an objective for the same. Example: Reduce warehousing cost by 25 percent or improve ontime delivery to 99 percent. For this exercise, refer to the relevant external quantitative benchmarking data available. This activity will help companies refocus on strategy and they can then focus on processes which will bring in the desired results. Step-2: Identify key processes that drive the above parameters: Identify the processes which have both strategic impacts on the customer and impact your firm as well. The processes which have the largest positive impact are the ones which should be best-in-class. (Refer to table 5.1). Step-3: Gather data about the relevant processes. Quantitative Benchmarking data will also be useful for The Warehouse Handbook 61
Benchmarking
Impact On Firm
Receiving & Inspection
Picking & Packing Material-Handling & Put-Away
Storage & Inventory Control Slotting
Load Consolidation & Shipping
Shipment Documentation
Source:WERC-Watch Spring 2011
5.1: Categorising Process By Impact
understanding where you stand. A word of caution here. The definitions of different organizations, may be different for the same measure. Example: On-Time delivery may range from leaving the warehouse on time to reaching the customer in the committed time. Therefore, while collecting the data one should understand the definition and also the calculation logic to arrive at a comparable number. (Refer to 5.2). Step-4: Understand the qualitative benchmarks regarding the process: For the chosen process and identified gap it is necessary to understand best practices in qualitative terms. Qualitative evaluation has
WMS
Impact On Customer
5.2: Process: Storage And Inventory Control KPIs
Source: Author
KPI
Poor Practice Major Opportunity
Inadequate Practice Diasadvantage
Common Practice Average
Good Practice Advantage
Best Practice Best in Class
Average Warehouse 82% Capacity Used
<78%
>=78% to <85%
>=85% to <87 %
>=87% to < 95%
>95%
Peak Warehouse Capacity Used
72%
<90%
>=90% to <95%
>=95% to <98 %
>=98% to <100%
>=100%
Inventory Count Accuracy
99.90%
<95.6%
>=95.6% to <98.4 %
>=98.4% to >=99.3% < 99.3% to <99.9 %
>=99.9%
Days Finished Inventroy on Hand
74
>=90
>=51 to <90
>=30 to <51 >=14 to < 30
<14
Inventory Shrinkage as a % of total inventory
0.30%
>=1.25%
>=0.544% to <1.25%
>=0.074% to <0.544%
Lost Sales (% SKUs stocked out)
7%
>=5%
>=3% to <5% >=1.08% to <3%
Medium Gap
Low Gap
High Gap
62 The Warehouse Handbook
You
Gap
>= <0.0043% 0.0043% to <0.074% >=0.14% to <1.08%
>=0.14%
Benchmarking
Step-5: Identify and analyse the gaps: Having understood the quantitative and qualitative position vis-à-vis the best-in-class, the need is to map understanding for further analysis. (Refer table 5.5). Based on the gap analysis, one also has to prioritise which process to work on priority based on impact. Different organizations have their own way of prioritizing. One such scoring/rating matrix is given in the following exhibit, which rates strategic and cost/performance impact to arrive at a total rating to help in the prioritizing process.
“
Qualitative evaluation has been a recent development—it was till now dependent only on quantitative data. Total benchmarking should cover both quantitative aspects AND qualitative aspects.
“
been a recent development—it was till now dependent only on quantitative data. Total benchmarking should cover both quantitative aspects AND qualitative aspects of the process to get a complete perspective. (Refer to 5.3).
5.3: Qualitative Benchmarking data Process Group
Poor Practice
Inadequate Practice
Good Practice
Best Practice
Dock Man-
n Trailer deliveries
n Shippers may notify of
n Receiving appoint-
n Manual scheduling of
n Dock appointments
agement
not scheduled
deliveries, but times not
ments manually ten-
trailer receipts to maximum
are made & a commit-
scheduled
dered, shippers given
labor & dock space utiliza-
ment to unload every
deliver window
tion, shippers given delivery
vehicle within 2 hours
time
when the appointment
nTrailers not un-
Source: Author
Common Practice
loaded in a timely
nTrailers unloaded as
way
they arrive and labor is
n Trailer deliveries
available
scheduled in broad
n Reduction of trailer switch
space utilization is
time windows in a
times by pre-planning all
optimized
manual process
trailer moves & yard staging
is kept, labor & dock
of trailers
The Warehouse Handbook 63
Benchmarking
Step-6: Decide the objectives and develop a plan for improvement: The real work on ground begins now. Having identified gaps and prioritizing, the next step is to define the improvement
plan. While developing the plan, based on resources, one can also decide on interim targets for a major improvement area with milestones. (Refer table 5.6)
5.4: Gap Analysis Matrix Process
Gap
Poor Practice Major Opportunity
Inadequate Practice Diasadvantage
Common Practice Good Practice Average Advantage
Receiving and inspection Material Handling and Putaway Slotting Storage and Inventory Control Picking and Packing Load Consolidation and Shipping Shipping Documentation WMS High Gap
Medium Gap
Low Gap
You
Y
Exemplar
Strategic Impact Cost/performance Impact
3 3 2 2 3 2 1 2
Receiving and inspection Material Handling and Putaway Slotting Storage and Inventory Control Picking and Packing Source: Author
Load Consolidation and Shipping Shipping Documentation WMS High Gap
Medium Gap
64 The Warehouse Handbook
Low Gap
Total Rating
3 3 2 3 3 2 1 3 High Impact
Y Y Y Y Y Y Y Y Y
Source: Author
5.5: Priority Rating Matrix Process
Best Practice Best-in-Class
Medium Impact
6 6 4 5 6 4 2 5 Low Impact
Gap
Highest & Secondary Priority
Benchmarking
5.6: Warehouse Improvement Plan Process
Gap
Poor Practice Major Opportunity
Inadequate Practice Common Diasadvantage Practice Average
Good Practice Advantage
Receiving and inspection
Y Y Y Y Y Y Y Y
Material Handling and Putaway Slotting Storage and Inventory Control Picking and Packing Load Consolidation and Shipping
Source: Author
Shipping Documentation WMS High Gap
Medium Gap
Best Practice Best-in-Class
Low Gap
You
The Challenge Of Data The biggest challenge is data and authenticity. There is a huge difference in the way the measurement system is implemented by various organizations. For most of them, a DC or a warehouse process is a part of the global business process. So the benchmarking survey has to be designed in a manner which captures all these nuances to present normalized data points for industry. As we have seen in the above examples, most benchmarking is either done by an in-
Target
Interim Target
Y
Exemplar
dustry body and /or academicians in collaboration with industry consultants. This is the right composition of a research team to bring in a rational, objective perspective, while bringing in data security and the confidentiality issue , which is one of the most important issues for such industry studies. The Road Ahead As explained above, external benchmarking is necessarily an industry initiative. For the Indian wareThe Warehouse Handbook 65
Benchmarking
housing industry, there is a need to get organized and undertake collaborative research, probably with an academic institution in this sphere. As we have seen above, all the models available serve only as a guideline and may not exactly fit in with Indian require-
ments. There is an Indian way of ‘doing things’, and we may be able to come out with better benchmarks, than relying just on Western benchmarks. That, perhaps, will help consultants like us to answer the question which I began with.
References: 1.”A Better Way To Benchmark “ An article by: Chris Gardner, Cheryl Harrity, and Kate Vitasek: Supply Chain Management Review :April 2005 2.DC Measures 2007: WERC Watch Spring 2007 3. DC Measures 2011: WERC Watch Spring 2011 4.Aberdeen Group : The Warehouse Productivity Benchmark report 2006 5.”Benchmarking : Scorecard For success”:An article by Kate Vitasek and Karl Manrodt: http://www.newworld. com.au. 6. Benchmarking Warehouse Performance Study: Data Envelope Analysis:Gerogia Insitute of Technology 7.”Best Practices in Your own Backyard” An Article by Kate Vitasek and Karl Manrodt:Supply Chain management January/February 2005 8.UK benchmarking Survey :Cranefield Univeristy,School of Management and The Chartered Institute of logistics and transport UK. 9.” World Class warehousing” A Book By Dr Edward Frazelle. 10.Georgia Institute of Technology :Internet based Data Envelope Analysis System:http://www2.isye.gatech. edu/ideas/. 11. Open Standards Benchmarking Collaborative research,APQC,US www.apqc.org/portal.
66 The Warehouse Handbook
case study
The Multi-tier Storage System DONRACKS tripled the storage capacity of an existing storage area by implementing a multi-tier storage system. A case study. Background The case study is about a company which is a leading manufacturer of mirror assemblies, wiring harness, plastic and fiber related components which are widely used in the automobile industry. The company has a presence in more than 25 countries around the globe. In order to cater to the increasing demand for their products, they had to increase their production capacities. Hence, an increased procurement of raw materials was necessary. The existing raw material storage area was not sufficient to handle the increased supply of incoming raw materials. Hence they approached DONRACKS for a solution about their raw material storage area. The Challenge The company has a 10,000 sq mt. manufacturing facility with well-established product manufacturing and assembly lines. The company follows a flow process of manufacturing, from raw material receipt to final product despatch. With the increase in production, the existing raw material storage area was overloaded. The raw materials arrive in a bag-packed condition with the names of the respective raw materials labelled on the bags. The bags weigh 20 kg to 50 kg, depending on the type and quantity of raw material. Workers usually unload the bags from the truck and use a hand pallet truck to move the raw material to the storage area. In the storage area, the workers stack one bag over another thus leading to a dense storage of raw materials. The following problems were discovered based on a study by DONRACKS: 1) The bags were stored one on top of another and there was a frequent mix-up between different types of raw materials. 2) The bags were stacked only up to a height of six feet beyond which it was not considered safe for stacking. 3) The sack bags were to be carried one at a time by labourers, which made it difficult in terms of manpower requirement and the time taken for delivery to the respective production area.
Solution Offered A study was conducted by DONRACKS and the raw materials were classified based on the five different types of material available. The area set aside for raw material storage was 2,100 sq mt. The pre-engineered building was nine meters high across the facility. It was observed that raw material storage area up to a maximum of 2.4 mt was being used. The rest of the vertical space available was completely underutilized. The ideal solution was to introduce a multi-tier storage system, which would ensure vertical height utilization and an increased storage capacity. The solution suggested was a three-tier storage system with a mezzanine floor on the top. The multi-tier storage system would consist of a shelving rack system on the ground, first and second floor, followed by a rack-supported mezzanine floor acting as the third floor. This entire racking system would be accessed by staircases, interspersed with aisles and integrated with a goods-lift for the movement of material at both ends of the warehouse. The catwalk system was designed to take the load of the hand pallet truck movement. The mezzanine floor on the top was commissioned to take the load of 500 kg. per sq. mt. Shelving racks were provided on the ground, first and second floors, amounting to six levels, to take the load of one ton and 40 bags at every level. The project after implementation ensured storage capacity of more than fifty thousand bags, through shelving racks and the same area of 2,100 sq mt. was available as mezzanine floor. Benefits 1. Complete vertical space utilization. 2. Easy and systematic storage and retrieval. 3. Easy identification of stocks. 4. Increasing storage capacity in the available area.
Case study provided by DONRACKS
The Warehouse Handbook 67
Warehouse performance
measuring Warehouse performance The role of a warehouse is critical in ensuring the efficiency of a supply chain. Hence calibrating a warehouse’s performance is essential, notes Vineet Kanaujia.
L
Vineet Kanaujia Vice President – Marketing, Safexpress Pvt Ltd
68 The Warehouse Handbook
ong recognized as one of the core components of a supply chain, warehouses have been used by manufacturers, exporters, importers, wholesalers, transport firms, customs, etc., as hubs for temporarily storing or re-routing goods to a different channel in their logistics networks. Conventionally, the basic scope of warehousing has included multiple functions such as receiving, identification, sorting, dispatching to storage, placing in storage, storage itself, retrieval from storage, order gathering, packing, shipping, and record keeping. The importance of warehouses cannot be understated. These commercial buildings add efficiency to an enterprise supply chain by consolidating products for shipment to clients and reducing transportation expenses. They also facilitate time utility by storing goods until they are demanded. Warehouses, if placed strategically, enable the positioning of products and
services close to major markets and customers (the economic principle of place utility)—thereby making the supply chain more effective. One can deploy optimization strategies to position product availability and delivery as a competitive advantage, while simultaneously optimizing the cost trade-offs tied to transportation, facilities, equipment, workforce, and other crucial cost parameters. However, as the modern supply chain undergoes dramatic expansion—in terms of scope and complexity, amid continuing globalization—the functional expectations from warehousing have evolved as well. The wide array of activities that now take place in modern warehouses go beyond mere fulfillment of customer orders, to offer an ever-increasing range of value-added services such as branding, labeling, packaging, assembly, kitting, reverse logistics, etc.
Warehouse performance
Encouraging Automation A common problem encountered in warehouses is the issue of wrong deliveries (dispatching short, excess or wrong products), which leads to disruption in operations and increased distribution costs— the end result being dissatisfied customers, as well as inventory inconsistencies. An automated approach to warehousing, coupled with human supervision, can help in minimizing such occurrences. Since information serves as the crucial driver for a successful warehouse operation, harnessing the power of technology can help in creating short-term projections which offer information to assess labor and space requirements over a short-term planning duration. Similarly, for capacity planning—warehouse size, workforce and equipment requirements—long-term forecasts can be used. Over the years, significant trends have emerged in warehouse automation. Initially, the menace of wrong deliveries was addressed through barcoding. Then came the AS/RS (Automatic Storage and Retrieval System) technology to eliminate incorrect deliveries. To improve warehouse standards further, Warehouse Management Systems (WMS) are increasingly becoming the norm. Equipped with the requisite func-
Source: Author
But with changing market expectations, rapid progress in information technology, growing demands for environmental sustainability (“greener” operations) and overall supply chain integration—within and even outside the enterprise, involving third-party logistics providers, sourcing allies, and so on—the strategic and operational responsibilities of warehouses have increased.
tionality for the completion and optimization of receiving, storing, and shipping operations, these information technology tools direct where products should be stored. To ensure further optimization in efficiency and cut-down on errors, additional WMS functionality is now available that facilitates the use of hand-held devices and barcoding. Most WMS set-ups have also come up with inventory management functionality that enables the warehouse manager to have real-time information regarding the inventory status of all items in the warehouse. All this results in higher productivity, near-optimal inventory accuracy, quicker shipping, better collaboration with partners and enhanced customer service.
With changing market expectations the strategic and operational responsibilities of warehouses have increased.
The Warehouse Handbook 69
Source: www.ssi-schaefer-asia.com
Warehouse performance
Performance measurement assumes critical importance in the context of warehouses.
70 The Warehouse Handbook
age free and at a competitive cost. The following are the most common performance metrics for warehouses: 1. Handling productivity: This metric is typically evaluated in ‘units or lines’ picked per hour or total handling cost per ‘unit’. 2. Space utilization: Space utilization is measured based on the percentage of total space available for storage, percentage of useable storage space actually used to store goods and storage cost per unit of product. 3. Accuracy: The scope of accuracy, in the context of warehouses, includes measures of location and record accuracy, the percentage of items picked correctly, and the percentage of orders picked correctly. 4. Damage: The metric for damage measurements involves the calculation of the percentage of items picked that are damage-free when received by the customer, and the percentage of orders picked without damaging merchandise. 5. Service: Service evaluations include the fill rate, which is measured based on the number of orders that were filled completely. 6. Cost and Inventory: While measuring cost and inventory performance, factors including total wareCalibrating A Warehouse’s Performance Given that achieving excellence in warehousing and house cost per unit handled, warehouse cost as a perthen integrating it into a customer-responsive supply centage of sales, and inventory turnover are taken into chain can lay the building blocks for sustainable cor- account. 7. Cycle time: Another crucial metric to determine porate success, performance measurement assumes service and efficiency of a warehouse is the cycle time. critical importance in the context of warehouses. Put simply, it is vital to judge the effectiveness and Dock-to-stock cycle time measures how long it takes efficiency of a warehouse through quantifiable met- to make material available following receipt, while orrics, as the primary goals of a warehouse are to offer der cycle time calculates the time elapsed from order Ccccccccccc xxxxxxxxxxxxx xxxxxxxxxxxxxxx till order shipment. At times, order cycle time the right product, at the right place, right time, dam- receipt
Warehouse performance
Source: Author
may also include transportation to measure the total time elapsed until the product is received by the client. Identifying and analyzing the above-mentioned performance metrics can help in determining how an organizationâ&#x20AC;&#x2122;s warehouses are structured and executed. And that can contribute significantly towards realizing the bigger goal of effectively integrating warehouse operations with other core supply chain functions. How Do Global Warehouses Perform? The Georgia Southern University and consultancy, Supply Chain Visions, during their annual survey of key warehousing metrics conducted in January 2010 among members of the Warehousing Education and Research Council (WERC) and readers of the DC Velocity publication, highlighted the 10 most popular performance metrics in warehousing mentioned below:
Source: Author
1
Metric
% using
On-time shipment-customer
85.80%
2
Order filling accuracy quality
73.20%
3
Average warehouse capacity usedcapacity
70.40%
4
Annual workforce turnover- employee
60.20%
5
On-time ready-to-ship-outbound operations
58.80%
6
Peak warehouse activity used-capacity
58.70%
7
Fill rate-line-outbound operations
57.70%
8
Dock-to-stock cycle time in hours- inbound operations
56.20%
9
Inventory count accuracy by locationquality
53.00%
10
Order fill rate-outbound operations
50.70%
Identifying performance metrics can help in determining how an organizationâ&#x20AC;&#x2122;s warehouses are structured and executed.
The Warehouse Handbook 71
Warehouse performance
Metric
Lower 20% of responses
Top 20% of responses
Difference in Performance
Performance Gap
Lost Sales ( % of SKUs stocked out)
Greater than 5.6 %
Less than 0.01 %
5.59
99.80%
Inventory Shrinkage as a % of total inventory
Greater than 1.5 %
Less than 0.01 %
1.49
99.30%
Material Handling Damage
Greater than 1 %
Less than 0.007 %
% of unsaleables (damaged product)
Greater than 0.5 %
Less than 0.06%
4.94
98.80%
Backorders as a % of total lines
Greater than 7.6 %
Less than 0.18 %
7.42
97.60%
Backorders as a % of total orders
Greater than 5.4 %
Less than 0.2 %
5.2
96.30%
Annual workforce turnover
Greater than 17 %
Less than 0.8 %
16.2
95.30%
Backorders as a % of total dollars/unit
Greater than 5.6%
Less than 0.5 %
5.1
91.10%
Suppliers orders received/hour
Greater than 0.9/hour
Less thn 10.26/hour
9.4
91%
Dock-to-stock cycle time in hours
Greater than 24 hours
Less than 2.3 hours
21.7
90.40%
Source: Author
Case Study One of the main warehouses operated by industrial products supplier ERIKS UK, a part of the ERIKS Group, stocks almost 40,000 stock lines, with the operation requiring flexibility so that the company can fulfill orders quickly and efficiently. Typically, all orders received by 5 pm are picked for delivery before 9 am the next morning. A specific group of clients has access to a facility to place orders with ERIKS till 6 pm, with the firm also providing an emergency 24/7 service for same day delivery. Nearly 80 percent of orders are sent to branches and delivered by an ERIKS van, with the remainder delivered directly to customers. On an average, the company picks almost 1,100 orders a day, equivalent to between 2,300 to 2,700 items. As volumes grew and clients demanded faster fulfillment of orders, ERIKS was forced to review its operations. The company was using an IT system that did not have a specialist warehouse management capability. It recognized the need for an application that could interface with its current systems and support specialist tasks, 72 The Warehouse Handbook
such as workload prioritization and automatic scheduling, as well as general stock control. Another objective that ERIKS had was to introduce flexibility and efficiency that would allow it to balance workloads and fulfill orders the next day, without overburdening overall operations. The company decided to purchase the Empirica WMS tool from Chess Logistics Technology, a vendor specializing in warehouse management software and integrated real-time technology. ERIKS deployed Empirica in conjunction with hand-held RF terminals to supervise the order picking and dispatch process. Empirica enabled ERIKS to balance task allocation and workloads, set order-picking schedules and sequences, and monitored and redefined priorities to make sure that its warehouse operated at maximum overall efficiency and met demanding dispatch commitments. And the overall results were impressive, with ERIKS claiming that Chess Logistics Technologyâ&#x20AC;&#x2122;s WMS tool increased its order picking and dispatch performance and accuracy. ERIKS says that its dispatch accuracy has risen to 99.78 percent, and errors have been
www.Swisslog
Warehouse performance
Supply chain managers also need to measure labor productivity in order to ensure efficient warehouse operations.
reduced by 50 percent. Pick rates have jumped by 30 percent, from 200 to over 260 items per person per day. The Labor Factor Apart from performance metrics, supply chain managers also need to measure labor productivity in order to ensure efficient warehouse operations. Unlike a manufacturing environment, warehouse operations are not repetitive across shifts. However, warehouse personnel do carry out a number of tasks similar to their manufacturing counterparts over a period of time. To measure labor productivity, it is imperative for managers to apply standard measurements that can be
used for operations like performing physical inventory checks or placing goods in the picking area. But in a typical warehouse, there are several factors that can change the time taken to perform a task. The use of enterprise resource planning (ERP) systems can help quickly measure the time an operation takes to perform, but a standard assessment tool must be agreed upon by using a sampling method or time study. One of the principal benefits arising from this exercise for warehouse management is that the standards can come in handy when any changes are to be made to the warehouse layout, loading or shipping dock, or at the time of staff reduction. The standard labor measurement, coupled with the number of tasks performed in the warehouse on any shift or series of shifts, can lead to an accurate picture of the performance of the warehouse. The Road Ahead The gap analysis in the above study should serve as a wake-up call for all warehouse managers to revisit their performance metrics. The gaps represent significant opportunities to enhance bottomlines as well as results. However, no enterprise can achieve results without refocusing its warehouses on the fundamentals of cost, quality, and operational performance. In the years to come, the integration of supply chains and the globalization of business will continue to shape the role and responsibilities of warehouses. The role of information technology in achieving warehouse efficiency and performance will be vital, as supply chains extend and become more complex and expensive to run in times to come.
The use of enterprise resource planning (ERP) systems can help quickly measure the time an operation takes to perform, but a standard assessment tool must be agreed upon by using a sampling method or time study.
The Warehouse Handbook 73
I n t e r v I e w
Effective Storage Systems Cut Costs
Y. SudarSana rao Managing Director, DONRACKS - ONE Stop Storage Solution TMTE METALTECH PVT LTD
Has the last year been fruitful for the storage industry in India? Where do you think it is moving this year? Despite the slowdown in industrial growth from 9.7% in 201011 to 5.8% in 2011-12, we have seen an increase in demand for storage equipment. We have been partnering with a number of clients to support them with their storage requirements. Companies have realized that investing in efficient storage systems help in cutting costs. This year in spite of the industry being cautious due to the global economic outlook, companies are endeavouring to save costs through effective storage systems. I do feel that industry is on the growth track. Recently, we moved into a new 75,000 sq. ft. facility with increased production capacity and are looking at growing revenues by at least 25 percent this year. Can you explain the service procedure followed by DONRACKS for clients? Please elaborate on the training procedure for installations as well as service staff? Our service procedure is very systematic. We meet the client to understand their requirements and the challenges they face. Then our technical team offers a comprehensive solution with design based on the latest FEM standards which ensure space utilization, minimizing throughput time, reducing man and material movement, increasing storage capacity and utilization of vertical space. Based on this, we manufacture and supply customized storage system. Our project execution team takes care of timely installation at the clientâ&#x20AC;&#x2122;s site. We have a standard operating procedure for Installation which is religiously followed by our installation team. Please share your experience with industrial/retail storage racks industry? Earlier, the storage industry was dominated by slotted angles and fabricated racks. The heavy steel structures were welded together for storage purposes. Over the past few years, industry has adopted roll-formed sections and modular racking system. Earlier, companies sought the storage industry as only equipment manufacturers, but today we are getting our
74 The Warehouse Handbook
due recognition as solution providers. What is the importance of an efficient storage solution in warehousing facility? Investing in an efficient storage solution helps in cutting costs. For example, if a warehouse has unorganized storage, it would lead to problems such as difficulty in stock identification, space wastage, higher throughput time and low productivity. With increased stock rotation or storage, the company would have to look for another warehouse thus increasing its operating costs through additional rentals, manpower and logistics. On the other hand, investment in an efficient storage system will eliminate increased costs. Efficient storage systems will lead to higher manpower productivity, low throughput time, easier stock identification and maximum utilization of available space. Can you share with us new product inductions you have planned for the future? We are constantly re-engineering our range of products. We ensure that our products meet international standards and safety requirements. Apart from that, we are also adding products to our existing portfolio such as ASRS, Shuttle-Aided Drive-In Racking systems and Seismic Proof racking systems. What is the range of your industrial and warehousing storage products? Our industrial and warehousing range includes heavy duty Pallet Racks, VNA Racks, Double-Deep Pallet Racks, Cantilever Racks, Mezzanine Floors, Slotted Angle Racks, Drive In/Drive Through Racks, FIFO Racks and Multi-Tier Racking Systems. How has DONRACKS organized its R&D facility? We have a team of design engineers who work on developing and testing new products, as well as improving existing range. Our specialized cross-functional team, such as personnel from departments such as design, production, brainstorm to improve products. We have built internal testing facilities and have standardized testing protocols.
InTervIeW
Creating Solutions DONRACKS brand of storage solutions comes from the stable of TMTE Metal Tech Pvt Ltd. DONRACKS is a popular brand in industrial, warehouse and retail storage industry. They provide end-to-end solutions starting from consulting, design, manufacturing and installation. DONRACKS has a state-of-the-art 75,000 square feet manufacturing facility at Ambattur Industrial Estate, Chennai. The company has trained technical consultants who visit client sites to observe and understand their storage issues and requirements. Based on observations, the design team offers suitable solutions that address their storage issues and requirements. Storage solutions offered are based on the following criteria: q Optimum utilization of available space q Minimizing man and material movement q Reduction in throughput time q Increasing storage capacity
The products are designed and manufactured based on latest FEM Standards. The products are: q Adjustable pallet racks q Drive-in/Drive-through racking systems q Mezzanine floors q Multi-tier storage systems q FIFO/Live carton storage/flow racks q Cantilever racks q Slotted angle racks Products are customized based on client requirements. The project executions are strictly monitored by an integrated team of experts. Projects are completed in the most effective and efficient manner to ensure highest customer satisfaction. DONRACKS has commissioned projects across India and the world. The company has a nationwide dealer/ sales network and is able to meet customer requirements across the nation.
To know more, kindly visit at http://www.donracks.com Email: marketing.donracks@sudarsangroup.com Phone: +919381017739
The Warehouse Handbook | 75
Human ResouRces
Leveraging People Power As industry changes rapidly Human Resource Management acquires new dimensions emphasizes S Kumar.
s KumaR Deputy General Managerâ&#x20AC;&#x201D;HR, Storage Solutions Business of Godrej & Boyce Mfg. Co. Ltd
76 The Warehouse Handbook
Impact Of Liberalization There have been rapid changes and growth in the last two decades both internationally and in India after the liberalization of the economy, changes which have been seen both in the macro economic as well as the micro economic factors. The following macro economic factors indicate the pace at which these changes and growth occurred in the last two decades compared to the earlier two decades.
Crude Oil Rate
Crude Oil - $/Barrel 100 50 0
1970
1980
1990
2000
2010
2000
2010
Gold - $/Oz Gold Rate
H
uman Resource Management is a very important facet of industry today and in this article I will try to describe the evolution of HR over the last two decades and the role of an HR professional in the current market scenario, especially in a faltering economy.
2000 1000 0
Source: Author
1970
1980
1990
Human ResouRces
Dollar Conversion rate
USD Vs INR 60 40 20 0
1970
1980
1990
2000
2010
GDP Rate in India
Source: Author
GDP in 1000 Billions 100 50 0
1980
1990
2000
2010
Likewise, the micro economic factors, whether it is the impact of the fluctuating inflation rate on food prices or the cost of living index in a particular state (which decides the minimum wages of the working class), have changed dramatically over the last two decades. The volatility of the macro and micro economic factors impact not only the industry, but also have a devastating effect on the common man. New Industries The accelerated growth rate of the last two decades gave birth and momentum to certain industries like Information Technology, the BPOs, KPOs,
insurance, the financial sector and realty and infrastructure development. While industries like Fast Moving Consumer Goods, pharmaceuticals and services continue to grow, the above industries have quickened and widened the economic activities of the country. Although the economy is sluggish at present, there is no doubt that new employment opportunities have been created in the country. In this age of information and technology where knowledge is open to all, it is people who make the difference by leveraging knowledge and technology to their advantage to achieve their desires and wants. Managing people in a situation like this is of utmost importance in most organizations. In this business environment Human Resource Management has become a buzz word to address these challenges and channelize human dynamics to meet changing business paradigms, be it talent acquisition, retention or motivation. Over time, the role of the HR manager has evolved from a purely administrative role to a strategic partner role. This was inevitable because today it is impossible to formulate a business strategy without a people strategy in the context of modern organizations. The matrix of the market has changed dramatically and moved from a sellers’ market to a buyers’ market due to the competition of domestic players with international giants. To give an example of this radical change and competition I give the example of the automobile industry and cell phone manufacturers.
The matrix of the market has changed dramatically and moved from a sellers’ market to a buyers’ due to the competition of domestic players with international giants.
The Warehouse Handbook 77
Human ResouRces
A successful talent acquisition strategy will be followed by a strong retention and motivation programme in any progressive organization.
Growth In Auto And Mobile Industry Twenty years ago there were only four or five car manufacturers in India who produced around 1520 models of cars. Today, the number has gone up many times, wherein a customer has got close to around 200 choices. Similarly, if you look at the mobile phone industry, every week a new model is being launched, putting current models into oblivion and hugely increasing the customer base of smart phones, which have multiple integrated features and a variety of operating systems, thus giving customers not only choices, but also value for money. This syndrome effectively points to cut-throat competition for survival. Various strategies are adopted to launch, penetrate, grow and sustain a new product or a commodity. The key differentiator will be the person who converts a vision into reality or a plan into action. In such a market scenario, a peopleâ&#x20AC;&#x2122;s manager plays a crucial role in addressing these dynamics and leveraging human potential to action. Recruitment In The Liberalized Era Today talent acquisition, recruitment and seeking executives for senior positions are as important as mergers and acquisitions in the industry. The challenges are daunting and therefore a dynamic recruitment strategy is the need of the hour. Organizations have started exploring new ways to recruit people; some of the new practices include re-recruitment of ex-employees, high incentive referral programmes, participation in rural job fairs, recruitment of housewives to work from
78 The Warehouse Handbook
home, recruiting students, from PhDs to regular graduates. In addition to this, new practices include attractive policies like the buy-back notice period, relocation expenses, joining bonuses and attractive pay packets. Often, during recruitment periods, market peak offerings in certain industries and sectors are as high as two-three times the current compensation. The new techniques and methodologies to screen prospective candidates have changed from simple interviews to multi-tier screening processes which include competency and psychometric assessments, aptitude tests, IQ/EQ evaluations etc. The recruitment matrix ranges from the number of days taken to fill a position, the number of positions filled by a recruiter per month, the number of critical positions filled within the stipulated period to the number of positions who move to Business Impact position and long serving positions. The rapid changes in the market have not only brought in dynamism in the entire process, but also new practices like long notice periods, frequent jobhopping as part and parcel of our culture and switching from company loyalty to job loyalty. Retention And Motivation Strategies Needless to say, a successful talent acquisition strategy will be followed by a strong retention and motivation programme in any progressive organization. In the last two decades, the number of new practices that have evolved to retain and motivate employees have helped organizations to explore their latent potential. The motivation strategies can be explained
Human ResouRces
Self-actualisation Personal growth and fulfilment Esteem needs Achievement, status, responsibility, reputation Belongingness and Love needs Family, affection, relationships, workgroup etc.
Source: Author
Safety needs Protection, security, order, law, limits, stability, etc. Biological and Physiological needs Basic life needs, air, food, drink, shelter, warmth, sex, sleep etc.
through some of the basic motivational theories that are employed in different industries. Maslow’s Hierarchy of Needs Theory Maslow’s hierarchy of the ‘need’ theory which discusses how physiological needs i.e., thirst, hunger and sleep, are then followed by other needs, namely the security need, social need, the esteem need and finally the self actualization need, can be observed at work at various stages in different industries. While many of the small manufacturing and engineering companies which pay minimum wages are striving to meet the physiological needs and security needs of their employees and are slowly graduating to address their social needs, the high paymasters in the IT and ITeS industries are striving to focus largely on social and self-esteem needs. The terms and con-
ditions of employment and the compensation policies and strategies are formulated on the basis of this theory, either knowingly or unknowingly and consciously or unconsciously. Herz Berg 2 factor (Hygiene and Motivation) Theory While small players are striving to maintain the hygiene needs of their employees, like providing basic working conditions, good canteen facilities, basic transportation and medical facilities, etc., the high pay-masters are addressing the motivational needs of their employees, like providing high incentive programmes, fast track career growth programmes, etc. The understanding is that ensuring the hygiene factors helps in achieving regular targets, while the motivational factors help in excelling beyond 100 percent.
While small players are striving to maintain the hygiene needs of their employees, the high pay-masters are addressing the motivational needs.
Herz Berg 2 factor (Hygiene and Motivation) Theory
Dissatisfaction and Demotivation
Hygiene Factors
Employees not dissatisfied, but not motivated
Positive satisfaction and motivation
Motivator Factors
Source: Author
Maslow’s Hierarchy of Needs (original five-stage model)
The Warehouse Handbook 79
Human ResouRces
Be it a simple pat on the back or sharing a prestigious award, these must be given immediately at the time of achievement, otherwise the essence is lost.
McGregor’s X and Y Theory The carrot and stick theory, otherwise known as the X and Y theory of McGregor’s, is widely used across various levels in any organization, from the shop floor worker to a business leaders. It helps to differentiate between employees, whom to reward or punish. This theory elaborates on positive reinforcements which include giving rewards and recognition to the positive act of any individual or group of employees and negative reinforcements for any act of indiscipline, be it poor performance, negligence in work, etc. The ‘hot stove’ rule conveys the reward and punishment policy very effectively. The ‘hot stove’ rule elaborates on two concepts: Firstly, the ‘hotness’ is felt immediately and does not differentiate on the basis of seniority or position and secondly, the same impact of ‘hotness’ is conveyed to all who touch it: n Immediacy of reward or punishment: Be it a simple pat on the back or sharing a prestigious award, these must be given immediately at the time of achievement, otherwise the essence is lost. Likewise, if you issue a charge sheet or a dismissal order, it must be done immediately, at the time of occurrence of the act of indiscipline. Immediate impact of “hotness” is a characteristic of a hot stove.
Unbiased punishment: This concept affirms that irrespective of position, power or the importance of an individual in an organization, the punishment for an act of indiscipline will be the same. Unbiased impact is again a characteristic of a hot stove. n
80 The Warehouse Handbook
A fine balance of both carrot and stick policies helps organizations to retain and motivate people. Some new practices in an organization should include a strong code of ethics policy, wherein irrespective of the seniority of an employee, integrity issues should not be tolerated in progressive organizations. The philosophy of these basic theories are the lynchpins of many organizations and provide an HR manager with insight to develop strategies for retaining and motivating employees. New Focus As in perspectives, likewise the approach to various issues and practices have changed in HR. Organizations have started focusing on certain new areas like corporate social responsibility, sustainable growth, the move towards excellence by obtaining certification standards, etc. The role of HR in training, involving people and driving these initiatives has now become vital in numerous organizations. The role of an HR Manager today has been expanded to achieve social goals by educating and involving people at various stages of these initiatives across levels and functions. These new perspectives not only help people come together, but also create a greater sense of synergy. It certainly contributes to better work-life balance when you involve employees’ families in these initiatives routinely as a part of work life. These initiatives have gained momentum, in particular, in the last one decade, when organizations have real-
Human ResouRces
ized that they need to play a key role in giving back to society and also in protecting our environment for the future. Impact of Economic Slowdown The impact of an economic slowdown has led to ripples across the world. This has had a significant impact on Indian industry too. The immediate impact of this crisis has meant job and wage cuts across industries, even if they are considered to be temporary. The long-term forecast has become extremely challenging in this scenario. The possible scenarios are either to continue to accelerate our liberalization and globalization policies or to restrict them; or in a worst scenario, to go back to a protected economy. The resistance to further globalization has been demonstrated by the friction on the proposed policy of Foreign Direct Investment in multi-brand retail. However, the consensus on an increase in single brand retail, from 51 percent to 100 percent is a progressive step to further globalize and liberalize our economy. In a volatile scenario like this, the role of an HR person is to keep employees intact and prepare for the next boom. It is extremely challenging for organizations to have a dynamic and an operable plan in place. Employees look forward to a greater role and involvement from HR to keep the organization going. The energies and the synergies of employees have to be channelized to manage the current crises and also to prepare for the future ahead. This becomes a key challenge for any organization as well as HR pro-
fessionals. Every organization is unique and hence what is right for one may not suit other organizations. HR plays a key role in bringing various sensitivities to an organization and developing customized strategies which will suit a particular organization, while at the same time deriving lessons from a particular situation and learning swiftly from a particular business matrix. How Globalization Affects Industry The growth in the manufacturing, engineering and automobile industry, has triggered off an encouraging growth rate in the logistics industry in the last two decades. Likewise, the boom in the retail industry has further accelerated growth in the logistics industry. The recent increase in the percentage of single brand retail will have a positive impact on the logistics industry, an impact which will be heightened further if the central government agrees to the much-awaited policy of FDI in multibrand retail. The different facets of the logistics industry like storage, material handling, transportation or movement and distribution have developed over time, bringing in the necessary technology and engineering features to industry. The logistics industry has changed from a mere transport industry, storage or Material Handling industry to one with integrated solutions, providing industry with various automation and engineering accessories which add value to this industry. Logistics is now a flourishing industry in the country and this attracts foreign investment and
HR plays a key role in bringing various sensitivities to an organization and developing customized strategies which will suit a particular organization.
The Warehouse Handbook 81
Human ResouRces
There is a need to acquire knowledge quickly about technology, integrated applications, and various certifications required to meet global standards.
82 The Warehouse Handbook
competition in every sphere, providing better value add to customers. Logistics plays a key role in todayâ&#x20AC;&#x2122;s business environment, wherein manufacturers largely depend on wide distribution strategies as one of their key parameters for business success. Preparing For A Future Boom The role of an HR person in a dynamic industry like this is therefore very vital in managing change and developing and retaining talent to meet changing business paradigms. An industry with accelerated growth rate requires competent people to derive benefits from various opportunities that may emerge in the industry. There is a need to acquire knowledge quickly about technology, various integrated applications, research, development and various certifications that are required to meet global standards, practices and challenges.
An economy which is slowing down is generally considered a precursor to a future boom. The role of the HR professional is to prepare talent to derive benefits from that future boom. The logistics industry is no exception to this understanding and is preparing its talent for a positive future. Thus, the role of an HR person becomes extremely challenging in retaining this talent by highlighting and focusing on the correct career path in troubled times. The single biggest advantage of the logistics industry is that the aggregate impact of the growth of other industries, on one common industry called logistics is huge, and it helps customers to get manufactured commodities or products at their doorstep. Hence, managing people in such an industry is a continuously progressive, evolving and enriching phenomenon.
case study
Space Solutions DONRACKS helped its client with space solutions to increase the storage capacity within the existing warehouse area and thus retained a client in the process. A case study. Background This is a case study about a well-known warehousing company which services clients across industries such as automotive, consumer durables, electronics, chemicals etc. The company has multiple warehouses across the country, generating revenue through their rental and material handling services. One of their clients, a well known consumer electronics manufacturer, wanted more space for storage of their stocks of air-conditioning units. The warehousing company was unable to allocate increased area due to space unavailability. Consequently, the client planned to move out their entire stock to a different warehouse service provider. The warehousing company approached DONRACKS for a solution to retain their existing client. The Challenge The company has a 3,500 sq. mt. warehouse which was being utilized by its client as a centralized distribution center to store its air-conditioning (AC) units. The AC units came in carton boxes of various sizes depending on their tonnage. The carton boxes were stacked together on a pallet and were unloaded at the warehouse with a forklift. The boxes were stacked one on top of another. A study was conducted by DONRACKS to understand the current storage method, based on which the following points were identified: 1) The height of the warehouse was 11 mt. at the center and 5 mt. at the extreme ends. 2) The ACs were unloaded using forklifts as they arrived stacked on the pallet. 3) The forklift had a maximum reach height of 4.5 mt. 4) Weight of each pallet would be 200â&#x20AC;&#x201C;600 kg. Certain pallets weighed upto 1 tonne. Solution Offered DONRACKS had observed that out of the center height of 11 mt., only about three meters was being used. Although some SKUs could have been stacked upto 20 boxes high, they were being stacked upto six boxes only. There was also a danger of the top boxes falling off, in case of uneven stacking. A mezzanine
floor option was suggested, but the pillars would have hindered the movement of the forklift for unloading of goods. The best option was a long span heavy-duty mezzanine with a load carrying capacity of 1 ton per sq. mt. The long span mezzanine would have a grid size of 6 mt. by 9 mt. The mezzanine was to be constructed at the height of 4.8mt., thus eliminating the danger of the forklift mast hitting the mezzanine floor from the bottom. The distance between pillars were 9 mt. and 6 mt. respectively. The long span mezzanine floor had galvanized catwalk panels as the flooring. The storage space on the mezzanine floor was doubled, as the SKUs which were stacked up to three meter high were now being stacked both below and above the mezzanine floor. This ensured that the consumer electronics manufacturer did not have to relocate to another warehouse provider. The warehouse service provider was also able to generate higher revenues. The modular mezzanine floor ensured that forklift movement was possible underneath and similarly, the forklift could unload materials at the top of the mezzanineâ&#x20AC;&#x2122;s loading area. The unloaded stock was handled using a hand pallet truck by the operators. There were two access staircases at the two ends for operators to access the top of the mezzanine floor. The long span heavy-duty mezzanine floor helped in block stacking of AC units above it, thus doubling the available storage area. The consumer electronics company did not have to relocate, thus avoiding unnecessary logistics and manpower costs. The warehouse service provider ensured that their investment in the mezzanine floor had a higher return on investments through increased rental rates. Benefits 1. Increasing the storage capacity within the area available. 2. Long span mezzanine ensuring minimum pillar obstruction. 3. Additional area added to generate extra revenue for the customer. 4. Denser storage due to block stacking above and below the mezzanine. Case study provided by DONRACKS
The Warehouse Handbook 83
Cold Chains
Cold Chains: neglected infrastructure Cold chains are an essential feature of the composite of logistics infrastructure, yet they remain neglected in the country. Purvin Patel reports.
A
Purvin Patel CEO, RK Foodland
84 The Warehouse Handbook
cold chain is a temperature-controlled supply chain which is used to extend and ensure the shelf life of products such as fresh agricultural produce, seafood, frozen food, chemicals and pharmaceutical drugs. The cold chain consists of two logistics systems: Surface storage: Refrigerated warehouses for storage of temperature sensitive products. Refrigerated Transportation: Reefer trucks, containers, ships and trains for transport of temperature sensitive products. A cold chain logistics player could either be a cold storage owner or the owner of a fleet of reefer trucks. Also, there are 3PL firms which own the entire network, right from procurement to the final destination of the temperature-sensitive products. Thus, the success of cold chain companies relies
on how efficiently they can transport temperature sensitive products from the place of origin to their destination with full integrity. Different products require different temperatures. The common standard temperatures are Chiller (-20 C), Frozen (-180 C) and Deep Frozen (-250 C). Current State Of The Sector Industries which need cold chains are fruits and vegetables, ice cream, processed meat and poultry, seafood, preventive medicines (mainly vaccines) and chemicals. The cold chain has a critical role to play in India as two-thirds of the countryâ&#x20AC;&#x2122;s population is dependent on agriculture for its livelihood. The Indian food market is estimated at over $182 billion. India is the second largest producer of fruits and vegetables
Cold Chains
in the world, with an annual vegetable produce of around 85 million tonne and an annual fruit produce of around 45 million tonne. Of the close to 130 million tonnes of fruits and vegetables that the country produces, nearly 40 percent gets wasted. India is the largest producer of milk in the world, producing close to 100 million tonne, and accounting for nearly 17 percent of global production. About 35 percent of this milk is processed. More than 10 percent of annual milk production in the country is lost due to inadequate storage facilities. India has roughly 5,300 cold storages with a capacity of 23 million metric tonne, over 90 percent of which are suitable for storing potatoes only. Inconsistent standards in different sections of the cold chain could lead to damage of food, either by shock or by undue temperature variations. This degrades food quality due to chemical reactions which are triggered off, which can otherwise be mitigated by low temperatures. To maintain integrity of food and pharmaceutical products, these providers rely on efficient and fully integrated end-to-end cold supply chain technology. Thus cold chain companies should design a supply chain solution which maintains the required temperature according to the physical attributes of the product. Challenges Of The Sector Cold chains face several roadblocks in their growth and some of the most challenging hurdles are listed below: n Rising Real Estate Cost: A fully integrated cold storage facility of international standards, with
Source: Author
one million cubic ft. of storage space, will require an area of approximately an acre, which is a huge investment. n Location for Cold Storage: Cooling units are not mobile units, so the location of such units becomes a key constraint as there are very few parcels of large land spaces available in India. n Lack of Proper Infrastructure: The cold chain industry in India is very fragmented, with players not having the strength to invest in the technology needed to build high quality cold storage or to invest in reefer trucks. n High Energy Cost: Energy expenses alone account for about 30 percent of the total expenses of the cold chain sector in India. This is the main The Warehouse Handbook 85
Cold Chains
New cold storage facility at the Pacific ring of fire â&#x20AC;&#x201C; economic and earthquake-proof â&#x20AC;&#x201D; cold storage facility seen from the out side.
constraint about setting up cold chains in India. Indiaâ&#x20AC;&#x2122;s peak power deficit is around 17-18 percent. Thus the investment in back-up systems increases capital investment costs. n Uneven Distribution of Capacity: The majority of cold storages in India have been established in states like Uttar Pradesh, Uttarakhand, Maharashtra, Gujarat, Punjab and West Bengal. But the establishment of such cold storages needs to be more geographically diverse. n The cold storages present in India can cater to single commodities only. Different commodities require different temperature conditions, resulting in poor capacity utilization and low financial viability.
n
FDI Restrictions in Retail: Cold chain infrastructure needs huge investment. Easing restrictions on FDI in multi-brand retail could open up the channels for further fund infusion from new foreign entrants.
Role Of Cold Chain Service Providers With the demand for better quality food at affordable prices by consumers, companies rely on cold chain service providers to fulfill it. The service providers should be able to develop systems and processes to mitigate risk associated with temperature abuse in cold chains and thus help in business growth.
Source: www.ssi-schaefer-asia.com/logistics-systems
86 The Warehouse Handbook
Cold Chains
Product Handling To move temperature sensitive goods with full product integrity, supply chain solution providers should have well-established processes from pre-shipment preparation to final verification and delivery to destination. Product handling is an inherent and important aspect which needs great attention. The maintenance of a cold chain is the best way to maintain the quality of a product and minimize all forms of deterioration after harvesting, including weight loss which results in wilting and limpness, softening, bruising, unwanted
Source:www.envirodoors.com
The service provider should understand the importance of capacity utilization, productivity, inventory, cost and waste, error and theft (WET) management, along with the ability to track and trace these parameters. This will help to reduce total system costs which in turn will improve the bottom line. The success of implementing cold chain solutions to serve the consumers involves proper network optimization of warehouses, facility planning, the monitoring of product quality throughout the cold chain and having a corrective action plan to counter any gaps. Further, the higher cost associated with operating cold chains needs excellent operational efficiencies and continuous improvements to maximize profits for service providers. Other major challenges which make cold chains more complex are inadequate logistic infrastructure, poor road connectivity, inadequate IT systems and inefficient transport providers.
Air-door
The Warehouse Handbook 87
Cold Chains
ripening, colour changes, texture degradation and the growth of fungus as well as the decay of products. The export of fresh produce often involves long transit time and frequent handling. This makes effective cold chain management more difficult and even more essential, to ensure that the product finally consumed retains maximum freshness. There are a few important steps for effective and efficient cold chain management: 1. Clean and calibrate: Make sure your refrigera-
Storage operation in the cold storage facility.
88 The Warehouse Handbook
tion equipment is clean and well-maintained, so that it performs at its best, minimizing chances of hot or cold spots in your warehouse or cold storage rooms. 2. Know your hot and cold spots: If your facilities have hot and cold spots, know where they are and avoid storing products there. An infrared thermometer can help you identify these spots. 3. Pre-cool: Pre-cooling freshly harvested fruit and vegetables is a critical component of shelf life and optimizing quality and value.
Source: www.ssi-schaefer-asia.com/logistics-systems
Cold Chains
4. Use humidifiers: Fresh fruit and vegetables are 80 percent plus water, so it is important that humidity levels are controlled to help them maintain their original weight. This will give them longer shelf life, enhancing your bottom line. 5. Avoid air pollution: Running LP or diesel forklifts indoor, or letting diesel trucks and tractors idle when under shelter, produces a range of hydrocarbons including ethylene, which is deadly to most fruit and veggies. If it is unrealistic to reduce pollution, air purifiers can help. 6. Rotate your product: Following the FIFO (First In, First Out) rule will mean a higher chance of all products being sold before their expiry date, thus reducing waste and increasing revenue. 7. Inspect the quality of your product on arrival: Ensure you inspect a statistically significant percentage of the product received in each load. 8. Keep score: Claims, credits, markdowns, and repacking must all be tracked to determine whether your operation is running well. 9. Traceability: The need for tracking and tracing products continues to be a supply chain challenge for many companies and agribusiness. Traceability needs are related to key supply chain issues including inventory, labor costs, response times, recalls, quality, and shrinkage. Hence it is very important to have a traceability program in place. 10. Security: With several changes in the law in our country as well as in the developed world, the laws requires companies delivering products destined for human consumption to document their flow of goods. A threat, such as biochemical agents, could
wreak horrendous damage. This increase in security has led to increases in operational expenses and traceability needs for numerous companies. To enhance the safety of perishable goods during transport and storage, as well as throughout the supply chain, there are increased efforts by many companies and agribusinesses to monitor and secure advanced reefers, vessels, yards, trucks, and containers. A cold chain can also be validated by a well-managed quality management system. The cold chain should be analyzed, measured, controlled, documented and validated. The food industry uses Hazard Analysis and Critical Control Points (HACCP) to validate the entire cold chain.
Traceability needs are related to key supply chain issues including inventory, labor costs, response times, recalls, quality, and shrinkage.
Importance Of Efficient Cold Chain n Increasing government regulation n The demand from customers for continuously available high quality food products are primary drivers of cold chain integration. n Todayâ&#x20AC;&#x2122;s busy and health conscious consumer is demanding fresh, wholesome and healthy products in increasing volumes and a variety of offerings. n Cold chain systems can be of strategic importance to companies since brand integrity, customer confidence, market share and profit are all at risk. Initiatives For Improvement n Budget 2011-2012 provided infrastructure status to the cold chain sector. n The budget exempted air-conditioning equipment and refrigeration panels used in cold chain infraThe Warehouse Handbook 89
Cold Chains
The profits of a cold storage facility depend largely on investment in technology, infrastructure and service standards.
n
n
n
Source: www.coldstoredesign.com
n
Refrigeration plant design.
90 The Warehouse Handbook
structure as well as conveyer belts from excise duty. The Budget 2010-2011 proposed a concessional import duty of five percent with full exemption from service tax to set up and expand cold chain s to preserve farm products as well as milk, meat and poultry products. The Budget 2010-2011 included duty-free import of refrigeration units, which is required to make refrigerated vans or trucks. It also exempted trailers and semi-trailers used in agriculture from excise duty. The government of India introduced tax benefits for companies investing in cold chain facilities as part of the budget 2009-2010. The government of India has also revised its scheme of food parks in the tenth Five Year Plan
and changed to the Mega Food Park Scheme (MFPS) under the 11th Five Year Plan n Investment from private equity funds in various cold chain projects. n The involvement of railways and airports for transportation of cold chain products. n The government of India has taken decision to set up the National Centre for Cold Chain Development (NCCD) to address the issue relating to gaps in cold chain infrastructure in India. Maintaining and enhancing efficiencies in the cold supply chain is the most important thing. The best way to do this is by reducing touch points in the supply chain. By following these practices rigorously and with passion, we can reduce the cost of the cold chain as well as improve cold chain processes. With average capacity utilization in the cold chain sector between 30 percent to 75 percent, the profits of a cold storage facility depend largely on investment in technology, infrastructure and service standards. The most important factors that will decide the growth of the cold chain sector is the flow of funds in this sector. The investment can be from large business houses. Also, the government can help in acquisition of land to set up cold chain storage facilities. The government must also speed up the introduction of GST, which will help in the development of centrally located warehouses. Sources: http://www.o3capital.com/pdfs/news/April_2011/Analysis_ Cold%20Chain%20-%20Finally%20warming%20up%20to%20 India.pdf
Bild fehlt
New ing
CASE STUDY
DM-DROGERIE MARKT, GERMANY Bild fehlt Bild fehlt
New Distribution Center in Waghäusel for a leading European retail group
The customer «The new distribution and his requirements center was completed within the budget and dm-drogerie markt – one of the leading months ahead of Newfour Distribution Center in Waghäusel a leaddrugstore chainsfor in Europe – operates over New Distribution Center in Waghäusel for asomelead1 850 retail outlets and employs 27 schedule.» ing European retail group people. dm-drogerie markt offers a ing European retail group000 range of some 15 000 product lines – with
Joachim Lück, Coordinator Distribution Centers
«The new distribution distribution center«The wasnew completed Bild fehlt was completed withincenter the budget and within ahead the budget four months of and four months ahead of schedule.» schedule.» Joachim Lück, Coordinator Distribution Joachim Lück, Centers Coordinator Distribution Centers
«The new distribution center was completed within the budget and four months ahead of schedule.» «The new distribution center was completed Joachim Lück, Coordinator within theDistribution budgetCenters and four months ahead of schedule.» Joachim Lück, Coordinator Distribution Centers
The customer customer and hisThe requirements and his requirements
dm-drogerie markt – one of the dm-drogerie markt – one of leading drugstore chains in Europe – the drugstore chains and in Europe – operates leading over 1 850 retail outlets operates overpeople. 1 850 retail outlets and employs some 27 000 dm-drogerie employs some 27 00015people. markt offers a range of some 000 dm-drogerie markt– offers a range product lines with about 10 of % some being 15 000 linesacross – withGermany, about 10 % being own labelproduct – in stores ownCzech labelRepublic, – in stores acrossSerbia, Germany, Austria, the Croatia, the Czech Republic, Croatia, Serbia, Slovenia, Austria, the Slovenia, the
The customer and his requirements dm-drogerie markt – one of the leading drugstore chains in Europe – operates over 1 850 retail outlets and employs some 27 000 people. dm-drogerie markt offers a range of some 15 000 product lines – with about 10 % being own label – in stores across Germany,
Slovak Republic and Bosnia. In 2003, with the group enjoying double-digit sales growth and opening some 50 new branches each year, dm-drogerie markt decided that it needed a further logistics facility in southern Germany and Waghäusel – between Karlsruhe and
about 10 % being own label – in stores across Germany, Austria, the Czech Republic, Croatia, Serbia, Slovenia, the Slovak Republic and Bosnia. In 2003, with the group enjoying double-digit sales growth and opening some 50 new branches each year, dm-drogerie markt decided that it needed a further logistics facility in southern Germany and Waghäusel – between Karlsruhe and Mannheim – was chosen as the location for the new 50 million Euro distribution center.
The c and h
dm-dr leading operat emplo markt produc own la Austria Sloven
Slovak with th sales gr new bra markt d logistic and Wa Mannh for the center.
The solution
2
The 20 000 m2 Waghäusel distribution center supplies some 5 000 lines – from cosmetics and healthcare products to pet food and detergents – to up to 500 outlets across an area from Frankfurt to Munich. After barcoding and checking for size and weight, incoming goods on Euro pallets are loaded onto one of 23 transfer cars mounted on an inverse monorail system for transport to one of the input stations of the pallet store. The thirteen 20m high automatic cranes store goods in the buffer store at the upper levels of the racking.
The solution The 20 000 m2 Waghäusel distribution center supplies some 5 000 lines – from cosmetics and healthcare products to pet food and detergents – to up to 500 outlets across an area from Frankfurt to Munich. After barcoding and checking for size and weight, incoming goods on Euro pallets are loaded onto one of 23 transfer cars mounted on an inverse monorail system for transport to one of the input stations of the pallet store. The thirteen 20m high automatic cranes store goods in the buffer store at the upper levels of the racking. The 3 lower levels of the warehouse are used for picking, with pallets being placed by the cranes on gravity-fed conveyor that rolls pallets forward for access from the picking aisles. The solution features Swisslog’s CaddyPick® concept, with orders picked manually onto specially-designed trolleys (CaddyPick®), each of which is automatically fed an empty pallet and receives a pick order electronically.
The 3 lower levels of the warehouse are used for picking, with pallets being placed by the cranes on gravity-fed conveyor that rolls pallets forward for access from the picking aisles. The solution features Swisslog’s CaddyPick® concept, with orders picked manually onto The CaddyPick® travels automatically trolleys (CaddyPick®), tospecially-designed its required pick stations, where the each ofread which automatically an pickers theisinstructions on afed screen empty pallet and receives a pick order mounted on-board. The CaddyPick® electronically. «The new distribution features special slots to accommodate empty pallets when pick-from loads are center was completed fully depleted. They also within the budgethave andbins for used shrink-wrap and waste cartons, to four months ahead keep the picking faces tidy. of
schedule.»
Completed orders are automatically
Joachim Lück, shrinkwrapped and directed Coordinator Distribution Centersto the
LOGISTICS DATA appropriate dispatch lane. Any waste materials and empty pallets on the Overall facility CaddyPicks® are then removed at a series Orders lines per day 240 000 ofNo. robotic stations and the trolleys then260 of order lines/outlets per day re-enter the system. Pallets dispatched per day 2 000
Swisslog supplied Transportalso systems TM , a warehouse AutomationManager No. of pallet lifts control system thattransfer manages No. of rail-mounted carsall the storage, transport and ancillary equipment, whilst interfacing with dm-drogerie markt‘s own warehouse management and host systems.
3 23
outlets across an area from Frankfurt to Munich. The CaddyPick® travels automatically to its required pick stations, where the After barcoding and checkingonfora size and pickers read the instructions screen weight, incoming goods on Euro pallets mounted on-board. The CaddyPick® DM-DROGERIE GERMANY are loaded MARKT, onto one of 23 transfer cars features special slots to accommodate mounted on an inverse monorail system empty pallets when pick-from loads are for transport to one of the input stations fully TheyThe alsothirteen have bins for of thedepleted. pallet store. 20m used shrink-wrap and waste cartons, high automatic cranes store goods into the keep picking faces tidy.levels bufferthe store at the upper of the Bild fehlt
racking. Completed orders are automatically shrinkwrapped and directed to the The 3 lower dispatch levels of lane. the warehouse appropriate Any wasteare used for picking, with pallets materials and empty pallets onbeing the placed by the cranes on gravity-fed conveyor CaddyPicks® are then removed at a series that rolls pallets accessthen of robotic stationsforward and thefortrolleys from thethe picking aisles. The solution re-enter system. features Swisslog’s CaddyPick® concept, with orders manually onto Swisslog alsopicked supplied TM specially-designed trolleys (CaddyPick®), , a warehouse AutomationManager each of which is automatically control system that manages allfed an empty pallettransport and receives pick order the storage, and aancillary electronically. equipment, whilst interfacing with
of the pallet store. The thirteen 20m features special slots to accommodate high automatic cranes store goods in the empty store palletsatwhen pick-from buffer the upper levelsloads of theare fully depleted. They also have bins for racking. used shrink-wrap and waste cartons, to keep the picking faces tidy. The 3 lower levels of the warehouse are used for picking, pallets being placed Completed orderswith are automatically by the cranes onand gravity-fed conveyor shrinkwrapped directed to the that rolls pallets forward access appropriate dispatch lane.for Any waste from the picking aisles. The solution materials and empty pallets on the features Swisslog’s CaddyPick® concept, CaddyPicks® are then removed at a series with ordersstations picked manually onto then of robotic and the trolleys specially-designed trolleys (CaddyPick®), re-enter the system. each of which is automatically fed an empty pallet receives a pick order Swisslog alsoand supplied electronically. AutomationManagerTM, a warehouse control system that manages all the storage, transport and ancillary equipment, whilst interfacing with dm-drogerie markt‘s own warehouse management and host systems.
DATA for a leadNew Distribution Center inLOGISTICS Waghäusel dm-drogerie markt‘s own warehouse facility ing European retail group Overall management and host systems. Orders lines per day 240 000 No. of order lines/outlets per day Pallets dispatched per day
The customer and his requirements
LOGISTICS DATA dm-drogerie markt – one of the leading drugstore chains in Europe – Overall facility operates over 1 850 retail outlets and Orders lines per day 240 000 employs some 27 000 people. No. of order lines/outlets per daydm-drogerie 260 markt a range Palletsoffers dispatched perof daysome 15 000 2 000 product lines – with about 10 % being own label –systems in stores across Germany, Transport High-bay Austria, thewarehouse Czech No. of pallet lifts Republic, Croatia, Serbia,3 No. 13 Slovenia, the cranes transfer cars No. of of pallet rail-mounted 23 Height of pallet store (m) No. of pallet locations System input, pallets/day
20 24 000 2 200
Transport systems No. of pallet lifts No. of Republic rail-mounted Slovak andtransfer Bosnia.cars In 2003,
260 2 000
Swisslo Automa control the sto equipm dm-dro manag
High-ba No. of p Height o No. of p System
3 23
with the group enjoying double-digit High-bay warehouse sales growth and opening some 50 No. of pallet cranes 13 new branches Height of palleteach storeyear, (m) dm-drogerie 20 markt that it needed a further24 000 No. ofdecided pallet locations logistics facilitypallets/day in southern Germany 2 200 System input, and Waghäusel – between Karlsruhe and Order picking system CaddyPick® Mannheim – was chosen as the location No. of overhead order picking cars 160 for the new 50 million Euro distribution No. of order picking stations 5 100 center. Length of monorail system (m)
approp materia CaddyP of robo re-ente
5 200
Order p No. of o No. of o Length
The benefits
DM-DROGERIE MARKT, GERMANY
3
DM-DROGERIE MARKT, GERMANY
3
> > > > > >
High system availability Accurate, paperless order picking Barcode-enabled inventory control Efficient and tidy picking methods Lower transportation costs Modern hardware and software platforms > Minimum system downtime > Quality control
Swisslog‘s scope of supply The benefits > Order picking system CaddyPick® > Software system configuration and specification > Software and hardware installation, testing and training > RF equipment and on-board monitors www.dm-drogeriemarkt.de
ange of , cosmetics, household ncludes Alverde, sa, Dontolt.
CUSTOMER DATA Company The headquarter is in Karlsruhe, Germany. The group has some 930 branches in Germany and a further 920 branches in Austria, the Czech Republic, Croatia, Serbia, Slovenia, the Slovak Republic and Bosnia. The company’s three distribution centers in Germany are located in Meckenheim, Weilerswist and Waghäusel.
> High system availability > Accurate, paperless order picking > Barcode-enabled inventory control The benefits > Efficient and tidy picking methods > Lower transportation costs > High system availability > Modern hardware and software > Accurate, paperless order picking platforms > Barcode-enabled inventory control > Minimum system downtime > Efficient and tidy picking methods > Quality control > Lower transportation costs > Modern hardware and software platforms scope of supply Swisslog‘s > Minimum system downtime >> Quality control Design and implementation of a new distribution facility > Order picking system CaddyPick® Swisslog‘s scope of supply > Software system configuration and specification > Design and implementation of a new > Software and hardware installation, distribution facility testing and training > Order picking system CaddyPick® > RF equipment and on-board monitors > Software system configuration and specification > Software and hardware installation, testing and training > RF equipment and on-board monitors
dm-drogerie markt offers a broad range of products including healthcare items, cosmetics, baby products, photographic goods, household essentials and pet foods. Its range includes a number of its own brands such as Alverde, Balea, Réell‘e, Sundance, Ebelin, Jessa, Dontodent, Babylove and Paradies Fotowelt.
www.dm-drogeriemarkt.de
CUSTOMER DATA Company The headquarter is in Karlsruhe, Germany. The
dm-drogerie markt offers a broad range of products including healthcare items, cosmetics,
did you facility decide to build a brand new facility industryasand Why did you decide to build a brand newWhy distribution retail industry anddistribution were prepared to use thatretail know-how a were prepared to use that know-how as a at Waghäusel? basis for aneeds. solution that was tailored precisely to our needs. at Waghäusel? basis for a solution that was tailored precisely to our As well as requiring the veryMARKT, best in automation technology, 4 4 DM-DROGERIE MARKT, GERMANY DM-DROGERIE MARKT, GERMANY As well as requiring the very best in automation technology, 4 4 DM-DROGERIE MARKT, GERMANY DM-DROGERIE MARKT, DM-DROGERIE GERMANY “We were experiencing sales growth in double figures and this our corporate culture required that we work with a partner “We were experiencing sales growth in double figures and this our corporate culture required that we work with a partner was causing severe to mount our existing DCs at competence. that would also focus on human competence. Our company was causing severe pressure to mount on our existing DCs at pressurethat wouldon also focus on human Our company INTERVIEW INTERVIEW INTERVIEW INTERVIEW Meckenheim andinWeilerswist. We also identified reduction philosophy is to seek methods of operation that promote Meckenheim and Weilerswist. We also identified a reduction philosophy is to seekamethods ofinoperation that promote WITH JOACHIM LÜCK, WITH JOACHIM LÜCK, our transportation costs as aJOACHIM keyspecific objective in of order improve specific work skills of our staff and result in a rewarding work LÜCK, WITH LÜCK, our transportation costs as aJOACHIM key objective in order to improve WITH the skills ourto staff and result in athe rewarding competitiveness and enhance our position as industry price experience for COORDINATOR DISTRIBUTION COORDINATOR CENTERS DISTRIBUTION CENTERS competitiveness andCOORDINATOR enhance our positionDISTRIBUTION as industry price COORDINATOR experience forDISTRIBUTION them. We felt that Swisslog understood andthem. We felt that Swisslog understood and CENTERS CENTERS leader.“ embraced this idea.“ leader.“ embraced this idea.“
“The build contract was conducted on an open-book accounting basis, came inside budget and was completed four months early. That’s pretty impressive for a facility of this magnitude. Communication was almost always clear and precise, which is very important in handling a complex project.“
What did you like about the way Swisslog handled the project?
WWW.SWISSLOG.COM
retail industry and were prepared to use that know-how as a basis for a solution that was tailored precisely to our needs. As well as requiring the very best in automation technology, our corporate culture required that we work with a partner that would also focus on human competence. Our company philosophy is to seek methods of operation that promote the specific skills of our staff and result in a rewarding work experience for them. We felt that Swisslog understood and embraced this idea.“
DM-DROGERIE MARKT, GERMANY
“The build contract was conducted on an open-book accounting basis, came inside budget and was completed four months early. That’s pretty impressive for a facility of this magnitude. Communication was almost always clear and precise, which is very important in handling a complex project.“
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About the Authors
Hemant Moharir Hemant Moharir is a production engineering graduate with a PG Diploma in Marketing Management. With over 20 years of experience in warehouse design and logistics engineering consultancy, he has been a consultant for several warehousing projects in India and abroad. He was the founder and head of the Godrej Logistics Engg. Consultancy Group. Having consulted for most industry segments like auto, FMCG, pharma, engineering, consumer durables, textiles, etc., he now works as an independent industry consultant. He also works as a Guest Faculty Member in SCM and the Logistics Domain with a focus on Humanitarian Logistics at the Tata Institute of Social Sciences, Mumbai. He works on social projects to establish agro supply chains for organic food, especially fruits and vegetables, for urban consumers. The author can be reached at hmoharir@gmail.com .
bour optimization projects. She is also working with India’s leading e-commerce company, Flipkart. Padmini is an industrial engineering graduate from Georgia Tech. in the US and the National University of Singapore. She also periodically writes for logistics magazines in the country. The author can be reached at mp@theprogressgroup.com
Purvin Patel Purvin Patel is the Chief Executive Officer at Radhakrishna Foodland Private Ltd. He has mastered every aspect of supply chain management by understanding the relationship of various sectors like Quick Service Restaurants, FMCG and agriculture. He also has a fair degree of experience in the pharmaceutical supply chain. After gaining a thorough understanding of various supply chains, he has increased the growth of R K Foodland immeasurably. The author can be reached at purvinp@rkfoodland.com.
Padmini Pagadala Padmini Pagadala is the General Manager and one of the founders of TPG Consulting Pvt Ltd. TPG Consulting is the Indian arm of The Progress Group, LLC, which is a Supply Chain Consulting firm based out of Atlanta. TPG’s main area of focus has been the design of Distribution Centres and process optimization. Padmini has worked on greenfield DC design projects for clients like the retail giant, Reliance Fresh. She is currently working with the Future Group on la-
Rajkiran Kanagala Rajkiran Kanagala has been associated with TCI since 2006 and has been working in the supply chain division since then. Prior to being appointed National Head – Business Development, TCI Supply Chain Solutions, Rajkiran handled the business development and operations of the division for three years as the Assistant Vice President – Western Region.
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About the Authors
Rajkiran holds a BE degree in electronics. He has an MBA from Jamnalal Bajaj, Bombay University . He has also been a part of the executive training program at the Indian School of Business (ISB), Hyderabad. The author can be reached at k.rajkiran@tciscs.com.
S Kumar S Kumar is a Deputy General Manager, HR and is currently working with the Storage Solutions Business of Godrej & Boyce Mfg. Co. Ltd at Chennai. He graduated with economics and also has a postgraduate degree in personnel management from Madras University. He believes that his core strengths are his pragmatism, optimism and his result-oriented approach to work. He enjoys badminton, chess, painting, swimming, vocal music and is a fitness freak! The author can be reached at skumar@godrej.com.
Steve Mulaik Steve Mulaik is a Partner in The Progress Group and one of the founders of the Indian arm of TPG. During his 25-year career involving logistics and information systems design, he has focused on processes and systems that impact or control various stages of the hard goods’ supply chain, e.g. inventory management, warehouse management, transportation planning, planogramming and pricing
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systems. He has also participated as the lead consultant in engagements involving warehouse and manufacturing design and process improvement. He has worked on systems and facility design projects in the US, Canada, India and Europe. Steve has extensive experience working in the 3PL industry and is a regular speaker at the IWLA on the topic of warehousing systems for 3PLs. He has worked on several design projects in India with the Indian office. The author can be reached at smulaik@theprogressgroup.com.
Vineet Kanaujia Vineet Kanaujia is an engineer with an MBA in marketing from the Faculty of Management Studies, Delhi. Before joining Safexpress five years ago, he had undertaken vital assignments with HCL, Conagra and Samsung. For Samsung, he created market leadership across multiple business lines and was honored with the ‘Best Employee of Samsung’ award. As Vice President – Marketing, he has made colossal contributions to the growth of Safexpress. He has formulated a powerful integrated marketing communications strategy for the firm. Through his persistent marketing efforts, he has firmly positioned Safexpress as a market leader and knowledge leader in the logistics industry. The author can be reached at vineet.kanaujia@safexpress.com. (Authors’ details given in alphabetical order)
2012
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2012