Welcome to Session 229 Leveraging Metrics to Drive Warehouse Performance Improvement Presented by: Sponsored by: John M. Hill 2012 Material Handling Industry. Copyright claimed as to audiovisual works of seminar sessions and sound recordings of seminar sessions. All rights reserved. 1
People need to be reminded more often than they need Samuel Johnson 1709 1784 to be instructed 2
TAMING THE SUPPLY CHAIN JUNGLE 3
WE VE GOT THE TOOLS! Network & Process Optimization --- right environment Material Handling & Controls --- right condition Automatic ID & Data Capture --- right material Supply Chain Execution Systems --- right time 4
HOW DO YOU GET THERE? "Would you tell me please, which way I ought to go from here?" "That depends a good deal on where you want to get to," said the cat. "I don't much care where," said Alice. "Then it doesn't matter which way you go," said the cat. 5
ROADMAP TO EXCELLENCE Warehouse Excellence Profile & Measure Current Performance Establish Target Performance Metrics Define Trading Partner Needs Map Processes, Material & Data Flows Identify Gaps & Opportunities Define Structural & Functional Needs Examine Alternatives to Close the Gaps Put a Value on Potential Incremental Gains Match Likely Costs & Benefits Prepare Roadmap & Action Plan Launch Initiative(s) 6
WHAT WOULD MOM SAY ABOUT YOUR WAREHOUSE? 7
WHAT WOULD MOM SAY? CONGESTION ü Does the facility resemble an LA freeway at rush hour? ü Are pickers delayed while waiting for others in the same area? ü How about slotting & activity scheduling? Spread the fast movers across a wider pick front. CLEAN, WELL - LIGHTED SHIP ü Are work areas clean or cluttered? What about lighting? ü Are storage, staging & pick locations well & logically marked? ü What about the temperature? Too cold? Too hot? THE DIRTY FINGER TEST While walking through the storage or picking areas closest to the shipping docks, drag a finger across the tops of the stored pallets, cases or items and check that finger every ten feet. The quicker it becomes dirty, the greater the problem with improper storage of slow moving materials. 8
WHAT WOULD MOM SAY? GOLDEN ZONING ü Are pick locations positioned at or near picker waist height? ü SKU profiling can help with deployment of fast movers in the golden zone. DOCKS ü Do you use proper dock plates, levelers, trailer wheel chocks & restraints that engage the impact guard on trailers to prevent movement? ü When lift trucks fall from docks, injuries can be serious & sometimes fatal. Don t skimp on the busiest & most dangerous part of the warehouse! PEOPLE ü What s the mood? Do managers know team members by name & greet them accordingly? ü Do workers receive regular feedback on targets & actual results? 9
HORSES FOR COURSES Should we go with an AS/RS or vertical or horizontal carousels? Which conveyor / sortation systems should we consider? What about robotic picking? Can we use our ERP for warehouse management? What about SaaS WMS? Is RFID ready? 10
HORSES FOR COURSES It s critical that you take the time to describe the track & define performance requirements before picking the horses to run the race. 11
PROFILING FACILITY LAYOUT Size: Usable Sq. Feet, Height Material & Data Flow Diagrams MOVEMENT Lift Trucks, Pallet Jacks Conveyor, AGVs, Other STORAGE LOCATIONS Bulk, Pallet Rack & Flow Rack Bins/Shelving AS/RS, Mini-Load, Carousels SYSTEMS Types, Applications, Interfaces PRODUCT PROFILE Number of SKU s Classifications; e.g., Hazardous ABC Percentages CONSIDERATIONS Shelf Life, Lot & Date Codes Serial Numbers Seasonal Issues, Other DATA COLLECTION Radio Data Terminals Bar Code, RFID, Voice Other Terminals 12
PROFILING ACTIVITIES RECEIPTS / HOUR / DAY Trucks/Railcar/Other Orders/Lines/Items Pallets/Cartons/Pieces PICKS / HOUR / DAY Orders/Lines/Items Cartons/Pallets/Other SHIPMENTS Trucks/Rail/Courier/Other RESOURCES Supervisory Receiving Operators Pickers / Packers / Checkers Replenishment Operators Shipping Personnel Inventory Control Expeditors Data Entry / Indirect Other 13
PROFILING Collect receipt, order & item history Profile transaction volume by task type Receipts by handling unit, material type Orders by handling unit, ship method, client SKU volume & daily activity by handling unit Profile transaction volume by labor expended Audit and validate results with users 14
CATEGORY ABC ANALYSIS # OF SKU S TOTAL PIECES % OF SKU S % PIECES SHIPPED A+ 36 58,665 0.9% 10.1% A 822 397,758 20.7% 68.8% B 867 80,594 21.8% 13.9% C 869 31,973 21.9% 5.5% D 1381 9,021 34.7% 1.6% TOTALS 3,975 578,011 100% 100% SKU s (%) D 34.7% C 21.9% A 20.7% B 21.8% A+ 0.9% Pieces (%) B 13.9 5.5 C A+ 10.1 A 68.8 D 1.6 1
ACTIVITY PROFILE 100% 90% 80% 70% Velocity Curve - Total Pieces Cum % Pieces 90% of Picking / 37% of SKUs 80% of Picking Activity / 22% of SKUs % of Pieces 60% 50% 40% 30% 20% 10% 0% % of SKU s 0% 5% 11% 16% 21% 27% 32% 37% 43% 48% 53% 59% 64% 69% 75% 80% 85% 91% 96% 16
ACTIVITY PROFILE Order Picking Productivity 60 50 40 30 20 10 Lines Labor Orders Lines/Person/Hr January Through November 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 Orders 17
WHO PLAYS GOLF WITHOUT A SCORECARD? 18
ESTABLISH KPI S INTERNAL KPI's Perfect Orders On-Time Deliveries Inventory Accuracy Inventory Carrying Cost Inventory Turns Order Cycle Time Order Entry Accuracy Workforce Utilization Shipping Accuracy Order Fill Rate Customer Satisfaction SUPPLIER KPI's Inbound Cost/Order Value On-Time Deliveries Lead Time Fill Rate IT / Technology Resources Service Flexibility Attitude Returns Policy Value Added Services VMI Capabilities Ease of Doing Business Ethics / Compliance CUSTOMER KPI's Profitability Sales Volume Growth Potential Credit / Payment History Shared Strategic Vision Return Rate Customer Viability Order Frequency Loyalty Cost to Serve Competitive Pressure Hassle to Serve 19
ESTABLISH KPI S Order Fill Rates Order Cycle Times Lines & Orders/Person/Hour Errors Damage Inventory Accuracy Days on Hand Cost / Order Cost as % of Sales 20
ORDER FULFILLMENT MEASURE CALCULATION TODAY FUTURE VALUE On-Time Delivery Orders On-Time Total Orders Shipped % % $ Orders Filled Complete Order Fill Rate % % $ Total Orders Shipped Error-Free Orders Total Orders Shipped Order Accuracy % % $ Error-Free Lines Line Accuracy % % $ Total Lines Shipped Actual Ship Date Minus Order Cycle Time Hrs Hrs $ Customer Order Date Perfect Order Completion Perfect Deliveries Total Orders Shipped % % $ 21
INVENTORY MANAGEMENT MEASURE CALCULATION TODAY FUTURE VALUE Inventory Accuracy Actual Qty per SKU System Reported Qty % % $ Total Damage $$$ Damaged Inventory % % $ Inventory Value (Cost) Avg. Month Inventory $ Days On Hand Days Days $ Avg. Daily Sales/Month Avg. Occupied Sq. Ft. Storage Utilization % % $ Total Storage Capacity Total Dock to Stock Hrs Dock to Stock Time Hrs Hrs $ Total Receipts Receipt Entry Time - Inventory Visibility Hrs Hrs $ Physical Receipt Time 22
WAREHOUSE PERFORMANCE MEASURE CALCULATION TODAY FUTURE VALUE Orders per Hour Orders Picked/Packed Total Whse Labor Hrs Ord/Hr Ord/Hr $ Lines per Hour Lines Picked/Packed Total Whse Labor Hrs Lines/Hr Lines/Hr $ Items per Hour Items Picked/Packed Total Whse Labor Hrs Items/Hr Items/Hr $ Cost per Order Total Warehouse Cost Total Orders Shipped $/Order $/Order $ Cost as % of Sales Total Warehouse Cost Total Orders Shipped % % $ 23
ESTABLISH KPI TARGETS MEASURE CALCULATION CURRENT TARGET On-Time Delivery Total Orders On Time / Total Orders Shipped 87% 95% Order Accuracy Errorless Orders / Total Orders Shipped 92% 98% Order Cycle Time Actual Ship Date - Customer Order Date 12 Hrs 8 Hrs Inventory Accuracy Actual Qty. by SKU / Reported Qty. by SKU 96% 99% Damaged Inventory Total Damage $$$ / Total Inventory Value.75%.50% Days on Hand Avg. Inventory Value ($) / Average Daily Sales $ 50 Days 42 Days Storage Utilization Avg. Inventory Sq. Ft. / Storage Capacity Sq. Ft. 78% 85% Orders per Hour Orders Picked & Packed / Total Whse. Labor Hrs 15/Hr 20/Hr Lines per Hour Total Lines Picked / Total Whse. Labor Hrs 40/Hr 54/Hr Cost per Order Total Warehouse Costs / Total Orders $4.26 $3.62 Cost % of Sales Total Warehouse Costs / Total Revenue 3.1% 2.7% 24
BENCHMARKING RESOURCES www.apqc.org/osbcdatabase Process Classification FrameworkSM & Open Standards Benchmarking Collaborative SM www.cscmp.org Multiple Process Standards & Metrics Reports, 2011 State of Logistics Report, 2011 Logistics Cost & Service Report www2.isye.gatech.edu/ideas/ System-Based Self-Assessment of Warehouse Operations www.supply-chain.org Supply-Chain Benchmarking with SCOR and SCORmark 25
BENCHMARKING RESOURCES Supply Chain Metric www.mhia.org/search/holistic+metrics Improving Order Execution Performance: A Holistic View of Metrics www.supplychainmetric.com A Comprehensive Look at Performance Metrics, Definitions & Calculations www.werc.org Multiple Reports, Tools and the Warehouse Manager s Guide to Benchmarking 26
METRICS CAVEATS Level the playing field: canoes vs. cases Over-complexity can undermine value So can over-simplification Workforce involvement is critical A Hard Look at the Soft Side of Performance, Vitasek & Maylett, CSCMP s Supply Chain Quarterly, Q4 2011 27
METRIC / IMPACT Orders / Hour On Time Delivery Order Cycle Time METRICS CAVEATS Order Accuracy Damage Orders / Hour On Time Delivery Order Cycle Time Order Accuracy Damage 28
YOU HAVE THE METRICS, NOW WHAT? 29
IT S TOUGH PLAYING GOLF WITH A BASEBALL BAT! 30
The best technology installed in operations with illconceived material flows & processes will only enable users to do things BADLY - - - FASTER! 31
SIMPLIFY & STREAMLINE PROCESSES BEFORE IMPLEMENTING TECHNOLOGY OR SYSTEMS 32
MATERIAL DATA 33
Receiving Flow 34
Operator Signs on to RF Cycle Count Screen 1 System Displays Count Location 2 3 Operator Proceeds to Location Operator Scans (or key enters) Location ID 4 5 System Confirms Location Discrepancy Cycle Counting Reenter Data Reenter Data Reenter Data 6 System Requests Tag # Discrepancy 11 System Confirms UOM/Qty. 10 Operator Enters UOM/ Quantity System Requests UOM/Qty. 9 Discrepancy System Confirms Tag # 8 7 Operator Scans (or key enters) Tag # System Logs Counts & Updates Inventory Records 12 9.6.1 YES 13 14 15 System Closes More Cycle Session & Count NO Directs Operator Tasks? to Next Task 35
BEST PRACTICES ISSUES Travel between locations Location searching Pick tour set-up Case & item picking Checking & verifying Counting Replenishment Congestion Operator idle time SOLUTIONS Bring location to operator Use WMS, lights, voice or RFID Sequence via WMS Assess alternate storage modes Bar code, voice or RFID Prepackage or weigh Dynamic via WMS Spread fast movers WMS task management 36
REFINE INFRASTRUCTURE EVERYTHING HAS TO BE SOMEPLACE Improve Space Utilization Reduce Travel Times Increase Pick Rates & Throughput Optimize Replenishment Activity Reduce Damage Improve Safety Simplify Retail Restocking Golden{ Zone 01 02 03 04 37
REFINE INFRASTRUCTURE INFORMATION TECHNOLOGY & SYSTEMS SYNCHRONIZE MATERIAL & DATA FLOW 38
USE KPI S TO DEVELOP YOUR ROI Measure Calculation Current Target Value On-Time Delivery Total Orders On Time / Total Orders Shipped 87% 95% $250,000 Order Accuracy Errorless Orders / Total Orders Shipped 92% 98% See above Order Cycle Time Actual Ship Date - Customer Order Date 12 Hrs 8 Hrs $100,000 Inventory Accuracy Actual Qty. by SKU / Reported Qty. by SKU 96% 99% See above Damaged Inventory Total Damage $$$ / Total Inventory Value.75%.50% $100,000 Days on Hand Avg. Inventory Value ($) / Average Daily Sales $ 50 Days 42 Days $1 Million Storage Utilization Avg. Inventory Sq. Ft. / Storage Capacity Sq. Ft. 78% 85% $100,000 Orders per Hour Orders Picked & Packed / Total Whse. Labor Hrs 15/Hr 20/Hr $864,000 Lines per Hour Total Lines Picked / Total Whse. Labor Hrs 40/Hr 54/Hr See above Cost per Order Total Warehouse Costs / Total Orders 4.26 $3.62 See above Cost % of Sales Total Warehouse Costs / Total Revenue 3.1% 2.7% See above Annual Savings $2.4 Million Probable Cost $1.8 Million 39
RETURN ON ASSETS IMPACT 100 100 + 3 Sales 13.5 15 18.6 20 14 15 8 2 46.35 45 56.65 55 Gross Margin 5.675 6.425 7.125 6.43 5 COGS Variable Expense Fixed Expense Inventory Receivables Other 33.5 32.1 35 Expenses 50% Taxes 25 24 Current Assets 25 Fixed Assets Net Profit / 103 100 Sales 103 100 Sales / 49 50 Total Assets Improved fill, increased sales 10% cut in transportation & outside warehousing costs 6.24% 5.5% 6.9% 5% 15 +45% Net Profit Margin X 2.06 2.1 2 Asset Turnover 12.8% 14.5% 11.3% 10% Return on Assets 7% Inventory reduction 40
RECAP Characterize current operations Profile current & projected activity Develop metrics & performance targets (KPI s) Identify gaps Look at processes to identify options for improving layout, inventory slotting & handling Assess value of automation, AIDC & WMS for throughput, accuracy & productivity Quantify potential gains & build ROI 41
Warehousing is like riding a bicycle keep moving forward or you ll fall down! 42
For More Information: jmhill@transystems.com www.transystems.com Booth 923 HAVE A GREAT SHOW! 2012 Material Handling Industry. Copyright claimed as to audiovisual works of seminar sessions and sound recordings of seminar sessions. All rights reserved. 43