Welcome to Session 205

Using Metrics to Drive Warehouse Performance Improvement

Presented by: Sponsored by:

John M. Hill
2011 Material Handling Industry. Copyright claimed as to audiovisual works of seminar sessions and sound recordings of seminar sessions. All rights reserved.

WEVE HAD QUITE A RIDE!

2011 FORECAST: 11 to 12% GROWTH

READY FOR THE TURNAROUND?

NAVIGATING THE SUPPLY CHAIN JUNGLE

WEVE GOT THE TOOLS!

Network & Process Optimization
--- right environment

Material Handling & Controls

--- right condition

Automatic ID & Data Capture

--- right material

Supply Chain Execution Systems

--- right time

HOW DO YOU GET THERE?

"Would you tell me please, which way I ought to go from here?" "That depends a good deal on where you want to get to," said the cat. "I don't much care where," said Alice. "Then it doesn't matter which way you go," said the cat.

ROADMAP TO EXCELLENCE
Profile & Measure Current Performance Establish Target Performance Metrics Define Trading Partner Needs Map Processes, Material & Data Flows Identify Gaps & Opportunities Define Structural & Functional Needs Examine Alternatives to Close the Gaps Put a Value on Potential Incremental Gains Match Likely Costs & Benefits Prepare Roadmap & Action Plan Launch Initiative

WHAT WOULD MOM SAY?

WHAT WOULD MOM SAY?

CONGESTION
Does the facility resemble an LA freeway at rush hour? Are pickers delayed while waiting for others in the same area? How about slotting & activity scheduling? Spread the fast movers across a wider pick front.

CLEAN, WELL - LIGHTED SHIP

Are work areas clean or cluttered? What about lighting? Are storage, staging & pick locations well & logically marked? What about the temperature? Too cold? Too hot?

THE DIRTY FINGER TEST

While walking through the storage or picking areas closest to the shipping docks, drag a finger across the tops of the stored pallets, cases or items and check that finger every ten feet. The quicker it becomes dirty, the greater the problem with improper storage of slow moving materials.

WHAT WOULD MOM SAY?

GOLDEN ZONING
Are pick locations positioned at or near picker waist height? SKU profiling can help with deployment of fast movers in the golden zone.

DOCKS
Do you use proper dock plates, levelers, trailer wheel chocks & restraints that engage the impact guard on trailers to prevent movement? When lift trucks fall from docks, injuries can be serious & sometimes fatal. Dont skimp on the busiest & most dangerous part of the warehouse!

PEOPLE
Whats the mood? Do managers know team members by name & greet them accordingly? Do workers receive regular feedback on targets & actual results?

HORSES FOR COURSES

Should we go with an AS/RS or vertical or horizontal carousels? Which conveyor / sortation systems should we consider? What about robotic picking? Can we use our ERP for warehouse management? What about SaaS WMS? Is RFID ready?

HORSES FOR COURSES

Its critical that you take the time to describe the track & define performance requirements before picking the horses to run the race.

WHO PLAYS GOLF WITHOUT A SCORECARD?

PROFILING
FACILITY LAYOUT
Size: Usable Sq. Feet, Height Material & Data Flow Diagrams

PRODUCT PROFILE
Number of SKUs Classifications; e.g., Hazardous ABC Percentages

MOVEMENT
Lift Trucks, Pallet Jacks Conveyor, AGVs, Other

CONSIDERATIONS
Shelf Life, Lot & Date Codes Serial Numbers Seasonal Issues, Other

STORAGE LOCATIONS
Bulk, Pallet Rack & Flow Rack Bins/Shelving AS/RS, Mini-Load, Carousels

DATA COLLECTION
Radio Data Terminals Bar Code Scanners, RFID, Voice Other Terminals

SYSTEMS
Types, Applications, Interfaces

PROFILING
ACTIVITIES
RECEIPTS / HOUR / DAY
Trucks/Railcar/Other Orders/Lines/Items Pallets/Cartons/Rolls/Other

RESOURCES
Supervisory Receiving Operators Pickers / Packers / Checkers Replenishment Operators Shipping Personnel Inventory Control Expeditors Data Entry / Indirect Other

PICKS / HOUR / DAY

Orders/Lines/Items Cartons/Pallets/Other

SHIPMENTS
Trucks/Rail/Courier/Other

PROFILING
Collect receipt, order & item history Profile transaction volume by task type Receipts by handling unit, material type Orders by handling unit, ship method, client SKU volume & daily activity by handling unit Profile transaction volume by labor expended Audit and validate results with users

ABC ANALYSIS
CATEGORY # OF SKUS TOTAL PIECES % OF SKUS % PIECES SHIPPED

A+ A B C D TOTALS

36 822 867 869 1381 3,975

58,665 397,758 80,594 31,973 9,021 578,011

0.9% 20.7% 21.8% 21.9% 34.7% 100%

C 16% B 14%

10.1% 68.8% 13.9% 5.5% 1.6%

A+ 2%

100%
A+ 10%

A 68%

SKUs (%)

Pieces (%)

ACTIVITY PROFILE
Velocity Curve - Total Pieces
100% 90% 80% 70% % of Pieces 60% 50% 40% 30% 20% 10% 0%
0% 5% 11% 16% 21% 27% 32% 37% 43% 48% 53% 59% 64% 69% 75% 80% 85% 91% 96%

Cum % Pieces 90% of Picking / 37% of SKUs 80% of Picking Activity / 22% of SKUs

% of SKU's

ACTIVITY PROFILE
Order Picking Productivity
60 50
6,000 8,000 7,000

40 30 20 10
Lines

5,000 4,000 3,000

Labor Orders Lines/Person/Hr

2,000 1,000 Orders

January Through November

ESTABLISH KPIS
Order Fill Rates Order Cycle Times Lines & Orders/Person/Hour Errors Damage Inventory Accuracy Days on Hand Cost / Order Cost as % of Saleses

ESTABLISH KPIS
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

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

ORDER FULFILLMENT
MEASURE
On-Time Delivery Order Fill Rate Order Accuracy Line Accuracy Order Cycle Time Perfect Order Completion

CALCULATION TODAY FUTURE VALUE

Orders On-Time Total Orders Shipped Orders Filled Complete Total Orders Shipped Error-Free Orders Total Orders Shipped Error-Free Lines Total Lines Shipped Actual Ship Date Minus Customer Order Date Perfect Deliveries Total Orders Shipped

% % % % Hrs %

% % % % Hrs %

$ $ $ $ $ $

INVENTORY MANAGEMENT
MEASURE
Inventory Accuracy Damaged Inventory Days On Hand Storage Utilization Dock to Stock Time Inventory Visibility

CALCULATION TODAY FUTURE VALUE

Actual Qty per SKU System Reported Qty Total Damage $$$ Inventory Value (Cost) Avg. Month Inventory $ Avg. Daily Sales/Month Avg. Occupied Sq. Ft. Total Storage Capacity Total Dock to Stock Hrs Total Receipts Receipt Entry Time Physical Receipt Time

% % Days % Hrs Hrs

% % Days % Hrs Hrs

$ $ $ $ $ $

WAREHOUSE PERFORMANCE
MEASURE
Orders per Hour Lines per Hour Items per Hour Cost per Order Cost as % of Sales

CALCULATION TODAY FUTURE VALUE

Orders Picked/Packed Total Whse Labor Hrs Lines Picked/Packed Total Whse Labor Hrs Items Picked/Packed Total Whse Labor Hrs Total Warehouse Cost Total Orders Shipped Total Warehouse Cost Total Orders Shipped

Ord/Hr Lines/Hr Items/Hr $/Order %

Ord/Hr

Lines/Hr $ Items/Hr $ $/Order $ % $

METRICS TRADE-OFFS
METRIC / IMPACT
Orders / Hour On Time Delivery Order Cycle Time Order Accuracy Damage
Orders /Hour On Time Delivery Order Cycle Time Order Accuracy Damage

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

www.cscmp.org
Multiple Process Standards & Metrics Reports, Annual State of Logistics Report

www.establishinc.com
Cost, Service, Transportation Rate & 3PL Benchmarks

www2.isye.gatech.edu/ideas/
System-Based Self-Assessment of Warehouse Operations

BENCHMARKING RESOURCES
www.mhia.org/search/Holistic+Metrics
Improving Order Execution Performance: A Holistic View of Metrics Across Plant & Warehouse

www.supplychainmetric.com
Supply Chain Metric A Comprehensive Look at Performance Metrics, Definitions & Calculations

www.supplychainconsortium.com
Benchmarking Services for Manufacturers, Distributors & Retailers

www.supply-chain.org
Supply-Chain Benchmarking with SCOR and SCORmark

www.werc.org
Multiple Reports, Publications & Tools including Warehouse Managers Guide to Benchmarking

ESTABLISH KPI TARGETS

MEASURE On-Time Delivery Order Accuracy Order Cycle Time Inventory Accuracy Damaged Inventory Days on Hand Storage Utilization Orders per Hour Lines per Hour Cost per Order Cost % of Sales CALCULATION
Total Orders On Time / Total Orders Shipped Errorless Orders / Total Orders Shipped Actual Ship Date Customer Order Date Actual Qty. by SKU / Reported Qty. by SKU Total Damage $$$ / Total Inventory Value Avg. Inventory Value ($) / Average Daily Sales $ Avg. Inventory Sq. Ft. / Storage Capacity Sq. Ft. Orders Picked & Packed / Total Whse. Labor Hrs Total Lines Picked / Total Whse. Labor Hrs Total Warehouse Costs / Total Orders Total Warehouse Costs / Total Revenue

CURRENT TARGET
87% 92% 12 Hrs 96% .75% 50 Days 78% 15/Hr 40/Hr $4.26 3.1% 95% 98% 8 Hrs 99% .50% 42 Days 85% 20/Hr 54/Hr $3.62 2.7%

YOU HAVE THE METRICS, NOW WHAT?

THE BEST TECHNOLOGY INSTALLED IN OPERATIONS WITH ILLCONCEIVED MATERIAL FLOWS & PROCESSES WILL ONLY ENABLE USERS TO DO THINGS

BADLY - - - FASTER!

MATERIAL

DATA

Receiving Flow

REFINE INFRASTRUCTURE
Use order & SKU activity profiles to deploy or slot inventory based upon historical & anticipated volume.
Improve Space Utilization Golden Zone Reduce Travel Times Increase Pick Rates & Throughput Optimize Replenishment Activity Reduce Damage Improve Safety Simplify Retail Restocking

01

02

03

04

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, RFID or voice Sequence via WMS Assess alternate storage modes Bar code, voice or RFID Prepackage or weigh Dynamic via WMS Spread fast movers WMS task management

REFINE INFRASTRUCTURE
INFORMATION SYSTEMS

SYNCHRONIZE MATERIAL & DATA FLOW

WEVE GOT THE TOOLS!

MULTIMODAL SOLUTIONS

WEVE GOT THE TOOLS!

WMS manage inventory, space, equipment & labor in real time to optimize the flow of materials & data from receiving & putaway to light assembly, order picking, value-added processing & shipment.

USE KPIS TO DEVELOP YOUR ROI

Measure
On-Time Delivery Order Accuracy Order Cycle Time Inventory Accuracy Damaged Inventory Days on Hand Storage Utilization Orders per Hour Lines per Hour Cost per Order Cost % of Sales Annual Savings Probable Cost

Calculation
Total Orders On Time / Total Orders Shipped Errorless Orders / Total Orders Shipped Actual Ship Date Customer Order Date Actual Qty. by SKU / Reported Qty. by SKU Total Damage $$$ / Total Inventory Value Avg. Inventory Value ($) / Average Daily Sales $ Avg. Inventory Sq. Ft. / Storage Capacity Sq. Ft. Orders Picked & Packed / Total Whse. Labor Hrs Total Lines Picked / Total Whse. Labor Hrs Total Warehouse Costs / Total Orders Total Warehouse Costs / Total Revenue

Current Target
87% 92% 12 Hrs 96% .75% 50 Days 78% 15/Hr 40/Hr 4.26 3.1% 95% 98% 8 Hrs 99% .50% 42 Days 85% 20/Hr 54/Hr $3.62 2.7%

Value
$250,000 See above $100,000 See above $100,000 $1 Million $100,000 $864,000 See above See above See above $2.4 Million $1.8 Million

RETURN ON ASSETS IMPACT

100 100 +3
Sales
Improved fill, increased sales

46.35 45
Gross Margin

56.65 55
COGS

10% cut in transportation & outside warehousing costs

6.425 7.1 5 5.675 6.43 7.125

Net Profit /

13.5 15
Variable Expense

6.24% 6.9% 5.5% 5% 6.24% 6.9%

Net Profit Margin

33.5 35 32.1 33.5

Expenses

103 100
Sales

+45%
11.3% 14.5% 12.5% 10%
Return on Assets

18.6 20
Fixed Expense

50%
Taxes

103 100
Sales /

X
2.1 2.06 2
Asset Turnover

14 15
Inventory

25 24
Current Assets

8
Receivables

49 50
Total Assets

25
Other Fixed Assets

7% Inventory reduction

Warehousing is like riding a bicycle keep moving forward or youll fall down!

For More Information:

Speaker: jmhill@transystems.com Home Page: www.transystems.com

PROMAT Booth 2043

2010 TranSystems. All rights reserved.

HAVE A GREAT SHOW!