Archives for Warehouse Optimization

How WMS Software Can Save Money for your Company

Warehouse Technology Systems, commonly called Warehouse Management Systems (WMS), are designed to make the movement of inventory in and out of the warehouse as efficient as possible. Through advanced functionality such as different inventory picking options, lot and serial management, cycle counting, bin placement,  space management, ERP to WMS integration and others; warehouse management improvements can be realized that can offer significant savings from having increase accuracy, fewer errors and reduce labor cost.

Increased Accuracy-If the physical inventory “on the books” and the physical inventory in a warehouse do not match, the situation is often chaotic. When a warehouse picker goes to retrieve a part and it is not there (or not enough is there), a series of manual checks and back tracking must be completed to fix the problem and get the order out the door. Inaccurate inventory results can have broad consequences including:Savings

  • Poor buying practices and excess safety stock associated to buyers lack of confidence in record accuracy
  • Delays in order fulfillment associated to lost or misplaced product
  • Lost sales due to stock outs and over commitments
  • Costs associated to placing and managing back orders
  • Lower labor productivity associated to searching for lost product
  • Potentially higher freight costs resulting from expediting shipments to customers

Example: These issues could result in excess inventory, which ties up capital and negatively impacts capacity. The results are higher costs, low productivity and bad customer service. The self-checking nature of a WMS, in addition to a good cycle counting program, ensures inventory accuracy of 99.9%. This high level of inventory accuracy is the foundation for a majority of the other benefits realized in using a WMS. Inventory may be the highest asset in your company.  What is the financial impact of 95% inventory accuracy compared to 99.9% over the course of a month or year?

Fewer Errors-A real-time Radio Frequency (RF), ie. Hand Held Bar Code Scanning driven WMS is self-checking. As transactions occur, the system verifies the activity and may even prompt the user with a question if the system detects a potential problem. In a paper-based environment, errors are common across all functional areas. The impact of an error in one function is amplified throughout the overall operation. An error in receiving (wrong product number, wrong quantity, etc.) will create potential delays across many operations.

Example: Let’s assume 20 cases of part A are received as 200 cases, a put-a-way operator may spend considerable time searching for the extra 180 cases. In a non-automated environment, it is common to have operators putting away whatever product is in a staging queue without checking product numbers or quantities. In this instance, the
quantity error in receiving will get pushed even further downstream as operators are sent to pick 40 cases from the
load with only 20 cases physically on hand. Also, if an automatic payment correction is generated, you may end up requesting approval for payment of an additional 180 ghost cases.

In a paper based manual data entry environment, there is also an increased chance of data entry error. Humans make mistakes; WMS doesn’t. Studies have shown, on average, one out of every 300 keystrokes is an error. The cost of even one such error can be significant.

Example: What would be the effect of a missed product of some value, such as the cost of miss shipping a piano to Albany, Oregon, instead of Albany, New York, could easily run in the thousands of dollars. And, this does not take into account the added cost in damaged customer relations. The automated data collection nature of an advanced WMS results in process efficiency and data integrity. The benefits of data integrity are numerous.

Reduced Labor Cost-By eliminating manual data entry, associated fixed labor costs are immediately reduced. These reductions alone can justify an investment in automated data collection which is a key component of WMS. But other labor costs are reduced as well.

Example: Administrative labor is reduced as less time is spent correcting errors. Fewer errors and timelier, accurate information also mean fewer, more productive meetings for managers and executives. In general, automated data collection lowers labor costs by reducing overall setups, idle time, cost of expediting, and time spent correcting errors.

Example: It is reasonable to expect up to a 20% improvement in direct labor productivity. Direct labor is better utilized due primarily to a WMS’s ability to provide specific task assignments based from a concise picture of inventory availability, inventory positions, and the overall movement activities to be accomplished. System directed activities minimize operators time spent identifying what actions need to be accomplished and planning the activities once they have been identified.

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Making Room In Your Warehouse

Space management is a big deal!  Your warehouse (or vault as I like to refer to it) has only so many square feet.  You need to utilize the space to its fullest potential.  In part 5 of my series of blogs on the 4 simple ways to pay for a warehouse management system I will discuss how a WMS (warehouse management system) can help you use your space and save you money.large warehouse

A WMS should improve space usage through improved inventory placement and tracking.  Because the WMS gives you a full view of your warehouse and where your items are, which ones are moving and which ones aren’t you can manipulate your stock with ease.  Putting the fast items in locations that are readily available for picking and replenishment.  You will have full visibility of where empty slots or bins are in order to put products away.  You can mix pallets and use pallet license plates to identify with one scan what is stored on the pallet in the slot it is assigned to.  This can be a big space saving technique.  Here are some other areas where savings can be derived

  • Eliminate existing overflow space  (this is usually a second location used solely to store items that won’t fit in your main location)
  • Reduced transport costs with elimination of overflow space
  • Avoid or greatly delay new construction of additional space or move to bigger space

When you can use the space you have more efficiently this allows you to reduce the space used for existing inventory.  Because a WMS allows you to reduce your on hand inventory levels this saves you money in carrying costs and purchases.

We had one customer put off the need to build on to their distribution center by nearly 4 years.  And when they did it was in order to do more fulfillment work which had a very positive impact on their profits.  Warehouse space is expensive so use what you have in the best possible way.  A WMS will certainly help you do this.

It a Matter of Time

Over the last 5 posts I have reviewed the 4 simple ways a WMS can be paid for.  The time for achieving a return on investment (ROI) of an investment in a warehouse management solution should be very short.  Many companies find that the system can pay for itself in as little as 6 to nine months.  A good average to plan on is 12 to 18 months.  Once you have reached the break even point all the found money flows directly to your bottom line and it can be thousands of dollars each month.  What could you do to grow your business with an extra 5 or 10 or 20,000 dollars each and every month.

Wouldn’t You Like to Know

As you can see a warehouse management solution reduces labor costs, improves space utilization and reduces inventory cost.  The big question to ask yourself is “By how much”.  Each business is different, you should investigate how a WMS would fit into you business.  We recommend that you work with a company with a great deal of experience in how a WMS works and how a warehouse operations functions.  We suggest engaging with a organization that will collect, compile and total all the information and provide you with a sound useful and believable ROI.  Once you have done this the decision to purchase and implement a WMS should be very clear.

Find out more about Warehouse Management Systems by contacting us here:

 

Improve Shipping Accuracy! (Part 4 of Four Simple Ways to Pay For a WMS)

Shipping accuracy to some companies is an oxymoron and to others a solid part of their business.  So what causes some to struggle and others to excel?  The accuracy of their pick and verification process.  Lets look a little closer.

I was talking with a prospect recently who shared with me that they shipped an average of 600 orders per day and 800 boxes.  He was very proud to tell me that they were 98.6% accurate on their shipping.  Now 98.6% sounds pretty good (especially in a busy disorganized paper driven warehouse) when you think of the fact that they ship 600 orders per day right.  I pointed out to him that means that about 8 orders go out wrong every day.  Industry statistics show it costs $200.00  to fix each mis-shipped order.  So if you do the math that’s $1600.00 per day for this prospect to cover the cost of their mistakes.  If you look at that over the course of one year the total is $83,200.  That’s a Problem.

 

A WMS will virtually eliminate the potential for making these mistakes.  By providing an accurate way to pick orders by scanning the barcodes and verifying the product  being picked is correct you gain tremendous accuracy.  By using a WMS to consolidate orders you can send fewer boxes and save shipping costs. By creating efficient pick paths and picking processes accuracy is increased dramatically.  Many companies find they can eliminate costly, time stealing check processes once a WMS has been implementing without increasing mistakes.  If the shipping process is integrated into the WMS shipping accuracy is improved and much more efficient.

Eliminating mistakes that go out the door to your customers will offset a large portion of the initial investment in a warehouse Management system like Accellos One Warehouse.  To learn more about how A1W can help a business be more profitable check out our dedicated website http://www.warehouse-management-systems-us.com/wp-admin/post-new.php.

Managing Your Labor Costs Pays Off

This is part 3 of my 5 part series on the four simple ways to pay for a warehouse management system. In the first part I listed the four ways and outlined each one.  In part two I covered how better control and accuracy of the inventory can save money and help pay for a WMS.  In part three I will discuss what is arguably your most important asset, your employees.

Here are a few points for you to consider; effectively managing labor costs in most businesses is difficult.  Labor costs account for a huge portion of your cost of doing business.  Arguably your staff in the warehouse can/will make or break your business.

Reducing or reallocating labor is the primary driver for finding the money to pay for a warehouse management solution.   A properly implemented WMS like Accellos One Warehouse can reduce your labor needs, help you reallocate staff and or keep you from needing to bring on more staff to meet growing sales or seasonal fluctuations.  More people mean more problems most of the time.  There is a long list of labor areas  that are strongly impacted by the implementation and use of best practices while deploying a WMS.

From the moment product hits your receiving dock until the invoice is sent for the shipped out items people are involved.  By using a WMS you increase the efficiency and accuracy of the work they do while eliminating the mistakes they will make.  A best of breed WMS should provide useful labor reports that can help you determine who your best people are and who needs help.  When the WMS is integrated tightly to your ERP/accounting/business management software  you can eliminate the costly clerical work.  This allows the people doing this manual data entry to be re-positioned  into areas that will help the company make money not just spend it.  Another plus here is the accuracy factor a WMS provides.  You can also speed up the invoices process which gets you paid in a more timely manner.

Here is an overview of areas of improvement;Workers In Warehouse Preparing Goods For Dispatch

  • Lines picked per shift are improved
  • Fill rates increase
  • Inventory accuracy is dramatically improved
  • Reduced staff and increased work volume
  • Higher pick/pack rates
  • Reduced shipping department needs
  • Shift elimination and or hour reductions
  • Transportation cost are optimized

It is not unusual for a WMS to reduce labor costs by 20 to 30 percent.   Lets look at a simple example.  If your annual labor cost for a staff of 15 warehouse employees including clerical support is $561,000.00 (18.00 per hour loaded, X 2080 per year, X 15 employees) and you save 20% with the implementation of a WMS you would save $112,000.00.  That is huge!  Of course every business is different but I have seen this kind of savings by many of our customers.  Maybe its time you took a good look at what you could save.

My next post will how cover how a WMS saves money by improving shipping accuracy.

Learn more about iCepts Technology Group and the many ways we work daily to help our customers improve their businesses.

Will Your Business Thrive or Wither?

With costs and competition rising faster than ever, only businesses that find new ways to improve and increase value to both their customers and shareholders will survive let only thrive in today’s market.  Only certain activities within a business represent opportunities for adding value to the product or service the business provides.  In general, these activities are profit-generators that can be distinguished from the overhead and support functions of commercial/wholesale distributors web-based retailers and company warehouses.

Value added functions often relate the specifics of a particular business. The following are some value-adding functions that are common to most business and should be familiar to anyone who depends on their warehouse as a critical part of their operation:

  • Kitting Services
  • Marketing and sales
  • Production/operations
  • Inbound logistics
  • Outbound processes

Warehouses are generally seen as  cost-centers to a business and rarely are considered as an area for profit creation.  Yet some businesses have discovered ways to turn their warehouse into a significant competitive advantage.  Of the value-adding functions listed above, inbound/outbound processes relate directly to wholesale distributors or distribution centers.  In addition the quality of these processes along with storing, delivering and moving inventoried products can impact sales, production and services in a positive or negative manner.  In my next post I will discuss warehousing practices in the value chain and how a warehouse management system plays a significant role in creating revenue inside the warehouse.

Top 10 “Must Have” Warehouse Management Systems (WMS) Features-Receiving

Receiving is another key “must have” in any warehouse management system.  Receiving is another functionality designed to migrate the paper receiving process to a wireless device.  Once a purchase order has been entered into an ERP system, it is seamlessly transferred to the WMS (warehouse management software) where receivers await shipment. They are armed with wireless mobile computers that have integrated bar code scanners.

After an inbound shipment arrives at the warehouse, the receiving team will typically unload the truck and grab the paperwork to identify which purchase orders are being received.

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The first job of the WMS Software is to receive items accurately into the warehouse and then reconcile the shipment against the original purchase orders entered into your ERP system. Rather than using pen and paper to reconcile physical receipts, the receiver will bring up the purchase orders on a handheld computer. Once this is done, the receiver only needs to start identifying the product that is being unloaded (in no particular sequence).

With “best-in-breed” WMS Software, the receiver counts down against items being received right off of the container. It validates items against multiple purchase orders in the background, and then seamlessly updates your ERP system. No more paperwork!

Because a receipt is recorded as soon as items are entered into the handheld, stock may be immediately put away to a bin location. Bin location assignment following receipt may be automatic; stock can be transferred to a temporary receiving location if receipts are to be staged prior to put-away.

Most of the time, stock will be put-away following goods receipt.  If there are backorders waiting for product (standard or non-stock) or there is a “low stock alert,” stock may be put away directly to pick locations. Otherwise, stock handlers will move pallets into bulk locations (typically up in the pallet racks or on floor stacks).

Some of the highlighted benefits for accurate, efficient warehouse receiving include:

  • Receive multiple orders simultaneously in no sequence, without paperwork
  • Scan product bar code or use quick lookup functions to identify products as they are being received
  • Print carton or pallet-ID labels as product is being received
  • Receive multiple pack-sizes on the fly.
  • Cross-dock non-stock items to forward pick locations
  • Immediately put product away without staging

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Which 30% Is your Company In?

Less than 30 percent of warehouses are efficient, according to “Benchmarking Warehouse Performance,” a study by Georgia Institute of Technology in Atlanta GA Efficiency translates directly into money. You may have been wondering if a WMS system could make your warehouse more efficient. Interestingly, about 30 percent of the warehouses in the United States have a WMS system installed. What are the numbers telling us? Only 30 percent of warehouses are efficient, and less than 30 percent of warehouses have a WMS system installed. Which 30% does your company fall into?  If you are in the under 30% group that does use a WMS good for you.  Most likely you are many times over more efficient than those not using a WMS to manage their warehouse operations.

Those numbers are telling me we can fix the inefficiencies or “lost revenues” taking place in over 70 percent of warehouses. These leaks involve serious money being lost and customers being poorly serviced. My point is this: There’s a lot of information out there on how to make your warehouse more efficient, but what you needs to realized is, “It’s not what you know that counts, it’s what you do with what you know.” Many companies already know their warehouse is inefficient, but are reluctant to make the move to improve due to what they perceive as a high cost to purchase and install a WMS.  I would suggest they should take a very close look at the ROI that a good WMS can achieve.  It might surprise many to find out that the initial investment can be recouped in a very short amount of time.  If you own or manage a business that operates a warehouse which 30% do you want to be in??

 

Learn more about electronic warehouse management solutions by visiting http://www.warehouse-management-systems-us.com

Learn more by reading this white paper on How Goods move through an Accellos One managed warehouse

It’s Time to Retire the Pencils and Paper

I am astonished on a weekly basis by the number of businesses I encounter that are still managing their warehouse operation with paper and pencil.  In most of these companies I see well thought out processes to handle the many functions and activities in the warehouse.  And while these processes do work and the products manage to get out the door,  they are holding back the business from making higher profits.  Why?  Because they are extremely inefficient and inefficiency robs the company of hard earned revenue.

For  companies that are in warehousing, distribution or manufacturing it is time to retire the pencil and paper and move into the 21st century.  Today, with profit margins being razor thin and customers looking for the very best prices and added services you need to be as efficient and productive as possible.  Your warehouse has to be profitable.  No longer can you subscribe to the notion that if the products get shipped out then all is well.  It is time to automate as many  processes as possible.

Its starts with  barcoding and with automating the receiving, put-away, replenishment picking and shipping functions by moving to an electronic warehouse management system.  WMS solutions are no longer just for the big guns in the 3PL, wholesale distribution or manufacturing business segments.  It is time for small and mid sized companies to adopt this technology.  Frankly your customers demand it.  It is my opinion (backed up by a plethora of industry statistics from the Aberdeen Group, Gartner and Supply Chain Management to name a few) that those that do not step up their game will be left behind.  They will wonder where their customers have gone and why they are losing money.

I said earlier it starts with the barcode because the essence of a WMS is tracking very item in the warehouse and every task performed by scanning the barcode that is on nearly every product produced today.  And should you actually have products without a barcode you can create one.  In your warehouse you add barcodes to every storage location where product could be stored.  The combination of scanning the product and the location of that product begins to create an efficiency and accuracy not possible in a paper and pencil, manually operated warehouse.

So take those well thought out processes mentioned earlier that you have been operating with and  automate them through the use of a warehouse management system that best fits your companies needs and watch your profits rise.  Small percentage gains in efficiency, accuracy and productive will add up to a significant return on investment.

To read more on optimizing ROI in the warehouse click here.

To Read a recent case study on how one company has improved their operation through the use of a WMS solution click here

 

 

Not All Are Created Equal

Not all warehouse management solutions are created equal, the right WMS saves you time and money and ultimately increases your customers’ satisfaction.  The key to choosing the right WMS is, will it help in maximizing customer service and satisfaction. A Best in Breed WMS will provide a spike in customer service, leading to greater customer satisfaction and increased profitability. Not having a WMS or one that is not meeting your changing needs means constant struggles to keep a stable customer base.

So, what should a best in breed WMS offer and what should you look for?  Here is a list of things to look for.

  1. Maximum Functionality; will the WMS streamline operations and provide improved productivity Read more
  2. Ease of Use; if the WMS is easy for the warehouse staff to learn and use they will not look for ways to not use it or find work-arounds.
  3. Transaction Management; You want the WMS to track everything from the moment product hits your receiving dock until it is shipped out the door.  And you want to be able to get easy instant reports on everything that moves and who is moving it in the warehouse.
  4. Flexibility; a good WMS will be able to grow with you and be able to meet new and changing requirements.  Be sure to review what the plan is for future upgrades.  Make sure the WMS can interface with today’s well known ERP solutions.  One day you may want or need to move to a new ERP and not want start over with your warehouse management system.  This is important.
  5. Useful Reports; data is important.  Review the way the WMS provides that data to you.  Are their easy to access reports?  Does it provide a way to easily create your own ad-hoc reports?  Does it have a business intelligence capability?
  6. ROI; this seems to be a horse that gets ridden too much.  But, ROI for a WMS can easily be established and should be investigated and analyzed.  Good WMS solutions can provide solid, real results from existing customers. Read more about ROI.
  7. Proven Track Record; a good WMS provider should be able to provide you with a viable list of references that are in the same or similar industry as you.  If possible go for a tour of a business using the WMS and if possible one that in seamlessly integrated to the same ERP solution.  Make a list of questions and get answers on the points I have listed.

The right WMS will save you time and money and ultimately increases your customers’ satisfaction and profits. The difference between purchasing the right WMS and the wrong WMS is simply a matter of knowing which questions to ask.

Read more on how a warehouse operates using a best in breed WMS

Top 10 “Must Have” Warehouse Management Systems (WMS) Features-Counting

Another “Key” feature for better inventory control is counting.  Counting should be a core module in any Warehouse Management System to accurately track all inventory.  Any sort of Counting Functionality should ideally support both Cycle Counting (forced and manual) and physical inventory counting.

Many distributors conduct an annual physical inventory. That is, they count the products in their facilities once a year.  Unfortunately we’ve found that most physical inventories are a total waste of time and money. Why?

Usually anyone with a pulse is drafted to count inventory during the physical.Even people who are not familiar with your products (like the receptionist and her brother-in-law) will be sent out to the warehouse so that all of the products can be counted in the time allotted.

Workers do not enjoy the physical count process.They probably have better things to do with their weekend than spend it in a hot or cold warehouse counting products. In all probability their actual objective is not to perform an accurate count, but to put down on the count sheet whatever management will accept so they can go home.

There is a tremendous time pressure to finish the count.Shutting down operations for a physical count is a very expensive process. Usually at the end of the time allotted, management will decide to accept the existing count as being as “accurate as possible” so that the company can return to the task of servicing customers. Many discrepancies between the computer’s perpetual inventory and the quantity counted may remain unresolved.

Even if an annual physical count is 100 percent accurate, how long does it stay accurate? A week? A month? Many distributors respond that on-hand quantities only remain accurate until they start shipping material again.  For most distributors, cycle counting provides a much better tool for maintaining accurate stock levels than an annual physical inventory. Cycle counting is the process of counting a few products every business day throughout the year.

There are three common methods to determine what products to count on a specific day:

1. Random selection—Products to be counted are chosen at random. While this method keeps potentially dishonest

employees on their toes, it does not ensure that all items in a warehouse will be counted on a regular basis.

2. Geographic selection—Products are counted in sequence. Starting at one end of the warehouse a certain number of products are counted each day until the counters reach the other end of the building. All products are counted the same number of times, even though some products are more susceptible to discrepancies than others.

3. Rank-based selection—Products that are sold most often (regardless of quantity) or have the highest cost of goods sold are counted most frequently. Slow-moving products and dead stock items are only counted once a year.

Of the three methods, we’ve found rank-based cycle counting to be the most effective at maintaining accurate stock levels. The more frequently an item is sold, the more chance for inventory inaccuracy. After all, every time someone fills an order or puts away a stock receipt is another opportunity for an error to occur. And the products that are requested most often are probably extremely important to your customers. In order to provide good service, it is critical that you have accurate counts for these items.

It is interesting that, for most distributors, relatively few products are responsible for the majority of product requests (also known as “hits”). You may have heard of the 80–20 rule or “Pareto’s Principle.” This theory states that 80 percent of your sales are derived from 20 percent of your inventory items. We’ve found this not to be true. Usually only 10–13 percent of a distributor’s inventory items are responsible for 80 percent of activity and 50 percent of items are responsible for 95 percent of sales.

We want to count the few items responsible for 80 percent of sales very frequently, perhaps four to eight times a year. Items with fewer hits can be counted less often. Let’s look at a typical rank-based cycle counting program.Items are sorted in descending sequence by hits. The items that are responsible for 80 percent of total activity are assigned to the “A” rank, products responsible for the next 15 percent of activity are assigned to the “B” rank, “C” rank products include the products that are responsible for the next 4 percent of activity, and “D” rank products are responsible for the last 1 percent of activity. Products with a rank of “X” have no activity (they’re dead stock).

• Count the “A” rank products six times a year

• Count the “B” rank products three times a year

• Count “C,” “D,” and “X” rank products once or twice a year

Rank-based cycle counting ensures that your counting activity is productive. Spending just an hour or so a day counting can make the difference in maintaining an accurate perpetual inventory system. It takes a lot of discipline to implement and follow a program in which you count a certain number of products every business day. Many distributors have tried cycle counting and abandoned the program. They’ve been frustrated as other tasks have interfered with the process or they have not been able to complete counting all of the products scheduled on a certain day. The following ideas have helped many of our customers develop successful cycle counting programs. These companies are working “smarter” rather than “harder.”

Additional WMS Software Counting Functionality could include:

  • Cycle Count by Bin
  • Inventory Count / Recount
  • Cycle Counting serialized items
  • Configurable workflow prompt for bin
  • Option to allow adjustments to inventory during Cycle Count based on discrepancies between expected qty and counted qty
  • Option to hold adjustments created through Cycle Counting in a pending state, for supervisor review
  • Ability to define bins to exclude from cycle counting
  • Physical Inventory Wizard supports Multiple Warehouses
  • Cycle Counting single-item license plates

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