Warehouse Productivity: Prove, Improve it
Ways to evaluate processes and return-on-investment
In the last two decades, smart companies have identified the warehouse operation as a profit center, not a cost center. This is far from universal, but it inches toward that every day. No longer are warehouse managers considered box-hustlers – at least not in smart companies. Many are utilizing varying levels of automation. WMS is standard for larger operations and is making its way even to single-building, midsize and smaller ones.
Clipboards, carts and spreadsheets
Very few operations of any size rely completely on muscle, clipboards, carts, and spreadsheets these days; automation, at least in areas, has come into its own. But do you need to radically change your operation (and spend the capital that comes with that change) to boost warehouse productivity?
Some no-nonsense steps:
- Evaluate warehouse processes. Is each part of the process logical? Process mapping can be done without expensive consultants, either by hand or with relatively inexpensive software. The discussions you’ll have with various department heads and people on the floor are often worthwhile by themselves. Look for gaps in the process you can plug. If packers point to picking issues that cause them problems, you have a place to start.
- Create a plan – and stick to it. Identifying issues isn’t enough by a long shot, of course. Companies who identify issues and then fail to plan and execute based on them are only talking improvement. Execution is the key.
- Be determined; bullheaded. Once you’ve identified, planned, and executed a process improvement, you should be able to understand its effect on the operation. If the result of our hypothetical issue between packers and pickers is that packers are better off, but order picking bogs down (or becomes less accurate), we haven’t achieved anything.
No longer are warehouse managers considered box-hustlers – at least not in smart companies
But you can’t always attain significant increases without capital expense. You may need to implement robotic palletizing, enhanced WMS, etc. “Productivity gains” mean little to CFO’s or other upper level managers, though. They’re interested in dollars – how many were spent, how many were saved, and how fast the investment returns its value to the operation.
ROI isn’t simple math
Do you know your company’s definition for ROI? If you don’t know what it is, find out. It varies throughout companies and industries. A simple line item of my cost of $X saved $Y may not be good enough. In many firms (including Cisco-Eagle) the standard is to also compare that expenditure to what else could have been done with the money, including letting it drop to the bottom line. Prove your idea will pay off better than alternatives.
Can you show that a new conveyor system or picking system costing $600,000 will reduce labor costs enough to pay for itself within a reasonable time? Sometimes this is easier than others. If the system helps you reduce headcount by 10, and each person earned $30,000 per year, you get a rough idea of what you are faced with. But if the system simply allows you to keep up with growth, your justification scenario is easier.
Can you also prove that your new idea is going to pay off better than, say, letting that money drop or better than an IT overhaul or other alternatives?
Scott Stone is Cisco-Eagle's Vice President of Marketing with more than thirty years of experience in material handling, warehousing and industrial operations. His work is published in multiple industry journals an websites on a variety of warehousing topics. He writes about automation, warehousing, safety, manufacturing and other areas of concern for industrial operations and those who operate them.