Warehouse Management:Measuring and Benchmarking Warehouse Performances

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Warehouse Benchmarking

• Setting world-class performance, practices , and infrastructure goals for the warehouse operations

• WBM Permits quantitative assessment of the opportunity for improvement in– Productivity – Shipping accuracy – Inventory accuracy – Dock to dock time – Warehouse order cycle time – Storage density

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Scheme of session

1. Benchmarking & its types?

2. Warehouse performance metrics

3. Warehouse Performance Gap Analysis (WPGA)

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1. Benchmarking & its types?

Benchmarking?• Quantitative assessment of aspects of performance• Process popularized in late 80s ; Xerox Corporation• Aspects

– Internal – External – Competitive

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1. Benchmarking & its types?Internal Benchmarking• Focused on the operations of a single company

Case of Gillette• Operation includes • Mexico , Chile ,Brazil ,Colombia, Argentina• Logistic managers are measured against key indicators:

– Shipping accuracy – Inventory turns– Fill rate– DC productivity– DC storage density– Order cycle time– Perfect order percentage

• Competition among group• Winner teach the group how he/she achieved that success

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1. Benchmarking & its types?

2. External Benchmarking• Looks outside the firm’s industry

Case of Xerox Service Parts• Embarked on major DC reconfiguration• Arranged tours of a variety of DC facilities • Exchanged information from the host company• Performance measurement frame work

– Lines shipped per person hours– High score facilities; a beacon of guidance

• Focal; L.L. Bean (retail)• Process worked and Xerox Chicago DC has achieved Modern

Material Handling’s annual productivity achievement award

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1. Benchmarking & its types?

• Xerox looked outside the industry• ECR in the grocery is the take-off on QR of Textile

industry• QR is a take-off of JIT from the Japanese automotive

industry• Carousels DC take-off of dry clean industryHow• Benchmarks with logistically similar company

– Order value– Average order cube – Average number of items on an order– Transaction volume

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1. Benchmarking & its types?

Case of SBC Telecommunication• Task to reduce material cost by 20 percent maintaining service level• Logistics benchmarking partnership

– SBC (t.c), John Deere (agro machinery), United Stationers & Excel Logistics

• Comparison by developing questionnaire• 12 questions from each company• Identified ULP of each company

– John Deere’s work measurement & safety– SBC; customer service excellence– US productivity– Excel ; Quality performance

• Teach ULP to other partner

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1. Benchmarking & its types?

3. Competitive Benchmarking

• Assessment of company’s logistics performance with competitors

• Case of wholesale distributor of Health care

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2. Traditional WBM metrics

• Operating cost – Warehousing and/or Distribution cost as percentage of sale

• Operating productivity– Measured in units lines, orders , pieces and pallets etc handled

per person hour

• Customer response time• Shipping accuracy• Annual Warehousing cost

– Labor cost (material handling, annual) [labor hrs X WR]– Space cost (storage) [square ft occupied X annual cost of space]– System cost (information handling) [system investment cost X

annual amortization/ depreciation rate

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2. Traditional WBM metrics

Integrating all ,Four important measure A. Warehouse Financial Performance B. Warehouse Productivity Performance C. Warehouse Quality Performance D. Warehouse Cycle Time Performance

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2. Traditional WBM metrics

A. Warehouse Financial Performance

• Warehouse activity based costing (ABC)

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2. Traditional WBM metrics

B. Warehouse Productivity Performance• Productivity

– Labor– Space– Material handling system

• Labor periodicity: – Ratio of units , orders, lines or weight shipped out of the

warehouse TO the number of hours spent in operating, supervising, and managing the warehouse

• Storage Density– The Ratio of the amount of inventory storage capacity TO the

square footage inventory stored• Safety

– Occurrences

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2. Traditional WBM metrics

C. Warehouse Quality Performance

• Four key indicators– Put away accuracy– Inventory accuracy– Picking accuracy– Shipping accuracy

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2. Traditional WBM metrics

D. Warehouse Cycle Time Performance

• Dock-to-stock– Time elapse between shipment receiving at

warehouse to readiness for picking

• WHS Order Cycle Time (WOCT)– Time elapse between releasing order to WHS

floor to readiness for shipment

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3. Warehouse Performance Gap Analysis

• Productivity – lines per hour

• Storage density – Case storage capacity per square foot

• Shipping accuracy – Percent line shipped in error

• Inventory accuracy • Dock-to-stock• Order Preparation Time (WOCT)

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Warehouse Performance Index

o Material handling system investment vs Annual working labor hours

o Workforce demographics and Warehouse performance

o Warehouse size vs. Warehouse performance

o Level of mechanization & Warehouse performance

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Warehouse automation & its dos and don'ts

– Automation can resolve complex issues– WHS practices training: is it a for granted

issue?– Analysis of live system– Use of CFT in performance evaluation– Compare & contrast operations– Mechanization & Flexibi9lity

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World Class warehouse Practices

• Receiving• Put away• Reserve Storage• Picking• Slotting• Replenishment• Shipping• Work Measurement• Communication

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Thanks