Warehouse Evolution in Vietnam What is a Warehouse? • A cost centre……a drain on resources………a black hole where things just disappear • Somewhere to put stuff you don’t need right now……somewhere to put family members not quite smart enough to handle office work…… • A den of rogues run by a local mafia • A cool place to sleep at lunchtime 1 A Paradigm Shift OLD • • • • • Static Fill High Inventory levels Measured in ‘000 m2 Unresponsive to market needs • No Added Value NEW • • • • • Dynamic Flow High Throughput levels Measured in pallets/month Quick Reaction to market needs • Value Added Services • Labelling / Bundling • Co-packing • Kitting / Customization Safety & Security in the Warehouse • A Supply Chain professional will make a judgment of the quality of a warehouse within 2 – 3 minutes of entering – if the housekeeping is bad then everything else is almost certainly going to be poor too. • A well-managed and efficient warehouse will always be tidy 2 Beware – Forklift Drivers! • Keep Pedestrians & Forklifts away from each other • No Passengers • Invest in your Forklift Drivers – the accuracy of your WMS depends on them! • …and they can do this to you…. Preventing Pilferage • Access all areas ? • Only allow authorized personnel to enter into the warehouse • Use the office as the barrier • Use uniforms (no pockets) • Minimize opened cartons • Create a dedicated pickface area for part cartons if you really need them • CCTV 3 BOOSTING WAREHOUSE PERFORMANCE The Case for KPI’s (Key Performance Indicators) What Gets Measured, Gets Managed Measure what can be measured and make measurable what is not so Galileo Galilei (1564 – 1642) 4 The Benefits of KPI’s • Increased inventory accuracy /Reduced inventory levels • Less time ‘wasted’ on wall-to-wall stock takes • More efficient warehouse operations • Know your true activity costs • Greater transparency of warehouse activities • Greater clarity of the required performance levels between you and your suppliers / customers • Greater understanding of the customer’s experience when dealing with you Deciding Your KPI’s KPIs should reflect and measure key value drivers that would help you achieve specific business goals : – – – – – Identify the criteria to be measured Develop the KPIs with the target audience in mind KPIs should be simple and manageable in numbers The source data for KPIs should be reliable and easy to generate KPIs should be prepared in consultation with the staff responsible for preparing them – KPIs should clearly state thresholds, targets and industry standards or benchmarks – Periodical results should be discussed, off -tracks communicated back on a timely basis, and follow-up actions taken – KPIs should be reviewed to ensure that they are still relevant at least once every three to six months 5 KPI Overload • Inbound • Cost – Putaway time • Inventory Accuracy – Accuracy at SKU level – Cycle count completion • Outbound – – – – Pick accuracy On time loading / delivery Order fill rates Perfect ordersDamages / Returns – Complaints – POD Timeliness – Warehouse Cost per unit or per m2 – Warehouse costs as % of sales – Activity Costing • Productivity – – – – Stock turns Throughput rates Pick rates per manhour HS&E incidents per manhour – Equipment downtime KPI Focus • Focus on only those KPI’s that really matter to you • Use a balanced combination that gives the best view of your end-to-end supply chain • Seek to understand the underlying interrelationships between the KPI’s you choose. 6 Managing Inventory • How do you decide where to put goods in your warehouse? • How efficiently do your staff move around the warehouse? • How much time do you spend counting stock? • ABC analysis can improve your efficiency and productivity significantly ABC Analysis • Pareto Principle : roughly 80% of the effects come from 20% of the causes SKU A B C D E F G H I J K L Throughput 2,967 2,456 2,378 1,985 1,786 1,672 1,145 986 867 545 432 332 % Cum. % 14.6% 14.6% 12.1% 26.7% 11.7% 38.4% 9.8% 48.1% 8.8% 56.9% 8.2% 65.1% 5.6% 70.8% 4.8% 75.6% 4.3% 79.9% 2.7% 82.5% 2.1% 84.7% 1.6% 86.3% A B C 7 Uses for ABC Analysis • Warehouse Layout – Reduce travel distance to your A’s – C’s stored further way from despatch area • Cycle Count Policy – Count the A’s often to catch errors before they are lost in the mass of transactions – Count C’s change less, so count less often • Configuring your WMS • Cleaning up your portfolio, culling slow movers MY WAREHOUSE IS WORKING OK, BUT IT’S NOT BIG ENOUGH 8 Space Utilization • First Law of Warehousing : “If there is available space, someone will eventually fill it, and usually sooner rather than later.” • Reasons for running out of space • • • • • Rapid growth Seasonal peaks Bulk buying for discount Inventory build to cover factory shutdowns or changes Sales & Forecasts not aligned • All of which your warehouse has no control over, and more often than not, is not even aware of… Space is not infinite…… • Too much of the Right Stuff • Good OTIF performance; Bad efficiency and safety • Largely self-correcting • Too much of the Wrong Stuff • Obsolete stocks • Non-inventory items • Bite the bullet – take the write-off hit • Poorly Utilized Space • Warehouse has not kept pace with the business development (new products, new service requirements…) • Wasted vertical space 9 Sweating the Assets • VN warehouses typically are not aligned to the business flow and usually work normal office hours…and everything stops for lunch! • Routine tasks become institutionalized overtime. • Working a 48 hour week Mon-Sat and allowing 3 hours OT per week* means the warehouse is in operation for just 30% of the possible time available! * Average 3 hours OT per week to comply with VN Labour Law – maximum allowed is 200 hours per year per person The One Man Band • The Warehouse Keeper – Held accountable and personally responsible for all inventory losses/gains – If the warehouse is open, he has to be there • Having a scapegoat ‘frees’ the company from investing in the normal checks & balances • The result ? : • • • • Ambiguity, collusion and cover-up Stock counts never properly reconciled Write downs not taken Inaccurate Inventory record 10 Go with the flow • Align warehouse operations to the natural business flow – Despatch your orders as early as possible – Use remainder of morning for Receiving . – (May be possible to schedule a 2nd round of despatches during the morning) – Putaway and cycle counting in early afternoon – Late afternoon is for picking and readying goods for despatch – If site security is good, load the trucks in the evening. Set the tempo • Inefficient warehouses are reactive – they don’t know what is going to happen next – Vehicles arrive at any time & spend hours waiting to be processed – No clear time demarcation for different functions • Allocate time slots for each function – Use booking in times for inbound & outbound vehicles – and enforce them. • An Efficient warehouse sets the rhythm 11 Communicate • As the warehouse grows it becomes more difficult to communicate effectively – different teams set their own (often conflicting) goals • A short Operational meeting at the start of each day (or shift) will ensure that everyone in the warehouse knows what is happening, what the priorities are, and are aware of any abnormal conditions (repair work …) STILL NOT BIG ENOUGH…… 12 Adding Space • Temporary Storage – seasonal fluctuations – Under tarpaulin in the yard – Short term – dry season only – Use Containers & trailers – Short term - Better security, but expensive – Use 3rd Party – Medium Term – Higher rates than for long term contracts • Renovation & Redesign Redesigning a Warehouse • More art than science, more common sense than theory • The Goals : – Use space efficiently – Allow for the most efficient material handling – Provide the most economical storage in relation to costs of equipment, use of space, damage to material, handling labor and operational safety – Provide maximum flexibility in order to meet changing storage and handling requirements – Make the warehouse a model of good housekeeping 13 8 Step Guide to Redesign • Measure the space you have to work with, • Define the fixed obstacles (columns, walls, doors, clearances, etc…) • Understand the product stored and handled • Establish the material flow paths • Determine auxiliary facility requirements (offices, dock staging, hold and inspection, etc..) • Generate alternatives • Evaluate alternatives • Recommend and implement improvements Design Considerations • Vertical Cube Utilization – A well designed facility will achieve 75-80% utilization • • • • • • • • Selective Racking is just the beginning Drive in Racking / Double Deep Racking Tunnel racking (across aisles) Racking over docks Mezzanines (Office space, VAS areas…) Narrow Aisle Racking Very Narrow Aisle Racking Pallet Flow / Moveable storage 14 Cross-Docking • Cross-docking is an activity whereby goods are received at a warehouse and dispatched without putting them away into storage. The goods may thus be transferred directly from the receiving bay to the dispatch day. This normally involves some sort of sortation. May combine crossdocked with stocked goods in a single order. • Transhipment is a simplistic form of Crossdocking. Cross-Dock Types • Transhipment – Useful for working around truck bans • Planned – Orders known at point of origin before despatch – Sortation required at Cross-Dock – Additional VAS may be included at Cross-Dock • Opportunistic – Matching order outgoing requirements with incoming – Requires WMS functionality – May compromise FEFO/FIFO controls 15 Cross-Docking Enablers • Integration and co-ordination of the appropriate supplier/customer interfaces. EDI/email, scanning and bar code technologies can be most useful enablers • Destination is known, ideally before, but at the latest when the goods are received • Customer is ready to receive the goods • Product data recognition to facilitate quick checking/verification • No long timescales for any quality control or checking on receipt • Good quality information • Co-operative supply chains • Disciplined deliveries – ASN’s Time slotting… Cross-Docking Disablers • Cross-docking will therefore be sensitive to : – Non- receipt of suppliers deliveries – Short receipt on suppliers deliveries – Late arrival of suppliers vehicles, bad weather, road traffic delays… – Last minute changes in customer orders 16 Is Cross-Docking Right For You? Advantages • Rapid flow of goods through the warehouse – vital for perishable goods • May allow reduction in inventory levels in RDC’s • Facilitates ‘Push’ strategies for moving goods into the market • Smaller vehicles can operate in restricted traffic areas Disadvantages • May increase upstream inventory • My not maximize carrying capacity of vehicles • Large space required for sortation • Complexity increases rapidly as the number of SKU’s increases • Delay effects are magnified 17