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Strategy
The Enterprise Resource Planning (ERP) boom of the nineties has not only led to a
tightening of the belt in many organizations, it has also followed a course through the
functional silos and departments within companies. Traditionally, the supply chain and
the warehouse in particular have been an afterthought in this process.
Warehouse
Management Systems have not typically been considered an integral part of ERP
implementations. This standard is changing.
As systems integration provides detailed and historical cost controls, the areas outside of,
or disconnected from this realm are falling under the microscope.
A good example of the need for integration is the introduction of a new product to the
market. If the product is a hit and the consumers can't purchase it due to lack of
availability in retail outlets, the introduction is a failure. At this point we are naturally
inclined to place blame. The marketing and purchasing group will be pointing the finger
at the distribution channels for failing to have the product to market, while the
distribution team will be returning fire claiming the manufacturing or purchasing
schedule failed to meet demand and lead times.
Multitudes of factors drive the need for change. The two most common are no stranger
to most companies "cost" and "speed", or the need to get it there faster and cheaper.
Complementing this strategy is the advent of new technology. The warehouse operation
can take advantage of advances in the transfer, management and control of information
from both internal and external sources. Internal operations are taking advantage of
advances in Radio Frequency (RF) technology to speed the flow of information and
materials.
Value Added Services
The effective use of value added services (VAS) is recognized as a potential means to
improved transit time and reduced inventory. The planning and execution of VAS can
mean success or failure to the supply chain. Essentially value-added services are used to
differentiate a unit of product from the standard stock keeping unit (SKU) stored in a
warehouse or distribution center.
Specific retailers or customers of the distribution network may require unique features of
the product. This could range from affixing barcodes, price tags or promotions stickers to
product packaging, inserts, kitting or light assembly. Once complete, these changes to
the unit limit the customer orders for which individual product can be allocated.
Successfully managing the point of VAS can have dramatic impact on product handling,
storage and carrying levels.
Compliance
Hand in hand with VAS are compliance issues. In an effort to simplify and standardize
the receipt of product, many customers are demanding that their vendors meet specific
compliance standards. This can pose significant hurdles for the distribution team and can
often make the difference in gaining and retaining important customers. Compliance
issues can range from providing EDI transactions to the format of the label on each
carton or pallet.
Inbound
In its simplest form the inbound process has two key processes, planning and execution.
Each possesses critical components that set the stage for the flow processing of material
and goods through the warehouse.
Inbound Planning
Ideally, the warehouse will be receiving via Advanced Shipment Notifications (ASN) or
Purchase Orders (PO) electronically from manufacturing sites, freight forwarder,
suppliers, etc. The ASN permits the inbound planner to schedule deliveries, dock doors
and receipt operations. If these are not being generated from outside sources, it will be to
the operator's advantage to create them manually prior to arrival. Manually receiving
merchandise without ASN's or PO's is a cumbersome task that will delay the flow of
goods.
Inbound Execution
Inbound Execution is comprised of three main areas; start receipt, receipt and putaway.
The start receipt function will verify and ASN exists and open the ASN. If it does not
exist, the ability to manually create an ASN will be activated, or if there is insufficient
information to create an ASN, a 'dummy' ASN can be created. Each of these options will
pose and ascending layer of interaction and delay.
At this point as well, any items or quantities required for special handling (ex. Quality
Control checks, notification of rework required, etc.) will be flagged in the system for
diversion or hold. Once receipt has been started License Plate Numbers (LPN's) can be
created and placed on each unit. The LPN will then become the primary data point to
follow the unit through the warehouse.
require LPN information be affixed to each package prior to receipt. This significantly
increases receipt throughput.
In a warehouse receiving via Radio Frequency (RF), cases or SKU's can be automatically
received with a simple scan. In non-RF scenarios receipt can be done unit by unit or
worksheets can be printed for manual receipt on the CRT. Once all discrepancies are
resolved, receipt can be closed, the host computer updated with new inventory and
putaway moves will be generated.
Putaway/Product Diversion
The first step in the putaway process will be to check pending orders and look for
opportunities to bypass putaway completely, moving inventory directly to shipping. If
this is not feasible the putaway sequence will begin. If the system is designed to
automatically generate putaway movements it will query the extensive table of putaway
rules to respond determine the putaway location and create putaway tasks for the user.
In a RF warehouse, users will merely scan the unit, case or pallet LPN (depending on
setup) and will be directed to the putaway location. Putaway rules can be based on a
number of criteria supporting dedicated to random location selection.
Changes or
discrepancies in putaway can be made on the spot, updating the database immediately,
eliminating manual processes and maintaining inventory accuracy.
Non-RF putaway is done manually from pre-printed sheets. Once complete, moves are
verified in the system and discrepancies rectified manually.
When inventory locations are not generated by the system, RF capabilities are set to scan
the unit LPN and respective putaway location determined by the user. Manual scenarios
are similar to above with the exception of the pre-printed task sheets. Actual moves are
recorded manually then updated in the system
Physical Counts
Although a physical inventory will provide the most accurate and current inventory
information, the labor involved and the need to be performed during non-operational
hours is often limiting. For the WMS this is generally an offline procedure which
involves the manual updating of databases after inventory count completion and prior to
operations startup.
Cycle Counts
The cycle count process takes an incremental approach to counting and inventory
maintenance.
frequency by SKU, product type, location, etc., and schedule counting to occur during
other work activity.
Inventory Management
The inventory management function serves several process management purposes;
inventory adjustments, tracking and inquiries, DC to DC inventory transfer, space
utilization and inventory movement control.
Inventory Audit Logs allow the look up and auditing of inventory changes. Users can
select specific audit details for inquiry by specifying criteria. Each audit record can be
exploded to view the sales order, purchase order, or container relative to the audit on a
separate screen. The information is sorted in descending order of time. A work-back from
the last record can be adopted to match stock pictures.
The Inventory Adjustment process allows for the stock adjustments for an SKU.
Controls for stock adjustments can be user or location specific for security purposes.
This provides a controlled process for inventory adjustments within the warehouse.
The Inventory Inquiry process allows users to view SKU's or LPN's at the warehouse
level and location level. As well, users can drill down if further information is required.
For example, inventory inquiries can be based on SKU, model, product type, individual
cases or pallets, product class, quality status, lot number, FIFO, country of origin,
allocatable/non-allocatable and pending pick/ship status.
The ability to control movements can be critical for a number of key processes. User
may wish to inquire the details of movements, modify any movements not yet completed
(or modify and complete at once), cancel incomplete movements, complete a movement,
group a series of movement in a batch or release a batch of movements into individual
moves.
The DC to DC Transfer process allows users to create a transfer order to move inventory
to another warehouse or distribution center (DC). The system will manage the transfer
using typical rules for order processing it will however bypass customer specific
processes such as wave planning and generate shipment information automatically. The
Perform Movements process provides a variety of options for performing move tasks
based on work type. Work types can be flagged to signal product movements into
"locations". Generally, the following operations will occur; Create Move Task, Perform
Move Task, Report Complete Move Tasks and Manual Move.
The process of consolidation or space utilization can help identify locations with the
same SKU and create move tasks to combine and consolidate. This is often a background
job that can be run automatically. The objective is to maximize the number of empty
locations - not to minimize the number of locations used.
Outbound
Like the inbound function, outbound operations consist of planning and execution. Each
possesses critical components that complete the inventory transactions, update systems
and take the merchandise from the warehouse system to the transportation system.
In its simplest form, the outbound modules process downloaded orders, create loads and
shippers for orders, create and release optional pick waves, run pick, pack and ship
activity and generate all necessary documentation and paperwork. The shipper will be
the command file (RF warehouse) or printed file (manual warehouse) which will govern
the picking, packing and shipping of an order or group of orders.
Outbound Planning
The planning of the outbound cycle is more complicated than the actual execution phase.
The initial process of creating loads and shippers starts with the consolidation of orders
downloaded from the host. As mentioned before, shippers are automatically created and
inventory allocated for transfer orders. All other orders will run through a consolidation
process. By matching orders to consolidation rules, the system can look for opportunities
to consolidate orders and improve pick, pack and ship efficiency. As well, inventory
checks can be run to ensure orders dropped will be meet fill rate standards. Once order
consolidation is complete, shipment mode selection occurs. In the case of Truckload
(TL) movements, a load planning module can be incorporated for trailer utilization.
Otherwise orders will run through a carrier selection module.
Here a rules-based
Otherwise, shippers are compared versus the inventory and units are
assigned to a wave based on user preference. Once all necessary shippers are assigned to
waves, the wave is released.
Wave release can be a complicated process. Once released the wave must first be tasked.
This means that each of the unique specifications or operations of the wave are identified.
Product collation is identified, pick locations are determined, and special cartonization
requirements (box, number of units, orientation, etc.) are noted.
>From this information a pick strategy is generated and physical tasks assigned. At this
point work tasks, pick strategies and print jobs are batched for efficiency and routed to
the respective locations pending picking.
Outbound Execution
Once released, waves pass through a series decision points.
involves pick-to-light or an automated sortation.
Information is automatically
downloaded to the respective systems. In some cases, these systems will control the
physical pick task activity as well as the movement of cartons to shipping.
Shipping
Once completed shippers have been verified, carton-by-carton against inventory and
orders, they can be forwarded to shipping. In an automated conveyor diverter system,
they will proceed directly to the shipping lane. Otherwise, they will be manually moved
to the shipping area.
Once in the shipping area, system generated RF commands or printed reports can detail
the ship mode and instructions required. Pallets can be built with specific cartons.
Palletization functionality can be critical in international shipping modes based on
customs declaration requirements. Upon carrier pickup for truckload (TL) and less than
truckload (LTL) movements, a Bill of Lading (BOL) or Master Bill of Lading (MBOL)
can be easily generated.
government requirements.
Parcel shipments can often move directly to the outbound door(s). Carrier specific labels
are part of the WMS functionality and can be incorporated into pick sheets generated at
packing and affixed to the carton. Once weighed (in many cases the system can generate
carton weight accurately) the carton can be scanned at the shipping dock to confirm
shipment. Carrier rate charts can also be built into the system. At pick up time a parcel
manifest will be generated automatically. As with all of the other modules of the WMS,
once orders are complete and shipped all databases are updated on the host system. This
will include (but is not limited to) removal of all shipped inventory form the system and
generation of Advanced Shipment Notifications ASN's (if required) to customers.
Postponement Strategy
There is a one step in the shipping process that is getting a lot of attention. Prior to
shipping the ship date must be verified. A pack and hold order/shipper will be processed
up to the actual ship point and then held until ship date. This can be a critical piece of a
successful postponement strategy.
Warehouses operations interested in shortening the customer fulfillment cycle may
incorporate a postponement strategy to expedite shipping and delivery for specific items
or to specific customers. This strategy takes careful planning and execution.
Postponement involves the advanced generation of shipments. This can be initiated by a
customer that places advanced orders with future ship dates or by a provider that projects
orders and fulfills in advance against the projection.
The warehouse can see added benefits in productivity by filling future orders in low
production periods. If future orders involve customer specific compliance requirements
postponement can be viewed as a value added service (to be discussed).
Although postponement can speed the fulfillment process form order to delivery, if not
managed well, it can negatively impact the inventory goals of the warehouse. Careful
planning ensures that inventory levels are being kept at optimal levels and future orders
are not robbing the warehouse of valuable space.
Value added services consist of three main processes; configuration, planning and
execution.
Configuration
Configuration defines the unique characteristics of the services.
reporting on Bills of Materials or special printed reports. They can specify physical
processes and instruction as well as redefinition of product class, kitting rules and pack
methods. Or, they can detail rules for the processes such as batch, outbound and wave
rules.
VAS Planning
In planning value added services, work orders must be created or imported. External
work orders can often be downloaded into the system based on order specific or dynamic
requirements. Manual work orders can also be created on an as needed basis for specific
tasks.
Once work orders are received, the inventory is verified. The item or SKU is compared
to the minimum specified quantity. If sufficient quantities exist for specified needs,
orders are created and routed appropriately based on kitting or packaging requirements.
VAS Execution
The release of work orders to the warehouse will result in specified inventory movements
for affected units. RF or paper depending on the warehouse will be used to execute these
tasks. Once move tasks are complete, value added services are performed.
When VAS is complete the work order and respective unit(s) of inventory are either
released as work in process toward an order or shipment or released back into active
inventory as a new product or product class for pending and future orders. Once released
from VAS, all necessary inventory updates will be made.
Conclusion
On the surface, warehouse processes may seem trivial and perhaps mundane. It is in the
methodology of replicating these processes in a computer model, with the intent of added
efficiency and improved flow, that one can see how complicated the warehouse operation
truly is.
In today's business world to operate a smooth running warehouse is not enough. The
perception of a precision operation could be masking symptoms that are undermining the
organization's progress.
Orders must be
processed in the right place, at the right time and with the right product.
As new products hit the market and the customer order frenzy ensues, it is the
warehouse's ability to receive and process information that can make or break the value
perception in the customer's eyes. As well, armed with data, the WMS can interact with
the ERP while the operators work hand in hand with marketing and purchasing. to track
and meet demand, minimize inventories and overhead, ultimately strengthening the
bottom line.
Thomas K. Cassidy
Director - Supply Spiral Solutions
Alliance Consulting
2005 Market Street, Suite 3200
Philadelphia, PA 19103
Phone: (800) 706-3339 ext.1115
(610) 909-6813
tcassidy@alliance-consulting.com
Biographical Sketch
Thomas K. Cassidy
Tom is a Director of Solutions Architecture in the Supply Spiral
Solutions Practice at Alliance Consulting.
He is a recognized member
of
the
engineering
community
with
experience
in
technology
applications, distribution/fulfillment operations, planning/support and
consulting. He has successfully managed Industrial Engineering,
consulting and operations teams on projects involving Technology
Integration, Facilities Planning, Total Quality Management, Business
Process
Re-Engineering,
Core
Process
Redesign,
Site
Location,
Warehousing and Transportation Operations. Prior to Alliance, Tom held
Manager positions at both United Parcel Service and answerthink.
Tom has a Master of Engineering in Engineering Science from Penn State
University and a Bachelor of Science in Industrial Engineering from
Lehigh University. He is member of the Council of Logistics Management,
the Engineers' Club of Philadelphia, a Senior Member of the Institute
of Industrial Engineers (IIE), The IIE Society for Engineering &
Management
Systems,
Director
of
IIE's
Division
of
Logistics,
Transportation & Distribution a former Chapter President and the
current Region 2 Vice President.