By Katrina C. Arabe

Companies are discovering how to better maintain inventory and fill orders with powerful new tools and best practices. Find out how they’re making drastic cuts like 30% less inventory look easy.

When managing warehouses, companies aim to reduce costs in two major operations—maintaining inventory and filling customer orders. To make both more efficient, they are not only adopting new technology solutions but also implementing “best practice” procedures. While the high-tech approach involves utilizing new software tools (think “collaborative visibility” and “inventory optimization”), the “best practice” tack entails arranging items in the warehouse or distribution center in the most expedient manner.

One new technology approach is collaborative visibility, which is helping manufacturers work more effectively with suppliers to avoid excess inventory.

“What we found is (that) companies have been working on the top-tier suppliers to take out the waste and create new efficiencies,” says Bill Linquist, a business unit leader for New Jersey-based Ingersoll-Rand Co. Ltd. “But companies aren’t working on the bottom tier suppliers (the remaining 20%) where you still see transactions and inventory waste.”

To help companies better collaborate with these suppliers, Ingersoll-Rand, along with Massachusetts-based software developer SupplyWorks Inc. and Illinois-based third-party logistics provider Roberson Transportation Corp. last year launched The 21st Supplier, a business-to-business service that optimizes discrete manufacturing procurement.

To improve supplier-manufacturer collaboration, the service gives suppliers insight into manufacturers’ inventory levels in real time. “When we provide visibility, inventory naturally goes down without doing anything else because suppliers realize for the first time what is out there,” says Linquist. In fact, he claims that the service has reduced inventory by 10-20% “in every case.”

“When you start to collaborate with your suppliers, it helps them think about what they can do to become more efficient, more effective and how they can execute better,” he says. Through collaborative visibility, suppliers can determine how long inventories will last and can forecast demand. In addition, they can study their own patterns and learn how much and how often they can ship. This will also allow them to cut down their own inventories.

Another cutting edge solution is inventory management optimization. For example, Boston-based Optiant Co. lets firms like Southern Novelties Co., a South Carolina-based packaging company, calculate the correct inventory levels at the correct locations. Its inventory management optimization software helped reduce inventory by maintaining it more strategically.

With Optiant’s software, Southern Novelties figured out that it made sense to hold more inventory upstream—before its metal ends are manufactured for specific products and become more affected by market forces. As a result, the company cut down inventory on its metal ends product line by 30%.

Inventory optimization also aided Arizona-based Dial Corp. Because inventory figures took time to calculate, Dial Corp. was hampered by both excess inventory at the end of every month and too many stock outs at the retail level. To remedy the situation, the company collaborated with New Jersey-based IMI Americas on a software tool that tackles customer fulfillment and affords a real-time view into its manufacturing and distribution network in North America .

“The (key) issue is how you manage the exception—not just planning and execution,” says Henry Bruce, a vice president of IMI Americas. He points out that many companies are skilled at forecasting product demand, but get stumped by day-to-day exceptions.

By gaining insight into its network, Dial was able to handle volatility in product demand planning. “Dial generates demand through promotions which would drive the volatility,” says Bruce. “They have insight now into that demand because they know how much they shipped to retailers (in past) promotion. We capture that and manage against it in the context of the promotion.”

As a result, Dial has been able to even out its demand flow, minimize stock outs and avoid having to dramatically discount extra inventory at the end of every month.

Inventory visibility also helps companies save on inventory costs. For example, customers of Connecticut-based NewRoads Inc., a business process outsourcing firm that offers order fulfillment and other services, can save on inventory costs by receiving products straight from the manufacturer.

For instance, if 60% of the customer’s inventory is fast moving and 40% is slow to leave the shelf, then the company’s overall inventory costs will go up because of the laggards. Through inventory visibility, NewRoads can offer to have the slow-movers shipped directly from the manufacturer to the customer, without stopping at NewRoads’ Kentucky warehouse. “This way our customers don’t have to incur the cost of storing the (slow moving) product here,” says Sally Miller, information technology director at NewRoads.

Another cost-cutting, high-tech approach is creating the “just-in-time” warehouse, which integrates a yard management system with a warehouse management and a transportation management system. The yard system allows companies to streamline the movement of products-laden trailers from yard to dock—including their unloading.

For example, New Hampshire-based ES3 LLC, a third-party distribution provider for the grocery industry, recently built a “just-in-time” warehouse that uses a yard management system from California-based WhereNet Corp, employing wireless, real-time locating system (RTLS) technology. “A lot of the yard maintenance management is gone,” says Geoff Davis, ES3 executive vice president. “We don’t have (those costs) and we don’t have to bill our manufacturers or retailers for it.”

As this example illustrates, receiving provides a huge opportunity to improve order fulfillment. “As we become more effective supply chain managers and get smaller and more frequent receipts, you have to pay attention to receiving,” says Jim Apple, a director and co-founder of The Progress Group, a logistics consulting group. “That’s the process of receiving efficiently; dock to stock time becomes more critical because the less of the stuff I have the more likely it is that what’s coming in the door is needed. I can’t afford to have five trailers sitting out in the yard that I haven’t gotten to yet.”

Improving order fulfillment doesn’t have to involve deployment of the latest technology either. For example, a well-established technology such as bar coding can result in huge efficiency gains. Progressive Distributor magazine looked at inventory costs for over 50 distributors from December 2001 through November 2002 and found that in warehouses where bar coding is used for receiving, picking and tallying up inventory, the cost of carrying inventory was on average 27.6% less than in those where such functions are manually completed.

Another highly effective approach is optimizing warehouse layout. Most distributors continue to store similar products close to each other, reserving warehouse areas for particular product lines. With this layout, finding products may be simple, but order pickers may often have to travel all the way to the back of the warehouse for popular items while slow moving products are needlessly stocked near the shipping, staging and receiving area.

To avoid productivity-draining travel, companies should position the most frequently picked items in the most accessible bins. In this manner, picking can be faster and more efficient, mostly taking place in a small area of the warehouse. In fact, in their study of 50 distributors Progressive Distributor found that less than 50% of stocked items make up 95% of hits (product requests). This means that the remaining half of products that are requested only 5% of the time can be placed farther away from the shipping, staging and receiving area without incurring too much extra travel.

Distributors can also further improve warehouse operations by following some additional layout guidelines. For one, they can store products that tend to be ordered together close to each other. Also, they can consider the order in which items should be pulled from stock in choosing bin locations. For example, if heavy products are usually at the bottom of a pallet, then they should be stored in lower bins or in locations where they can be picked first.

Indeed, when it comes to inventory management and order fulfillment, both high-tech and low-tech solutions can help your company drastically cut costs and dramatically improve efficiency.

By Katrina C. Arabe

Vendors are currently courting the warehouse management field with a new line of web-based management software. Before you rush into a purchase, be sure the software is really what your business needs — and if you even need it at all.

As the vendors of warehouse management software begin offering web-based packages to their clients, warehouse managers have the option of putting their operations online. For some warehouses, especially those of smaller and mid-size companies, there are advantages in doing so. Software upgrades are much easier and quicker with web-based systems. The software is located in one central place rather than having to be installed repeatedly in separate PCs. The software is simply installed on the main server and accessed through the browser. Managers can use the system from anywhere in the network, running warehouse reports whenever, and wherever, they are needed.

Another advantage of web-based warehouse management software is that it eliminates problems that are typically associated with multiple platform use. For the program to run on different platforms, the user needs only to have compatible web access software. This umbrella accessibility makes it easier to distribute programs over the Internet and throughout the network. The relative ease of navigation is another plus. End users usually find that they can get around the system with little more than pointing and clicking.

Warehouse managers seem to appreciate the ability of web-based software to transmit and receive information in real time. This helps them better allocate time and labor to specific tasks. The fact that data acquisition is immediate on the web-based system allows up-to-the-minute analytics that were impossible prior to the software’s availability. In the words of Reg Bryant, warehouse director at L.G. Zenith, “At any point in the day, we can look to see how much work is left on the floor. We used to have to coordinate lots of reports and then guess at the figure. Now the system considers how much work is left that day and how many people are on the floor to work on it, and it tells us how quickly we can get the work finished.”

Of course, web-based warehouse management software may not be right for everyone. Generally, the software is more favorable in a small warehouse setting. These companies simply do not have the critical mass to build an infrastructure to run their own management software, a condition that makes them ideal for web-hosted systems. Large companies, on the other hand, are more likely to assume their own systems. In addition, it is the view of some professionals that web-based software is actually better suited to transportation management and other supply chain functions than to warehouse management. In their opinion, warehouse management is a strictly an internal operation so there is little need to involve an external enterprise.

For those that do adopt web-based software, they may wish to bring their customers into the fold. Giving clients access to the system would improve their visibility of the supply chain and facilitate better planning and scheduling on both ends. For many warehouse managers this is the way to go and web-based software helps them get there. In the words of Zenith’s Bryant, “We’re going to that next step so that we can allow our distributors to look at our deliveries and know what’s available and what isn’t within our warehouse.”

By Katrina C. Arabe

A distributor’s warehouse can be made more efficient and effective by implementing a warehouse management system. The results? Happy customers and increased business.

Without an efficient, cost-effective warehouse, a distributor may not have a business. A well-run warehouse allows the distributor to ship products to customers completely, correctly and on time. The cost of not doing so is high, from the sales force’s time to apologize and correct the error, to staff time to duplicate work, to the risk of losing a customer. In addition, the ability to do so at a profit is critical. Warehouse management software systems can be the lynchpin that makes the business work.

A recent survey by Industrial Distribution asked readers about their use of warehouse management software (WMS). While only 22% of the respondents indicated that they planned to purchase WMS this year, over 30% indicated that they already use such systems. The remainder were not planning on purchasing the systems due to cutbacks or changes in IT priorities this year, or had no plans to purchase.

There are three main objectives of those who plan to invest in a system in 2002. The objectives are tracking inventory levels, increasing productivity, and reducing shipping errors. The distributors are also interested in automating and streamlining picking, automating billing, and automating tracking.

All of these things can be achieved if the company is dedicated to making the system work. “It’s so dependent upon management saying ‘we’re going to put this investment in and we’re going to put a man on the ground to see that we get some benefit from it.’” Says David Allais, president of Pathguide Technologies. For example, Jeffrey Ramras, a vice president of billion-dollar distributor Applied Industrial Technology, is in charge of tracking the progress of his company’s warehouse management system. The new warehouse management program included conveyor and automated sortation systems and a software system that uses radio frequency bar coding. The company also re-designed its warehouse space. The results were increased productivity, personnel reductions of almost 15%, lowered error rates, and increased accuracy to 99%.

For the average distributor, a company that implements a warehouse management system in 2002 will begin to see return on the investment by 2003. Payback of the warehouse management systems will be seen in not only increased productivity, error reduction, and inventory accuracy but also reduced training time, improved picking procedures, and better utilized storage capabilities. Everything depends on the company’s management deciding to make the investment and then have someone analyze the results.

Jim Beckstein, the president of the construction and general-line distributor Mill Supplies, Ft. Wayne , Ind. , has two locations with a total of about 60 employees. Two years ago the company decided to install a system that uses a real-time warehouse management system with radio frequency bar coding. According to Jim Beckstein, the payback is very simple: you don’t have errors – more automation and fewer people equals less chance for human error.

A warehouse management system can be costly, which is a common complaint for many smaller companies. For example, a system that includes software, hardware, training and installation for a typical industrial distributor with annual sales of about $10 million and a single warehouse facility, could cost around $125,000. Small distributors with talented workers who are familiar with the warehouse and don’t make mistakes, probably consider it unnecessary to purchase such an expensive system. Small companies interested in rapid growth and companies of ten or more employees with high turnover that can lead to inefficiency and mistakes should consider looking into purchasing systems.

To have the most effective warehouse management program, it is vital to integrate it with the company’s overall operating system. This allows all parts of the business to “speak” to each other, making the whole facility more efficient. With management investment and commitment to the program any company can utilize a warehouse management system effectively and successfully.

Source: More Than a Storage Facility

May 2002

Industrial Distribution

Victoria Fraza

Automated warehousing applied to part or all of a distribution centre operation can provide a wide range of benefits including space savings, lower building costs, improved productivity, more efficient material flow, less people, safer operations, reductions in inventory, increased reliability, reduced running costs, better ROI and lowest lifecycle cost.

Automated warehousing systems provide the maximum possible usage of available floor space and building height.

In some cases, this enables companies to increase storage capacity by up to 400% compared to conventional forklift operations. Where space is limited, switching to an automated warehousing solution can free up additional space for other activities, such as manufacturing.

And because automated warehousing solutions make the most effective use of space, building costs can be kept to a minimum. Significant cost savings are possible through the need for less land and a smaller building. Because Automated Warehousing systems do not require special floors or expensive in aisle guidance systems. further savings can be achieved.

Automated storage and retrieval machines also weigh a lot less than comparable narrow aisle trucks further reducing construction requirements.

Improved Productivity

Automated warehousing systems also offer tremendous performance in terms of productivity.

Not only do they work faster than forklifts and narrow aisle trucks, they can also operate 24 hours a day, 7 days a week, keeping product on the move.

With automated storage and retrieval machines, there are none of the delays associated with putting away or retrieving pallets from high locations. Every pallet is picked up and deposited at the same speed regardless of where it is located within the system.

Automated warehousing systems can also enhance the efficient flow of materials through a manufacturing facility or distribution centre. By integrating the system with production materials handling systems, raw materials, tools, parts, work-in-process, and finished goods can all be efficiently delivered to where they are required just-in-time.

The systems can also be set up to provide a buffer storage function on assembly lines, and can service multi-floor applications.

By using automated storage and retrieval machines the need for drivers/operators is eliminated. Compared with conventional methods, and calculated over the life of the machine, savings can be substantial and the ROI can be highly attractive.

The machines operate within fixed aisles protected by safety fences so the risk of people being injured in a collision is minimised. The need for operators to physically lift heavy products, or even heavy empty pallets, is also eliminated.

Reductions in Inventory

With integrated location and inventory control software combined with faster throughput, it is possible to reduce stockholdings.

Inventory can be accurately tracked at all stages, maximising stock availability. Stock control can also be improved, with the software enabling goods to be automatically picked on a First In First Out basis, or by ‘use-by’ date etc. Intelligent location control ensures goods are located in the most appropriate zone depending on their usage within the Automated Warehouse.

Once the automated warehouse has been set up, ongoing operating costs are minimised. Typical warehousing costs involving refueling or recharging of batteries, regular mechanical and electrical maintenance, and staffing, lighting are also minimised.