Guest column: Act now to save warehousing costs!

Alba Logistics' Patrick Daly argues that best practice is the key.
COMMENT, Warehousing


Patrick Daly, founder and managing director of Alba Logistics, explains how cost savings with regard to warehouse time management can add up over a short period of time.

Consider this:

  • Best-in-class warehouse operations are significantly more productive than those with industry average levels of performance according to the Warehouse Education and Research Council (WERC)'s Warehouse Manager's Guide to Benchmarking
  • Up to 60% of a warehouse operative's time in put-away, retrieval, kitting and order picking tasks is spent travelling from one place to another, often empty-handed
  • Work processes and procedures that do not undergo constant revision and streamlining are routinely found to have 30%+ of non-value-added and totally avoidable tasks such as waiting, talking on the phone or looking for tools and information. 

These are astonishing figures and the time when they can be overlooked as a reservoir of untapped potential is now most definitely over. When business is expanding and the challenge is to keep up with demand it is understandable that the primary focus might be elsewhere.

However, when the economy has tightened up and competition has become fierce it is essential to get everything you can out of everything that you have got.

Given that recent WERC surveys of warehouse operations across all sectors indicate that only about 20% of you out there are achieving best-practice scores against the most significant performance measures, it is clear that there is a major opportunity to be exploited in warehouse operations.

Let's just do a quick and dirty, hypothetical, back-of-the envelope exercise based around the above facts to get a feel for what we are talking about here.

Let's say that you are running a medium-to-small-sized warehouse operation with 30 operatives in a manufacturing or distribution environment. This will mean that you have a wage bill, depending on your location, of somewhere in the region of US$1.3 million to $1.6 million annually.

If you could find a way to move even your most critical processes from average to best-of-class on the scale of operational best practice, minimise travel time overall and eliminate dead-leg travel, while at the same time streamlining processes and eliminating non-value-added and avoidable tasks, what do you think your level of overall performance improvement would be?

I should think that an improvement in labour productivity of say 25% to 30% overall, while it would of course constitute a challenge - change always does - would by no means be an unreasonable aspiration under these circumstances.

Aggregated over three years, this level of improvement could lead to savings that come to a total of around US$1.3 million. This is an extraordinary amount of money to be leaving on the floor for no good reason.

Bear in mind also that this is just the labour saving without even quantifying the other benefits that would accrue in terms of accuracy, visibility, performance and quality. 
So, what would it take to achieve this level of improvement - in other words, what would you have to do to get from where you are to where you want to be?

Well, inevitably it would take some up-front investment - but doesn't it always?

In this case we are primarily talking about investment of time and commitment, some money - not too much relative to the benefits - and a lot of focused effort and determination sustained over a period of time.

Here's the high level roadmap;

  • First step is to establish the start point. That is to say, where you are now on the scale of best practice and where you want to get to. This enables you to determine the potential for bottom-line benefits that you could achieve in moving up the scale so that you can judge whether it is worth the time and effort to pursue.
  • Second step is to decide exactly what needs to be done and in what order - in other words, prioritisation. Then you need to build a plan, assign the required resources and set up a small team with a mandate and sponsorship to deliver the required results in a specified period of time.
  • Third step is to put the plan into action and manage the change and improvement through to completion.
  • Final step is to monitor the key performance measures and metrics and provide ongoing support to the operation over a sustained period to embed the improvements on a permanent basis.

So, if you have the requisite commitment AND you want get yourself started on the road to operational best practice and cost reduction, now is the ideal time to act.

The first step is a quick audit of your operation reviewing throughputs, productivity, equipment, systems, layout and processes. From this you will learn where you are on the scale of operational excellence now. Then you can work out what you will need to do to improve, how you would measure and track that improvement and what the potential financial benefits of doing so would be.

The time to act is now!

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