Global Logistics and Supply Chain Strategies - October 2008 - (Page 50)

Warehouses: The Supply Chain’s New Efficiency Experts BY ROBERT J. BOWMAN Never mind the complications of global supply chains. Some of the biggest boosts in productivity are to be found within the four walls of the traditional warehouse or distribution center. C ompanies look far and wide for ways to make their extended supply chains more efficient. But sometimes the best solutions lie close to home. In the case of one consumer products company, a customer of Oakland, Calif.based APL Logistics (APLL), there were $1m in savings to be gained simply by reconfiguring a few warehouses. The customer was one of many targeted by APLL in its effort to apply classic “lean” techniques to warehouse operations. In this particular case, the focus was on space utilization. Using lean tools such as value stream mapping, process metrics and waste elimination, APLL was able to free up a substantial amount of space on behalf of the company. One change arose from the realization that the facility had more dock doors than it needed, according to Charlie Jacobs, senior product manager with APLL. So the operator “buried” some of those doors with products for storage. In addition, it adopted a new strategy for replenishing the pick line. Before, the picking system had been geared entirely to demand. By taking a more proactive approach to replenishment, APLL reduced the amount of “honeycombing” it had to do within the racks to fill orders on the fly. In the process, it made room for more bulk storage. Other actions taken by APLL included reassessing the best candidates for upperrack storage, to make better use of doublestacking, and converting some special-project areas into basic storage. Taken together, the changes freed up so much space that the company didn’t need to utilize an APLL overflow facility. That meant less potential revenue for APLL, notes Jacobs, but the program ended up saving the customer more than $1m a year when it was replicated at multiple facilities. If there’s any one trend that best characterizes how warehouses are changing today, it’s increased speed. Buyers want product faster, but they don’t want to keep a lot of inventory close at hand to ensure its availability. And that puts more pressure on warehouses to ramp up efficiency. The alternative is boosting safety stock, which raises overhead to unacceptable levels and heightens the risk of product obsolescence. Cost control is a never-ending concern. Soaring oil prices are eating into the already-thin margins of logistics providers throughout the supply chain. “Fuel costs are becoming an increasing percentage of total inventory-carrying costs,” says Wilson Rothschild, senior product marketing manager with Infor in Atlanta. Vendors and buyers are responding by postponing the receipt of inventory until the last possible moment. In the process, Rothschild says, 50 OCTOBER 2008

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Global Logistics and Supply Chain Strategies - October 2008

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