There are two main goals that companies with leading practices strive to achieve in the warehousing process: to provide value-added services such as product customization and to move those products through the warehouse into the hands of the consumers as quickly as possible. Companies that achieve these goals follow the leading practices discussed below.
Customer-Focused and Value-Centered Warehousing Strategy
To keep pace with the moving target known as customer demand, companies need to build flexibility into their warehouse operations so that they are ready to give customers whatever they want, whenever they want it. In this competitive environment, "product customization" has become the new focus and a critical function of modern warehouses.
In fact, leading practices companies view the warehousing phase as a "last chance" to please their customers and stay ahead of the competition. As a result, they have identified several ways to create additional product customization opportunities in the warehouse. Prevailing strategies include incorporating value-added services such as compliance labeling or floor-ready packaging into warehouse operations, as well as postponing final assembly until the warehouse phase.
Postponement at the packaging, the product, and the circuit board levels presents three opportunities to create "special" versions of the company's basic products while keeping the amount of buffer stock reasonably low.
At the same time, leading practices companies improve product delivery by practicing virtual warehousing and redefining the warehouses as knowledge centers for the entire supply chain. The increased emphasis on value-added services has also prompted many companies to redefine their warehouses as profit rather than cost centers.
Consolidate Warehousing Operations
After decades of decentralizing, that is, setting up small regional warehouses close to local markets, many companies are discovering the economic advantages of consolidating multiple warehouses into a single large facility. Warehouse centralization lowers the cost of operations because it reduces the number of facilities that a company needs to run as well as the amount of inventory it needs to carry.
Many companies achieve savings early in the consolidation process by selecting central warehousing sites based on a balance of land, labor and transportation cost advantages. Others lower transportation costs by partnering the consolidated warehouse with efficient carriers. Leading practices companies also make it a priority to create a centralized information system to ensure accurate data collection in the consolidated warehouse.
Create a Flexible Warehouse Design
In recent years, many leading practice companies have been particularly keen on exploring new designs that build flexibility into warehouse operations. Built-in flexibility allows warehouses to make best use of space and ensure efficient work flow, helping warehouses keep up with ever-changing customer demands for new and better products.
To build flexibility into warehouse design, leading practices companies take a "team-build" approach to the design process by involving all departments concerned, including engineering, information systems, finance, marketing, customer service, purchasing, manufacturing and warehouse operations, right from the start. They also redesign the block layout as the need arises to make sure that products flow smoothly through the warehouse.
Many companies also apply simulation modeling to test various proposed designs before selecting the one that provides the most flexible interaction of warehouse equipment. Other companies apply ergonomic principles to fit warehouse designs to different types of workers, knowing that a well-designed environment enhances worker productivity.
Use a Warehouse Management System
For most warehousing operations, the right warehouse management system (WMS) software serves as the vital bridge linking production, scheduling, shipment planning and order fulfillment systems. Leading practices companies are careful to work only with WMS vendors who have expertise in the best warehousing strategies for their types of warehouses, regardless of the vendors' knowledge of the company's vertical industry.
As an execution system, WMS manages warehouse resources, that is, space, labor, equipment, tasks and material flow, to move inventory to market most efficiently. Moreover, when equipped with automatic identification and data-collection technologies such as bar coding and radio frequency data communication systems, the WMS becomes a highly effective inventory-tracking tool.
In addition, WMS minimizes downtime in the warehouse by alerting warehouse managers and workers to tasks that may be "interleaved," that is, performed simultaneously or in rapid succession. Many companies also improve supply chain efficiency by integrating WMS into other logistics technology such as order management systems (OMS) and transportation management systems (TMS). The integrated systems not only increase productivity in the warehouse, but also improve vendor-customer communication and enhance shipping accuracy.
Reengineer Warehouse Operations
To keep up with marketplace demands for efficient consumer response and just-in-time (JIT) delivery, companies across the board are actively seeking opportunities to speed product flow along the supply chain. Recognizing the warehouse as a critical agent in supply chain efficiency, leading practices benchmark current warehouse operations and establish targets for improvement.
Leading companies capitalize on every opportunity to streamline warehouse operations. Other strategies to streamline warehouse operations include using optimal slotting logic to direct put-away and picking activities and adjusting the slotting logic based on reviews of customer orders and inventory mix. Leading practices companies minimize storage needs by cross-docking and packing inventory in standard-size containers as often as possible. They also make the order fulfillment process more efficient by picking several orders at the same time rather than making a separate trip through the warehouse for each order.
Outsource Warehousing Functions
To reduce costs, as well as to better meet the growing customer demands for JIT service, companies are divesting themselves of their private warehouses in favor of third-party options. While not a universal solution, outsourcing is an attractive low-cost alternative for many companies, based on benchmarking costs of internal versus third-party service providers.
When choosing among third-party options, companies prefer to lease a third-party warehouse to store steady inventory but rent public warehouses to solve emergency and temporary storage needs. Public warehouses are also popular because they enable a group of companies to converge services and share solutions.
Because many third-party warehouse providers have successfully expanded into the logistics business in the last 10 years, many companies also take advantage of the value-added services that they offer, including transportation and freight forwarding.
Progressive companies even occasionally appoint the third-party provider as supply chain coordinator when they see warehousing activities as key to company success. They select the best-in-class providers by exercising due diligence to check the third-party warehouse's credentials.
Looking for more information on supply chain management and related topics? Check the links below!
Performance Management/Measurement, Sales Process & Marketing, Supply Chain, Change Management, Inventory & Materials Management
Related Audit Tool and Resources
Business Process Best Practices and Key Performance Indicators GuideInventory Policy
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