Business Automation and Software Blog

Maximize Distributor Profitability with Warehouse Management Software

Posted by Robert Baran on Tue, Apr 05, 2011 @ 03:49 PM

Getting the most efficiency out of your warehouse and distribution processes is crucial in today’s business environment. Reducing waste as well as improving your processes and workflow is imperative to your success. This is often referred to as a lean philosophy, and was originally introduced by Toyota. Their approach to production management considers any resources spent on non-value added items to be wasteful, and in need of elimination.

For distributors a lean approach will improve inventory management, streamline the flow of material, reduce errors and eliminate wasted time. The 5 steps of the Toyota Production System (TPS) include:

  1. Learn and specify the customer’s “desired value”
  2. Identify the value stream – how to make the end product – and eliminate non-value-adding processes.
  3. Make a continuous flow for the remaining value-adding processes.
  4. Make the end result pull its components forward.
  5. Continuously improve the whole process.

In honor of this philosophy, we’d like to take a look at some ways you can improve your warehouse management processes in order to maximize your profitability.

Step One: Observe your processes.

Invite your mid and lower level managers to get involved in observing your current processes on the floor. They should seek to become familiar with the details of the tasks being completed, from start to finish. This knowledge will give them a better platform for coming up with ideas on how to create and implement improvements.

Step Two: Record mistakes in order to correct them.

Many companies either hide or ignore mistakes, however this approach hinders the ability to identify and correct them effectively. Examples include damaged materials; unintentional scrap; drops; etc. Be sure to implement a process for recording and keeping track of mistakes in order to determine if there are ways to avoid repeating them in the future.

Step Three: Eliminate all non-value-added movement.

A distribution best practice is to properly organize your warehouse to streamline order picking. This includes utilizing the most accessible locations for the most commonly picked products; as well as storing products that commonly appear on the same sales order near each other.  Additionally, you should seek to create a ‘flow’ that makes sense. It is a good idea to involve your staff in any process improvements you make. They will likely have some great ideas on how to best reorganize your warehouse in order to work smarter, not harder.

Step Four: Eliminate all non-value-adding processes.

Oftentimes management implements processes that make sense in theory, but not in practice. Be sure to communicate regularly with your staff in order to continuously improve and update processes. Some non-value-adding processes may include:

  1. Overburden
    This may include requiring staff to carry heavy objects over unnecessarily long distances, or perform repetitive tasks at a pace that isn’t appropriate.
  2. Waste
    Waste includes any process or staff member who do not contribute to the value stream. Examples include: poor utilization of space, too much or too little inventory, ineffective transportation processes, etc.
  3. Defective materials or procedures.

Step Five: Implement Lean Processes

In lean manufacturing, each department only builds a subassembly once they are asked to do so by the department down the production line. This eliminates build up of work between departments, and the value added process is streamlined.

In lean distribution each in-stock item should have a designated location where it belongs, to make it easier for staff to find at all times. Additionally, the amount of space needed in the warehouse should be known to both the purchasing and warehouse management departments.. Further, there should be some reserved space for special purchases that can be utilized when necessary.

Step Six: Consistent Communication & Ongoing Training

Don’t assume that your managers are experts on lean processes. Regularly educate and communicate with them in regards to new best practices you’d like to implement and integrate into the culture of your warehouse. Further, be sure to supply all applicable information such as assembly processes, work instructions, repair procedures, etc., to allow your workers to make the necessary decisions quickly without always having to go to a busy supervisor for help.

Benefits of implementing a lean philosophy into your warehouse and distribution procedure far outweigh hanging on to legacy practices. Many companies have seen significant improvements some of which include: up to 50% improvement in labor productivity; less space requirements and reduced unnecessary inventory; increased morale and productivity leading to a lower employee turnover rate; accelerated workflows and a greater throughput; and more.

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Topics: Warehouse Efficiency