Tuesday, November 17, 2009

Affecting Warehouse Efficiencies, Part 1: Labor

In a previous post, I talked about the three main categories of warehouse efficiencies. These were operational, stocking, and fulfillment efficiencies. In this series of four posts, I would present the levers available to an organization to enhance these warehouse efficiencies. We would be talking about the four main levers to target and affect these efficiencies. These levers being Labor, Inventory, Slotting and Flow. In each of the proposed four posts, I will focus on one of these levers and expand upon the functional capabilities that must be developed to enhance warehouse efficiency. Today's topic is Labor.

Labor Management:

Labor is typically one of the largest recurring expenses in a warehouse. Managing labor can result into huge savings in the warehouse. Most of the warehouse management solutions provide some labor management functions but seldom do they address all the following factors affecting the labor efficiency in the warehouse.

  1. Labor Planning: Labor planning in the warehouse means projecting the labor requirements and using them to ensure that adequate labor is available to support the expected levels of warehouse activities. The labor requirements in the warehouse can vary greatly by the season and demand patterns. To accommodate such variability, warehouses typically employ a mix of permanent and temporary workers and adjust the working hours in the warehouse. While most firms forecast demand and use this data to plan their replenishments and orders, seldom is this data used to project receiving and shipping activities at the warehouses and the required labor levels. However, there is no reason to not make use of such data, since this can provide a very dependable source of labor planning activities for the warehouses. Most of the contemporary warehouse management solutions still lag in this key aspect of labor planning at the warehouses in spite of its relatively simple requirements and strong potential for providing cost savings that advance labor planning can provide. By developing a labor planning process using the projected demand data, managers can establish the total labor requirements, identify the best mix of permanent and temporary workers, as well as define working schedules in advance for all workers at a warehousing facility.
  2. Labor Optimization: Labor optimization is another function that can be leveraged to reduce warehouse labor costs. The labor optimization process models the daily task requirements at a warehouse and identifies the best resources to complete these tasks within the constraints of resource availability and resource skills. Facility specific constraints such as seniority, number of breaks, user-zones, and so on can be modeled as well, if required. The mathematical model is solved to minimize the total cost of labor to finish the tasks. Such optimization can reduce the total labor requirements up to 10% in larger facilities. Mathematical modeling to optimize supply chain objectives is not new, but most warehouse management solutions are very tactical in their labor management aspects and simply have not taken the leap into supporting such requirements. On the other hand, retailers may be blamed as well: while they routinely use workforce management solutions for managing their stores, they have ignored (the equally strong case to use) similar solutions to optimize warehouse labor.
  3. Labor Standards: Deploying labor standards in the warehouses provides another method of measuring labor efficiency against the pre-determined engineered labor standards that provide the target efficiency levels for standard warehouse activities. These engineered standards are created by firms specializing in industrial engineering practices and the labor data is provided for integration in the labor management systems at the warehouses. Most high-end warehousing solutions provide the ability to integrate such data and measure the efficacy of the labor used in the warehouses. The actual task time is computed using the task elements and its attributes with the corresponding engineered standards. Using labor standards not only provides a comparison with the best practice, but also allows a relative measurement of individual workers that can be used for training and incentive purposes.
  4. Technology & Processes: Finally, there are technology and process enhancements that can increase the labor efficiencies in the warehouses. Such technology may provide automation such as conveyors and sorters, or, directly support user tasks such as pick-to-voice and pick-to-light technologies, or, simply support a better process such as a move from paper-based picking to RF based systems. Latter can direct the user tasks dynamically, provide task-interleaving, avoid congestion, and reduce traveled distance in the warehouse, all of which add to provide better labor utilization.

Better labor management processes directly affect the operational metrics of the warehouse which are primarily focused on the number of activities performed. The examples of such metrics are number of cases received and shipped, number of picks and put-away tasks completed, units handled, dollar value of the handled merchandise, and so on.

Next time, I will talk about the opportunities to enhance warehouse efficiencies through better inventory management that is a primary lever to drive the fulfillment efficiencies at a warehouse. In the meantime, you can read more about inventory planning process here.

© Vivek Sehgal, 2009, All Rights Reserved.

Want to know more about supply chain processes? How they work and what they afford? Check out my book on Enterprise Supply Chain Management at Amazon. You will find every supply chain function described in simple language that makes sense, as well as see its relationship to other functions.

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