How To Assess Your Ecommerce Warehouse Dock-to-Stock Efficiency

   

Dock to Stock time is a KPI that measures the length of time from when a receipt lands on your dock until it is in a pickable (or bulk reserve) location. From an efficiency perspective, best-in-class companies achieve “dock to stock” in two to eight hours.  To help achieve this quick dock to stock time, larger e-commerce companies, retailers, and multichannel merchants generally implement EDI technology solutions and vendor compliance policies.  

This dramatically reduces manual effort, paperwork errors and allows for faster put-away. Because EDI integrates to the ERP and accounting back-office systems, it also provides a transparent system of record rather than different views of data in different systems.  An additional benefit is that merchant companies can resolve issues on an exception basis, this greatly reduces the total processing cost to companies.

In comparison, many small to moderate-sized businesses dock-to-stock may average 24 to 72 hours (or even longer) to clear receipts.  With dock to stock time, turnaround time is only one factor to evaluate.  Some receipts may sit for days awaiting resolution by the buyer and the vendor - or for some necessary rework in the warehouse.  This entire time, the merchandise is not available for sale. There is a very real cost your company absorbs in the warehouse, accounting, and purchasing (or buying) departments from these potential problems.

This article explains how to:

  • Assess the dock-to-stock processes for improvement. 
  • Identify problems in receiving through put-away. 
  • Determine the costs of correcting vendor problems. 
  • Propose solutions for process improvement.  

The dock-to-stock process involves aspects of the purchase order writing process; inbound transportation; dock receiving, staging, inspection, and put away.      

Performing the Assessment

“You cannot improve something you haven’t measured”.  Dock-to-stock processes may not have been a process improvement area before for your company, but it has potential for many small to moderate-sized companies to lower costs and have stock ready for sale.  To get a complete picture of the problems and solutions, the warehouse needs to collaborate with accounting and purchasing (or buying).

Pick a representative time period (e.g. a busy week) to identify the problems, lost time, and cost to the organization.  Picking too large of a timeframe will not be manageable. 

Trace inbound receipts and create flowcharts of what happens when various error conditions occur and when receipts are fully compliant and can be put away. Using flowcharts will show you how time-consuming and expensive it is to resolve problems.

Here is the data and reporting that is needed for a thorough analysis:

  • Number of inbound receipts by type (e.g. merchandise, returns, supplies, other small package delivery such as mail).  Assess these independently.  Merchandise receipts are where you will spend the majority of your assessment time.
  • Receiving reports.  Is there a report showing the status of each purchase order receipt, when it arrived and was cleared or put away?  How long did each receipt take?  What errors and exceptions did each receipt have?   
  • Receipts with problems.  Is there a “trouble report” which isolates current receipts on the dock or floor needing correction and a message as to status?    
  • Customer reason for return reports.  Does your company have a report that indicates by vendor and item why customers return products?  What warehouse reasons would be helpful?

Problem Identification

At a high level, what major problems are immediately apparent which negatively affect performance?  What prevents stock from being immediately received and put away?  Here are 8 areas to analyze:

Inbound Visibility and Management

Do carriers show up without appointments? Does this cause truck yard congestion and make the dock difficult to plan required labor on a day-by-day basis?  Is there an effect on the staging area

Carrier Problems

What carrier damage problems are occurring?  Are there problems with vendors not following routing guides resulting in higher transportation costs?  Are there problems with on-time deliveries

Dock-to-stock Efficiency

Efficiency is expressed as the time to clear a receipt and put to stock in hours. What is your standard and the actual hours to process?  Let’s say your standard is 24 hours.  For the representative period of time, for each receipt, place them according to their total time from dock receiving to put away in one of three categories:

  • Best performers – look at top 10%.  What is their range and average?
  • Median performer – what vendor receipt is in the middle of the array of hours?  Go 5% above and 5% below the media receipt time.  What is their range?
  • Bottom performers – how many elapsed hours as a range and average?  

This will begin to show you more about the elapsed time spent correcting problems.  What are the really reliable vendors?  What vendors are always a problem? 

Dock and Staging Space/MHE  

What issues are there from a physical facility perspective?  Is there congestion caused by insufficient docks or equipment?  Is the dock undersized for the volume of receipts?  Is the square footage sufficient for staging?  A business that is growing may have outgrown a facility’s dock and staging, especially during peak receipts.

WarehouseVendor-related Problems

Do you have standards for receipts? Examples: Are vendors following standards for external carton labeling? 

 

Related: How to Achieve Warehouse Efficiency Through Vendor Compliance

 

What are the costs to correct problems like packaging, kitting, remarking, labeling, etc.?

From quality assurance and inspection perspective, does purchasing provide product specifications to vendors?  Is there sufficient space to inspect the product?  Can inspection processes be less stringent with vendors that are complaint consistently? 

The more manual your warehouse systems and processes are, the more errors occur in data entry and not being real-time.  Read how barcoding all the warehouse and pallets, cartons and product is the cornerstone for reducing errors.

Other Department Problems

In purchasing and accounting, what increased costs are incurred to resolve paperwork and vendor problems?  What problems are there with the purchase order, receipt, and invoice matching within acceptable tolerances so the invoice can be paid?  This applies to merchandise, supplies, freight, and logistics services.

Put Away Process

Do you have WMS functionality to cross dock high priority items and back-ordered products directly to the packing area?  What prevents timely put-away once stock is ready for storage? These include identifying open-stock locations manually because of a lack of system functionality. Do you have sufficient staff and material handling equipment?

Increased Inventory Levels

Are vendor receipts arriving off schedule based on the requested purchase order’s delivery date?  How do delivery date and dock-to-stock efficiency affect inventory turnover?  What would have to happen for lower inventory levels to be an achievable goal?  

What Is the Cost of an Error and Lost Time?

As mentioned, be sure to identify the typical time lost to correct types of errors.  In a typical operation without vendor compliance policies or EDI, the costs will be surprising.  If you are paying $12.00 per hour, when you add benefits, recruitment, and training costs, the fully loaded cost per hour is over $20.00 per hour.  

 

Related: 6 Ways to Combat Increasing Labor Costs

 

Suppose a vendor receipt has a packaging mistake and you have to correct 1,000 units received before they are ready for sale.  At 1 minute per piece, the $20.00 per hour means the vendor’s error costs you $0.33 per unit.  (Calculation:1,000 units takes 1,000 min. or 16.66 hours x $20.00 per hour = $333.33 or $0.33 per unit)

Develop Process Improvement Recommendations 

After identifying the problems, come up with the steps necessary to reconcile and correct the problem.  Is there “low hanging fruit” that brings immediate benefits with less change or cost?

In collaboration with purchasing and accounting, what operational costs can you expect to reduce for the various solutions you propose?

Develop a plan of action with suppliers to lower costs and make process improvements.

Bring management into the review and decision-making.

Recognize that vendor compliance policies, when enforced, will bring down the cost of your operation.

 

Related: 11 Ways to Improve the Dock-to-stock Process