Distribution & Supply Chain Strategies Performing Peak Season Audits for Warehouse Optimization

The holiday season often represents a make-or-break period for businesses aimingpeak-season-audit-warehouse-optimization to hit their annual sales forecasts. With Mastercard reporting a 6.7% increase in online spending compared to last year and noting that the final five shopping days accounted for a substantial 10% of holiday sales, it’s clear that consumer behavior continues to shift heavily toward e-commerce.

Deloitte’s prediction that holiday sales would total between $1.58 trillion and $1.59 trillion, with e-commerce growth of 7% to 9%, highlights the magnitude of this shopping season.

However, this surge in demand also placed unprecedented stress on operations that were already running lean due to lower-than-expected pre-holiday sales. This strain underscores the need for a comprehensive post-holiday audit of your warehouse and fulfillment processes.

By quickly assessing how your operation performed during this critical period, businesses can identify challenges, decide on necessary changes, and implement improvements to ensure readiness before the next peak season.

The focus of a warehouse audit and operations assessment is process improvement, cost reduction, improved warehouse utilization as well as improving customer service metrics.

Performing Audits for Improved Warehouse Optimization 

The first step in the audit is to form a post-season review team, which should include fulfillment supervisors and some key personnel in the fulfillment center. The team’s observations of what went right, what was marginal, and what needs to be fixed before the next peak season should include finding answers to these questions:

  • How well did the fulfillment operations perform overall?
    • What were the strongest aspects in the operations?
    • What were the unexpected challenges that arose during peak season?
    • What aspects must be corrected prior to the next peak season?

  • What, if any, changes need to happen to the overall layout, design and warehouse storage to facilitate efficiencies?
    • How about material handling equipment?
    • What created the largest bottlenecks and disrupted flow?

  • How was the overall warehouse utilization and storage capacity in the facility?
    • Were you out of space to handle the inventory at peak?
    • Was the facility over congested and disorganized?
    • What space optimization could be implemented?

  • How did your picking footprint perform during peak volumes?
    • Were the picking locations properly sized with the right amount of inventory?
    • Was there excessive walking while picking and fulfilling orders?
    • What challenges did pickers have when picking inventory?

  • Were packing and shipping operating efficiently?
    • What challenges did packers and shipping have during peak?

  • What was your peak season rate of returns?
    • What were the reasons for returns, which were DC related (i.e. picking error, broken in transit, etc.)?
    • What was the turn around period between receiving the return and processing refund or exchanges?
    • Are there any bottlenecks in the returns process that need to be corrected?

  • What labor challenges did your operations encounter this peak season?
    • Are there any recruitment or hiring changes that should be implemented?
    • Was training sufficient for onboarding new workers?
    • Did you have sufficient training guides and SOPs to assist with the process?
    • Did you cross-train all regular associates to pack during the course of the year?
    • What was the rate of overtime during the holiday season versus the balance of the year?
    • What was the turnover rate for seasonal employees and for what reasons?

  • How did your warehouse management system perform at peak volumes?
    • Were there any areas of the operations that suffered due to the warehouse management system (WMS) being inadequate?
    • Did you have all the reporting and monitoring that was needed to efficiently manage peak volumes?
    • Were there warehouse processes that should be reconfigured or changed and tested within the WMS?

  • Did your carriers perform? Were their pickups on schedule?

  • How well did your inventory and warehouse slotting perform?
    • Did you have the right sized locations, or do you need to consider reprofiling picking locations?
    • Did you have the right amount of inventory in each location?
    • How were your replenishment operations affected?

  • How could automation aid your operations?
    • Is it time to consider shipping line automation or good to person technologies for picking?

  • How can a 3PL support your operations in full or specific functions?

Your warehouse and fulfillment audit should cover all aspects of the operations from warehouse management systems, layout and design to labor and process improvement. As you work your way deeper into the operations, you should look at your costs, as well as benchmarking and metrics.

The performance of these metrics will help to uncover additional areas that should be assessed. Consider challenging your team on these metrics and results.

  • What was the labor cost per order shipped during the increased staffing period of your holiday season, vs. your balance-of-year average cost per order shipped? This identifies how effectively you used the temporary holiday labor and how they performed.
  • What was the cost of training the seasonal labor force? Were they brought in at the right time for sufficient training and to match volume surges, or were they on the payroll too early?
  • What was the found error rate and subsequent rework required? Are they higher than normal? Why did they increase?
  • How did the DC perform daily against order volume? Did the facility fall behind scheduled shipments? How far behind by day? What was the order carryover identified as both orders and a percent carryover by day?

For a list of operational benchmarks to consider implementing, utilize our guide for your operations.

To help answer these questions, use departmental reports throughout the center. These include transaction volume reports for orders received, picked, shipped, manifested, returns, back orders processed.

Additionally, service levels achieved (standard or plan and actual) payroll and productivity reports (budgeted and actual) will be needed for a thorough analysis. Also pull your Fulfillment center inventory control reports about inventory adjustments, products not found in picking process, error reporting, etc.

Implementing Changes for Improved Warehouse Optimization

Now it's time to implement some changes in your operations. This will give you sufficient time to plan and execute those changes and still have time to test the results. But many ask, where should we start or what should be our priority?  Here’s a checklist of some steps to take.

  • Bring your workforce down to the size required for your post-holiday business forecast. Nothing increases costs more than excess people on the payroll—and by attempting to manage hours with too large a staff, you’ll wind up sending employees home early multiple days per week, running the risk of losing key associates who can’t afford to work less than 40 hours.
  • This is also a great time to evaluate all employees and retain the workers who performed best. Frequently you’ll find gems in the seasonal staff who are better than some of your regular associates. So, bite the bullet, make the difficult decisions, and reduce staff quickly.
  • Perform inventory consolidation in your warehouse storage, both to organize warehouse storage and create space for new product arrivals. Consolidating inventory now will save inbound labor dollars later, as well as ease and expedite the ability to locate product.
  • Assure your key performance metrics are in place for pick, pack, ship, replenish, receive and put away. Be certain you are generating reporting on all the key indices which will help you manage expenses, including labor hours and dollars (regular and premium) measured against volumes received and shipped (units, lines, orders, boxes).  
  • Reconfigure your warehouse slotting and pick locations to reduce travel time to a minimum.  Relocate items appropriately to slow moving or to fast moving picks to create efficiency.  Remove seasonal items from the pick line so you are not walking by them each day.
  • If you didn’t cross-train all regular associates to pack last year, begin now for next year and continue cross-training throughout the year. Be sure any new employees retained from the seasonal worker ranks are fully trained and performing to standard. Training for seasonal associates is often quick, so if you are retaining people, make sure they are properly trained to be successful.
  • Develop a fulfillment to-do list from your post-season audit. Assign responsibilities and follow up to assure the tasks are being performed.  If you have never developed goals and objectives for your operation and your fulfillment staff, this is the perfect time to start. Goals and objectives or key performance indicators are the most objective method of evaluating individual performance.  Successful accomplishment of goals and objectives adds to the profitability of the company.  
  • Create your fulfillment budget for the next fiscal year. Remember that an effective budget reflects improvement in performance and reduction of expense to enable the company to offer wage increases where appropriate.
  • Review transportation contracts. When shipping volume is down, every penny of cost becomes critical. Knowledgeable review of both inbound and outbound transportation contracts and costs can typically yield strong savings.
  • Review your packaging supply vendors for performance or cost. If you’re still using Uline, you are overpaying for supplies and can most likely find a local supplier that is cheaper and can supply you the next day as well.
  • Determine if this is the time for experienced help to assist you in reconfiguring the warehouse layout and design. There are many ways to improve layout within your current walls to expand capacity and improve efficiency.
  • Along those lines, are your systems generating the necessary results in the required time periods, or is your fulfillment center losing efficiency because your systems are unable to perform?  This is a great time to develop a systems requirement document identifying your needs for growth and for performance.
  • Conduct objective individual performance evaluations for your salaried staff. Objective and honest evaluations of individual performance are the building blocks of great teams.

And finally, the only good thing about slow volume is that it affords you the opportunity to evaluate past performance failures and to implement change for future performance successes.

 

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