I will never forget this accident. On a Sunday I got a call from a client, “Can you come immediately to our distribution center?” several hours away. Literally a wall of improperly stacked product had collapsed from cartons being crushed. The falling wall created a “domino effect” knocking down 8 aisles of 3 level pallet racking. Luckily no one was hurt or worse – killed. True story.

Summer time is here, the kids are out of school, time to hit the pool, right? I know that you don't want to hear this, but it is prime time to conduct an operational audit to identify those areas needing improvements. Believe it or not there are only 5 months left before the Holiday season is here again! Make certain that you have ample time to implement your fixes, develop strategies and plans for the distribution center. What are the objectives you and your management team have set for improving operations this year?

Here are a few areas to look at for your operational audit in order to determine what changes will be most beneficial to your distribution center and operations: 

Through the hundreds of operational assessment projects we have worked on over the years, we have compiled the following quick-hitting list that will assist in reducing your operating expenses in the distribution center.

Here is a summary:

1. Efficient receiving. Inventory accuracy and product flow through the distribution center all start with receiving. The single biggest improvement companies can often make is to develop and implement vendor compliance policies.

2. Reduce freight costs. Outbound freight now exceeds direct labor in many distribution centers. Don’t be too proud to ask a consultant to help reduce your cost of shipping and to help identify areas on your carrier contracts that will reduce your rates. Many times these consultants will work on a project basis or on a shared savings basis. There are too many dollars at stake not to have someone help you.

As warehouse consultants, we work with a wide range of businesses, the discussions often surround topics such as, "How do we know if we are as efficient as we could be?  What do we need to change to support the business’ growth and order fulfillment needs?”  The short answer is typically companies need to perform a warehouse or distribution center operations assessment.  

So, what is an operations assessment?  It is a methodical and comprehensive approach to analyzing all facets of the operations – from organizational staffing, team members and people utilization; processes, and warehouse management systems; to the layout of the facility; and how material handling equipment and automation are deployed. The objectives are to identify all the ways in which the warehouse operations and the physical assets can/should be improved to meet both the customer’s and management’s expectations and requirements.   These recommendations should then be prioritized based on resources; capital expenditures required as well as benefits to build a roadmap for implementing the recommendations. 

When Should a Warehouse Operations Assessment be Performed?

It seems never-ending, but yes, its time that you kick-off your operational audit in order to identify those problem areas from this past Holiday season. This should give you enough time to implement any recommendations, plans and strategies developed to prepare for the upcoming Holiday season. What are the objectives you and your management team have set for improving operations?

Here are 8 steps for determining what changes will be most beneficial to your operations:

Many multichannel businesses are partners with marketplaces like Amazon and eBay, and big-box retailers like Sears, Walmart and the like.  With them, you’re not just processing orders, managing inventory and agreeing to performance standards.  Working with one of our clients recently in their call center’s support operations for their marketplaces, we focused our attention on the cost of an error.  

When was the last time you conducted an operational assessment to analyze the cost of various types of errors? Not just the number of times monthly or annually a particular error occurs, but what is the actual cost of that type of fulfillment error?  The types of errors I’m referring to are mis-picks, customers' lost packages by the carrier, packages damaged in transit, etc.  The best place to obviously capture these are in the call center and fulfillment center.  

1. Labor
2. Facilities
3. Workflow and procedures
4. Systems

Labor is incontestably the most expensive area on your profit and loss statement relating to fulfillment, so it’s important to get the most for your payroll dollar. Labor, in turn, consists of four areas, the first two of which can be easily quantified; the others are more difficult to quantify but should not be ignored.

We recently have been working with a few warehouse clients that are involved in moving to a new warehouse facility. Along the way, it became apparent that the planning for the move required a lot more time and effort than originally thought. What seems like a simple concept can become a daunting task in a hurry.