Warehouse Management

Contents Contents v List of Figures xi List of Tables xv Acknowledgements xvii Introduction 1 What is a warehouse? 1 01 5 The role of the warehouse 5 Introduction 5 Types of warehouse operation 7 Why do we hold stock? 12 Warehouse location 16 Number of warehouses 20 Supply chain trends affecting warehouses 21 The growth of e-fulfilment and its effect on the warehouse 22 Specialized warehousing 24 Summary and conclusion 34 02 36 Role of the warehouse manager 36 Introduction 36 Warehouse trade-offs 38 The warehouse manager’s challenges 39 Lean warehousing 43 People management 47 People challenges 47 Attracting and retaining warehouse employees 51 An ageing and constantly changing workforce 52 Operating hours 53 Training 55 Warehouse audit 56 Quality systems 56 Summary and conclusion 57 03 58 Warehouse processes: receiving and put-away 58 Introduction 58 Receiving 60 Pre-receipt 60 In-handling 66 Preparation 66 Offloading 67 Checking 70 Cross docking 73 Recording 74 Quality control 74 Put-away 74 Summary and conclusion 76 04 77 Warehouse processes: pick preparation 77 Introduction 77 Preparation 79 Warehouse pick area layout 90 Summary and conclusion 93 05 95 Picking strategies and equipment 95 Introduction 95 Picker to goods 98 Goods to picker 103 Types of automated picking 105 Examples of automated picking systems 106 Handling equipment 119 Storage equipment 124 Summary and conclusion 132 06 138 Order-picking methods 138 Introduction 138 Paper pick lists 138 Pick by label 139 Pick by voice 139 Barcode scanning 146 Radio frequency identification 151 Pick by light/pick to light 152 Put to light 156 Comparisons 157 Cost of errors 160 Deciding on type of picking system and equipment 165 Summary and conclusion 167 07 168 Warehouse processes from replenishment to despatch and beyond 168 Introduction 168 Replenishment 168 Value-adding services 169 Indirect activities 170 Stock management 171 Stock or inventory counting 173 Cycle counting or perpetual inventory counts 174 The count itself 175 Security 176 Returns processing 177 Despatch 181 Role of the driver 186 Summary and conclusion 187 08 188 Warehouse management systems 188 Introduction 188 Why does a company need a WMS? 189 Choosing a WMS 191 The process 191 Selecting the right WMS 192 What to look for in a system 195 Selecting a partner 197 Before the final decision 198 Implementation 198 Software as a service 199 Cloud computing 200 Summary and conclusion 201 09 203 Warehouse layout 203 Introduction 203 Data collection and analysis 205 Space calculations 207 Aisle width 213 Other space 214 Warehouse layout examples 215 Finding additional space 217 Summary and conclusion 219 10 220 Storage and handling equipment 220 Introduction 220 Storage equipment 220 Storage options 221 Shuttle technology with a difference 231 Very high bay warehouses 232 Other storage media 236 Warehouse handling equipment 239 Vertical and horizontal movement 242 Automated storage and retrieval systems (AS/RS) 250 Specialized equipment 252 Recent technical advances 253 Summary and conclusion 254 11 255 Resourcing a warehouse 255 Introduction 255 Processing activities 256 Other factors 274 Summary and conclusion 275 12 276 Warehouse costs 276 Introduction 276 Types of costs 277 Return on investment (ROI) 280 Traditional versus activity-based costing systems 280 Charging for shared-user warehouse services 285 Logistics charging methods 290 Hybrid 292 Summary and conclusion 292 13 293 Performance management 293 Introduction 293 Why do we need to measure? 294 What should we be measuring? 294 How to choose the right performance measures 299 Traditional productivity measures 301 New performance metrics 304 Hard and soft measures 306 Integrated performance models 307 Benchmarking 309 Balanced scorecard 312 Summary and conclusion 315 14 316 Outsourcing 316 Introduction 316 The outsourcing decision 317 Core activity/core competence 320 Improvement in customer service 321 Cost reduction 321 Labour relations 321 Financial strategy 322 Flexibility 322 Role of third-party contractors 323 Preparing to outsource 323 Choosing the right partner 325 The transition 328 Managing a third-party relationship 328 Why contracts fail 328 The future of outsourcing 331 Summary and conclusion 337 15 338 Health and safety 338 Introduction 338 Risk assessments 341 Layout and design 345 Fire safety 349 Slips and trips 351 Manual handling 352 Working at height 352 Vehicles 353 Forklift trucks 354 Warehouse equipment legislation 356 First aid 357 Summary and conclusion 357 16 359 The warehouse and the environment 359 Introduction 359 Legislation and other pressures 361 Warehouse energy usage 361 Energy production 367 The environment and waste 369 Packaging 370 Pallets 371 Stretch wrap 372 Cartons 372 Labelling 372 Product waste 373 Waste disposal 373 Hazardous waste 373 Forklift trucks 373 Summary and conclusion 374 17 375 The warehouse of the future 375 Introduction 375 Context 375 Views of the future: the landscape 377 Views of the future: the warehouse 380 Other advances 384 Summary and conclusion 385 Appendix I 387 Further information 402 References 402 Appendix 2 403 For further information 405 Reference 405 References 406 Useful websites 411 Glossary 413 INDEX 419

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Warehouse Management A complete guide to improving efficiency and minimizing costs in the modern warehouse

Gwynne Richards

second edition

iii

First published in Great Britain and the United States in 2011 by Kogan Page Limited Second edition 2014

Apart from any fair dealing for the purposes of research or private study, or criticism or review, as permitted under the Copyright, Designs and Patents Act 1988, this publication may only be reproduced, stored or transmitted, in any form or by any means, with the prior permission in writing of the publishers, or in the case of reprographic reproduction in accordance with the terms and licences issued by the CLA. Enquiries concerning reproduction outside these terms should be sent to the publishers at the undermentioned addresses:

Publisher’s note Every possible effort has been made to ensure that the information contained in this book is accurate at the time of going to press, and the publishers and author cannot accept responsibility for any errors or omissions, however caused. No responsibility for loss or damage occasioned to any person acting, or refraining from action, as a result of the ma terial in this publication can be accepted by the editor, the publisher or the author.

2nd Floor, 45 Gee Street London EC1V 3RS United Kingdom www.koganpage.com

1518 Walnut Street, Suite 1100 Philadelphia PA 19102 USA

4737/23 Ansari Road Daryaganj New Delhi 110002 India

© Gwynne Richards, 2011, 2014

The right of Gwynne Richards to be identified as the author of this work has been asserted by him in accordance with the Copyright, Designs and Patents Act 1988.

ISBN 978 0 7494 6934 4 E-ISBN 978 0 7494 6935 1

British Library Cataloguing-in-Publication Data

A CIP record for this book is available from the British Library.

Library of Congress Cataloging-in-Publication Data

Richards, Gwynne. Warehouse management : a complete guide to improving efficiency and minimizing costs in the

modern warehouse / Gwynne Richards. – Second edition. pages cm

Includes bibliographical references and index. ISBN 978-0-7494-6934-4 – ISBN 978-0-7494-6935-1 (ebk) 1. Warehouses–Management. 2. Business

logistics. 3. Materials management. I. Title. HF5485.R53 2014 658.7’85–dc23

2013050663

Typeset by Graphicraft Limited, Hong Kong Printed and bound in India by Replika Press Pvt Ltd

iv

Contents

List of figures xi

List of tables xv

Acknowledgements xvii

Introduction 1

01 the role of the warehouse 5

Introduction 5

Types of warehouse operation 7

Why do we hold stock? 12

Warehouse location 16

Number of warehouses 20

Supply chain trends affecting warehouses 21

The growth of e-fulfilment and its effect on the warehouse 22

Specialized warehousing 24

Summary and conclusion 34

02 Role of the warehouse manager 36

Introduction 36

Warehouse trade-offs 38

The warehouse manager’s challenges 39

Lean warehousing 43

People management 47

People challenges 47

Attracting and retaining warehouse employees 51

An ageing and constantly changing workforce 52

Operating hours 53

Training 55

Warehouse audit 56

Quality systems 56

Summary and conclusion 57

v

Contentsvi

03 Warehouse processes: receiving and put-away 58

Introduction 58

Receiving 60

Pre-receipt 60

In-handling 66

Preparation 66

Offloading 67

Checking 70

Cross docking 73

Recording 74

Quality control 74

Put-away 74

Summary and conclusion 76

04 Warehouse processes: pick preparation 77

Introduction 77

Preparation 79

Warehouse pick area layout 90

Summary and conclusion 93

05 Picking strategies and equipment 95

Introduction 95

Picker to goods 98

Goods to picker 103

Types of automated picking 105

Examples of automated picking systems 106

Handling equipment 119

Storage equipment 124

Summary and conclusion 132

06 order-picking methods 138

Introduction 138

Paper pick lists 138

Pick by label 139

Pick by voice 139

Barcode scanning 146

Radio frequency identification 151

Pick by light/pick to light 152

Put to light 156

Contents vii

Comparisons 157

Cost of errors 160

Deciding on type of picking system and equipment 165

Summary and conclusion 167

07 Warehouse processes from replenishment to despatch and beyond 168

Introduction 168

Replenishment 168

Value-adding services 169

Indirect activities 170

Stock management 171

Stock or inventory counting 173

Cycle counting or perpetual inventory counts 174

The count itself 175

Security 176

Returns processing 177

Despatch 181

Role of the driver 186

Summary and conclusion 187

08 Warehouse management systems 188

Introduction 188

Why does a company need a WMS? 189

Choosing a WMS 191

The process 191

Selecting the right WMS 192

What to look for in a system 195

Selecting a partner 197

Before the final decision 198

Implementation 198

Software as a service 199

Cloud computing 200

Summary and conclusion 201

09 Warehouse layout 203

Introduction 203

Data collection and analysis 205

Space calculations 207

Contentsviii

Aisle width 213

Other space 214

Warehouse layout examples 215

Finding additional space 217

Summary and conclusion 219

10 storage and handling equipment 220

Introduction 220

Storage equipment 220

Storage options 221

Shuttle technology with a difference 231

Very high bay warehouses 232

Other storage media 236

Warehouse handling equipment 239

Vertical and horizontal movement 242

Automated storage and retrieval systems (AS/RS) 250

Specialized equipment 252

Recent technical advances 253

Summary and conclusion 254

11 Resourcing a warehouse 255

Introduction 255

Processing activities 256

Other factors 274

Summary and conclusion 275

12 Warehouse costs 276

Introduction 276

Types of costs 277

Return on investment (ROI) 280

Traditional versus activity-based costing systems 280

Charging for shared-user warehouse services 285

Logistics charging methods 290

Hybrid 292

Summary and conclusion 292

Contents ix

13 Performance management 293

Introduction 293

Why do we need to measure? 294

What should we be measuring? 294

How to choose the right performance measures 299

Traditional productivity measures 301

New performance metrics 304

Hard and soft measures 306

Integrated performance models 307

Benchmarking 309

Balanced scorecard 312

Summary and conclusion 315

14 outsourcing 316

Introduction 316

The outsourcing decision 317

Core activity/core competence 320

Improvement in customer service 321

Cost reduction 321

Labour relations 321

Financial strategy 322

Flexibility 322

Role of third-party contractors 323

Preparing to outsource 323

Choosing the right partner 325

The transition 328

Managing a third-party relationship 328

Why contracts fail 328

The future of outsourcing 331

Summary and conclusion 337

15 Health and safety 338

Introduction 338

Risk assessments 341

Layout and design 345

Fire safety 349

Slips and trips 351

Manual handling 352

Working at height 352

Contentsx

Vehicles 353

Forklift trucks 354

Warehouse equipment legislation 356

First aid 357

Summary and conclusion 357

16 the warehouse and the environment 359

Introduction 359

Legislation and other pressures 361

Warehouse energy usage 361

Energy production 367

The environment and waste 369

Packaging 370

Pallets 371

Stretch wrap 372

Cartons 372

Labelling 372

Product waste 373

Waste disposal 373

Hazardous waste 373

Forklift trucks 373

Summary and conclusion 374

17 the warehouse of the future 375

Introduction 375

Context 375

Views of the future: the landscape 377

Views of the future: the warehouse 380

Other advances 384

Summary and conclusion 385

Appendices 387

References 406

Useful websites 411

Glossary 413

Index 419

LIst of fIguRes

Figure 1.1 Warehousing in the supply chain 8

Figure 1.2 Seasonality: chocolate 15

Figure 1.3 Seasonality: apparel and equipment 15

Figure 1.4 Warehouse costs globally (courtesy of DTZ) 18

Figure 1.5 Factors determining the location of a warehouse 19

Figure 1.6 Bendi articulated truck for use in a refrigerated environment 29

Figure 1.7 Sorter bag system (courtesy of Knapp) 34

Figure 2.1 Warehouse trade-offs 39

Figure 2.2 Warehouse challenges (adapted from Dematic Corporation 2009) 44

Figure 3.1 Warehouse activities as a percentage of total cost 59

Figure 3.2 Warehouse processes 60

Figure 3.3 Example of incorrectly sized cartons 63

Figure 3.4 Automated unloading (courtesy of Joloda) 68

Figure 3.5 Boom conveyor unloading cartons (courtesy of Best Conveyors) 69

Figure 3.6 Robotic palletiser (courtesy of Bastian Solutions) 70

Figure 3.7 Robotic unloading of container with boom conveyor (courtesy of Bastian Solutions) 70

Figure 3.8 Example of cross docking 73

Figure 4.1 Picking interrelationships 78

Figure 4.2 Pareto’s Law or the 80/20 rule (courtesy of Vanderlande) 80

Figure 4.3 Pareto analysis of orders and SKU 81

Figure 4.4 ABC analysis: quantity and frequency of sales (courtesy of ABC Softwork) 82

Figure 4.5 ABC analysis: product value and frequency of sales 83

Figure 4.6 FMCG manufacturer: order analysis 87

Figure 4.7 Product cube picked and despatched per month 88

Figure 4.8 Basic warehouse layout based on ABC classification 90

Figure 4.9 Rack and shelf layout (adapted from and reproduced by kind permission of J B van den Berg) 91

xi

List of figuresxii

Figure 5.1 Picking strategies and equipment 96

Figure 5.2 Cluster pick cart (courtesy of Inther) 99

Figure 5.3 Mini-load system (courtesy of Vanderlande) 107

Figure 5.4 Cimcorp 3D Shuttle 109

Figure 5.5 Autostore robot 111

Figure 5.6 Ergonomic workstation (courtesy of Dematic) 113

Figure 5.7 Use of equipment for picking (Baker and Perotti 2008) 114

Figure 5.8 Highly automated solutions (courtesy of System Logistics) 116

Figure 5.9 Robot picking (courtesy of SSI Schäfer) 117

Figure 5.10 Robotic systems (courtesy of Kiva Systems) 118

Figure 5.11 Low-level order picker (courtesy of Toyota) 120

Figure 5.12 Tow tractor (courtesy of Crown) 121

Figure 5.13 High-level order picker (courtesy of Toyota) 121

Figure 5.14 Translift Bendi order picker 122

Figure 5.15 Conveyor systems (courtesy of Dematic Corporation) 123

Figure 5.16 Carton flow rack (courtesy of Knapp) 125

Figure 5.17 Static shelving versus carton flow (courtesy of Cisco Eagle) 127

Figure 5.18 Horizontal carousel 129

Figure 5.19 Vertical carousel (courtesy of System Logistics) 131

Figure 5.20 Pick module selection matrix (courtesy of OPS Design) 136

Figure 6.1 Benefits of voice picking (courtesy of ARC Advisory Group) 141

Figure 6.2 Why voice outperforms scanning 142

Figure 6.3 Laser-guided AGV with voice (courtesy of Toyota) 146

Figure 6.4 One-dimensional and two-dimensional barcodes 147

Figure 6.5 Wearable RDT with finger scanner (courtesy of Vanderlande) 149

Figure 6.6 Picking with hand-held barcode scanner (courtesy of LXE) 149

Figure 6.7 Picking with finger scanner (courtesy of LXE) 150

Figure 6.8 Yankee Candle pick to light (courtesy of SSI Schäfer) 155

Figure 6.9 Pick rate comparison for the various pick technologies (Wulfratt 2013) 158

Figure 7.1 The returns cycle (courtesy of University of Huddersfield) 178

Figure 8.1 Advantages of quality information (used with permission of Tompkins Associates) 190

List of figures xiii

Figure 9.1 Warehouse 3D drawing (courtesy of ATMS) 204

Figure 9.2 Aisle widths (courtesy of Carson Racking Systems Limited) 214

Figure 9.3 Aisle widths (courtesy of Carson Racking Systems Limited) 214

Figure 9.4 U-flow warehouse (courtesy of University of Huddersfield) 216

Figure 9.5 Through-flow warehouse (courtesy of University of Huddersfield) 216

Figure 9.6 Rail-connected warehouse (courtesy of DHL) 217

Figure 10.1 Pallet storage equipment used in UK warehouses (Baker and Perotti 2008) 222

Figure 10.2 Example of block stacking (courtesy of Howard Tenens) 223

Figure 10.3 Double-deep racking (courtesy of Redirack) 225

Figure 10.4 Narrow aisle racking (courtesy of Constructor Group) 225

Figure 10.5 Drive-in racking (courtesy of Howard Tenens) 227

Figure 10.6 Pallet-flow racking (courtesy of Constructor Group) 228

Figure 10.7 Push-back racking (courtesy of Redirack) 228

Figure 10.8 Mobile racking (courtesy of Constructor Group) 229

Figure 10.9 Shuttle racking above despatch bays (courtesy of Toyota) 230

Figure 10.10 Example of satellite racking (courtesy of Toyota) 231

Figure 10.11 Activ in action (courtesy of Retrotech) 232

Figure 10.12 Quinn Glass warehouse (courtesy of Stöcklin Logistik) 233

Figure 10.13 Warehouse capacity graph: euro pallets (courtesy of Constructor Group) 235

Figure 10.14 Warehouse capacity graph: UK pallets (courtesy of Constructor Group) 236

Figure 10.15 Two-dimensional decision tree (courtesy of Insight Holdings) 237

Figure 10.16 Cantilever racking (courtesy of 512 Sheffield) 238

Figure 10.17 Automated guided vehicle (courtesy of Dematic) 242

Figure 10.18 Internal view of computerized forklift truck (courtesy of Atlet) 243

Figure 10.19 Pallet stacker (courtesy of Toyota) 243

Figure 10.20 Mini-Bendi (courtesy of Bendi) 245

Figure 10.21 Reach truck (courtesy of Atlet) 246

Figure 10.22 Articulated forklift truck (courtesy of Flexi) 248

List of figuresxiv

Figure 10.23 Crane system for AS/RS (courtesy of Stöcklin Logistik) 250

Figure 10.24 Articulated forklift truck with side-loading attachment (courtesy of Bendi) 252

Figure 10.25 Toyota hybrid truck (courtesy of Toyota) 253

Figure 11.1 Put-away time illustration 256

Figure 11.2 Growth factors influencing work rates 261

Figure 11.3 Demand variability 263

Figure 11.4 Daily activity profile 266

Figure 11.5 Weighted hours 273

Figure 12.1 Simple warehouse cost tree 279

Figure 13.1 Retailer and third-party KPIs (courtesy of Steve Whyman) 296

Figure 13.2 Cost of service improvement (courtesy of Rushton, Croucher and Baker 2010) 297

Figure 13.3 The balanced scorecard (adapted from Kaplan and Norton 1996) 313

Figure 14.1 The outsourcing decision (McIvor 2000) 318

Figure 14.2 Outsourcing decision matrix (Vitasek 2010) 319

Figure 14.3 Outsourced relationships (courtesy of Steve Whyman) 329

Figure 14.4 Why outsourced relationships fail (courtesy of Eye for Transport) 330

Figure 14.5 Performance pyramid (Vitasek 2010) 332

Figure 14.6 From confrontation to collaboration (Vitasek 2010) 332

Figure 14.7 The five rules 333

Figure 15.1 Main causes of injuries in the warehouse (www.HSE.gov.uk) 339

Figure 15.2 The accident pyramid (adapted from Bird and Germain 1996) 342

Figure 15.3 Partial rack collapse (courtesy of Nene) 350

Figure 16.1 Warehouse energy usage (courtesy of UKWA 2010 and the CTP) 362

Figure 16.2 Energy-saving warehouse (courtesy of Chalmor and Ritrama) 366

Figure 16.3 Solar panels on warehouse roof (courtesy of Miniclipper) 368

Figure 17.1 Current retail warehouse map (© The Consumer Goods Forum, Capgemini; reprinted with permission) 378

Figure 17.2 Collaborative warehousing (© The Consumer Goods Forum, Capgemini; reprinted with permission) 379

LIst of tabLes

TaBLe 1.1 Comparison between many and fewer warehouses 20

TaBLe 2.1 Warehouse shift patterns (adapted from Ackerman 2000) 54

TaBLe 3.1 Pallet dimensions (ISO) 64

TaBLe 3.2 Goods received non-compliance report 72

TaBLe 4.1 Best in class: picking (WERC) 78

TaBLe 4.2 ABC comparison 81

TaBLe 4.3 ABC analysis using Excel 84

TaBLe 4.4 Example of product slotting tool (courtesy of John Bartholdi, www.warehouse-science.com) 85

TaBLe 4.5 Order analysis: FMCG manufacturer 86

TaBLe 4.6 Example of pick-face analysis 89

TaBLe 5.1 Shelf storage versus carton flow storage (courtesy of Cisco Eagle) 126

TaBLe 5.2 Comparison chart – order pick strategies 133

TaBLe 6.1 Pick method comparison (adapted from CILT Warehouse Management course) 159

TaBLe 6.2 Pick system advantages and disadvantages 161

TaBLe 6.3 Cost and accuracy comparison of the various pick technologies (Wulfratt (2013)) 165

TaBLe 7.1 Stock classification 172

TaBLe 9.1 Storage space calculation 209

TaBLe 9.2 Storage method options 210

TaBLe 10.1 Choosing a warehouse racking system 234

TaBLe 10.2 Comparison chart for MHE (courtesy of Toyota) 251

TaBLe 11.1 Task breakdown 257

TaBLe 11.2 Task breakdown, version 2 259

TaBLe 11.3 Example of resource model 265

TaBLe 11.4 Value-adding service volumes by day 267

TaBLe 11.5 Period and daily variations 268

TaBLe 11.6 Allocation of hours 270

TaBLe 11.7 Labour hours calculations 272

TaBLe 12.1 Warehouse cost structure 282

xv

List of tablesxvi

TaBLe 12.2 Overhead contribution 282

TaBLe 12.3 Main warehouse activities and cost drivers (adapted from Griful-Miquela 2001) 284

TaBLe 12.4 Example ABC model 286

TaBLe 12.5 Pallet storage charge calculations 288

TaBLe 12.6 In-handling cost per pallet 289

TaBLe 13.1 Manual record of work 298

TaBLe 13.2 Department metrics (courtesy of Vitasek 2010) 300

TaBLe 13.3 Stock cover calculations 305

TaBLe 13.4 Integrated performance model (adapted from and printed with permission of Tompkins Associates 1998) 308

TaBLe 13.5 Mondelēz benchmarking model 311

TaBLe 13.6 WERC performance metrics (2013) (courtesy of WERC, Karl Manrodt and Kate Vitasek) 314

TaBLe 14.1 Reasons for outsourcing (CILT UK surveys) 319

TaBLe 14.2 Outsourcing decision matrix (adapted from and used with permission of Tompkins Associates 1998) 326

TaBLe 15.1 Example risk assessment partly completed for the warehouse 346

TaBLe 16.1 Potential warehouse energy savings 363

aCknoWLedgeMents

first I need to acknowledge the help and support of my wife Teresa who has provided hours of encouragement and insight, together with bucketfuls

of tea and coffee.

Second, I must acknowledge the help of my co-writers:

Mike Hodge

David Cairns of Q Log Consulting;

Chris Sturman of FSDF;

Ruth Waring of Labyrinth Logistics Consulting;

Simon Edwards of Aaron and Partners, Solicitors, and his colleagues Claire Riding