Every part of the corporate supply chain is tasked with improving operations and increasing efficiency, and the warehouse or distribution center is not excepted. There, in the pursuit of greater productivity, managers want to get more from the labor force, more from their IT systems, more from the facilities themselves. While different areas or functions of the warehouse can be improved one at a time, a significant boost in productivity generally requires more of a comprehensive approach rather than a piecemeal one. The focus, then, should be on every aspect of warehousing-business strategies, resources, processes, facilities and, of course, on the technology that supports the operation-and on getting the best from each element.

After all, as Steve Simmerman, vice president of marketing and business development at Swisslog says, "There is no single thing to boost productivity."

Sometimes, it helps to begin with a definition. Strategy, for instance, is the purpose of the facility. Is that entity solely for internal needs of the company, to receive raw materials or parts to be used by the company? Is it outbound-directed, designed to hold inventory for some period before product is sent out? Or is it a pure cross-deck, where product is received, processed or repackaged and sent on? The answer is important because it may determine if the facility is seen as a benefit to the company, a competitive advantage, or merely a cost to it.

Strategy analysis seeks to know how the warehouse/DC fits into the overall supply chain. Questions to consider include: does the company manufacture its own products or is it receiving finished product from elsewhere; does the business operate a few mega-distribution facilities or does it run many small, hub-and-spoke operations?

"A lot of that depends on the industry and the business," says Jeff Hutchinson, global leader for Accenture's Supply Chain Execution and Warehouse Management System practice. "For example, in the food industry, a bakery has a short shelf life and it doesn't pay to ship a lot of things. They tend to put lots of DCs all over the place. On the other hand, an apparel manufacturer may have just a couple mega-distribution facilities because their shipping patterns are very different. Then there are companies where regulation and tax issues drive the location, such as those selling alcohol or tobacco or drugs. So, it is important to understand how the nature of the business ties into strategy."

The perceived industry norm in such areas as order-to-receipt time is a crucial aspect of strategy that affects the warehouse. For example, if the norm in a given market sector is one or two days from order to delivery, that significantly drives the role of the warehouse, Hutchinson says.

Consequently, when looking to boost warehouse productivity, it's important to know what importance top management puts on the distribution function. For example, if DC managers report from "deep" in the organizational hierarchy, their contributions may not be seen as that important.

Resources means people, and considerations here extend beyond raw numbers-either of workers or their salaries. First, who "owns" the labor? Is it internal or does a third-party have that responsibility?

Second, the "quality" of the labor force turns on the skill sets required. Is the resource pool low-skilled or highly trained?

Clearly, that depends on the work performed in the facility. A simple pick-and-pack environment is generally more manual. In other areas, a lot of value-add services may be taking place.

Compensation obviously plays into productivity, but pay schemes and incentives vary depending on the nature of the business and the skills required. For example, performance-based pay can boost productivity depending on the type of operation. An apparel manufacturer may use a piece incentive approach. In this kind of operation, where there is little automation, the specific task may vary-picking, packing, shipping, whatever-but the pay is based on how much is processed within a given time. This is tied in with accuracy, of course. If accuracy drops, there may be associated penalties.

"You must improve accuracy," says Dale Jeffries, president of Radio Beacon, a Toronto-based provider of warehouse management systems. "The biggest source of inefficiency in the warehouse is doing things wrong."
The piece mentality is not as common in fairly technology-intensive operations, says Hutchinson, though there may be team bonus incentives designed to improve productivity. "Once you get a lot of automation in there, it's very difficult to vary the operation itself, so the piece incentive usually doesn't apply."

As more areas of the warehousing/distribution operation are automated, some jobs become redundant. Indisputably the labor force will feel the effects, ranging from firings to reassignments. For example, a checker whose job is to validate the work of a picker may find barcode scanning has pretty much put an end to his usefulness, at least in that function. Similarly, scanning has done away with traditional use of error-prone manual data entry at the receiving dock in many places.

What about the shipper, the person who selects the carrier for particular shipments? Data tables built into WMS today often have all the rules needed for carrier selection.

While the head count can certainly be reduced, that doesn't have to be case. Simmerman says Swisslog, which performs network modeling and offers a line of WMS and distribution solutions, "looks for technology to drive the labor to those areas in the equation were they add the most value."

	"Twenty percent of inventory may not sell due to inaccurate forecasts." - Alan Scroope of FreeFlow

Jeffries says redundant checkers can be moved into cycle counting, for instance. As more real-time inventory systems are deployed, he says, workers can be repositioned from other parts of the warehouse to handle these instant updates on inventory counts and any associated leakage or damage. "I don't have to wait until the end of the year to do physical inventory now. I can do the cycle count four or five times a year for the whole warehouse, without locking down the place for a week-so I have to add a couple people back in to get these inventory accuracy improvements."

Moreover, some business event-such as a new product line or great volume spikes-is what prompts companies to look to implement a WMS in the first place. While some jobs may be cut, that isn't the stimulus for what can be a rather costly investment. They may even be contemplating new hires. Of course, vendors say their job at that point is to show operators how they can handle the additional work by creatively moving forces around.

Any effort to increase warehouse productivity must assess company processes at some point. They, however, depend a great deal on the size of the operation. For example, the processes are likely to be much more complex in a high-volume, million-square-foot business than they are in a small facility. Larger warehouses or DCs generally have much more rigorous standards and very tight interaction between the different parts of the company. Larger facilities may utilize reserve stock, bulk stock, and prep stock much more than smaller companies. They may require multiple-tier replenishment schemes that smaller facilities don't need. And they often have timing dependencies that are highly complex. For instance, they may have to match work in a bulk area with efforts in an each-pick environment so the separate products can get to the distributor dock at the right time.

An operation's size dictates the nature and complexity of its processes, says Hutchinson, but all companies should be concerned with their efficiency. "This is not to say that small operations shouldn't have clean processes," he says. "They should, but the impact is far less on the operation if they don't."

It's no surprise that consultants often see that a great deal of process reengineering is needed to really boost productivity, Simmerman says. That's particularly true of older facilities. "We find that over 40 or 50 years such companies evolve a lot in terms of growth. But when you look at their facilities and processes, there's no way you would design them the way they look. So we look at existing material and information flows, talk about pain points and their forecasts, what kind of volumes they expect in coming years, and then design processes and systems around those anticipated volumes."

Of course, forecasts and reality don't always march in step. Alan Scroope, CEO of FreeFlow, says the best forecast in the world is likely to be in point only 80 percent of the time. "If you extrapolate that to the warehouse situation," he says, "that means that potentially 80 percent of your inventory is active product you are currently selling. That in turn means that you've got 20 percent that's either slow moving or it's never going to sell simply because you've forecast inaccurately. That's a huge number. That's a fifth of your inventory."

Scroope says FreeFlow's asset management solutions are primarily concerned with what he calls at-risk inventory, the slow-moving, aged or obsolete items. One solution is designed to promote products to existing retailer or distributor bases, Scroope says. FreeFlow clients reportedly include SanDisk, Creative, Apple, Motorola and Logitech. "Each morning they can drop the price until such time as they've secured an order from one of their clients."

However, if products remain unsold after a period of time, clients can use freeflowauctions.com, or perhaps their own branded sites powered by FreeFlow, to notify liquidators or other brokers that inventory is available for purchase.

"These clients are very good at building products and shipping them out," says Scroope, "but they don't have good visibility to what they call the gray market. In terms of moving this at-risk inventory out of the warehouse, we're playing in that space."

To the outside observer, the facility itself is what warehousing is all about, and it is difficult to overstate how important the building, its infrastructure and its location are to overall productivity. Everything has to be considered, from where the operation is sited to how many dock doors it has, from how much floor space is set up for shipping and receiving to how much trailer parking space there is. Clearly, one of the most important considerations is access to major transportation lanes. But a building near highways and with rail access still won't be nearly as productive as it should be if it doesn't accommodate the kind of products moving in and out. For example, is the product something that needs to be broken down, does it require value-add services to be done within the DC, does the product lend itself to a picking mechanism? Is it a regulated product to be stored and picked in a locked area, like drugs for pharmacy chains? What's the product mix-are there weight or bulk limitations on the shipment? Do you have to pack according to a planogram? All that drives the layout of the facility.

A crucial question for operators of existing facilities is whether business, either in volume or by nature, requires renovating or migrating to a greenfield site facility-or to another building originally put up for another company.

Amazon's distribution hub in Fernley, Nev., addresses many of these location concerns. The structure, originally built for Stanley Tools, is near Reno and the major thoroughfares in the West. And crucially, it's near to but not in California, with its high labor, land and tax costs.

Technology enablement is so vast a topic that, whether you're talking about warehouse management systems, voice recognition systems, conveyors and sortation systems or whatever, the ultimate set of questions includes: what's necessary to do the business, what is the benefit in the technology and what is the total cost of ownership in the solution?

Here's one example: If systems improvements allow you to receive quicker, then goods become available for sale sooner. That means less time is needed for inventory, and that means less space is required. You also can promise things to end users quicker. Clearly, technology that provides these benefits is hard to dismiss, especially since all parties benefit.

But do you care about the efficiency of your downstream partners? Jeffries, for one, thinks you should. While the accent today often is on speed, doing things quicker may be a headache for your clients. If the way you pack at your DC winds up adding labor costs to your client, you may be the one to suffer, he says.

"Don't just think about your efficiency," he says. "If you think about how to make your customer more efficient, you'll make more money."

Finally, Hutchinson thinks you can over-automate. You can have so much, you can't ever change anything. Remember, Hutchinson says, "The business is going to change, customers will change, supply chain requirements are going to change. Yet if you put too much automation in, you become too stringent and don't have the flexibility to change as the economy changes."

And it's flexibility that allows you to squeeze the most benefit from each aspect of the warehouse, from strategies to resources, and from processes to technology, as well as from the facility itself.

Now Hear This: Voice Recognition Is What Warehouse Productivity Needs

Move over RFID, voice recognition systems are probably the biggest technology to hit the warehouse in the last 20 years. That's a fairly strong statement, but its author, warehousing and supply chain management consultant Kenneth B. Ackerman, stated it boldly earlier this year in a publication of ProLogis, a global provider of distribution facilities and services. Ackerman, president of K.B. Ackerman Co., Columbus, Ohio, repeated his assertion in a recent interview. In the February 2006 issue of ProLogis Supply Chain Review, he wrote that VRS is "arguably the most important technological breakthrough in warehouse/distribution operations of the past two decades. Yes, RFID is a highly promising, up-and-coming technology. But VR systems are already delivering concrete, impressive benefits today." Despite misgivings about radio frequency identification (see our cover story this month), RFID undeniably is on everyone's lips. So what does Ackerman have to say about RFID now? "There's no payback," he says. "There may be for Wal-Mart, but not for anyone else. I'm speaking for the warehouse operator, you understand. I'm not saying there will never be any payback for him, but there is none in 2006. "It simply costs too much for the warehouse operator. In contrast, voice recognition has clear payback. It has clearly demonstrated it improves productivity in the warehouse." Among benefits Ackerman sees in VRS: • The technology facilitates two-way communication between warehouse workers and warehouse management system software. • VR is paperless • Hands are free and eyes are trained on the task And in Ackerman's view, that adds up to fewer mistakes, reduced returns, more accurate inventory counts and a boost in warehouse productivity. VRS gets its greatest workout in order picking, but it works as well in such areas as cycle counting, loading, sortation, replenishment, putaway and receiving. In his ProLogis account, Ackerman wrote that it's typical to see a 60 percent reduction in picking errors and productivity boosts of as much as 40 percent over six months. So does nothing compete with VRS? "I'm not saying this is a miracle drug; it doesn't cure everything." For instance, scanning devices are cheaper than speech-recognition terminals, and they can read information faster than people can speak or read. "Barcoding is cheaper and more mature, and you have more choices with how to do things," he says. "In some operations, pick-to-light is the best solution. Scanning may be best where you have huge, long serial numbers to record, for instance." Six VRS Vendors 1. Genesta: a Texas-based technology provider that offers voice-recognition as part of a package. Genesta purchased the assets of SyVox, a VRS hardware pioneer. Ackerman says its voice-recognition package is a partnership with IBM and Intermec and offers a complete mix of automated data collection technologies, not just voice-recognition. The Intermec hardware can serve as a barcode scanner, a screen display, or keyboard entry. He says it performs particularly well in a noisy environment. 2. Inther Integrated Systems: IIS is a Dutch firm company with nearly all of its installations in Europe. Its system also uses standard hardware in order to control the cost of investment. IIS has a close alliance with SAP. Its speech output is natural rather than synthetic. 3. Lucas Systems Inc.: Pittsburgh-based provider has a full offering of hardware and software. Hardware is provided by either Intermec or Symbol. The firm claims that its customers experience productivity hikes between 20 percent and 50 percent, Ackerman wrote in the ProLogis newsletter- "a higher percentage than we have seen from other providers." 4. SAE Systems: a Texas company whose VRS hardware is provided by Symbol Technologies. SAE emphasizes a broader solution, not just voice technology but a combination of voice, scanning or keyboard entry, Ackerman says. Its current installations are in Europe, and it is just beginning to crack the U.S. market. 5. Vocollect: the market leader in voice recognition applications in the U.S., Ackerman writes. Based in Pittsburgh, the company has captured "well over half the total market." The company offers a complete software system to combine with existing legacy systems. 6. Voxware: the second-place runner-up in the American market, according to Ackerman. Headquartered in New Jersey, the company takes a consultative approach in marketing its product. The firm collaborates with Lucas and with Symbol Technology.