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Inward Investment Guides

Don't Judge a DC by Its Shape - What's Inside Matters Most

Although many distribution centers look the same from the outside, the processes that go on inside need to be uniquely configured for process optimization.

Norm Saenz, Senior Vice President and Principal, TranSystems (August 2012)
Recently, while looking out the plane's window when flying into Ontario, California, I couldn't help but notice the valley of distribution centers (DCs) and their various shapes. There were squares, rectangles, "L"-shaped, and others that had no specific shape. There were also many that seemed to be the same exact shape! This emphasized my belief that while facilities can be different shapes and sizes, the process within is the more critical factor. It's true that the clear height, bay spacing, floor design, number of dock doors, fire protection, and other facility configuration factors impact the layout design. But, too often, little planning is done when establishing a new operation. A simple strategy of floor storage and standard pallet racking across the entire facility might work for a few companies, but very likely won't result in an efficient operation.

The modern distribution center must handle shipments from international and domestic suppliers and provide an increasing amount of value-added services to satisfy customers. Often it is a company's own retail stores that are the most demanding! Today's distribution center must deliver accurate and on-time shipments, with an efficient and nimble operation. Such demands can't be satisfied with basic racking and floor storage.

With this level of challenges and expectations, where does management start? The answer is receiving - but management must continue with planning for all major warehouse processes through shipping. The order fulfillment area typically requires the most labor and demand for accuracy. It is also the area where technology and automation can make a big difference in achieving both accuracy and higher throughputs while controlling labor costs. An untapped and overlooked area is often the last 100 feet, where packaging, manifesting, and shipping occur. The order fulfillment area can kick-out volumes only as fast as the last 100 feet can free up the shipping dock. More often than not, the picking area gets the necessary attention, but many of the other areas lack the required planning. The fact is that every area, starting with receiving, is critical to the successful fulfillment of customer demands. Stepping through the major warehouse functions, you can see the important considerations in each area.

Receiving: Don't ignore this area, which controls the receipt on inventory into the facility and can impact pending orders and/or allocation/release for future orders. How can you speed-up this process? Automated Shipping Notice (ASN) comes to mind first. ASNs are generated from the suppliers and give the receiver forewarning of the purchase orders and arriving inventory. Additionally, ASNs enable the receiving clerk to manage the dock equipment, staging space, and staffing for the receipt before it arrives. Most importantly, ASNs allow for the rapid receipt of entire purchase orders with the scan of pallet identification bar codes, vs. the scanning of each case or piece in the receipt.

Stocking/Cross-Docking:
The speed and accuracy of the receipt process directly integrates with the stocking of products into the storage area. Additionally, when the products are received, they can be flagged for immediate cross-docking for completion of a staged order ready for shipping. The stocking of products is most efficient when directed by a warehouse management system (WMS), with the use of random storage philosophy. While random, the WMS should also consider the planned volume or activity profile of the products in order to store them in the most accessible location for replenishment or picking. Depending on the operation, management might store products within the same area/equipment from which orders are fulfilled. Alternatively, there might be a separate forward-picking area for order fulfillment that is replenished from a reserve storage area. Traditionally, the stocking activity is directly into the reserve storage area. However, more advanced systems may be able to direct the put-away into the forward-pick area, should there be no overstock and the picking location is empty.

Replenishment: Not running out of product in the pick location is cardinal rule #1 or #2. The function of replenishment alone cannot be blamed should a location run out of product during picking. The first objective should be to size the pick locations so that they hold enough product quantity to limit the need for replenishment. This involves a delicate balance of reducing replenishments to an average of every two weeks and not oversizing the picking area. Assuming that the pick locations are adequately sized, the success of replenishment falls on the process and technology supporting the process. The ideal technology is for the system to trigger replenishment when the pick location reaches a minimum quantity. The replenishment would occur during an off-picking shift and ready the pick location for the proper amount of inventory prior to the picking activity. Should the replenishment function be based on a visual queue, then the operation is at risk for stock-outs during picking.

Picking:
Up to this point, you see the importance of properly designing the prior functions within the distribution center. The picking area is often the most critical function within the warehouse to properly design. There are many details to work out including the process, equipment, and technology. The process ranges from discrete to various combinations of batching, zone-batch, zone-pass, and zone-batch-pass. The decision depends on the level of technology to support these applications and the complexity of the orders to fulfill. Discrete picking provides complete accountability for the accuracy of the order on one picker, but often provides the lowest order throughout. Simply batching multiple small orders with a single picker can speed up the productivity of completing those orders. When moving to various zone combinations, then technology is a must in order to accurately manage the orders moving through the system and consolidate them in shipping.
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