1 – Analyse and improve your Stock-Turn. Stock-turn is a term used for the amount of time it takes to turnover stock. It can be applied to a single SKU (Stock Keeping Units) or to the entire contents of a warehouse. An astute warehouse operator will regularly analyse their stock-turn and strive to reduce any SKUs that are not regularly turned over. Many businesses will store unused SKUs for far too long. The result is poor return on the lingering product – which could soon transform into a vintage or deteriorated product. More often the highest loss will be in the cost of your warehouse space or real-estate that the unwanted tenant is occupying.
Something to inspire you: While most of us would be elated with a whole-of-inventory stock-turn of 90 days, one of our customers had a target (which was policy) to leave no product on the shelf for more than 14 days. If a SKU had not been sold within 14 days, then that SKU was removed from the shelf, corralled in isolation with other like SKUs and put at sale within the next 7 days. If not sold at sale, the original supplier was requested to take it back and credit was requested. Failing this, the unmovable and non-returnable SKUs were donated or dumped. The result was a nett whole-of-inventory stock-turn under 30 days. If the final remedy seems a little extreme or wasteful to you, try the following exercise.
As an exercise: Calculate how many cubic meters of usable storage space exists in your warehouse; then divide that into the annual real-estate cost including aisles, access and common areas. The result will be the real-estate cost of one cubic meter within your warehouse per annum. Now apply that cost to the space your slow moving stock is occupying. Depending on how long the stock has been sitting there, it can be surprisingly costly.
2 – Regularly analyse and optimise your SKU locations: Pareto’s principle (also known as “the 80/20 rule” and “the law of the vital few”) is the key to optimising the location of your products.
Many are aware of the concept behind Pareto’s 80/20 rule. For those not familiar to the rule and how it applies to stock in a typical warehouse, the concept is that 80% of your warehouse inventory or SKUs will be subject to 20% of your warehouse activities or movement. While 20% of your SKUs will involve 80% of your activities. So where practicable, it is prudent to keep your customer’s favourite 20% located in the most easily accessible location and equally as close to both Receiving and Despatch areas.
It may also be prudent to consider storage and picking concepts which ensure maximum picking efficiencies for your customer’s favourite 20% while providing the lowest cost storage for the not-so-popular remaining 80%.
3 – Examine your warehouse activities: Although optimising your SKU locations should have a direct and positive effect on reducing the unnecessary activities of your warehouse staff, there is more to consider. Often there will be areas of activity which is either inefficient or straight-out wasteful. Open and welcoming communication with all stakeholders may provide the most rewarding results here. But there are always better ways of doing things; better and more suitable tools, concepts and equipment. Some will fit the budget and some will not. When looking for ways to improve it is often worthwhile to simply ask the experts.
Calling in help sometimes helps: One of our customers (Paul) called us in after he identified a glitch in one of his workshop processes. It came as a little of a surprise when Paul asked me to review a video he had recorded while his staff were performing some routine tasks in their workshop. The video was the result of Paul trying to understand how his opposition were getting a process completed quicker than his guys could. With the consent of all stakeholders, Paul set up a video camera to monitor activities and it was soon discovered that the process was flawed. It was flawed in that there was unwanted dead-time in the process. There would be one guy waiting for the other guy to finish his task before he could commence with his. This was not an uncommon issue, but it did require some inventive thought processes which resulted in Elbowroom – along with Paul – designing and implementing a unique live-storage installation. Paul and the guys were stoked when they measured their time and success against their opposition.
4 – Bigger, Stronger, Safer; Three little-ish words that can make a huge difference in our work environment. Why mess with this stuff? Here is a simple exercise you could employ every time you make an investment choice related to your warehouse; your people; your products and your customers.
Your future success exercise:
Storage System Supplier’s Score Sheet
|Supplier’s engineering support & endorsements|
|Supplier’s insurance cover|
|Supplier’s documented WHS systems|
|Supplier’s support (of you)|
|Supplier’s understanding of your expectations|