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Mistakes to Avoid in
Distribution Center Planning
From Our Free "Best
Practices" Booklet
Operations
Associates has executed nearly one-thousand projects.
We
have documented key mistakes that are typically made by
less experienced project teams. Our goal is to share
this critical information with you so you can avoid
these mistakes. We hope this helps your project team
successfully plan and design your DC improvement
project.
We would
like to share "Mistake #6" with you. Please contact us
for a free pamphlet to view all 10 of the lessons. In
subsequent newsletters, we will focus on each of the 10
Mistakes to Avoid in Distribution Center Planning.
Mistake #6
Failure to Apply Lean Logistics Principles
Lean principles, or the
elimination of non-value-added activities, apply
just as
much to distribution operations as they do to
manufacturing. Failure to apply lean
principles leads to:
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Excess travel distances, congestion,
and reduced picking efficiency.
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Unbalanced work flow leading to excess
staging and dock space.
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Inadequate process design leading to
picking errors and reduced accuracy.
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Reduced throughput and order fill rates.
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Poor housekeeping creating low morale,
inefficiencies, and lower quality.
For example, a recent customer in the pharmaceutical
wholesale business required same day shipping to
hospitals and independent pharmacies.
They designed their processes to pick all orders,
stage these orders on the dock, and then sort and
palletize all of the orders for shipping. In essence,
they stored 100% of that day’s orders twice–they just
moved locations within the facility. We safely
redesigned the process into four main shipping waves
balancing the workflow between picking and shipping.
Although some benefit was achieved with labor
efficiency, the size of their dock was reduced by 65%.
This delivered a reduction of over 100,000 square feet
in facility size and the corresponding savings in
construction costs.
Lean techniques that should be applied to DC planning
include:
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Create a facility wide takt time or pace based on
daily demand. Many operations run pick waves but
fail to manage receiving, stocking, and shipping
operations in a similar manner. To reduce facility
space, shipping should perform at the pace of
customer demand, picking to shipping’s pace,
stocking to picking, and receiving to stocking. This
minimizes “Work in process (WIP) Inventory” between
functional areas to reduce space, minimize travel
distances and handling, and allow for level-loaded
staffing. This concept controls inbound flow by
scheduling deliveries or using a small, managed
buffer yard. By managing WIP, unbalanced flow and
errors can be easily monitored and root causes
corrected.
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Don’t pass on poor quality to other areas. Build in
checks and balances in each functional area to
ensure the work is processed with six-sigma quality.
Correct supplier shipment errors before product
leaves the dock. Improve putaway accuracy to
eliminate picking the wrong item later. Place only
one SKU in a pick location, create separation with
dividers, and routinely perform inventory
consolidation and control functions. Validate
picking prior to performing dock operations by
either product scanning or automatic weighing and
identification techniques.
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Minimize travel distances. The biggest waste in
distribution operations is excess travel. We often
find that 30-60% of a stocking or picking operator’s
time is consumed with moving from one pick location
to another or waiting for materials to arrive. A
Warehouse Management System (WMS) will not solve
this problem by itself. A WMS can help ensure
inventory accuracy when the operator arrives for the
pick, but if the layout and operational design is
constructed poorly, excess travel will occur. One
technique to solve this problem is to break the
operation into logical storage zones. A storage zone
can be organized by size (e.g. 100,000 square feet),
by velocity (A movers in the front, C movers in the
back), by commodity (group all bumpers in one zone
and tail pipes in another), or a combination of
these. Storage zones minimize the distance an
operator travels. Techniques such as pick and pass,
automated order sorting, or dock consolidation are
used to combine orders that require picking in
multiple zones. These techniques keep operators
stocking and picking rather than walking and riding.
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Cross-dock or use floor stack storage for
high-volume, low variability products. Accelerating
the flow reduces travel distances in the facility.
This is accomplished by moving the fast runners to a
prime pick zone. Another benefit to consolidating
fast movers is the application of selective
automation to reduce labor. In addition,
cross-docking lowers average on-hand inventories and
reduces total space requirements.
Lean techniques improve DC operational efficiency.
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Operations
Associates, in Conjunction
with Rheem Manufacturing Company, Designed a 6.1 M,
180,000 SF Parts Distribution Center for the Replacement
Parts Department
Rheem Manufacturing Company is a privately held
company that produces a full line of high quality
residential and commercial heating and cooling products
under the brand names, Rheem and Ruud that are marketed
throughout North America and the world.
Rheem Sales Company, Inc. is the aftermarket parts
department of Rheem Manufacturing. Rheem made the
decision to relocate its parts distribution center to
Randleman, North Carolina due to the need for additional
space for the increasing parts business. Operations
Associates worked with Don Harter, General Manager and
Chuck Holcombe, Operations Manager, to develop a
distribution center in Randleman, NC that was selected
by Rheem. Operations Associate’s (OA) role was to
develop the best storage and material handling design
within the parameters laid out by Rheem. OA used a
combination of existing and new equipment in the design,
streamlining the material flow and providing
high-density storage to both, increase productivity and
maximize cube utilization.
With the guidance of OA, the company constructed an
180,000 square foot distribution center, with an
additional 65,000 square feet of expansion capability on
the 46-acre West Randleman Business Park location. The
design features a u-shaped dock flow, carton flow
racking for small parts picking,
and rack storage with both narrow and very narrow aisle
storage. The distribution center now serves as the North
American headquarters for the fast growing replacement
parts business for Rheem.
The distribution expansion was approved to keep pace
with annual double-digit growth rates achieved over the
past few years. In 2001, the Company launched a network
of dedicated independent wholesale parts stores for
aggressive merchandising of parts to contractors.
PROSTOCK® stores are modern, well lit, fully stocked,
self-service parts and supply centers, catering to the
professional heating, ventilation, and air conditioning
(HVAC) contractor. The stores provide replacement parts
as well as a wide variety of aftermarket parts,
supplies, and accessories for all HVAC equipment needs.
According to Ed Raniszeski, Rheem Director of
Communications, “The new Replacement Parts distribution
center location will significantly improve delivery
performance by comparison to the previous Fort Smith, AR
warehouse location. The new parts distribution center is
central to 85% of current and projected market demand
versus the previous location of 41% market reach.
Federal Express’s construction plans of a new major
sorting and shipping hub in Greensboro, NC brings a
combination of a close-to-market distribution center and
efficient transportation to increase the ability to
efficiently deliver small parcel parts one day after
receipt of order, regardless of US time zone.”
In addition to the transportation and proximity
advantages of the new distribution center location, the
new facility will enable Rheem to consolidate its parts
distribution operations into a single facility that has
been specifically designed for parts distribution, and
to provide fast, reliable, efficient, and competitive
customer service.
For more information
contact:
Alan Nager, Principal
AlanNager@oallp.com
Mike Rigg, Principal
MikeRigg@oallp.com
Christi Suchyna, Marketing Manager
ChristiSuchyna@oallp.com
800-860-4902
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Ten Mistakes To
Avoid In
Distribution Center Planning
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Mike Rigg, Principal
MikeRigg@oallp.com
800-860-4902 |
