Friday, April 12, 2013

Logistics – Warehouse Management (Material Handling & Order Picking) – Part V

One of our blog reader Mr. Johny Marsh has rightly commented as “Warehouse Management is also called Material Handling”.  Hence in this session, I am planning to write on Material Handling  and Order Picking process followed at Warehouse.

With the advent of technology changes and the increasing globalization, the logistics and supply chain has become competitive area for companies. New trends in the Supply Chain and technology changes has impacted the warehouse operation and their performances.

Impact of new trends in the supply chain on the warehouse operation and performance

a.        Increasing the customers bargaining power
b.      Change of Customer Order pattern
c.       Consolidation of warehouse (Centralization) – Network design

  •    Increasing power of customers -
The existence of various substitutable products and stiffer competition, makes companies to realize that a faster delivery system of their products to customer is of paramount importance for them to survive and also use this as a competitive tactics against their competitors. The requirement of faster delivery has large impact on warehousing operations. Products need to be stored and picked in a way that the customer order execution time in a warehouse can be shortened. New material handling equipments are introduced to assist the put-away and order picking process.

  •         Change of Customer Order Pattern
With the advent of Just In Time (JIT) and Vendor Managed Inventory (VMI) concepts, the companies are reducing their customer order size and increasing the order frequencies (higher order arrival rate) to suppliers, in order to keep the inventory level low and also to maximise the usage of  warehouse space at their end.  For example the suppliers who received 12 Customer orders (1 order per month) in a year from their customer earlier are now started getting  18 Customer Orders per year.

To provide high customer service level and to achieve economics of scale in transportation,
these small size orders need to meet the tight shipment schedule. Hence the time available for picking orders at warehouses becomes shorter, which demands speedy order picking processing at warehouses.

  •          Centralization of Warehouse
During the last two decades there is a change in the approach related to network design planning in the supply chain ie., Centralized Vs Decentralized facilities (warehouses). Compared to a decentralized network, centralized facilities have the following advantages.
  • Lower overhead cost due to decrease in facility (warehouse) numbers (for example instead of having 10 decentralized warehouses to cater entire India customer base having 4 or 5 centralized warehouses.  This reduces the overall expenses like warehouse rent, salary to workers, material handling equipments etc.  However one may note down that it may increases the transportation cost due to long distance to be covered. But saving in other overhead cost as explained above will offset the increase in transportation cost.
  •  Decreased inventory level. For example if you are having 10 decentralized warehouses you need to keep safety stocks across all 10 warehouses.  Instead if you have 4 or 5 centralized warehouse, your safety stock  level will go down as compared to decentralized warehouses. 
  • Higher fill rate.  The factory or production units find it easy to dispatch finished goods in bulk to fewer warehouses due to centralization.  The centralized warehouse will be having large variety of products and hence the higher fill rate with respect to customer order execution.
The result of centralization is fewer warehouses with greater variety of products. The direct impact of the larger product variety on warehouses is the pressure on space utilization. To accommodate the variety of products, warehouses become larger, which causes longer travel time in picking orders and subsequently impacts order response time.

Impact of Technology change on the warehouse operation and performance

In warehouses many operations which used to be done manually have now been mechanized or automated.

In an fully automated warehouse, the putaway operations are carried as details below. 
  • a.       machines and robots are used to stack the incoming products basis SKU/Item  on pallets.
  • b.      The content of each pallet such as SKU / number of units, batch number, rate etc are communicated / input into  the central computer which assigns the pallet to an empty location in the storage area.
  • c.       Conveyors or Vehicles  are used to transport the incoming pallets to the storage location
  • d.      Automated Storage/Retrieval machines are used to store the pallet at the right position in the storage area.

Note : Putaway is  the process in which materials are stored/putawy after being received by a warehouse. Determining where the materials will be stored and organized is part of this process, as well as identifying the materials in order for easy future retrieval.

In an fully automated warehouse, the retrieval & shipment operations are carried as details below. 
  •  Basis the customer order, the computer (Warehouse Management System) will direct or inform the number of pallets and item units to be picked from the respective storage location details.
  • Storage/Retrieval machines are used to assist order picking process.  The picking process consists of few methodologies like Batch Picking, Zone Picking.  These picking process is also supported by systems such as pick-to-light, pick-to-voice, Radio Frequency Identification (RFID), etc.  We will learn more about these terms in our next session.
  • The picked orders can be transferred through conveyor systems to an automated sorting area / location which contains multiple chutes (sub area)  for different orders. For example you can pick 3 different customer orders which consist of multiple items / SKUs through Batch or Zone picking.  All items picked against a given customer order goes only to a one specific chute (sub area) allotted by the computer system for that customer, without any mix up.
  • The orders for a specific customer are sorted automatically to the same chute. Sorted orders are then packed and grouped for shipments.
  • The development of information technology and warehouse management software systems integrates the Putaway and retrieval processes seamlessly.