Every year billions of dollars of warehouse materials is damaged somewhere in between the packing, delivery, or and the retail shelving process. Any number of reasons can cause damage to goods and the only way to determine the cause for the damage is to conduct a thorough warehouse audit to examine every time a product is touched, by whom, and at what location. It is necessary to observe how the product is handled from case to palletizing and ultimately retailer stocking.
Areas of concern:
Packing material should be strong and durable enough that it will not break as you palletize the materials. You may need to change paper to corrugated cardboard in order to maintain the integrity of the packaging during shipping.
The handling of the product should be done with the proper equipment. Improper use or equipment that is used for the wrong application can damage goods. An improperly used forklift will cause damage by crushing or dropping the product.
Proper palletizing should consist of placing product to build strength using proper load configuration and distribution of the weight to reduce voids between boxes. If need be, use stabilizing material to fill in the voids.
The method of handling by the customer is just as important as the process within your own warehouse. Is the pallet being placed in an area with adequate space to accommodate the material without damaging the packaging? Is the customer using correct moving and storage equipment appropriately, or are they misusing equipment?
Observation, communication between customer, vendor, and manufactures, using metrics, and constant analyises is important in reducing damage to products either in the warehouse or in transit. The above is a sampling of the areas of concern. Consider using an unbiased third party in order to assist you to mitigate product damage and ultimately reduce cost of damage.
Friday, June 26, 2009
Wednesday, June 24, 2009
Supply Chain Forecasting in Manufacturing
Warehousing costs can be an excessive expense to your organization if supply forecasting is significantly over estimated, because it can lead to excessive expenditure in warehousing inventory, labor, and wasted material. On the other hand, if demand forecasting is significantly underestimated, you risk the possibility of lack of inventory, which leads to lost sales and ultimately lost customers, because they will go elsewhere to secure what is needed. Poor forecasting include shortcomings in such things as over or under stock of a specific apparel size.
Maintaining accurate inventory is necessary in order to prepare for demand. You must take into account respond to other retailer’s actions, and consider your own competitive market share in relations to your own organization.
Proper allocation of stock entails estimating the quantity of goods or service that the public will demand. By using both scientific and non, such as historical data, test market information, along with quantitative methods, demand may be closely determined. In order to calculate demand-forecasting, warehouse managers use the average of percentage errors, which is the equal to the deviation of actual demand from forecasted demand. If the deviation is above 100%, then the forecast in inaccurate.
Forecasting is a combination of art and science and requires a keen sense of understanding of the market, economy, historical data, statistical analyses, and the law of diminishing returns. Excellent skills in such areas will help in the strategic planning of the organizaiton.
Maintaining accurate inventory is necessary in order to prepare for demand. You must take into account respond to other retailer’s actions, and consider your own competitive market share in relations to your own organization.
Proper allocation of stock entails estimating the quantity of goods or service that the public will demand. By using both scientific and non, such as historical data, test market information, along with quantitative methods, demand may be closely determined. In order to calculate demand-forecasting, warehouse managers use the average of percentage errors, which is the equal to the deviation of actual demand from forecasted demand. If the deviation is above 100%, then the forecast in inaccurate.
Forecasting is a combination of art and science and requires a keen sense of understanding of the market, economy, historical data, statistical analyses, and the law of diminishing returns. Excellent skills in such areas will help in the strategic planning of the organizaiton.
Saturday, June 20, 2009
The Importance of Safety Stock in a Manufacturing Environment
Improve your fill rate, and reduce lead-time on inventory on hand at all times. You need to maintain stock levels, so that it does not fall below a specific amount. An important aspect of inventory management is having the optimal amount of safety stock available at all times. The right balance is essential, because too much will cost the company money in carrying cost, potential breakage, or expiration of non-durable goods. The right balance will allow you to meet unexpected increases in sales demand or cover a shortage caused by labor or material shortcomings.
An important aspect of maintaining accurate inventory control is to calculate safety stock as accurately as possible, so you can optimize stock levels all the while mitigating the waste of money on an inventory glut. In order to make an informed decision on calculating the amount of safety stock, one must consider demand for the product, lead-time for raw materials, and shipping, even potential delays due to inclement weather. The more accurate the forecast, the less safety stock is required thus saving your company lost revenue due to holding costs or lack of goods to market thus increasing customer turnover.
Your Enterprise Resource Planning system will help you immensely to calculate inventory required and automatic ordering once the inventory dips below a certain value.
An important aspect of maintaining accurate inventory control is to calculate safety stock as accurately as possible, so you can optimize stock levels all the while mitigating the waste of money on an inventory glut. In order to make an informed decision on calculating the amount of safety stock, one must consider demand for the product, lead-time for raw materials, and shipping, even potential delays due to inclement weather. The more accurate the forecast, the less safety stock is required thus saving your company lost revenue due to holding costs or lack of goods to market thus increasing customer turnover.
Your Enterprise Resource Planning system will help you immensely to calculate inventory required and automatic ordering once the inventory dips below a certain value.
Wednesday, June 17, 2009
The Replacement Value of Inventory
While reading a great article on the value of lost material it really clarified the true value of lost, stolen, or damaged material to an organization. Jon Schrebfeder gives a great example of how the folly of one employee can decrease profitability substantially.
As you daily walk through the distribution center or manufacturing plant, do you or the employees notice inventory that is out of place? What about items that are stolen or broken by employees just by working in their daily routine; never considering the reproductions of their actions. The example given demonstrates how the value of an object is not merely the cost of that item, but is actually based on a formula, which takes into consideration additional sales needed to make-up for inventory loss. For instance, consider that the item that has been broken or misplaced has a value of $30 and your organization has a net profit margin of 3% before taxes, it would take $1000 of additional sales to make up the difference in profit loss (1000 x 3% = 30).
Unfortunately, the loss does not stop there. Other intrinsic expenses also come into play such as the further administrative cost that is incurred just in additional marketing, labor costs, and administrative costs incurred.
It would behoove you to enlighten your employees that the value of lost, stolen, or damaged material directly impacts the company and indirectly affects their bottom line.
As you daily walk through the distribution center or manufacturing plant, do you or the employees notice inventory that is out of place? What about items that are stolen or broken by employees just by working in their daily routine; never considering the reproductions of their actions. The example given demonstrates how the value of an object is not merely the cost of that item, but is actually based on a formula, which takes into consideration additional sales needed to make-up for inventory loss. For instance, consider that the item that has been broken or misplaced has a value of $30 and your organization has a net profit margin of 3% before taxes, it would take $1000 of additional sales to make up the difference in profit loss (1000 x 3% = 30).
Unfortunately, the loss does not stop there. Other intrinsic expenses also come into play such as the further administrative cost that is incurred just in additional marketing, labor costs, and administrative costs incurred.
It would behoove you to enlighten your employees that the value of lost, stolen, or damaged material directly impacts the company and indirectly affects their bottom line.
Friday, June 12, 2009
Negotiate the Cost of Your Warehouse Lease
Warehouse and manufacturing organizations are taking advantage of the glut in the market in commercial property. Even with the over population of building in many cities, developers continue to build industrially geared structures. There is no doubt that it is a buyer’s market, but consider, that it is also a leaser’s market as well.
If you are currently paying the same price per square foot as you did three years ago, why? Now is the time possibly to cut costs by negotiating the price per foot and trying to reduce your monthly lease expenditure. Let’s face it, there are a lot of options open to you right now and if feasible, it may actually be cheaper in the long run to invest in moving equipment to another location if the current property owner is not willing to negotiate.
Strategies include researching the current market within your immediate area as well as others that might be of interest. Make certain that you are prepared with current statistics and information about cost per square footage as well as lease requirements such as minimum number of years, sub-lease options should you need to leave the location, and what repairs and maintenance the property manager covers.
Once you are armed with all the information pertinent to negotiation you lease, you can then contact your current property manager and negotiate a potential reduction in your lease terms. Not all property owners are willing to negotiate, but if you have good negotiation skills, then you might find yourself in an advantageous position and substantially lower your monthly expenses.
If you are currently paying the same price per square foot as you did three years ago, why? Now is the time possibly to cut costs by negotiating the price per foot and trying to reduce your monthly lease expenditure. Let’s face it, there are a lot of options open to you right now and if feasible, it may actually be cheaper in the long run to invest in moving equipment to another location if the current property owner is not willing to negotiate.
Strategies include researching the current market within your immediate area as well as others that might be of interest. Make certain that you are prepared with current statistics and information about cost per square footage as well as lease requirements such as minimum number of years, sub-lease options should you need to leave the location, and what repairs and maintenance the property manager covers.
Once you are armed with all the information pertinent to negotiation you lease, you can then contact your current property manager and negotiate a potential reduction in your lease terms. Not all property owners are willing to negotiate, but if you have good negotiation skills, then you might find yourself in an advantageous position and substantially lower your monthly expenses.
Wednesday, June 10, 2009
If You're Not a Union Facility Now, You May Be Soon
How will the National Fair Choice Act (NFCA) also known as the H.R. 800 affect your organization? The National Fair Choice Act could potentially amend the current Labor Relations Act to make it easier for employees to unionize. That is right folks. Currently, in order for employees working for an organization that would like the opportunity to unionize can request blank cards from an existing bargaining unit. Once the employees have a minimum of a 30% consensus, it would then be presented to the employer, and the employer can opt for secret ballot. If passed, the employees then become part of the collective bargaining unit. The collective bargaining unit can now negotiate wages, working conditions, and benefits on behalf of the employees.
If the H.R. 800 passes, it will make it easier for the employee to unionize by removing the option of secret ballot election from the employer and instead gives it to the employee. Unless the employee is thoroughly informed, the H.R. 800 makes it much easier for unscrupulous practices, because employees could be signing a document that does not fully disclose their role or effects of the decision in signing a collective bargaining card.
The end result could mean a higher population of unionized workers. Organizations could lose bargaining power over wages and benefits, which could increase overall labor costs. They will also face stricter penalties for perceived violations of union agreements.
Just because your organization is not unionized now, do not be so confident that the NFCA will not affect you soon. Research how this amendment could affect your organization and consider developing two sets of business plans to address potential outcomes if your company unionizes.
If the H.R. 800 passes, it will make it easier for the employee to unionize by removing the option of secret ballot election from the employer and instead gives it to the employee. Unless the employee is thoroughly informed, the H.R. 800 makes it much easier for unscrupulous practices, because employees could be signing a document that does not fully disclose their role or effects of the decision in signing a collective bargaining card.
The end result could mean a higher population of unionized workers. Organizations could lose bargaining power over wages and benefits, which could increase overall labor costs. They will also face stricter penalties for perceived violations of union agreements.
Just because your organization is not unionized now, do not be so confident that the NFCA will not affect you soon. Research how this amendment could affect your organization and consider developing two sets of business plans to address potential outcomes if your company unionizes.
Saturday, June 6, 2009
Key Performance Indicators
Each organization has its own key performance indicators (KPI) with which they measure their success or area of needing improvement. It is an essential aspect of running a business. What key indicators should you use for your warehouse business? That will depend upon what is most important to your organization and applies to your industry.
Key performance metrics indicates your warehouse organization’s health. It must be quantifiable, and there must be a visual representation, which can be either color-coded or in graphic form. The best method of measure is numerical rather than a general improvement. An example would be a percentage of deliveries or returns due to poor quality control. The measurements must take into consideration current market trends within measured industry performance.
A warehouse management system will do wonders in assisting you to track performance within your organization. Areas of measures include the automated entry and approval function, on-demand and real time measures, data input and real time performance, and set up procedures. Other areas of performance can include order accuracy, product availability, inventory accuracy, and product quality.
Overall, the KPI should be actionable by the company. It is useless to track and try to modify a performance indicator such as economic trends because your organization cannot change outside forces. It is best to target an area in which you want growth. An effective KPI leads to increased profitability, adds value, and efficiency if used consistently over the long-term.
Key performance metrics indicates your warehouse organization’s health. It must be quantifiable, and there must be a visual representation, which can be either color-coded or in graphic form. The best method of measure is numerical rather than a general improvement. An example would be a percentage of deliveries or returns due to poor quality control. The measurements must take into consideration current market trends within measured industry performance.
A warehouse management system will do wonders in assisting you to track performance within your organization. Areas of measures include the automated entry and approval function, on-demand and real time measures, data input and real time performance, and set up procedures. Other areas of performance can include order accuracy, product availability, inventory accuracy, and product quality.
Overall, the KPI should be actionable by the company. It is useless to track and try to modify a performance indicator such as economic trends because your organization cannot change outside forces. It is best to target an area in which you want growth. An effective KPI leads to increased profitability, adds value, and efficiency if used consistently over the long-term.
Thursday, June 4, 2009
Meeting Safety Standards
Whether in a warehouse or manufacturing environment, unfortunately many organizations do not think about earthquake preparedness until it is too late. It is then, that they will prepare for the next quake. Unfortunately, it may be too late if the damage that occurs is severe enough to stop production or employees become injured because of poor planning.
Consider taking some basic precautions and avoid potential hazards that could occur during a natural disaster. Walk around the facility and observe your surroundings carefully. Take a coworker with you to get a second opinion of potential issues. Issues to look for could include things like whether or not shelving is secured to the wall with the appropriate hardware that will hold up to an 8.0 earthquake. Does your facility have chemical tanks, large manufacturing equipment, cylinder storage tanks, or machine tools. What special requirements must be followed to secure your equipment while taking into consideration state and federal regulations as well as OSHA requirement?
If you do not have the time or knowledge to properly inspect your facility, then consider hiring a company or sub-contractor to conduct a safety inspection. Once he or she reviews your facility, they will provide you with documentations and recommendations to meet minimum standards within your industry.
Ultimately, you will help eliminate potential hazards within your warehouse or plant as well as maintain OSHA and security standards. All this adds up to smart business when you think about the potential cost of workers’ compensation or fines incurred because of non-compliance.
Consider taking some basic precautions and avoid potential hazards that could occur during a natural disaster. Walk around the facility and observe your surroundings carefully. Take a coworker with you to get a second opinion of potential issues. Issues to look for could include things like whether or not shelving is secured to the wall with the appropriate hardware that will hold up to an 8.0 earthquake. Does your facility have chemical tanks, large manufacturing equipment, cylinder storage tanks, or machine tools. What special requirements must be followed to secure your equipment while taking into consideration state and federal regulations as well as OSHA requirement?
If you do not have the time or knowledge to properly inspect your facility, then consider hiring a company or sub-contractor to conduct a safety inspection. Once he or she reviews your facility, they will provide you with documentations and recommendations to meet minimum standards within your industry.
Ultimately, you will help eliminate potential hazards within your warehouse or plant as well as maintain OSHA and security standards. All this adds up to smart business when you think about the potential cost of workers’ compensation or fines incurred because of non-compliance.
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