For many manufacturers and distributors, a seamless supply chain of highly efficient and tightly integrated business processes sharing a single unified source of accurate real-time data seems an unachievable goal. That’s not surprising since such organizations are struggling to gain control over their entire supply chain using a mix of disparate systems that fail to fully mesh with one another creating silos of outdated and unreliable information. Instead of enabling manufacturers and distributors, a mixture of poorly connected systems actually work against organizations to create bottlenecks in the free flow of information resulting in order delays, picking and packaging errors, and dissatisfied customers and partners.
The Inefficient Warehouse
One key area of operations that is frequently an obstacle to an efficient supply chain is warehouse management. At one end of the spectrum, a smaller company may not yet have fully thought through or automated the business processes within its warehouse or warehouses to capture all the information concerning the receipt, storage, handling, picking and packing, and order fulfilment and shipment of products and materials to distribution centers or end customers. Such a manufacturer or distributor may be using Excel spreadsheets or some limited homegrown database to manually enter data introducing the potential for errors and data duplication.
A larger manufacturer or distributor may already have a standalone warehouse management system (WMS) but it may lack flexibility and scalability to grow as the company expands or changes its business. That WMS may also not be well integrated with the organization’s other business management solutions such as enterprise resource planning (ERP) and customer relationship management (CRM). On the ERP side of the house, it’s vital for finance staff to have complete real-time visibility into inventory management since products sitting at a shipping dock negatively impact the corporate balance sheet. On the CRM side of house, sales and service personnel who are directly interfacing with customers or wholesale and distribution partners also need full real-time insight into the status of outstanding orders and available inventory so they can communicate that information.
While a WMS may be too complex or rigid, manufacturers and distributors often lack rigor in how they manage their warehouse in terms of facility layout, training and use of staff. What many organizations have effectively done is to take both the day-to-day running of their warehouse and the business processes that underpin it and set them in stone. My advice to those organizations, whether large or small, is to take a step back and start rethinking WMS and then to move to a lean warehouse.
Think Differently: How to Get to a Lean Warehouse
When thinking lean, a manufacturer or distributor is looking to introduce measures designed to make warehouse management more efficient and accurate to benefit themselves as well as their customers and partners. But, three other factors should also be top of mind – adaptability, flexibility and scalability – so that the lean warehouse can change, grow and help enable shifts in the company’s expanding business. With that in mind, here are some pointers to lay the seeds for establishing a lean warehouse:
- Embrace cloud computing. The best solution to support and enable warehouse management for small, midsize and enterprise-level organizations is a cloud-based WMS which is architected to scale with a company’s growth and provides an accurate, unified and actionable complete source of real-time data. Take NetSuite customer Alpha Comm Enterprises, a leading B2B provider of custom wireless accessory solutions for carriers, major retailers and distributors with headquarters in Lawrenceville, Ga. Running its business on NetSuite and embracing the concept of the lean warehouse, Alpha Comm has complete access to real-time warehouse and inventory management data as well as sales order information, the combination of which enable the company to better respond to customers and to improve internal planning. It’s vital for the B2B company, which can ship 25 million to 30 million products in a year, to be able to run highly efficient warehouses given the fast-paced market it serves where products reach obsolescence rapidly. All of Alpha Comm’s efforts have paid off handsomely with company revenue dramatically increasing from $5 million to $55 million over a six-year period.
- Focus first on fixing what’s broken. As a manufacturer or distributor starts to rethink warehouse management or indeed initially adopts a formal WMS, evaluate which business processes are currently broken. Concentrate on fully resolving these issues before leaping on the latest technologies such as voice-activated or robotic picking. Get the basics right first and automate those processes, then start optimizing processes and don’t stop fine tuning. Continuous refining should be a goal for every company’s warehouse management operations. Make sure business processes are streamlined, unified and tightly integrated with the ERP, ecommerce, and CRM systems used by the company. Ensure everyone within the organization as well as partners like third-party logistics (3PL) providers have real-time access to the data they need to do their jobs effectively and to use as the basis for future decision making.
- Establish a WMS center of excellence. By having a repository of best practices and a team responsible for constantly adding to those practices and refining them, a manufacturer or distributor is well positioned to achieve continuous reinvention of its lean warehouse. Ensure there is a constant daily conversation with warehouse staff on what worked and didn’t on each shift and then use the metrics in the system to drive efficiency. The goal is to drive improvements so that the same problems don’t continue to occur, that safety awareness is always reinforced, and that staff are also ready to handle the next set of challenges in the working day.
- Drive optimization efforts across the entire warehouse. With a cloud-based system like NetSuite, a company has a great foundation on which to create a lean warehouse, but IT isn’t the only area to drive improvements. Companies must work towards optimal use of the storage space within their warehouses, to boost the productivity of their workforce by creating optimal pick path and to improve shipping processes. It’s worth remembering that efficiency around transportation cannot only keep costs down but can also boost business with customers and partners concerned about carbon footprints.
- Efficient management and communication across multiple locations. Manufacturers and distributors need to enable the free flow of information across their regional and global warehouses and those facilities of their partners so everyone involved in the supply chain has real-time insight. When rolling out the concept of lean WMS for the first time or follow-up iterations, select a cross-discipline staff drawn from the warehouse, transportation, finance, purchasing, sales and customer service and have that group evangelize the lean warehouse and its benefits to the entire organization. Consider involving partners too. If the manufacturer or distributor is going lean across multiple warehouses, having that lean cross-discipline team can be very helpful in ensuring consistency of the lean message – streamlined and unified business processes, real-time accurate data, improvements in productivity and in picking and inventory accuracy, optimizations in warehouse space and an exemplary work safety record.
Why Be Lean?
Today’s market for products and materials is customer-centric. Companies need to be able to quickly refocus their supply chain operations in anticipation of or in response to changes in customer purchasing preferences. In general, customers’ expectations are now set pretty high and are growing even higher by leaps and bounds. As consumers become increasingly used to a world where ordering a product online results in a guaranteed delivery 24-48 hours later, get the products customized, all manufacturers and distributors need to ensure that their supply chains are fully efficient. What’s more, that pressure on supply chains is only set to become more intense, thanks to online sellers like Amazon.com and Alibaba, already piloting more immediate delivery of some items within one to two hours rather than days.
At the same time, again to meet customer demand, companies need to leverage their warehouse to provide value-added services, light just-in-time manufacturing, and collaborate even closer with their supply chain partners by sharing information, perhaps systems as well. A company may well find themselves scrambling to quickly stand up additional warehouses in new locations to minimize transportation costs yet ensure customers receive goods as promised.
What manufacturers and distributors need is a future-proof highly flexible and resilient WMS that is based on a wealth of best business practices, is continually refreshed with new functionality, and which facilitates business growth. This is what cloud WMS can provide as opposed to older more limited and rigid systems which companies can quickly grow out of. The essence of the lean warehouse is continuous improvement which is next-to-impossible to achieve if you have to regularly change your underlying WMS. The goal for manufacturers and distributors is to get lean and stay lean and cloud is the way to help warehouse management be an enabler of overall supply chain efficiency and optimization rather than an inhibitor. Improve warehouse management by adopting a lean approach and the benefits are reduced inventory, faster and more accurate product shipments and ultimately the goal of every organization, happy customers keen to engage in repeat business.
Sid Geddam is Vice President & General Manager of Warehouse Management Systems at NetSuite.