Lots of warehouses in your network, all performing at different levels and all performing at different costs, that’s a very common problem.
“Hi, this is Rob O’Byrne from Logistics Bureau and I’m just heading out to a client today to talk to them about a problem just like that.
They have a network of about 20 warehouses right across Australia. They’re all operating in very different cost profiles, and some are in urban areas, some are in rural, but the cost difference is like a 100%, if you looked at the cost per case throughput.
And of course they’re concerned about why that is and how is it possible for some warehouses to operate, apparently, so much more efficiently.
So it’s a really common issue I’ve seen dozens and dozens of times over the years. So what we’re doing with this client is that we’re going through a really thorough benchmarking process.
So we’re looking at the performance of each of those warehouses, we’re measuring the resource usage, all the various costs involved, how much space is being utilised, obviously looking at the product throughput, the order profiles, trying to get a very accurate picture of the performance of each of the warehouses.
We do that using a very detailed methodology that’s actually based on the SCOR methodology out of the US, which is the Supply Chain Operations Reference model, an international industry standard on measuring performance. Anyway, if you don’t have access to that kind of thing, you can do lots of this yourself.
So if you’ve got a number of warehouses all with different performance just like this client, what I would do is to start to measure some of the key activities.
Particularly look at picking activity, look at order size because that can change depending on the geography. Large urban based warehouses may have much larger orders, many more orders going through the warehouse which can make them more efficient on a unit cost basis.
So look at the order profiles, look at the utilisation of space, look at the head count for the various activities: receiving, put away, picking, and then start to do an internal benchmark of all of those different warehouses and where you see dramatic differences, talk to the people who are running those warehouses.
And very often a good way to do this is to bring the various warehouse managers together, maybe you do this periodically so that you can compare performance.
We might have a warehouse manager who’s got a really good picking rate compared to the rest and we can dig down and question that person as to how they’re doing it, what are their processes like, how are they different, and you can do that for picking, for cost, and so on.
It’s amazing the difference that that can make. Not only are you identifying the better performers in your network and sharing that best practice across the network, but you actually start to get everybody engaging and sharing their knowledge of what works and what doesn’t and you can really start to lift improvement.
So if you’ve got a network with lots of different warehouses, all with varying performance, I’d recommend you do that, it’s really simple internal benchmarking.
If your operation’s really complex and you want to get down into a lot more level of detail and you want to go through the sorts of benchmarking that we do, give me a call, I’d be happy to talk about it. I’ll put my details below.
But you can do a lot of this yourself. I’ll put some tips below the video as well which will give you some guidelines on how to go about this. It’s all about picking out the best performers and trying to lift the performance of all the other warehouses in the network to a similar one of the best. Wish you luck.”
For further information just use the search function on the this Blog and you’ll find lots of resources about benchmarking and warehouse improvement.
These are some posts that you might want to check out:
4 Ways to Improve Warehouse Layout Efficiency and Save Costs
Warehouse Key Performance Indicators
And there are some more selected posts that are relevant below this post…
Here are some things to Benchmark across your warehouse network:
- Cost per case throughput (or pallet, tonne etc)
- Lines picked per hour per FTE (Full Time Equivalent employee)
- Lines receipted per hour per FTE
- Sales per square metre of warehouse. (or cubic metre for warehouses above 3 pallets high)
- Cost per order processed
- Warehouse costs as a % of sales