Excellence in WarehouseManagement

How to Minimise Costs and Maximise Value

By Stuart Emmett

John Wiley & Sons, Ltd

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Excellence in Warehouse Management

Excellence in WarehouseManagement

How to Minimise Costs and Maximise Value

By Stuart Emmett

John Wiley & Sons, Ltd

Copyright 2005 John Wiley & Sons Ltd, The Atrium, Southern Gate, Chichester, WestSussex PO19 8SQ, England

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Library of Congress Cataloging-in-Publication Data

Emmett, Stuart.Excellence in warehouse management : how to minimise costs and maximise value / by Stuart

Emmett.p. cm.

Includes bibliographical references and index.

ISBN 13 978-0-470-01531-5 (pbk. : alk. paper)ISBN 10 0-470-01531-4 (pbk. : alk. paper)

1. Warehouses Management. 2. Business logistics. 3. Materials management. I. Title.HF5485.E46 2005658. 785 dc22

2005005164

British Library Cataloguing in Publication Data

A catalogue record for this book is available from the British Library

ISBN 13 978-0-470-01531-5 (PB)ISBN 10 0-470-01531-4 (PB)

Typeset in 11/15 Goudy by SNP Best-set Typesetter Ltd., Hong KongPrinted and bound in Great Britain by TJ International Ltd, Padstow, Cornwall, UK

This book is printed on acid-free paper responsibly manufactured from sustainable forestry inwhich at least two trees are planted for each one used for paper production.

http://www.wileyeurope.comhttp://www.wiley.com

Contents

Introduction ixAbbreviations xiAcknowledgements xv

1: The Role of Warehousing and Stores 1

Warehousing and the supply chain 1

Training topics 2

Definitions 4

Strategic aspects of warehousing 5

Customers 7

The value chain 9

Warehouse location 12

Modern warehouse operations 14

World-class warehousing 21

Conclusion 24

2: Inventory, Stock Analysis and Classifying Products 25

Product classification 25

Demand analysis 26

ABC analysis 30

Product coding 34

Product handling groups 34

Inventory management: why hold stock? 35

Inventory costs and service 37

Lead time 41

Demand forecasting 46

Inventory and statistics 48

How much stock should be held? 51

Replenishment methods 54

Questions about inventory 65

Appendix 72

3: Stock Control 75

Stock inaccuracy 75

Continuous or periodic stock checking 77

Stock control 79

Security and preventing loss 81

Information security 84

Training topics 86

4: The Warehouse and Operational Principles 88

Warehouse structure 88

Warehouse operations 90

Receiving 91

Location methods in the warehouse 96

Picking options 97

Customer orders 99

Methods of picking 100

Despatching activity 110

Organising for flow 111

5: Equipment 112

Fork-lift trucks 112

Racking/shelving 119

The aisle width decision 125

6: Warehouse Information Communications Technology 128

Importance of information 128

Decision-making and ICT 132

Improvements with ICT 133

Warehouse ICT applications 134

Systems implementation 149

7: Regulations 153

Health and safety at work 153

Management of health and safety 154

Health and safety arrangements 158

Warehouse health and safety risks 160

Risk assessments 164

Fork-lift trucks: health and safety 166

vi C O N T E N T S

8: Productivity, Cost and Service 173

Framework for analysis 173

Key costs 174

Key productivity drivers 176

Basic improvements 179

Understanding productivity 189

Determining pricing and charging 192

Customer service 195

Added value 203

Warehouse layout 208

Training topics 210

9: Outsourcing 212

Users views of third parties and the marketplace 212

Selecting third parties 220

Training topics 225

10: People Management 227

Company culture 227

Management 231

Work objectives and performance 235

Motivating people 245

Empowering 251

Teams 252

Communication 254

Managing change 255

Warehouse picking operatives 262

Training topics 264

11: Developments and Trends 268

Supply chain impacts on stores and warehousing 268

Global logistics 270

Reverse logistics and customer returns 271

Risk 277

Roads 278

Legislation 279

C O N T E N T S vii

Technology 279

People development 279

Political influences 280

The supply chain 282

Warehouse aims/ideals 286

Useful Information and Websites 288Bibliography 290Index 292

viii C O N T E N T S

Introduction

My interest in handling freight goes back to childhood and was fosteredand matured during employment. Starting out in shipping and forward-ing in the days of conventional cargo shipping in the early 1960s, an earlyresponsibility was in arranging transport to the docks. We were quicklyforced to change to roll-on roll-off and lift-on lift-off methods as con-tainers and trailer methods of transport largely took over and also movedactivities inland, involving the setting up of inland warehouses for cargoconsolidation.

With the UK making the decision to join the EU in 1972, this alsochanged my work and I moved into consultancy, giving distributionadvice to those people who previously had only traded in the UK andnow had the view that the whole continent was soon to become a domes-tic market. This consultancy work was also widened out to include world-wide export/import movements.

After completing studies with the Open University in 1978, I thenmoved out to Nigeria where I was employed by the countrys largest Forwarding and Shipping Agency, with over 1000 staff in Lagos alone. Iwas involved with different responsibilities: clearing, containers de-consolidation/warehousing, and lighterage/road transport of strategicimports. It was never a dull place in which to work, and fascinating alsoto be able to work where skills in distribution were highly appreciatedand well rewarded.

The time in Nigeria ran its course and on my return to the UK I tookone year out to complete an MSc at Cranfield, before joining a third partycompany in a commercial development role on UK Distribution, workingfor such companies as Heinz, Pedigree Petfood and Boots the Chemist.

This role continued until 1990 when I moved into training, with workassociated largely with the, then, Institute of Logistics and DistributionManagement (now the Chartered Institute of Logistics and Transport).

Since 1998 I have been a freelance independent mentor/coach, trainerand consultant trading under the name of Learn and Change Limited(www.learnandchange.com). I now enjoy working all over the UK andon four other continents, principally in Africa and the Middle East, butalso in the Far East and South America. Additional to undertaking train-ing, I am also involved with one to one coaching/mentoring, consulting,writing, assessing and examining for professional institutes qualificationsand as an external MSc examiner for Purchasing and Logistics.

The journey, while an individual one, could not have happenedwithout the involvement of other people, and I am grateful when I recallthe assistance they offered. Additionally, during the lifetime of learningand meeting people, the original source of an idea or information can beoverlooked. If I have, in this book, omitted to give some people the creditthey deserve, I apologise and hope they will contact me to enable me tocorrect that omission in, hopefully, a future edition.

Therefore, anyone who has ever had contact with me can be assuredthat they will have contributed to my own learning, growing and devel-oping. While thanking you all, my hope is that in this book I have givenyou back something positive.

I am pleased to say, and acknowledge, that my learning still continues,both with formal pieces of paper as evidence to the CV viewers, but moreimportantly, in trying to find something new in every day.

I have made great endeavours to ensure that nothing in this book, ifused, would be in any way injurious or cause financial loss to the users.The users are, however, strongly recommended to check and verify theirown company policy/requirements before applying or using any of theitems mentioned. No liability will be accepted by the author for the useof any of the contents.

Throughout this book, there are some Action Times, Challenges/Thinking Points and Case Studies. These are designed to enable the students to think and reflect. Without this, there is unlikely to be anylearning. Additionally, I have including typical training topics/contentplans to highlight the appropriate knowledge that is needed for the giventopics. Again, my hope is that this will encourage study and eventuallearning with specific application.

x I N T R O D U C T I O N

Abbreviations

The following is a list of the abbreviations used in this book. The list does notinclude Acts or Regulations.

3PLSP third party logistics service provider company4PL fourth party logistics providerABC ABC analysis or 80/20 rule or Pareto analysisACOP approved codes of practiceAFT articulated fork-lift truckAGV automated guided vehicleAPR adjustable pallet rackingAS/RS automatic storage and retrieval systemBOM bills of materialsCBT counter-balance truckCCTV closed circuit televisionCPD continuing professional developmentCR continuous reviewCRM customer managementDIR drive in rackingDV demand variabilityEDI electronic data interchangeEOQ economic order quantityERP enterprise resource planningFCL full container loadFLT fork-lift truck

FMCG fast-moving consumer goodsFMS fast, medium, slowFOQ fixed order quantityFOT fixed order timeG-O goods to operatorHD hoist downHPT hand pallet truckHU hoist upICT information and communications technologyIMS inventory management systemKPD key productivity driverKPI key productivity indicatorLT lead timeLTV lead time variabilityMBWA management by walking aboutMESC materials and equipment standards and codesEPOS equipment at point of saleMHE material handling equipmentMPS master production scheduleMRO maintenance, repair and overhaulMRP materials requirement planningMRPII manufacturing resource planningMRPT man riser picking truckNART narrow aisle reach truckNRA no-returns agreementOG operator to goodsOTIF on time, in fullPMPR powered mobile pallet rackingPPE personal protective equipmentPPT powered pallet truckPR periodic reviewPU put downQC quality controlR&D research and developmentR&R rent and ratesRA returns agreementRDC regional distribution centre

xii A B B R E V I A T I O N S

RFID radio frequency identificationRL reverse logisticsROL re-order levelROP re-order pointRT reach truckSD standard deviationSKU stock keeping unitSLT supply lead timeSLTV supply lead time variabilitySM standard minuteTAC total acquisition costTRAMS transport management systemULD unit load deviceVDU visual display unitVOQ variable order quantityVOT variable order timeWMS warehouse management systemXML extensible mark-up language

A B B R E V I A T I O N S xiii