Getting warehousing right
September 15, 2014
Warehousing is both the link and the enabler of other strategies, such as inventory, procurement and sales strategies. Its location, size and capacity, as well as level of mechanisation – managed through warehouse management technology – affects inventory and procurement strategies and must be viewed as an integral part of the supply chain.
Yet, in Africa, there are specific aspects to be considered in the growth area of warehousing. This includes the fact that facilities are often “refurbished” but are not up to scratch, which comes at a premium and without the choice of selecting the correct size or location.
Other hidden costs can come in because these facilities are often presented as a “shell” and do not include the cost of racking, shelving, bins and handling equipment. Once a lease is terminated, getting your money back for such investment can be problematic. The luxury of designing a suitable facility is only available to companies that can commit to long-term contracts or invest in their own infrastructure.
Inefficient warehouses will directly affect companies’ bottom lines, as well as their ability to supply customers on demand. Not managing this process correctly will add to costs, pushing up the final price of the product and resulting in a company becoming uncompetitive.
In addition, the location of the warehouse can add to logistics and delivery costs, which will be magnified if the site does not offer enough storage capacity to cater for the optimum inventory level and future expansion or potential growth. This will also affect delivery times and the company’s ability to service clients, which can also increase costs if additional product needs to be brought in.
Another issue to be cautious of is inefficient operating practices, which could lead to the deployment of costly and labour-intensive practices in the supply chain, directly affecting profitability. The profit margin on an item can easily be eroded by a company’s inefficient processes.
However, efficient design of the facility including racking, shelving and equipment will improve flow of products, as well as handling capacity. This, in turn, will directly impact throughput and can limit potential stock losses as a result of improper storage and handling practices.
Warehouses can be designed in such a way as to be operationally efficient and cut down the amount of time it takes to get a product to where it needs to be. The key aspects of improving efficiency are:
• being involved in the early design and planning phases of the facility
• companies closely cooperating in developing optimal inventory levels across procurement, warehousing and inventory management departments
• implementation of inventory optimisation and warehouse management technology
• implementation of best practices and standard operating procedures in warehousing. To determine the optimal storage size, companies need to embark on a “volumetric” exercise, which analyses the size and volume of each item to be stored. This information is then coupled with the planned movement and inventory levels per item, which allows the total volumetric storage capacity to be determined for all products.
This metric informs the type of racking and handling equipment, as well as the design of the facility, the flow of goods and – ultimately – the size of the warehouse.
Best inventory management practices allows companies to work out how much to stock and when to reorder. Replenishment levels are based on supply lead times, a function that must be closely monitored and managed by procurement as part of their supplier relationship management role. Getting procurement wrong can directly impact a warehouse’s efficiency.
Best operating practices in warehousing must be designed around:
• binning practices
• data management
• goods receiving practices
• housekeeping practices
• picking and moving practices
• key performance measures
• packaging and preserving practices
• physical safekeeping
• safety and security