Warehouse failures – How to avoid them Part 2

For a quick recap on last weeks discussion, please read last weeks blog titled Warehouse failures – How to avoid them Part 1

Let’s look at the sequence of steps that that was presented from last weeks blog. These steps ought to be in place and solidly documented prior to purchasing a warehouse management system. A flexible and effective warehouse management system automates existing processes.  Certainly, it can add best practice activities, as well, but the fundamental function of a WMS is to automate the processes that were manually documented prior to the implementation of the WMS. 

Here is a brief discussion of how detailed documentation can ensure that the functions automated by a warehouse management system will dovetail with the operating processes employed in a particular business.  Each of these functions should be well thought out and properly documented before even selecting a WMS.

Establishment of maximum / minimum quantities of inventory

After the implementation of a WMS, inventory quantities will be tracked automatically by adjusting inventory quantities as ordered are fulfilled (and inventory quantities are confirmed by cycle counts).  Minimum and maximum levels of all inventory items must be documented.  But, a good WMS can offer a great deal more functionality to help you maintain necessary inventory levels.  One efficiency benefit that an effective WMS can offer is to automate the issuance of new purchase orders to suppliers as inventory quantities fall below established minimum levels.  Once the supplier or suppliers are identified in the system, the time period between placing a purchase order and receipt of material can be built into business rules.  Quantity and price break information can also be woven into the matrix of decisions that lead to purchase decisions.  A detailed list of all suppliers and the order processes and timelines should be created.  For example, Supplier A is local, and can ship small quantities in two days, but the per-unit price is higher.  Supplier B is a foreign supplier who ships larger quantities at better prices, but requires 60-days from receipt of order to delivery.  Before the peak season, it may be better to order larger quantities at lower prices, anticipating the length of time until the shipment will arrive.  During the slow season, it might be better to order smaller quantities from the local supplier, even though the unit cost is higher.  By writing these rules down, the warehouse management software can be considered in light of the data transmission necessary to support these requirements.

Cycle count or automated notice of inventory shortage

Even the best automated system requires confirmation from time to time.  Establishing a consistent and accurate cycle count system will ensure that the decisions made from information generated by the system are correct and timely.  Documentation of current cycle count practices is important.  Some companies don’t do effective cycle counting.  Even in that situation, a plan should be developed to cycle count at least the most critical inventory items on a regular basis, to ensure system accuracy.  Once a WMS is implemented, inventory quantities will be reduced by a standard deduction based on picking activities and / or production processes.  As cycle count activity proves the accuracy of the standard deduction of units from the inventory quantities maintained by the WMS, cycle count frequency can be reduced, based on the confidence level attributable to the consistently accurate inventory quantities.  But, even infrequent cycle counting can be slow and often interferes with production or shipment.  By automating the cycle counting process (by the use of RF technology, for example) the cycle count process can be fast, accurate and minimally disruptive to production and shipping schedules.   Again, the key is to plan and document the cycle count process, so that the WMS can adopt the frequency of cycle counts and inventory quantities can be adjusted, as necessary, after WMS implementation.

Automated or manual decision to purchase inventory

As noted above, there are some inventory items that are used on a regular basis, and some inventory items that must never be depleted.  It may make sense to automate the reorder process for those items.  By carefully documenting the use and replenishment of those items, it may be possible for the WMS to automate the reorder process.  At the very least, an automated email can be sent to the purchasing department to alert purchasing personnel of impending inventory shortages.  This must be coordinated with the time it takes suppliers to fulfill orders for these inventory items.  It will do no good to realize on Tuesday that there is shortage of a critical inventory item if the item cannot be delivered from a foreign supplier in fewer than 60 days.  Anticipatory inventory management is, of course, the key and a WMS system can be structured to anticipate quantity and usage and predict when purchase orders ought to be ordered.  For some inventory items, it is better to leave that decision to a human.  For others, the more automation that can be built into the system, the better.  Proper documentation and knowledge of the supplier and inventory dynamics is key to making the best decisions.

Issuance of Purchase Order to supplier

To replenish inventory levels, a purchase order must be issued to the supplier of that inventory item.  It is important to anticipate many aspects of this transaction.  Some suppliers will require minimum purchase amounts, which may be tied to volume discounts.  Some suppliers will have immediate availability of the required inventory item, while others will only be able to fulfill orders with prescribed intervals between order and receipt.  Certain suppliers may be sole-source, while others may compete for  your business on particular items.  While it is always logical to require a human member of the purchasing department to issue certain purchase orders, it is frequently possible to automate the PO issuance, especially in relation to items that are critical and must never be allowed to run out of stock.  For this reason, it is important to decide which inventory items fall into the latter category prior to the implementation of a WMS.

Receipt of Purchase Order confirmation with anticipated shipment / receipt date

Another activity that can be automated, albeit with the cooperation of the supplier, is the issuance and receipt of an acknowledgement or confirmation of a purchase order.  This will indicate that the price and quantity are correctly reflected in the confirmation and should also provide an anticipated delivery date. This information will permit the assignment of receiving bays and personnel to the receiving activity.  It will also contribute to assuring that critical inventory items are never allowed to be depleted.  Again, by planning this feature prior to the implementation of a WMS, the implementation can be planned to include this automated notice system.

Automated, or manual, scheduling receipt of incoming inventory.  Anticipating inbound inventory processes (preparing for receipt, location, quality control review, approval, authorization to pay, putaway).

There are many people and processes involved in receiving inventory.  This may include your suppliers, their transportation partners, your operations and administrative staff, your processes (receiving bays, quality inspection personnel, storage space allocation, etc.).  With numerous purchase orders issued to several  suppliers , assigned to a limited number of receiving bays, it is imperative to schedule these dynamics to avoid confusion, delay and expense.  An effective  WMS will automatically anticipate and assign space, equipment and personnel to the receiving tasks.  It will anticipate the storage space required prior to putaway.  It will alert the quality inspection department to the anticipated receipt.  It will help you to manage the chaos.  It is very important to evaluate these dynamics and build them into the WMS / Receiving system prior to implementation.

Receiving – physical location / process for goods – move to QC, cross-dock, ship upon receipt, etc.

Quality control review.  Quality processes – pass, reject, partial acceptance, notice to supplier

Putaway, inventory quantity updates, cost updates, etc.

Thanks for reading, don't forget to follow us on Twitter, Facebook, and LinkedIn for more company updates and look out for our next weeks blog!

TEL. (714) 656-2898 | info@avectous.com 

http://avectous.com