Warehouse process from replenishment to dispatch

Chapter VIII- Warehouse Processes and Replenishment to Dispatch and Beyond

Replenishment

In order to ensure a smooth and efficient picking process we need to ensure that the
right products and quantities are in the correct pick location. As in the case of
replenishing overall inventory to ensure customer satisfaction, the warehouse also has
to replenish its pick faces regularly to ensure picker satisfaction. An empty picking slot,
just like an empty shelf location in store can mean a lost sale. The result of a poor
replenishment process is order shortages, increased picking times and therefore
increased cost per pick and an overall reduction in service level. Real-time WMSs will
recognize the need to replenish pick locations through real-time data transfer. These
systems are also able to identify the total actual order quantities and therefore replenish
before the next wave of orders arrive on the warehouse floor Other systems will rely on
a trigger that denotes when the stock level within a pick face falls to a certain level. This
will rely heavily on timing as orders that have generated pick lists may not actually have
been picked and therefore replenishment has been triggered early.

Late replenishment can result where staff have picked out of sequence, for example, and
emptied the pick bays before the replenishment team have had an opportunity to top
up the location. Timing is crucial. An early instruction to replenish can cause as many
problems as late replenishment, with potentially overfull pick faces and issues with FIFO.
If product can be moved directly to the pick face from the inbound section this cuts out
a number of processes. This will require a certain amount of preplanning to ensure that
pick faces are not overfilled. Pallets can be de-layered to correspond with expected pick
quantities.

Value-adding services

Many warehouses have introduced areas where value-adding services can be carried
out. These are common in both dedicated and shared-user or public warehouses where
third-party logistics companies are providing an all-encompassing service to their
customers.

These value-adding services include the following:

· (re)labelling;

· pricing;
· tagging and kimballing;

· (re)packing;

· bundling, as in ‘buy one, get one free’ (BOGOF) offers;

· reconfiguration;

· sub-assembly;

· repair and refurbishment.

Undertaking shop-floor-ready labelling, tagging, bundling and pricing in the warehouse

removes the task from the retail assistants who can spend more of their time selling.

Indirect activities

There are many support activities that occur in warehouses and are crucial to the
efficient operation of the warehouse. These are, in the main, undertaken by supervisory
staff, specialist teams and the housekeeping team. These activities include:

· ensuring optimum staffing levels and providing a pool of suitably

· trained staff for peak periods;

· managing the allocation of labour for value-adding services;

· ensuring optimum space utilization;

· monitoring work flow and congestion;

· provision, allocation and maintenance of equipment;

· identification and replenishment of fast-moving items;

· identification of non-moving stock;

· stock integrity and dealing promptly with non-conforming, lost or found stock;

· managing cycle counts and organizing full stock checks;

· security of high-value or hazardous stock; and

· ensuring the cleanliness of the warehouse and the safety of both staff and visitors.

The above tasks can be separated into three distinct sections:

o the management of labor, space and equipment;

o the control of stock; and

o the security and safety of stock and people.  

Stock management

Inventory or stock management and warehouse management tend to be two very

distinct roles.

Warehouse managers are in a position to advise their inventory colleagues on levels of

safety stock and the specific movements and characteristics of particular stock items.
However, they tend to stop short of determining stock levels. This function is a major
part of a company’s operation and the theories and practices are covered in many
books on the subject of inventory management. Although the majority of warehouse
managers are not involved directly in the choice, purchase and replenishment of stock,
they can play a role in the identification of fast-, medium-, slow-, non-moving and
obsolete stock. This can be done using one of the mainstays of a warehouse manager’s
armory – an ABC classification. The information can normally be obtained

from the WMS and as mentioned in Chapter 4 a simple spreadsheet can categorize
stock items by volume and frequency of sales. A warehouse manager can extend the
normal classification to include nonmoving and obsolete stock together with identifying
stock that may not require storage in the warehouse but can be dispatched direct from
the supplier to the end customer where the lead-time is in line with the customer’s
requirement.

Stock or inventory counting

All warehouses are obligated to undertake some form of stock count. It depends on the
law of the country and accounting requirements as to how frequent and comprehensive
the count is. We have seen over recent years a move towards cycle counting or
perpetual inventory counts as a replacement for an all-encompassing annual count of
stock in the warehouse. A full stock count usually necessitates the closure of the
warehouse for a period of time when all inbound and outbound movements are
suspended. A significant drawback of a single annual count is the difficulty in reconciling
the discrepancy as it could have occurred over 11 months ago. The count is normally
carried out at the company’s year-end. Some companies will carry out quarterly or
possibly half-yearly checks depending on the stipulations laid down by the auditors.

Cycle counting or perpetual inventory counts

When undertaking cycle counts it is prudent to use an ABC analysis to ensure that your
fast-moving and high-value items are counted more frequently than your slow-moving,
inexpensive items. Mis-picks are more likely with fast-moving goods, and high-value
items are prone to shrinkage. It is suggested therefore that fast-moving and high-value
items are counted monthly, medium sellers are counted quarterly and slow-moving
items either once or twice a year.

The following percentages can be used to ensure a comprehensive count:

· 8 per cent of A items counted weekly (ensures each SKU is counted approximately
once per quarter);

· 4 per cent of B items counted weekly (counted twice per annum); and

· 2 per cent of C items counted weekly (counted at least once per annum).

The accuracy of the counts will also determine the frequency. A high error rate should
result in more frequent counts until the accuracy improves. Each discrepancy needs to
be investigated and procedures put in place to ensure that there is no repeat of the
problem. Increasing the frequency to daily ensures a more accurate count; however, this
will depend on the number of product lines, available resource and the cost of that
resource. The trade-off here is the cost of the error against the cost of discovering it in
the first place. As mentioned previously, a number of auditors will be happy (or as happy
as they can be) if stock in the warehouse is counted at least once during the Year.

Security

Security of product within the warehouse is paramount. The warehouse manager is

responsible for the integrity of all the products under his or her care, whether they are
owned or stored on behalf of other companies as a third-party contractor. This can be
achieved through good housekeeping, the use of security cages and carousels for
storage, and through vigilance by staff.

Poor security costs companies in lost inventory, higher insurance premiums and
personnel turnover. Loading docks and platforms tend to be the most vulnerable areas –
they’re very easy places for a thief to remove stolen property, often in partnership with
an outsider, a delivery driver for example. Security systems tend to be designed to
protect your facility from people breaking in – but many thefts are perpetrated from
within.   

Closed-circuit television at strategic points throughout the warehouse is a significant

deterrent; however, unannounced inspections and walkabouts are also effective and
much cheaper. With regard to the loading bays, one common-sense recommendation is
that you separate them from employee parking areas, making it much more difficult to
remove items from the warehouse. Searches on entry and exit, whether instigated by
staff or by a random system of lights, is also very effective. Not only is product security
important but also the protection of data. WMSs hold a large amount of sensitive data
that needs to be protected. Internally this can be done through the use of password
protection for different access levels and firewalls for external protection. The data
needs to be backed up daily and the backup files stored offsite. Protecting data from
being stolen or copied is also paramount. Equipment such as servers, computers and
laptops need to be protected. These items need to be locked with key or code access,
and personal computers need to be password protected and those passwords changed
regularly.

The core attributes of security within a warehouse are as follows:

· appropriate recording of inbound and outbound products;

· authorizations for all despatches;

· accurate audit trails;

· regular stock checks;

· the use of appropriate storage equipment; and

· vigilance.

Returns processing

Returns processing, or reverse logistics as it has become known, involves the handling of
product returns, transit packaging and surplus items. The processes associated with this
operation include repair, reuse, refurbishment, recycling and disposal.  The processing of
returns has gained increasing importance in the warehouse over the past few years.
There is now an increasing awareness of the economic value of reusing products and
the effect on cash flow of perfectly serviceable items that can be repackaged and made
available for sale. There is also the possibility of fines if products and packaging are not
disposed of in an environmentally friendly way. Doing nothing about returns costs
money. They take up space, are difficult to count during stock takes, difficult to value
and, more importantly, could be back on sale rather than taking up much-needed space
within the warehouse.

Dispatch

Packing – pieces/items

Once product has been picked there is the question of how it is packaged for dispatch.
As previously discussed, with individual order picks the operator may well package the
product immediately, attach shipping labels and where required insert dispatch
documentation and invoices. This reduces the number of touch points in the warehouse
but does take the operator away from the prime task of picking. Where there is the
possibility of damage in transit, material can be added to the carton such as polystyrene
and foam pellets, shredded paper, corrugated paper, air-filled bags, etc. This again
increases time at dispatch and puts the onus on the customer to dispose of the excess
packaging on receipt. Where possible this material needs to be recyclable. The use of
carton erectors which cut the cardboard to fit the contents is one way of overcoming
this problem. The trade-off here is the cost of the machine versus the labor and material
cost of doing it manually and the cost to the customer.

Packing – cartons

Full carton dispatch is somewhat easier to manage. Individual cartons may require the
attachment of a shipping label which may be generated from the WMS or from a carrier
system such as those operated by UPS, Fed Ex, USPS and the Royal Mail. In terms of
multiple carton dispatch, firstly there is a need to establish whether it is more cost
effective to dispatch via a parcel network or a pallet distribution or LTL carrier. This will
decide the means of shipment – loose cartons or a palletized load. If palletized, the
decision here is how to stabilize the cartons on a pallet for dispatch. Many companies
will use stretch wrap to do this. Some companies will stretch wrap manually whilst
others utilize an automatic stretch wrap machine. The trade-off here is the cost of the
machine versus the cost of labor and the reduction in the use of stretch wrap material.
Velcro has introduced pallet straps to secure cargo. These are more environmentally
friendly than stretch wrap but there is the added complication of tracking and returning
the straps for reuse. The use of returnable packaging is also growing under
environmental pressure. The use of plastic totes and pallets, slip sheets and collapsible
cages is growing; however, there is a trade-off here between the initial cost of these
items and the cost of returning them to the shipper versus the cost in money and
environmental terms of cardboard packaging and one-way pallets.

Loading

The efficient loading of containers and trailers is crucial in today’s environment of rising
fuel prices. Unused space is inefficient and can cost a company a great deal of money.
Efficient loading of vehicles and containers begins with the initial packaging of the
products. Companies need to ensure that the outer packaging of their products is
designed to fit perfectly onto the pallets used for both transportation and storage. The
ideal is to ensure no overhang whatsoever with a reduction in unused space. It also
needs to be robust enough to travel. Pallet loads need to be configured to ensure that
product damage is minimized, cubic capacity is fully utilized, load stability is ensured
and the configuration is acceptable to the receiving location. Fortunately, there is
software available to not only assist with pallet configuration but also container and
trailer loading. The software can optimize packing within a container and trailer, on a
pallet and even within an individual carton. This sophisticated software optimization not
only takes into account the cube of the products but also their load bearing strength
and location within the container. The latter ensures ease of off-loading at the receiver
with all the cartons from the same product line being located together. The software
also ensures that lighter items are packed on top of the heavier items. Examples
include Cube master and Cube Designer.   

Shipping

Many operations are now taking orders late into the evening and dispatching that same
night for next-day delivery. Next, a retailer in the United Kingdom, has a cut-off time for
internet orders of 10 pm for next-day delivery. Work plans are now centered around the
latest dispatch time for orders, and managers work backwards from this ensuring that all
processes are completed and both labor and equipment are made available at the right
time to meet these deadlines.

The dispatch process has to be managed precisely and be aligned with most other
activities within the warehouse. If, for example, receiving and dispatch share the same
doors, a daily schedule needs to be drawn up to ensure that labor and equipment are
utilized as efficiently as possible, the work content is matched to the number of doors
available and congestion is avoided in the

dock area. In many operations receiving tends to take place in the morning whilst
picking and dispatch occur during the afternoon and evening as order cut-off times
continue to be stretched later into the evening.
Documentation

Finally, dispatch documentation and labelling need to be completed to ensure

compliance with customer requirements and government legislation. Different countries
will have different requirements and these will also differ if shipments are within country
or for export. Any errors in the export paperwork can result in non-shipment, seizure,
fines or delays accurately and have the correct documentation.

Typical dispatch paperwork depending on ultimate destination includes the following:

· advanced shipping notice;

· manifest;

· shipping labels;

· Bill of Lading;

· commercial invoice;

· shipper’s export declaration;

· export packing list;

· certificate of origin;

· export licence;

· inspection certificate; and

· insurance certificate.

As mentioned above each country will have its own requirements in respect of the
documentation needed.

Role of the driver

In situations where companies operate with their own transportation there are no issues
with what the driver’s role is in the actual loading process. However, when third-party
contractors are used there is the age-old dilemma of what to do with the driver whilst
the loading process takes place. Some companies insist on the driver assisting with the
loading and checking the contents of the load, whilst other companies have health and
safety issues with external staff being on the loading bay. If the latter is the case then
the driver has to be accommodated elsewhere, preferably not in his cab. The possibility
of the driver moving off the dispatch bay whilst the vehicle is still being loaded is just as
real.

There is also the question of what the driver should sign for once the vehicle has been
loaded. If he has not seen the products loaded onto the vehicle and the vehicle has
been sealed prior to leaving the dispatch bay, then it is reasonable to suggest that he is
at liberty to sign the document and preface it with the word ‘unchecked’. A time limit
needs to be agreed in terms of how long the collecting company has to report any
discrepancies. If the vehicle is sealed, the seal number needs to be recorded on the
delivery paperwork and any other relevant documentation such as hazardous data
sheets handed to the driver.