Integral Warehouse Management - Jeroen van den Berg Consulting

Integral Warehouse Management The Next Generation in Transparency, Collaboration and Warehouse Management Systems

Jeroen P. van den Berg

Management Outlook Utrecht, The Netherlands

Copyright © 2007 by Management Outlook Publications ISBN 978-1-4196-6876-0 All rights reserved. No part of this book may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or by any information storage and retrieval system, without permission in writing from the publisher. Management Outlook Publications Franz Schubertstraat 45 3533 GT UTRECHT The Netherlands www.ManagementOutlook.nl

Contents FOREWORD ............................................................................................................ 7

CHAPTER 1 1.1 1.2 1.3 1.4 1.5 1.6

Effects of Poor Warehouse Performance ......................................... 10 Best-in-class Supply Chain Performance......................................... 12 Best Practices in Warehouse Management ...................................... 14 Integral Warehouse Management .................................................... 16 Capitalizing on Cost Savings ........................................................... 19 Summary .......................................................................................... 22

CHAPTER 2 2.2 2.3 2.4 2.5 2.6 2.7 2.8

WAREHOUSE MANAGEMENT SYSTEMS ................................... 83

WMS Modules .................................................................................. 84 Real-time Communication................................................................ 87 Material Handling Control .............................................................. 90 Interfaces.......................................................................................... 91 Summary ........................................................................................ 104

CHAPTER 5 5.1 5.2 5.3 5.4 5.5

WAREHOUSING........................................................................ 55

Material Handling............................................................................ 57 Warehouse Processes....................................................................... 60 Inbound Processes ........................................................................... 61 Storage ............................................................................................. 65 Wave Planning ................................................................................. 66 Outbound Processes......................................................................... 74 VAL .................................................................................................. 80 Cross-dock ....................................................................................... 80 Summary .......................................................................................... 81

CHAPTER 4 4.1 4.2 4.3 4.4 4.5

INTEGRAL WAREHOUSE MANAGEMENT .................................. 23

Warehouse Justification ................................................................... 30 Company Strategy ............................................................................ 33 Service Levels................................................................................... 35 Collaboration ................................................................................... 40 Innovation of Information Systems................................................... 44 Success Factors................................................................................ 48 Summary .......................................................................................... 53

CHAPTER 3 3.1 3.2 3.3 3.4 3.5 3.6 3.7 3.8 3.9

THE NEXT GENERATION............................................................ 9

EFFECTIVE WAREHOUSE MANAGEMENT ............................... 105

Service Level Agreements .............................................................. 106 Process Specifications.................................................................... 114 Activity-based Costing ................................................................... 116 Performance Indicators ................................................................. 124 Summary ........................................................................................ 138

6

INTEGRAL WAREHOUSE MANAGEMENT

CHAPTER 6 6.1 6.2 6.3 6.4

Service Level Improvement ............................................................ 140 Efficiency Improvement.................................................................. 143 Compact Storage............................................................................ 150 Summary ........................................................................................ 151

CHAPTER 7 7.1 7.2 7.3 7.4 7.5

COLLABORATIVE WAREHOUSE MANAGEMENT ..................... 189

Discontinuities ............................................................................... 191 Activity-based Pricing.................................................................... 198 Synchronized Operations ............................................................... 202 Virtual Warehousing ...................................................................... 208 Summary ........................................................................................ 215

CHAPTER 10 10.1 10.2 10.3 10.4 10.5

RESOURCE UTILIZATION ....................................................... 179

Utilization Improvement................................................................. 180 Cut.................................................................................................. 181 Activate .......................................................................................... 183 Postpone......................................................................................... 184 Space Utilization ............................................................................ 186 Summary ........................................................................................ 188

CHAPTER 9 9.1 9.2 9.3 9.4 9.5

RESPONSIVE WAREHOUSE MANAGEMENT ............................ 153

Justification.................................................................................... 155 Capacity Planning.......................................................................... 157 Wave Management......................................................................... 167 Task Management .......................................................................... 169 Summary ........................................................................................ 177

CHAPTER 8 8.1 8.2 8.3 8.4 8.5 8.6

PROCESS EFFICIENCY ............................................................ 139

SERVICE ALIGNMENT ............................................................ 217

Rationalize ..................................................................................... 218 Accelerate/decelerate..................................................................... 220 Balance .......................................................................................... 223 Summary ........................................................................................ 228 What’s Next? .................................................................................. 228

APPENDIX A

MATURITY PLOT ................................................................... 229

APPENDIX B

PROCESS SPECIFICATIONS ..................................................... 235

REFERENCES ...................................................................................................... 241 INDEX ................................................................................................................ 245 ABOUT THE AUTHOR ......................................................................................... 252

Foreword

I wrote this book to challenge the general thinking about warehouse management. It is my opinion that most distribution centers can be improved substantially. However, the current generation of management models and warehouse management systems fall short on several accounts. In this book I present a number of new ideas which can help distribution centers to evolve towards the next generation. I have incorporated these ideas into a methodology called Integral Warehouse Management. The methodology seeks optimizations, both within the warehouse and beyond, sometimes in radically different directions than other models. In 1996, I completed my Ph.D. thesis which covered various optimization problems arising in the management of distribution centers. I became a consultant specializing in warehouse management systems (WMS’s). These systems were rapidly gaining popularity at the time and I helped clients to achieve substantial benefits from their systems. I also performed annual surveys comparing the many systems available on the market. What struck me in these studies was the limited intelligence of the systems. WMS’s were highly capable of getting the goods in and out, but provided limited intelligence in their planning and control routines. In particular, the introduction of radio frequency (RF) scanning gave the WMS a real-time view on the activities in the distribution center. One would expect WMS vendors to eagerly take advantage of this new technology to develop sophisticated planning and control policies in their systems. However, this has not happened. Apart from some moderate advances over the years, the systems have predominantly continued to operate as if the operators still read their tasks from paper slips. An important logistical development over the past twenty years has been the ongoing reduction of inventories, achieved by more frequent ordering of smaller order quantities. This trend has been encouraged and supported by models like ECR, MRP and Lean. However, the changed order characteristics have complicated the tasks of the warehouse operation and substantially increased its costs1. Although this effect has been recognized, it is generally considered (also by most logisticians) to be the responsibility of the distribution center which is expected to overcome inefficiencies through process redesign and automation. I strongly object to this line of thinking. Of course, it is important to streamline processes, but doesn’t the theory of supply chain management preach 1

A similar effect is seen in transportation.

8


the optimization of the integral processes? Hence, we need models that actually aim to do this, rather than models that merely aim to minimize inventories. I hope that this book inspires you to make a difference. If you are a manager, then I hope that you challenge the usual practices throughout your organization. If you are a WMS vendor, then I hope that you recognize the new concepts and adopt them in your system. If you are a consultant, then I hope that you confront your clients and offer them an alternative approach. If you are a student, then you are the next generation, and I hope that you introduce the ideas in practice when you start your career. Finally, I would like to thank a number of people who helped me to realize this project. In the first place, my clients for the many open discussions where we analyzed alternative solutions for their logistics problems. This is where many ideas were born. I also want to express my gratitude to my friends Steve Joel, Sander de Leeuw, Ad van Goor, Steve Mulaik and Art van Bodegraven for their valuable comments and suggestions that greatly helped to sharpen the contents and structure of this book. Without their support I could never have completed this endeavor. Also many thanks to my sister Fabya van den Berg for her stylish cover design. Last but not least, I want to thank my partner Godelieve Meeuwissen for her comments, enthusiasm and unlimited support during the many hours I spent writing this book. Jeroen van den Berg Utrecht, The Netherlands, 2007

Chapter 1

The Next Generation

Some warehouses, or distribution centers, have an excellent performance with 99%+ perfect deliveries, a productive and strongly motivated workforce and a flexibility that anticipates any changes in the market. The distribution center runs smoothly in close collaboration with other departments within the company and with other members of the supply chain. The manager (or director) responsible for the distribution center plays an important strategic role within the company, and is seen as an equal to other managers in sales, production, purchasing etc. How striking is the contrast with many other distribution centers. Their performance is poor and unreliable. Staff are badly motivated and need the constant attention of the manager and team leaders. The manager is absorbed in his day-to-day routine. Unexpected (and expected) events, special customer requests, delays of incoming goods and dozens of other issues require his immediate attention. Moreover, the distribution function is held in low esteem compared to other departments and is expected to cater to their whims. Naturally, the manager wants to improve the performance of his distribution center. The distribution center is an essential link in the supply chain. It makes goods available when (and how) we need them and it creates efficiency in upstream and downstream activities. If the distribution center can provide competitive service levels against substantially lower costs, then this gives the company, or even the entire supply chain, a major advantage. However, despite the hard work of the manager, his efforts remain fruitless. Ironically, the manager is so busy with everyday problem-solving that he rarely has time to solve his problems and find a way out of this ordeal. In this book we introduce Integral Warehouse Management as a new methodology to help managers successfully transform their distribution center from its current state2 into a best-in-class operation. The model is called Integral Warehouse Management because it considers the distribution center as an integral part of the logistics supply chain. This broad scope unleashes an 2

Use the test in Appendix A to estimate the current state of your distribution center as well as the potential for further savings.

10


enormous savings potential. In fact, empirical evidence shows that the model realizes cost savings of up to 30 percent while establishing competitive service levels at the same time. In addition, the changes in the distribution center may also deliver savings in transportation, production, order-processing and holding inventories. In this book we identify the best practices employed by the best-inclass distribution centers, we introduce a number of innovative ideas relating to the use of information technology and we present a new implementation strategy that helps the manager to escape from his vicious circle and move forward successfully. Integral Warehouse Management shifts the distribution center to the next generation in transparency, collaboration and warehouse management systems. The methodology distinguishes itself from the current generation of techniques and methodologies for two reasons: • It advocates a new line of thinking about logistics optimization that looks beyond the more obvious directions. • It capitalizes on the detailed data captured by modern information systems. The current generation of logistics models such as JIT, ECR, TQM, Kaizen, Lean and Six Sigma seek optimizations in obvious directions, i.e. reducing inventories, shortening response times, eliminating errors and rationalizing process steps. These methods have proven to be highly successful in achieving these goals and we certainly recommend them for these purposes. However, after many years of successful application the question arises whether further reductions in these areas are still effective. Zero inventories (Hall, 1983) may sound great, but it eradicates all economies of scale in the supply chain. Therefore, Integral Warehouse Management introduces a new framework that not only attempts to reduce inventories, shorten response times, eliminate errors and rationalize process steps, but also looks in opposite directions when necessary. Modern information systems capture highly detailed data on the logistics activities. However, the current generation of warehouse management systems (WMS’s) derive little benefit from these data. Integral Warehouse Management uses the data to provide powerful analytics for performance evaluation and process analysis (transparency) and for aligning relationships in the supply chain (collaboration). Moreover, the model introduces several advanced planning and control methodologies that capitalize on these detailed data. These methods seek to make WMS’s more intelligent. 1.1

Effects of Poor Warehouse Performance

Distribution centers hold inventories, which makes them crucial links in the supply chain. They allow inventories to be readily available to customers and enable goods to be produced and acquired in an efficient manner. If the distribution center performs poorly, then this may seriously impair the entire

THE NEXT GENERATION

11

company, not to mention the overall supply chain. We identify three effects of poor warehouse performance: • Complex management • Poor customer service • High logistics costs Complex Management

Many departments within a company as well as several companies in the supply chain may rely on the distribution center to safeguard inventories and successfully forward the goods. As such, an important responsibility of the distribution center is the registration of the inventory levels in the company’s information systems. If these figures do not coincide with the actual inventories, then it becomes difficult for other departments to decide how much can be purchased, produced or sold. As a result, inventory levels rise to compensate for possible inventory discrepancies and the company requires substantially more efforts to manage all resulting incidents. Likewise, if the distribution center frequently ships goods late or incorrectly, then companies downstream in the supply chain require additional safety stocks to manage the uncertainties. Besides, many more incidents and exceptions arise that need to be handled. All in all, a distribution center’s unpredictable behavior makes it complex and laborintensive to manage supply chain activities and often results in increased inventory levels. Poor Customer Service

Poor performance from the distribution center immediately impacts customer service levels. Errors in deliveries may cause empty shelves in stores or downstream warehouses which could result in lost sales. In time-critical situations it may even render the customer’s operation ineffective. For example, if the customer needs spare parts for a defective machine, then it can only be fixed after all parts are available. Late or partial deliveries are useless. In particular, the distribution center must be able to sustain its customer service levels during busy periods. In general, customers become dissatisfied when goods arrive late or incorrectly. They complain, demand compensation or even switch their business to a competitor. In addition, incorrect deliveries must be returned and the correct goods shipped with substantial extra costs. High Logistics Costs

Finally, we consider the logistics costs. Davis (2006) gives an indication of the average logistics costs for companies as a percentage of the sales price of a product (Table 1.1). Total logistics costs are on average almost 9 percent of the sales price. Naturally, this percentage varies between industries depending on product value and handling characteristics. The transportation costs refer only to costs associated with the transportation of finished goods. If we would include the inbound supply of raw materials and semi-finished goods, then the logistics costs would increase to approximately 11 percent. The average profit margin on

12


Table 1.1 Logistics costs as percentage of sales price (Davis, 2006). Category Order-entry/customer service Administration Inventory holding Warehousing Transportation Total

Percentage of Sales 0.7% 0.2% 1.9% 1.5% 4.4% 8.8%

these products is 4 percent (Ballou, 2003). Hence, a reduction of the logistics costs can have a substantial impact on the profit margin. Van Goor et al. (1999) characterize the trends in the logistics costs by comparing studies of Ballou, Davis and the European Logistics Association (ELA) over the years. They identify that the percentage of the inventory holding costs has consistently declined due to initiatives like just in time deliveries and Lean Thinking. At the same time, advances in production technology and new management philosophies have strongly reduced the cost per man hour and thereby the portion of the production costs (not shown in Table 1.1) in the overall costs. While the inventory holding and production costs dropped, the relative shares of the transportation and warehousing costs steadily grew. Despite the technological progress in material handling equipment and IT, distribution centers have not been able to improve their productivity. This was due to the increased demands imposed by smaller, more frequent orders. Likewise, elevated fuel prices, traffic congestion and decreasing drop sizes have consistently enlarged the transportation costs component. Recently, a new trend has emerged. Davis (2006) observed that the share of the inventory holding costs hit a 25 year low in 2005 and started to rise again in 2006. He identified that this cost increase was compensated by a reduction in warehousing costs. However, transportation costs continued to rise in 2006 due to higher fuel prices and a shortage in carrier capacity. We believe that this trend will continue in the coming years. Companies will realize that reducing inventories at the expense of more complex warehousing and transportation activities is no longer a valid approach. The time has come for a new approach that considers the integral performance instead. 1.2

Best-in-class Supply Chain Performance

International research shows that companies with best-in-class supply chain performance considerably outperform their peers: • Accenture, INSEAD and Stanford University (Accenture, 2003) identify a strong correlation between superior supply chain performance and financial success in a study among large global enterprises in 24 industries. A high-performance supply chain not only achieves cost advantages but also helps enhance revenues.

References

Accenture (2003). Connecting with the Bottom Line: A Global Study of Supply Chain Leadership and Its Contribution to the High-Performance Business, white paper, Accenture/INSEAD/Stanford University. Ackerman, K.B., & A. van Bodegraven (2007). Fundamentals of Supply Chain Management: An Essential Guide for 21st Century Managers, DC Velocity Books, North Attleboro, MA. Anderson, C. (2006). The Long Tail: Why the Future of Business Is Selling Less of More, Hyperion, New York. Anthony, R.N. (1965). Planning and Control Systems: A Framework for Analysis. Harvard University Graduate School of Business Administration, Boston, MA. Ballou, R. (2003). Business Logistics/Supply Chain Management, 5th edition, Prentice Hall, Reading, UK. Berg, J.P. van den (2002). Dynamic Routing, white paper, Jeroen van den Berg Consulting, Utrecht, The Netherlands. Berg, J.P. van den, & A.J.R.M. Gademann (1999). Optimal Routing in an Automated Storage/Retrieval System with Dedicated Storage, IIE Transactions, (31), p. 407-415. Berg, J.P. van den, F. Boumans, H. Kapelle, D. Kooij-IJkema, H. Leenaars, E. Peet & W. Stel (2006). Best Practices in Logistics Performance Indicators (In Dutch), Vereniging Logistiek Management, Amersfoort, The Netherlands. Bie, P. de, R. Broekmeulen, K. de Jong, T. de Kok, J. van Nunen, P. van der Vlist, H. Wortmann & R. Zuidwijk (2002). Supply Chain Synchronization in Retail (In Dutch), Deloitte & Touche, Amsterdam, The Netherlands. Camp, W.E. (1922). Determining the Production Order Quantity, Management Engineering (2), p. 17-18. Christopher, M. (2005). Logistics and Supply Chain Management: Creating Value - Adding Networks, 3rd edition, Prentice hall, London, UK. Davis, H.W. (2006). Logistics Cost and Service 2006, Presentation CSCMP Conference, San Antonio, TX.

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Deloitte (2003). Mastering Complexity in Global Manufacturing: Powering Profits and Growth Through Value Chain Synchronization, white paper, Deloitte & Touche LLP. Drickhamer, D. (2005). Census of Distribution: Onward and Upward, Material Handling Management, November. Drickhamer, D. (2006). Census of Distribution: What is World-Class?, Material Handling Management, February. Enslow, B. (2007). Supply Chain Cost-Cutting Strategies: How Top Process Industry Performers Take Radically Different Actions, white paper, Aberdeen Group, Boston, MA. Enslow, B., & J. O’Neill (2006). The Warehouse Productivity Benchmark Report: A Guide to Improved Warehouse and Distribution Center Performance, white paper, Aberdeen Group, Boston, MA. Esmeijer, G. (2001). Operational Internal Logistics (In Dutch), Academic Service, Schoonhoven, The Netherlands. Forrester, J.W. (1961). Industrial Dynamics. Productivity Press, Cambridge, MA. Frazelle, E.H. (2002a). World-class Warehousing and Material Handling, McGraw-Hill, New York. Frazelle, E.H. (2002b). Supply Chain Strategy: The Logistics of Supply Chain Management, McGraw-Hill, New York. Goedschalckx, M., & H.D. Ratliff (1988). An Efficient Algorithm to Cluster Order Picking Items in a Wide Aisle. Engineering Costs and Production Economics, 13(1), p. 263-271. Goldratt, E.M., & J. Cox (1984). The Goal: A Process of Ongoing Improvement, North River Press Inc. Goor, A.R. van, M.J. Ploos van Amstel & W. Ploos van Amstel (2003). European Distribution and Supply Chain Logistics, Stenfert Kroese, The Netherlands. Graves, S.C., W.H. Hausman & L.B. Schwartz (1977). Storage-Retrieval Interleaving in Automatic Warehousing Systems. Management Science, 23(9), p. 935-945. Gunster, B. (2005), Yes-but What if Everything Works out? (In Dutch), A.W. Bruna Uitgevers B.V., Utrecht, The Netherlands. Hall, R.W. (1983). Zero Inventories, McGraw-Hill, New York. Hamel, G., & C. K. Prahalad (1994). Competing for the Future, Harvard Business School Press, Boston, MA.

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Hardjono, T.W. & R.J.M. Bakker (2002). Management of Processes: Identify, Control, Manage and Innovate (In Dutch), Kluwer/INK, Deventer, The Netherlands. Kaplan, R.S., & D.P. Norton (1996). The Balanced Scorecard: Translating Strategy into Action, Harvard Business School Press, Boston, MA. Kaplan, R.S., & D.P. Norton (2001). The Strategy-Focused Organization, Harvard Business School Press, Boston, MA. Kaplan, R.S., & R. Cooper (1998). Cost & effect: Using Integrated Cost Systems to Drive Profitability and Performance, Harvard Business School Press, Boston, MA. Kaplan, R.S., & S.R. Anderson (2007). Time-Driven Activity-Based Costing: A Simpler and More Powerful Path to Higher Profits, Harvard Business School Press, Boston, MA. Makridakis, S., S.C. Wheelwright & R.J. Hyndman (1998). Forecasting: Methods and Applications, 3rd edition, John Wiley, New York. Porter, M.E. (1980). Competitive Strategy: Techniques for Analyzing Industries and Competitors, The Free Press, New York. Pyzdek, T. (2003). The Six Sigma Handbook: A Complete Guide for Greenbelts, Blackbelts and Managers at All Levels, McGraw-Hill, New York. Ratliff, H.D. & A.S. Rosenthal (1983). Order-picking in a Rectangular Warehouse: A Solvable Case of the Traveling Salesman Problem. Operations Research, 31(3), p. 507-521. Roodbergen, K.J. (2001). Interactive Warehouse, www.roodbergen.com/ warehouse. Scheper, W.J., W.V. Bertoen and C.G. Rexwinkel (2005). In Charge of Complexity with the Business Maturity Model: A Benchmark Study in the Dutch Industry (In Dutch), white paper, Deloitte Netherlands. Supply Chain Council (2004). Supply Chain Operations Reference Model, version 6.1, www.supply-chain.org. Treacy, M., & F. Wiersema (1995). The Discipline of Market Leaders, Perseus Books, New York. Walton, M., & W.E. Deming (1986). The Deming Management Method, NewYork: Dodd. Wild, T. (2002). Best Practice in Inventory Management, Elsevier, Oxford, UK. Womack, J.P., & D.T. Jones (2003). Lean Thinking: Banish Waste and Create Wealth in your Corporation, Simon & Schuster, New York.

Index

6 6D cubing

71

A ABC class 64; 73 classification 26; 64; 150 Accelerate/decelerate 29; 221 Accuracy 39; 110; 127 rate 110 Act See Deming circle Activate 28; 181 Active capacity 181 voice 116 Activity 35 Activity-based costing 113; 116 pricing 220 Activity-based pricing 200 Add-on module 84 Advance notice of receipt 98 replenishments 184 shipment notification 98 Advanced planning & scheduling system 44 Age mix 182 Alignment 15 Amazon 228 ANR See Advance notice of receipt

AS/RS See Automated storage/retrieval system ASN See Advance shipment notification Automated storage/retrieval system 59; 173 Availability 127 rate 110 Available to promise 94; 205 B Backhaul 95 Backorder 94 Balance 29; 218; 224 Balanced scorecard 34 Balancing 65 Barcode label 62 Batch See Lot communication 87; 169 processing 94 Batch-picking 70; 73; 141; 149; 167; 186 Best-of-breed system 86 Big picture, The 190 Bill of lading 97 material 80 material order 96 Billing of logistics services 85 Block stacking 58 BOM See Bill of material Bottleneck 171 Brainstorm session 145 Breakthrough project 52

246


Bulk area 64 location 64 Bullwhip Effect 225 Business intelligence system 135 Buy-hold-sell 55; 212 C Cannibalization 68 Can-ship order 183 Capable to deliver 205 promise 94; 205 Capacity check 205 planning 47; 154; 158; 169 Case 58 picking 77 Cause-and-effect relationship 21 Change management 135 process 134 Check See Deming circle digits 77 Collaboration 10; 189 Collaborative Warehouse Management 18; 189 Combine 27; 144; 149 Combitruck 60 Committed resource 116 Company strategy 33; 46 Complete view 127 Complexity 89 Compound task 69; 169 Connectivity 214 Constraint 169 Control rule 45 Conveyor See Roller conveyor Corrective measure 142; 143 Correlated products 74 Cost center 201 Cost-to-serve 201; 223 Cross-dock 35; 55; 61; 64; 80; 210; 214 Cubing 71; 207

Customer 38 intimacy 34 order 93 order decoupling point 223 Customs management 85 Cut 28; 180; 181 Cut-off time 108 Cycle count 61; 65; 99; 111; 133 D Data accuracy 45 Days on hand 227 Deadline 45 Deep stacking 59 Delivery 95 Deming circle 137 DESADV See Despatch advice Despatch advice 63; 97; 146 Direct shipment 55; 210 Discontinuity 43; 190; 195; 196; 197; 198; 201; 221 Disposition 63 Do See Deming circle Dock & yard management 85; 163; 208 Dock reservation 226 Dock-to-stock time 132; 144; 171 Drawer rack 59 Drop shipment 212 Dual command cycle 141; 150; 167; 171; 186 Dynamic pick location 75; 148 E EAI See Enterprise application integration Earliest deadline rule 175 starting time 186 Economic order quantity 199 Economies of scale 23 ECR 23; 198 EDI 93

INDEX

Effective Warehouse Management 18 Efficiency 27; 170; 177 Efficient 26 consumer response See ECR Electronic data interchange See EDI Eliminate 27; 144; 146 Emergency task 175 Engineered labor standards 85 Enterprise application integration 92; 214 resource planning See ERP EOQ See Economic order quantity ERP 86 European distribution center 56; 209 Excess capacity 180 Extrinsic motivation 137 F Factory gate pricing 95; 201 Fast mover 74 FEFO See First expired first out FIFO See First in first out Finance 86 First carton seen 62; 102 expired first out 68 in first out 59; 68 Fixed route 86; 95; 163 Flexibility 39; 84; 111; 127; 133 range 133; 166 Flexible 15 resource 117 Forecast 160 Forklift truck 59 Forrester Effect 225 Forward area See Pick area stock positions 212 Frequency 108 Full case 58; 192; 193 pallet 33; 58; 192; 193 pallet layer 193

247

G General Food Law Globalization Greedy rule

58 208 46

H Hierarchical control rule Hub

175 42

I Idle capacity 181 Improve 27; 145; 150 Incentive alignment 220 Individual performance 137 piece 58 Intangible benefits 50 Integral Warehouse Management 9 Integrated system See Best-of-breed system Intelligent agent 204 Interface 92 Interleaving 170; 174 Internal client 38 movement 61; 66 supply chain See Value chain Intrinsic motivation 137 Inventory accuracy 132 allocation 67 allocation rule 67; 150 attributes 102 discrepancy 65; 100 holding costs 12; 119; 217 management 85 management system 86 J JIT

See Just in time

248


Just in time 12; 23; 74; 148; 195 replenishment 76 K Key performance indicator Kitting

126 36

Modular procedures 115 Movement 30 MTO See Make-to-order MTS See Make-to-stock Multi-step move 64; 77 Must-ship order 183 N

L Labor management 85 management system 158 Last in first out 59 Latest goods issue date 68 starting time 186 Lean 12; 23 Legacy system 83 License plate 62; 63; 87 LIFO See Last in first out LMSSee Labor management system Loading dock See Shipping dock Logistics costs 13 Logistics service provider 37 Long tail 228 Lot 58; 98 LP See License plate receiving 63 LSP See Logistics service provider M Make-to-order 42; 80; 223 Make-to-stock 42; 80; 223 Management information 85 Mass production 23 Material handling control system See MHCS Material handling system 90 Merge-in-transit 55; 210; 214 Mezzanine 59 MHCS 86 Miniload AS/RS 59

Narrow-aisle truck 60; 170 Nearest neighbor rule 174; 175; 176 Negotiated time windows 109 Nesting 71 Next generation 45 in collaboration 16; 198 in transparency 15; 105; 121; 138 in warehouse management systems 15 O Off-the-shelf system 83 OMSSee Order management system On time in full 133 Operational excellence 34 management 46 Operations research 44 Opportunistic cross-dock 80; 147 Order 93 acceptance 94; 226 cut-off time 224 disposition 94 line 93 management 86 management system 86 profile discontinuity 193; 201 promising 94 Order-pick cart 60 truck 60 OTIF See On time in full Outsourcing 156

INDEX

P P/D location 64; 172 Pallet 58 picking 77 rack 59 Paperless warehousing 45; 88 Pareto curve 227 Pareto’s law 74 Payback period 48 Peer pressure 136 Perfect order (line) rate 133 Performance indicators 124 management 136; 154 Pick 61 area 64 density 73 list 87 location 64 sequence 72 sequencing 150 tour 69 Pick/drop location See P/D location Pick-and-sort 70; 150 Pick-to-light 45; 87; 88 Piece 58 picking 77 Plan See Deming circle Planned cross-dock 80; 147 PLC 90 PO See Purchase order Postpone 28; 184 Prearranged time window 109 Preventive measure 142 Priority matrix 50 Private warehouse 36; 85 Proactive replenishment 74; 184 Problem-solving 9 Process 26 Product 58 attributes 101 definitions 101 group 64; 101 leadership 34 master data 101 proliferation 227

249

Production costs 12 order 98 Productivity 27; 127 Product-to-picker systems 59 Profit center 201 Programmable logic controller See PLC Public warehouse 111 Pull 45 Purchase order 62; 98 order confirmation 99 Push 45 Putaway 60; 64 rule 150 Q Quick-win

52

R Radio frequency 15; 45 terminal 87; 146 Rationalize 29; 218 Reach truck 59 Reactive replenishment 74; 174 Warehouse Management 18 Real-time communication 45; 87; 150; 169 processing 94 Receipt advice 62; 98 dock 61 Receiving 60; 61 Regional distribution center 209 Relaxed FEFO 68 FIFO 68 Replenish 61 Reserve area See Bulk area Resource planning 47; 158; 159 utilization 123

250


Response time discontinuity 196; 201 Responsive Warehouse Management 18 Responsiveness 39; 108 Return merchandise authorization 63; 96; 98 Reverse unloading sequence 79 RF See Radio frequency RF terminal See Radio frequency terminal RFID 45; 105 tag 62 RMA See Return merchandise authorization Roller conveyor 60 Rolling stock 147 S Sales orders 94 SCM See Supply chain management Section 64 Sell function 37 Sell-source-ship 55; 212 Separation 65 Service 35 fee 111; 198 level agreement 34; 40; 46; 107; 124; 140; 154; 201 portfolio 107; 201 Shelving rack 59 Ship 61 Shipping dock 79; 80 Shortpick 65 Side show 52 Simple task 69; 169 Single command cycle 150; 170 Single-order picking 70; 149 Single-step move 64 Six dimensional cubing 71 Six Sigma 23 SKU See Stock keeping unit SLA See Service level agreement Slow mover 74 Sort-while-pick 70; 78; 150

SSCC 63; 147 S-shape 73 Staging area 197 Standard pack configuration 58 time 121; 167; 168; 184 WMS 15; 83 Static pick location 75; 148 Status 100 Stock adjustment 100 keeping unit 58 product 208 Storage 30 Strategic management 46 Substitution 68 Supplier 38 Supply chain event management 204 life cycle 30 management 15; 23 manager 29 structure 55 synchronization 198 Supply function 37 Surprise receipt 62 T Tactical management 46 Task management 47; 154; 169; 184 Team performance 136 Theory of constraints 44 Third-party logistics service provider 36; 155 warehouse 36 Threshold level 176 Time and material costs 116 bucket 168; 184 window 109 Time-driven activity-based costing 117; 219 TMS 46; 86 TOC See Theory of constraints Top-down deployment 46

INDEX

Tracking & tracing 45; 58; 83 Transfer order 96; 98 Transformation 30 Transparency 10; 14; 106 Transport order 95; 96 order confirmation 97 Transportation costs 12; 217 management system See TMS planning 86; 226 Planning function 37 U Unbiased fee view Unloading dock Up-to-date view Urgency Utilization

113 127 See Receipt dock 127 170 27; 153

V Value added logistics 35; 57; 61; 80; 210 chain 37 Variable route 86; 163 Vehicle routing & scheduling system See VR&S Velocity class See ABC class Vendor managed inventories 201; 219; 223 rating 63; 147 Virtual warehousing 55; 208; 210 Visibility 214

251

Voice recognition Voice-picking Volume discontinuity VR&S

45; 87 77 194; 201 86

W Warehouse design 26 function 31 management 14 management cycle 46; 154; 180 management system 10; 15; 44; 83 planner 67 Warehousing costs 12; 13 Waste 23 Wave 67; 167 management 47; 154; 169 monitoring 183 monitoring screen 167 planning 66 Web portal 85 Whale curve 220 WMS See Warehouse management system Workload balancing 47; 158 X XML

92

Z Zone Zone-picking

64 70; 150

About the Author

Jeroen P. van den Berg (1967) is director and founder of Jeroen van den Berg Consulting, a consulting and software firm based in Utrecht, The Netherlands. The company specializes in warehouse management and the application of logistics software tools. In 2006, it launched WIS (Warehouse Intelligence System), the world’s first standard management information system for warehouses and distribution centers. Mr. Van den Berg has used the principles highlighted in this book to help boost the logistics performance of numerous clients. He has written over thirty white papers and articles on this and related subjects. Mr. Van den Berg is a popular speaker at seminars and logistics courses. In 1996, he earned a Ph.D. from the University of Twente in The Netherlands with his thesis “Planning and Control of Warehousing Systems”. He holds a Master’s degree in Applied Mathematics from the same university. Mr. Van den Berg can be reached at [email protected].