Different shades of ‘grey sheds’ can beat competition

The warehouse is the beating heart of the supply chain, but the “grey shed” now does a lot more than just circulate goods, writes Sam Tulip

Companies need to plan beyond their current warehousing needs to what they will need in the next ten years, says Craig Sears-Black, UK managing director of supply chain process developers Manhattan Associates. “In the internet retailing space, everything is changing so quickly,” he says. “Having a system that can adapt and grow with you at a reasonable cost is essential.”

 Razat Gaurav, senior vice president international for JDA Software, comments: “Albeit for what seemed good reasons, many companies have got off on the wrong foot in serving the omni-channel market. They often created separate distribution networks for online activity because they recognised that shipping unit items to consumers was a very different activity from moving pallets to shops.

“But consumers are transcending channels, using mobile, online and physical stores seamlessly even in the same transaction. There are many models and probably there will be some we haven’t thought of yet,” he says.

Markus Schmücker, managing director, Supply Chain Solutions, Arvato UK & Ireland, says: “Supply chains have to juggle entirely different order profiles at the same time. As a solution, many are shifting strategy towards operating larger, more centralised pools of stock as opposed to holding stock at multiple locations. When this is combined with an integrated end-to-end view of inventory across all the different sales channels, it’s a much more efficient strategy.”

Distribution centres are losing an average of almost £242,000 a year due to mis-picks

All this means that, far from being a simple shed, the modern warehouse is a hive of IT systems, picking technologies and material handling automation. Finding solutions that are both efficient and future-proof is no trivial task.

Mr Sears-Black adds: “Order management is very entwined with warehouse management systems. Most people have evolved order management systems with no optimisation or decision-making within them, so they need to automate in order to see more stock and therefore sell more. This means integrated visibility from warehouse management systems, order management systems and ERP [enterprise resource planning] systems, through a straightforward, unified process.”

Order picking is the heart of the warehouse operation but, according to a recent study by inventory tracking solutions vendor Intermec, distribution centres are losing an average of almost £242,000 a year due to mis-picks.

The study, which surveyed managers across the UK, United States, France and Germany, found the average mis-pick costs approximately £14, with more than half of companies reporting a successful pick rate of less than 97 per cent. A further 19 per cent do not even measure the costs of mis-picks in any form.

According to Access Group, supplier of the Access Delta warehouse management system, there is no single best practice for order picking. “A multitude of factors interplay, including the nature of the goods, patterns, complexities and quantities of demand, whether additional operations are to be carried out and so on,” the company says.

“There is wave-order picking, where the requirements for multiple orders are picked in a single optimised route around the warehouse and tote-order picking whereby orders are sorted as the picker does his or her round so they are pre-sorted when they reach the packing station.

“Task interleaving may combine picking with other functions, such as physical stock counts. Operating systems may involve scanning, weight verification and other techniques to detect and eliminate errors at the point of pick, the packing station and the loading bay.”

Gordon Smith, chief executive of warehouse automation providers SDI Group, says: “Even if the actual pick is manual, automation and technology can help get labour to product or vice versa, improve transport times, cut walking distances. When you have multichannel demands, you can’t have 500 people wandering around an ever-increasing number of skus [stock keeping units], picking single £10 orders.”

Phil Steeds, sales director of automation supplier TGW, adds: “While continued economic pressures make large capital expenditure projects difficult to finance, automated storage and retrieval systems, combined with high-velocity picking systems, are becoming increasingly important.

“In addition to significantly reduced storage and handling costs, automated solutions can also deliver improved accuracy, better inventory control and stock rotation, increased throughput and storage capacity.”

Phil Shaw, managing director of 3PL Norbert Dentressangle Logistics UK, says: “Automation is great where there is consistency of product and if a warehouse is operating in a consistent way. But if the product group or demand is more variable, manual intervention is appropriate. It’s not a question of automation versus manual – it’s about finding the appropriate blend.”

So who should run your warehouse? JDA Software’s Mr Gaurav says: “Especially in manufacturing, there is a continuing trend to outsourcing supply-chain functions, including warehousing, leveraging the skills and expertise of third parties, either in dedicated or shared-user facilities. However, in retail the dominant trend is for retailers to take more control of warehouse processes, even if they are actually performed by a third party.”

Mr Shaw believes it’s a specialist activity. “Third parties or 3PLs have the core skills in coping with variability of demand and the rapid cycling of product ranges,” he says. “It’s a dynamic environment with which our customers’ core retail and e-commerce skills don’t necessarily match, especially when you are looking for economies of scale and deployment of highly complex IT skills and systems. The best 3PLs can and do provide this.”

Brian Templar, of consultants Davies & Robson, says it is more difficult for contractors to demonstrate economies of scale in warehousing than it is with transport, but a large third party can offer the flexibility needed for future growth, down-sizing or seasonal peaks.

In-house or outsourced, firms need to spend some time and money looking at processes and systems, and what happens to an order, says Mr Templar. They will find many opportunities for efficiencies, from inventory reduction through sharing stocks across channels, to simple changes to packaging, optimised picking procedures and staff development.

“Sometimes the increase in complexity suggests a greater degree of automation, but either way warehousing requires a different calibre of staff, and firms are investing in cross-training, education and change management for their staff,” says Mr Gaurav.

This also affects the choice of location for a distribution centre, says Mr Shaw. “You have to balance transport efficiency and labour availability. The computer suggests a dot on the map as the perfect location, but you have to take into account social demographics and people resources,” he says.

“Warehouse workers are adding value, consistency, flexibility, quality – they are our eyes and ears, they understand the customers’ products and requirements. We have to build a good motivating environment for them.”

Or as SDI Group’s Mr Smith puts it:  “You have to look for a good-quality workforce who want to be part of the team.”