Logistics Case Study: Warehouse Performance

Walter Martin
Wake Technical Community College
April 2012

This case study was funded by the National Science Foundation as part of NSF ATE #1003507
 Warehouse Performance - Case Study

Overview:

A well known local business is having efficiency problems or at least

management believes so. There are currently 6 warehouse locations within this
local business situated between 3 states; NC, SC, and VA. Recently, they tasked
you to determine which location was the slowest and what items need to be
measured to determine location efficiency.

Facts:

Most recently, you attended an introductory class on Program Evaluation

and Review & Technique Chart, (PERT) and Critical Path Methods (CPM).You
have a lot of ideas but are still unsure exactly where to start. The PERT training,
although introductory, seemed much more in-depth then necessary to resolve
management’s questions. You have been steered to find the “slowest” location
and speed up their order processing system without recommending any major
software / hardware purchases.

Additionally, there are some security concerns at all 6 facilities as client claims
have increased for missing / non-receipted property. No one is sure where the
losses are occurring, there are several “touch-points” in the pick and pack
process. Your hopes are, upon performing a PERT or CPM assessment on the
first warehouse, it will highlight some critical flaws in property accountability.

Unsure about which location is in fact the slowest, you have gathered some
information on the 6 locations to make a determination. The areas you
researched included receiving processing times, dock-to-stock times, order pick
times, replenishment times, dock to dock times, and warehouse cycle time.

Background on PERT and CPM:

At times, as a supervisor or manager, you will be challenged to reduce

manpower or processing times for tasks. In order to properly evaluate the
situation you first must know if your employees are being productive as
discussed. You will evaluate if certain tasks are taking too long, if too many
employees are assigned to certain tasks or to few, identify bottlenecks, and
opportunities for improvement.

Many times, supervisors just make a guess and reallocate employees to other
tasks or accuse employees of working to slow however; there are ways to
properly access the situation. One of the ways to help identify opportunities for
improvement or reallocation of resources is to develop a PERT chart, (Program
Evaluation & Review Technique Chart).
A PERT chart helps you identify:

· Task · Dependency Task · Duration · # of personnel assigned · Wait time.

CPA Analysis or CPM (Critical Path Method):

Another tool is called a CPA Analysis or CPM (Critical Path Method) analysis. A
CPM identifies:

· Dependent tasks which take the longest to complete

· Tasks that require attention

· Tasks that can become show stoppers

· Tasks that as a minimum MUST be completed (CRITICAL PATH)

Between the two tools you can usually identify all the tasks associated with
achieving an end result and the paths that it takes to achieve the result. In some
cases it may only be one (task) path. In other cases there may be several paths
and one CRITICAL path. While we're not going to draw PERT or CPM charts we
are going to take the identified problem and have you identify the paths and the
critical path. You'll also be asked some questions which you will be able to
answer upon identifying the paths. Why would we want to do this process? For
the reasons as mentioned above and / or:

· Identify reengineering opportunities

· Identify cost saving opportunities

· Review allocation of resources

· Reassignment of personnel or tasks

· Eliminate steps

Procedures are created to perform a process, yet technology and capabilities

change but the documentation or approach for the associated tasks do not.
These tasks / processes are the low-hanging fruit for improvement. The lesson
here is you should perform periodic reviews of your processes and the tasks /
steps it takes to complete them. This review is also called performing a task
analysis and or a small version of job profiling.
 Remember, a critical path is the sequence of project network activities which
add up to the longest overall duration. This determines the shortest time possible
to complete the project. Any delay of an activity on the critical path directly
impacts the planned project completion date (i.e. there is no float on the critical
path). A project can have several, parallel, near critical paths. An additional
parallel path through the network with the total durations shorter than the critical
path is called a sub-critical or non-critical path.

Review on warehouse / DC inefficiencies:

Today, organizations are trying to reduce what is referred to as “Total

Logistics Cost.” Others may refer to it as “Total Cost of Ownership,” but that term
generally refers to the total cost from cradle to grave. Total Logistics Cost is more
commonly associated with the cost it takes from the time of receipt to the time of
release. Either way, both terms contain some of the same cost components that
lead or contribute to warehousing or DC inefficiencies.

Inefficiencies exist in all organizations in various tasks, and they contribute to a

reduction in positive revenue or profit. In logistics, typically a dollar saved is a
dollar contributed to revenue without any associated costs. As an employee,
supervisor, or manager, you are responsible for identifying these inefficiencies
and finding a way to correct the identified area for improvement. The misuse of
resources can lead to many different outcomes besides financial. Some of the
most common yet most overlooked items that deal with inefficiency are:
 Redundant / Excess Handling – Redundant or excess handling is a waste
of labor, financial, and equipment resources. All touch paths need to be
reviewed to determine if there is “value added” every time an asset is
picked up and placed down within the facility.

 Poor Space / Cube Usage – Unless you’re in a new facility, chances are
the organization has grown, expanded, increased product offerings,
changed package configurations, and deleted product offerings. When
was the last time the facility was reviewed for its storage effectiveness in
response to the changes that have taken place?

 Is new shelving, racking, needed?

 Are the current storage methods being utilized to their fullest potential?

 Does honeycombing exist?

 Are you repackaging items into larger or smaller containers?

 Are items still stored in prime picking zones as needed?

  Are individuals traveling more to complete assignments?

 Have product / customer classifications changed?

 Are new products stored in product relationship areas for possible kitting
or grouping of similar requested items?

 Outdated Procedures – Are the training manuals or process instructions

up to date with the current procedures for completing the process?

 Obsolete IT Routines – Is it time to implement new technology or software

packages that can result in savings? Have processes/procedures changed
that require the current IT routines to be updated?

 Obsolete MHE – Is the current configuration of the storage facility

conducive to the use of the current MHE? Is the MHE in place capable of
allowing personnel to perform at their optimum or does it slow them down?

 Excessive Maintenance Costs – Is the cost of repair and maintenance on

the current MHE outweighing the purchase of new equipment? Is the MHE
on hand available as needed or in repair status when needed?

 Least Handled / Best Handled

Situation:

You’ve been tasked with “speeding up” the order processing system at the
slowest of 6 locations. The data you have reviewed on all locations actually
shows that they are all equally exceeding times in certain tasks. By performing
the CPM exercise, you hope to uncover the problem and apply the results to all 6
locations to improve efficiency.

There are 12 specific tasks involved in processing and shipping orders. Some
can be performed at the same time as others, whereas others have to be
performed in sequence- meaning, one cannot take place before the other is
completed. You job (based on the information provided below) and (remembering
the notes above) is to analyze the order-processing and shipping operations. All
shipments in this situation are currently transported by truck, or truck / rail.

Review the supplied data below and then answer the questions. As you review
the chart to answer the questions, keep in mind, the paths will have related tasks.
**Note – When reviewing the chart you will notice that PRECEDENCE (P)
RELATIONSHIPS has a ** beside it, the explanation for this area is as follows:
(Tasks on the right of the < cannot begin until tasks on the left are
completed)

Task Description Duration (in days) P Relationships**

A Order received / Entered in system 0.35 A<D

B Decision, Fill or back order 0.40 B<C

C Print pick ticket / order 0.15 C<H

D Verify buyer credit 0.45 D < G,E

E Check / determine buyer discounts 0.12 E<F

F Prepare invoice, enter in accts. receivable 0.55 F<K

G Decision – mode of shipment and carrier 1.80 G<J

H Pick order at warehouse 0.60 H<I

I Pack and label shipment 1.30 I<L

J Notify carrier, prepare shipping documents 2.50 J<L

K Transmit invoice to shipping dock 1.00 K<L

L Deliver order to customer 4.50

REVIEW THE PROCESS PATHS AND ANSWER THE FOLLOWING:

1. Arrange the tasks as shown above into cycle paths. HINT there are 3
paths. (think about process similarities)

2. Identify the critical path?

3. Which path is the quickest to complete?

4. Considering your answers to questions 1 and 2 which path offers the best
opportunities for reducing the order / ship processing cycle? Why?

5. Since speed to the customer is the issue, should you source faster
transportation or look at the identified paths for improvements?

6. Realizing the chart doesn’t tell you how many workers are assigned to
each task; are there any tasks that could be identified for reducing the
number of employees assigned to them and if so where would you
reassign them to?
 INSTRUCTOR APPLICATION NOTES

This case can involve the various chapters of study from the entire semester for
students who have taken a Warehousing, and / or a Supply Chain Management
course.

This case gives students an opportunity to research performance in warehousing

and distribution. Areas to be addressed depend on how the students read and
dissect the case include but are not limited to:

Question 1. The three paths are as follows:

- A,B,C,H,I,L - A,D,E,F,K,L - A,D,G,J,L

Question 2. The three paths are:

- P1 Documentation
- P2 Pick Path
- P3 Critical Path

Question 3. Quickest path to complete:

- Path 2

Question 4. How to reduce order processing time:

- Look at the longest processes in the critical path.

Question 5. Improving speed to the customer:

- Look at the critical path again for the longest processes.

Question 6. Reassigning workers; recommendations:

- Look at processes not on the critical path for reduction of

manpower or increase of manpower.