Businesses are still trying to grasp the reality of e-commerce. With Amazon leading the way, many firms have adapted to capture customer orders via the Internet and deliver products as fast as one day.
Yet, many executives still struggle to bring their logistics, especially their warehouse operations, to the standards e-commerce demands.
Warehouse management in the e-commerce world can no longer be confined to back-end operations focused simply on storage and receiving, materials handling, and stock rotation. Warehouses instead have emerged as the backbones of on-time and complete deliveries to customers.
Higher customer expectations coupled with technological advances have encouraged companies to change the focus of warehouse management from ensuring few items are put away and handled correctly to supporting timely deliveries via rapid storage and retrieval of thousands of items.
Record-breaking orders and high product availability do not translate to performance success if the firm is unable to deliver within expectations. The mantra in some organizations has been “Save the Sale.”
Many executives have lamented:
“It takes us 5 to 8 days to deliver complete orders to our customers.”
“We lost more than one month’s sales last year because orders were not delivered.”
“We do not know if we can ship current orders; we have no idea what is our warehouse capacity.”
“We lost two-week’s worth of sales when we transitioned to a new 3rd Party Logistics (3PL) Provider”
Firms have also discovered that simple PC-based spreadsheet applications, which many logistics professionals find cheap and convenient, cannot cope with the ever-growing complexities of day-to-day warehouse operations.
On the other hand, the arrival of modern Warehouse Management Systems (WMS), which boast real-time visibility and efficiency, have brought on comments such as:
“Our warehouse personnel weren’t involved in the design and implementation of the WMS as we were busy shipping orders, so now we’re having difficulties adapting to the new system.”
“It’s too complicated.”
“We thought it was just another IT project.”
Indeed, while WMS has become a key component for effective warehouse operations, some basic requirements are needed before one can serve customer orders timely and completely.
Education and training
Often neglected in a WMS project are people. People need to be educated on how WMS plays in the overall growth of the company. In some instances, people are immediately sent to training wondering what will be their new roles or if they will have jobs in the future.
In other cases, projects fail as people don’t understand why the company is changing systems in the first place. Keeping people informed and aware of changes in goals such as better customer service increases the probability of success.
WMS cannot be effective if data are inaccurate. Examples of root causes of inaccuracies include:
- Some warehouses rely on “veterans” who have developed personalized systems of tracking inventories, in which no one else knows what’s going on in the warehouse except them.
- Warehouse personnel encode transactions only once or twice a day, sometimes based on their own personal preferences. This defeats the instantaneous visibility of state-of-the-art WMS which underlies the capability to satisfactorily fulfill customer demand.
- Complicated item codes or unclear item definitions can cause difficulties. For example, some companies include color in their WMS item codes but this frequently leads to encoding mistakes such as when black (e.g. BLK0011) is erroneously entered as blue (BLU0011).
Most WMS failures stem from a lack of documented standards in physical inventory management. For example, some warehouse forklift operators haphazardly put away items in the absence of clear rules on storage assignments which cause delays when the same operators search for them. Some new WMS applications offer “best practice warehousing” standards that can enable organizations to set up productive procedures.
The right performance measures
Every warehouse should have the right performance measures. Executives can sometimes be too preoccupied about warehouse costs that they over-focus on productivity and expenses rather than on the more important turnaround time of items from storage to delivery. Warehouses share every supply chain’s ultimate goal of delivering to the customer such that their performance should be consistent with this goal.
Warehouses have come a long way from just a storage facility to a distribution center essential to meeting customer demand. Organizations who accept that warehouses are an important link in the supply chain stand to reap enormous benefits.
Jovy Jader is a Managing Director and a Supply Chain Management Consultant at Prosults Consulting LLP. Email at email@example.com.