Group 3: Raymond: Design of warehouse operations

Question 1: What type of storage strategy should be adopted -no mix strategy (1 SKU per bin) or
mix strategy (more than 1 SKU per bin)?
Answer:

Mix strategy should be employed in maintaining the stock as there are total 10,504 Bins whereas the
SKU’s currently are 15,754 and it is expected that SKU’s will increase by 40% i.e. to be over 22,000
SKU’s. Also the area in the warehouse should not be divided according to the market as there are
instances where workers keep all the quantity of a particular SKU’s at one place mistakenly whereas it
should be fragmented across different market space where it is meant to be kept. Therefore bins in the
warehouse should be uniquely identified with numbers and same should be linked with the warehouse
management system/SAP to efficiently track down the material where it is kept or in other words, bin
should be assigned SKU wise with an upper limit of capacity assigned to every bin and one SKU should
be kept at one place rather than multiple locations.

Further segmenting/changes can also be done in bins so that it enables keeping more than one SKU at one
bin as it enables the following:

- Maximize and optimize all available space – SKU’s to be maintained at one location will be
increasing in time, therefore rather than increasing the footprint of the warehouse, the existing place needs
to be efficiently used. If any particular SKU stocks out, its bin can be assigned to any other SKU.

- Lean Inventory – Reduce or eliminate slow moving stock, inventory should be lean, it means keep
whatever is needed. Inventory should be maintained according to the moving cycle i.e. in such a manner
that fast moving stock is kept at ground level and slow moving stock should be kept at upper levels.

- RFID and ERP system – Employing barcode or radio frequency identification (RFID) reader can
improve accuracy and remove errors. It will also improve the picking efficiency by suggesting the best
routes and methods for picking and put away.

In addition, Fixed and flexible bin assigning system should be present, for certain SKU’s fixed bins
should be assigned and SKU’s having larger quantities should be assigned with flexible bins.
Question 2: How should the bin location for each SKU be decided? Further, how should an SKU be
directed to its bin at the time of inward receipt?
Answer:
Bin location is the smallest unit where the merchant store their goods. An efficient storage tracking
system should be deployed to track each SKUs so that the orders are fulfilled on time. The storage
tracking system will help in identifying where to stock a product which will not only prevent the goods
from getting misplaced but also help induct new person in the team.
The software should distinguish between different market scenarios for warehouse management system.
Since Raymond has two distinct markets and there were separate racks for showrooms and multi brand
outlets, the software didn’t differentiate between the two and it was entirely dependent on the competency
of the workman. The storage tracking system will help them in differentiating the market and utlilise the
bin up to its full capacity.
There should be a system guided storage plan which will instruct the workmen where to put a particular
SKU so that the products are not left unscanned. The product should be kept at a particular bin based on
its SKU. This will help in obtimising the warehouse space, properly utilising it and not blocking the aisle.
Raymond should use statistical slotting. In a statistical slotted warehouse, all the units of one SKUs are
kept in one or two parts. The location of the good will be scanned into a handheld computing device, and
items will be placed. Workman in a statically slotted warehouse can easily identify products by looking at
the computing device. Since the demand will increase by 40%, bins in the warehouse should be uniquely
identified with numbers and same should be linked with the warehouse management system/SAP to
efficiently track down the material. Due to the expected increase in demand, two or three SKUs will be
put together in one bin and this will be decided on the fabric quality and length of the piece.
The SKU will be received for the first time and enter into WMS and an inward receipt will be generated.
The person at the receiving dock receives the SKU and then the workmen will assign a bin location for
that SKU from the WMS. The storage will depend on the SKU and not on the distinct markets. The
workmen will scan the product and place it in the bin. The SKU gets putawayed there.

Question 3: How should the picking efficiency be improved?

The picking efficiency can be improved in the following ways:

1) RFID and ERP systems - Each bin should be assigned an RFID tag which can provide the details
of the SKUs present in that particular bin. Subdivision of a bin will help workmen to efficiently
pick up the order without wasting time to search for SKU’s even if its a new workmen.
2) Predefined picking - A predefined schedule is to be followed where scheduling is done
prioritizing shipping dates so as to increase the efficiency in picking, reduce overtime and
effectively utilize manpower. Predefined picking will eradicate rush hours and idle time of
manpower resulting in saving of cost.
3) Assigning a person - Pre assigned personnel should be assigned to particular area/zones for
picking orders. Experienced personnel would be more efficient in picking orders from a well
known area due to its prior knowledge.
 4) Investment should be done in equipment for picking orders and providing RFID machines to the
pickers.
5) Different Picking models can be considered- Zone Picking where all orders or SKUs of one zone
can be picked then compartmentalized on the basis of exclusive showrooms and multiple brand
showrooms. Zone picking is to be combined with wave picking so that the orders are picked in a
‘wave’ which may be defined as per the number of orders. Say, there are 100 orders which
require the same product rather than allotting pickers to pick 100 of them individually, wave
picking talks about picking them simultaneously to get them to the staging area.
6) Amendments in WMS: Reservation system should be employed to face challenges in case of
shortage of material i.e. if any particular SKU is needed in 5 orders and we have quantity that can
fulfill only one order, then the system should restrict creating further pick list.
Question 4: What are the recommended KPIs (Key Performance Indicators) to monitor warehouse
performance?

Let us look at the recommended KPIs to monitor the performance of Warehouse according the work
carried out in the warehouse;

a) Inventory
- From the case study it is observed that inefficiencies in inbound process, storing, picking and
packing along with the limitations of the WMS has led to high inventory levels. High inventory
can substantially increase the costs for an organization which finally hits the bottom line of the
business. Inventory carrying cost will give us a clear picture about the cost that we are incurring
due a lower inventory turnover. Inventory holding cost will include taxes, insurance, labor,
transportation, depreciation, etc.
- Inventory Turnover; this tells us about how many times the inventory is sold/replaced/used to see
if the business has excess inventory with reference to sales. It is calculated as Cost of goods
sold/Average Inventory.
- Inventory accuracy; the accuracy of your physical inventory should correlate with that recorded
in your data, however in any major distribution warehouse, there is often a gap between the two.
Unexpected back orders, unsatisfied customers, and, eventually, greater total expenses might
come from a high percentage of inventory inaccuracy.
- Order lead time; The amount of time it takes for a client to receive an order after it has been
placed is referred to as order lead time. Order lead time not only has a direct impact on customer
satisfaction (the shorter the lead time, the happier the customer), but it also influences how much
inventory a warehouse has to hold at any one moment. Long lead times add to customer
unhappiness and might compel a firm to rely largely on demand forecasts to place orders, thus
keeping this KPI under strict scrutiny.

b) Receiving
- Receiving efficiency; It is a measure used to assess warehouse workplace productivity when
receiving stock. Inefficiencies in your receiving area can have a knock-on impact across your
warehouse operations, therefore it's critical to recognise and reduce inefficiencies as soon as
possible in order to simplify the remainder of your workflow.
- Receiving cycle time; Receiving cycle time is the average amount of time it takes to handle
incoming stock, which includes accounting for it, classifying it by category, and storing it.
c) Putaway
- Putaway accuracy rate; It is the percentage of goods that were successfully stored the first time. A
rating of 1 shows that there were no errors or mistakes. Inaccuracy will cause adverse effects on
picking.
- Putaway cycle time; The overall amount of time it takes to put away objects is measured by the
put away cycle time. A fast put away cycle time indicates that the process is efficient, whereas a
long put away cycle time indicates that there is space for improvement.
d) Picking
- Order picking accuracy; An erroneous order might cause inventory to be returned to the shelves,
longer delivery time per average order, a higher percentage of return, and so on. Picking accuracy
should be closer to 1.
- Back order rate; It counts the amount of orders that cannot be filled when a customer places them.
A sudden increase in demand can understandably result in a temporary high back order rate for
any particular item, but a continually high or growing back order rate is a strong symptom of poor
forecasting and a lack of response.