It might sound like a new breakfast cereal or chocolate bar, but it’s not that sort of crunch.
A credit crunch occurs when the normal flow of money through the banking sector is impeded. Following similar thinking, a warehouse crunch occurs when the normal flow of goods through the warehouse is impeded – the warehouse pipe becomes blocked. When a credit crunch occurs there is a severe shortage of money, so the equivalent in the warehouse is a severe shortage of goods. There is a further parallel. In a credit crunch the banks may have money and savers may be depositing, so there is money coming in and being stored by the bank, but not enough is going out in the form of loans, and that is the ‘crunch’. It is not that the money does not exist, but that it is not moving around properly. Equally, there may be goods arriving and items in the warehouse, but the real ‘crunch’ is whether the items leave correctly and on time.
So what might cause a warehouse crunch? Remember in our terminology a warehouse crunch occurs when items are apparently there but not leaving correctly and on time. The first example is obvious, the correct stock is in the warehouse but cannot be found. We are searching for an item to pick but it is not where we expected it. It may have been put in the wrong location, or its location wrongly recorded. Alternatively, we may have thought we have the right items, but subsequently find that the items were booked in incorrectly. It could be that the correct items are in the correct place, but when we get there we find that there is not a much as we thought there was, due to earlier picking errors. We may find that stock we have reserved for one customer has inadvertently been sent out to someone else. The next scenario that may impede delivery is that we have stock of the correct item, but it is out of date. Stock may have been incorrectly rotated, or perhaps the items we have do not meet the specific shelf life requirements of our customer. Finally, it could be that we are simply unable to handle the required volume of work. Even though we have the right stock and it is in the right place, our productivity levels are not good enough to ship the stock out in the required timescale. All of these examples potentially create a ‘warehouse crunch’, where the right items do not leave at the correct time.
I have a book by Richard Koch entitled ‘The 80/20 Principle’ which has the strapline ‘the secret of getting more out of less’. This may be what many of you are experiencing with your warehouses: a continuing demand to get more out of less. Inevitably in these difficult and uncertain times there will be an ongoing drive to process the required volumes through your warehouse with less staff, and less space. In these circumstances there are two things you could do. Firstly read the book, which will help you assess where your priorities should lie, and secondly consider how your warehouse processes could be made more efficient and effective. Improved systems have been shown to help alleviate some of the ‘warehouse crunch’ constraints highlighted earlier – those factors that impact the smooth flow of goods from your warehouse. An easy method for locating stock, minimising items in the wrong place, better processes for receipting and putaway, proper rotation, and improved efficiency and accuracy are all benefits that have been shown to result from the use of a fully featured warehouse system.
I know the immediate response to a ‘credit crunch’ is to stop spending, but in the case of improved systems that could be false economy. A new, or better system should cost justify itself, and you may well find that the additional cost is more than offset by the ‘warehouse crunch’ savings. At Proteus Software we have also introduced a number of initiatives that will allow you to spread the cost of the system across its lifespan, so that the timing of the costs is more closely aligned with the benefits. These options, including SaaS where the costs of the system are linked to the volume of transactions processed through the system, are welcome facilities to help reduce the initial costs.
A powerful system will help clear the blockages in your warehouse so as to allow the smooth flow of product in and out, and help ensure that your business beats the ‘warehouse crunch’.
Howard Turvey
January 2009
Document > Warehouse Crunch.pdf |
