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Operational Excellence: Streamlining the Warehouse layout Process

Posted by Jason Minghini on Mar 14, 2016 8:30:00 AM

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Precise historical operational data, good communications, and understanding inventory flow are key to minimizing costly design errors.

Companies moving into new warehouse space need to take an honest assessment of their current and expected business to maximize their operations. While that may seem obvious, there are potential pitfalls along the way that can create less than desirable conditions, decrease efficiency, and possibly endanger the safety of warehouse workers.

A new warehouse is like a blank canvas with its size just one aspect to consider. Structural considerations such as the number and location of loading docks and the variety of vehicles needing to access the building are all important logistical aspects of the warehouse, but designing the layout inside the warehouse requires a much deeper understanding.

Companies and the warehouse design team must:

  • Closely examine the company’s historical operational data
  • Have good communication processes to ensure everyone is on the same page
  • Understand how the inventory moves

Define your company's “behavior”

The first step in the process is to dig into the data on your current operations to determine the “behavior” of your inventory. The objective is to discover as much detail as possible about the volume of goods and how it moves around the warehouse, so the design minimizes travel and touches as well as maximizes the use of the space.

This includes characteristics like:

  • The volume of inventory on pallets vs. cartons
  • The overall volume — is it relatively consistent or are there significant fluctuations?
  • Are pallets mixed?
  • Is picking done by pallet, carton, or piece — or all three?
  • Are pick lines needed?
  • Can inventory be racked? Does it require special racking?
  • Is special handling required (e.g. refrigeration or hazardous material)?
  • The 80/20 rule: which 20 percent of the SKUs account for 80 percent of the volume?

The answers to all these questions and more lie in your current operating data and inventory profile analysis. If you can provide your warehouse design team with a year’s worth of data, chances are good you can avoid many layout pitfalls, and achieve a lean warehouse layout. Unfortunately, most companies do not deal with their own day-to-day warehouse operations, consequently they do not have a firm grasp on all the details necessary to design an efficient warehouse layout.

Allowing your warehouse team to visit an existing warehouse operation similar to the one being designed can also shed light on the operational requirements of the new space. While it might not be identical, there is still much to be gleaned from observing the flow of inventory in a real-life setting.

From good data and observation, the warehouse design team can create a set of assumptions about how the new warehouse will operate, which drives the layout of the space. One thing you can never assume is that you are all using the same terms when describing warehouse operations.

Are you speaking the same language?

It is very common for miscommunications to occur in any situation because people may use the same terms, but could have entirely different definitions for those terms. Assuming you are speaking the same language can lead to costly mistakes in warehouse design.

In one real-life example of miscommunication, a customer said all the inventory was handled in cases, so the warehouse was designed around moving and storing nothing but cases. When the customer finally visited the completed warehouse, they asked “Where is the pick line?” It turned out inside the cases of goods were blister packs — which the customer referred to as “cases.” So the warehouse designer heard cases as in “boxes” while the customer was calling the individual blister packs “cases.”

In another example, a customer described their inventory as 95 percent pallets in and 95 percent pallets out. In the customer’s mind a “pallet” was what the warehouse team referred to as a “case” so the teams were at cross purposes and the design had to be modified after the fact.

Mistakes are common because people communicate from their own perspectives and experiences, and it is very easy for two groups of people to use the same terms for different objects or actions. But when designing a warehouse layout out, miscommunications can lead to expensive changes and delays.

Avoiding miscommunications requires a process that removes assumptions from the process.

Once the company’s “behavior” is well defined, the warehouse design team creates the layout of the entire warehouse operation — from docks to storage to picking and back out the door. When the layout is completed, everyone needs to come together and walk through every aspect of warehouse operations in detail — the layout, equipment, people, and processes. It is critical here to shake off the assumptions of the past, listen to each other, and confirm you’re all on the same page, because it is much less expensive to catch miscommunications here than after the warehouse has been built out.

Know how your inventory moves

After you have defined the inventory and confirmed the design meets the assumptions of the warehouse, it is time to confirm exactly how the inventory is going to flow through the warehouse. This means defining precisely what happens at each area in the warehouse where goods are handled:

  • Inbound staging area
  • Storage
  • Outbound staging
  • The order processing area, if goods are picked and packed

This is another area where everyone needs to cast aside their assumptions and ensure that the agreed upon flow is actually how the company works.

In another real-life example, a warehouse facility was designed based upon a standard outbound staging area where goods are staged and moved out the same day. What the company didn’t share was that their behavior was to postpone orders after they were picked to consolidate shipments with carriers. The result was goods clogged up the outbound staging area because there was no room designed for temporary holding.

Again, never assume everyone is on the same page. The key is to communicate and confirm every step along the way.

Getting it right

Efficient warehouse operations are critical to the health and competitiveness of companies, so following a rigorous facility layout process — comprehensive assessment of inventory type and behavior, clearly communicating needs, and knowing how goods flow through the warehouse — is crucial in getting a new facility up and running so goods move at peak efficiency and operational excellence is achieved.

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Jason Minghini

Written by Jason Minghini

Vice President, Best Practices at Kenco Group