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•building and site;
•equipment and other resources;
•maintenance;
•pallets and pallet repair;
•packing materials and other consumables;
•services including any bought-in services.
It may be helpful to isolate the costs of specific operations such as order picking or packing, and monitor these as a proportion of total warehouse costs. It may also be useful to express some of these measures as ratios such as the cost per unit of throughput, the cost per pallet stored or the cost per item picked.
Resource utilization is concerned with how effectively the warehouse facilities are being used. It can include utilization of storage facilities - percentage fill - and also the utilization and availability of handling equipment, and how much availability is lost through maintenance and breakdown. However, it should be noted that the measure of high resource utilization may be in conflict with the provision of capacity to handle infrequent peak volumes. For example, if stacker cranes in an AS/RS are normally fully utilized then it would not be possible to handle a sudden increase in throughput.
Safety and the effective use of staff include performance and productivity monitoring such as pick and pack rates and order fulfillment rates. It is also concerned with the monitoring of overtime and absence, the provision of necessary skills and safety training, safe working practices and environment, safety audits and hazard monitoring. In this context, risk assessment is a legal requirement in many countries – to examine the total operation and identify potential hazards, and to assess the likelihood of accidents and identify action to eliminate risk.
Stock integrity is concerned with the condition and security of inventory, including minimizing loss, damage and deterioration. Relevant factors can include the control of stock rotation on the basis of first in first out (FIFO), and the meeting of 'sell by' dates and shelf-life constraints. An important control parameter is the measurement of stock turn, which indicates the rate at which goods move through the system in relation to the average inventory level. For any stock line, stock turn is: 1) annual throughput and 2) average inventory level. For example, if a product sells 1,000 units per year and the average inventory level is 100 units, the stock turn will be 10, i.e. on average the stock is 'turned over' 10 times per year. This figure is
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also often represented as the number of weeks of inventory held in the warehouse (ie a stock turn of 10 equals 52/10 or 5.2 weeks of inventory in the warehouse).
It is particularly important to monitor the operational parameters that define the context in which the warehouse is operating. These parameters may have a significant impact on the performance indicators mentioned above. For example, a change in the size of order may result in a much greater workload for a warehouse (at the same throughput) and thus may account for an apparent reduction in performance. For this reason, great care must be taken when benchmarking across different warehouses, as performance measures are only comparable within the same operational context (and this may vary significantly within the same industry and even within the same company).
These operational parameters include:
•throughput;
•number of SKUs;
•unit load characteristics;
•product characteristics (e.g. size and ease of handling);
•lines per order;
•units per order line;
•added value requirements.
Meeting legal requirements and local regulations particularly apply to working environment and safety. There is a wide range of legislation that impacts on warehouse operations, including for example health and safety, manual handling, lift equipment and working hours. In addition, there are often regulations relating to the goods themselves, such as food and hazardous goods regulations. It should also be remembered that there are codes of practice giving guidance on a wide range of warehouse operational issues, for example racking guidelines issued by such bodies as the Storage Equipment Manufacturers Association (SEMA) in the UK, and the Federation Europeenne de la Manutention (FEM) in Europe. An increasing aspect of safety regulations is the requirement for formal risk assessments to be carried out within organizations to identify potential hazards and motivate preventative measures.
The use of computer-based information technology is now the norm in most warehouses, and is essential for the management of large facilities. Even in conventional warehouses, for example with reach trucks and ground-level picking,
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significant advantages can be achieved in terms of productivity, speed and accuracy with the benefit of a good warehouse management system (WMS).
The WMS normally interfaces with the company's main transaction system (such as an ERP or legacy system) to access information such as purchase orders and to download customer orders. In turn, the WMS will feed back information such as goods received and dispatched. The WMS is used to control all the operations in the warehouse and issues instructions to subsidiary systems, for example equipment control systems. Thus, a WMS will issue an instruction to an AS/RS control system for a crane to move a specific pallet from a pick-up and deposit station at the end of the aisle to a particular location in the racking. The equipment control system will then direct the crane and provide feedback and diagnostics if the crane cannot fulfill this operation (e.g. owing to mechanical failure).
The major WMS packages are very complex and have a wide range of functionality that may be turned on or off for particular applications. For example, in electronics, batch traceability of components in kitting operations may be significant, whereas in food manufacturing the control of sell-by dates may be important. By having common software across industries, it is easier to apply upgrades to the software.
However, it is also common for companies to develop bespoke software to meet their particular requirements. WMS functionality covers all the activities of the warehouse, as shown in the examples below:
•receiving: yard planning, checking against electronic advance shipping notices (ASNs), checking for dimensions and weights, quality sampling;
•put-away: algorithms to determine the best storage location, support for all feasible storage types (e.g. block stacking, double deep);
•replenishment: fixed trigger point or order-based replenishment to pick locations;
•picking: pick route optimization, slotting (i.e. optimum location of each SKU in pick face), wave management;
•added value services: kitting, labelling, final assembly (requiring bills of materials);
•packing: identification of correct carton size (by database of dimensions for all SKUs);
•cross-docking: planning, labelling and sortation;
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•sortation: by various categories, such as by order, vehicle or geographical area;
•dispatch: marshalling lane control, documentation, transmission of ASNs;
•management: workload planning, performance measurement, productivity schemes, modelling (eg for new product ranges or new racks), billing, pallet management, customs reporting;
•stock counting: full count and perpetual inventory.
An increasingly important benefit of such systems is the ability to track individual goods and batches as they progress through a system, to provide quick and accurate information on progress and also to enable quality back-checks in the event of quality failures.
An integral part of exploiting the benefits of computer management packages is the data capture and communication systems to which they are linked. Data capture and transfer can be accomplished by a number of techniques.
The most widely used technique in warehousing is bar-coding, which represents numbers and letters in printed bar form and is machine-readable by appropriate scanning equipment. It is a fast and accurate technology, and fairly robust. There are various different bar-code types or 'symbologies'. In warehousing, bar-coding is used to identify goods and verify stock locations. It allows goods to be sorted and routed through a handling system, and enables them to be tracked as they move through the system. It simplifies stock checking and many other data input and capture requirements. Bar-code labels are cheap, although they can be damaged by scuffing, and the technology is established, reliable and fast. Normal bar codes can only provide a few digits of data, such as a product code or a pallet identification code.
There are two-dimensional bar codes available and, as the name suggests, these are scanned in two directions simultaneously. These can hold hundreds of numbers or characters, but their use is not widespread, as special scanners are required at each stage in the supply chain and common standards are not fully established.
They are, however, used in 'closed-loop' situations.
Optical character recognition (OCR) technology uses labels that are both machineand human-readable. It is appropriate in applications such as document handling and interrogation, and text scanning.
Radio frequency identification (RFID) is being applied increasingly in supply chains for the tracking of unit loads (such as roll-cage pallets and tote bins), for
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carton identification (e.g. in trials by food retailers and by parcel carriers) and for security and other purposes at item level (e.g. for high-value goods). As the name suggests, RFID is basically the identification of items by means of radio waves.
There are normally four components of such a system:
•a tag, which is affixed to the goods or container - this normally comprises a microchip and an antenna and may, or may not, contain a battery (depending on whether it is an 'active' or a 'passive' tag);
•an antenna, which receives the data from the tag (and may also emit to it);
•a reader, which reads the data received by the antenna;
•a host station, which contains the application software and relays the data to the server or middleware.
Active tags tend to be used for high-value units (e.g. for tracking car chassis in assembly plants or ISO containers). However, the greatest current interest in commercial supply chains is in passive tags. These tags rely on incoming signals to provide power and are thus limited in range to between about 1 and 4 metres. This is because they need very strong signals to provide the power and because the power they can emit is very weak. The reader and tag therefore have to be in close proximity. The real interest is in their low and falling costs, which mean that it is becoming increasingly cost-effective to place these tags on pallets or cases or even to integrate them into individual products. However, there are still issues to be fully overcome in such areas as standards, technical feasibility, operational robustness, financial business cases and, in some instances, civil liberties.
A technique of communication commonly found in warehouse information applications is the use of radio data communication. This is usually linked into the warehouse management computer system and provides radio communication between the computer and any required workstation, which can be static or mobile. For example, fork-lift trucks may be fitted with remote radio data terminals and sometimes also with a label printer mounted with the terminal. The operator is online to the computer, takes instructions from the computer, confirms work carried out and interrogates the computer for further information if required. Radio data terminals may also be hand-held or wrist-mounted, and are often fitted with barcode scanners. In the case of wrist-mounted terminals, the scanners may be located on a ring on a finger, thus keeping both hands free for picking.