If you do nothing else, please re-arrange your DC by ABC analysis

 

Are you ready for a "DO IT YOURSELF" small slotting exercise ?

if you have seen this "Do it yourself exercise" and ready to graduate to the next level, please click  Slot.. But  Verify .. with Penalty costs 


We will explain below, how a simple ABC analysis can get you going? Sure, we need to look at many factors like family groups, case weight and dimensions, pallet hi and ti etc.

If we ask you to make a total review of your current layout and a full wall-to-wall re-slotting, that is a non-starter. You will spend considerable amount of time and money and it will remain as a paper-plan.

In many cases, you and your staff already know, how to improve your slotting. But you are 'locked-in'. All current slots are full. About 40% of the items are in the wrong slots. You have utilized every inch (cubic-inch) with products. If you have an aisle bigger than 10'-6", then you have started placing products in the aisle.

And in this situation, we are offering a 'Do it yourself" exercise.  Yes. Click on Section 6 in the Table above.

Use the Table of Contents above to jump to a particular section.
Use the 'Back Space" key to return to the Table of Contents.





ABC Analysis - Why and How?


A quick quiz for you, before you read this article.


Using your present Warehouse information, find out the TOP 3 items (Sku's) by sales units or movement units.

Note down their present Slot Number locations [If you don't have it, ask your senior most Forklift operator]

Leave your office, walk over to those 3 slot numbers, to locate the TOP 3 items.

If the 3 items are already located somewhere close to the shipping dock (or a packaging section), pat yourself.  You are in good shape.

On the other hand, if they are located, way in the back of the warehouse, either you can read the following article or reach us for help.



What is ABC?


Everyone reading this article already knows the ABC concept as the 80-20 principle.  That -about 80% of the total sales or product movement comes from just 20% of the items. Instead of using the word 'items', let me use the word "sku's".





As an example, the Item may be 'Tomato Soup". But it may have different sizes, type of container (glass, tin etc), constituting many SKU's. Of that list of SKU's, only some will be popular. Hence the word SKU is more appropriate here.

ABC analysis is a business term used to define an inventory categorization technique often used in materials management. It is also known as Selective Inventory Control.

ABC analysis provides a mechanism for identifying items that will have a significant impact on overall inventory cost, while also providing a mechanism for identifying different categories of stock that will require different management and controls.


ABC codes

  1. "A class" inventory will typically contain items that account for 80% of total movement, or 20% of total items.
  2. "B class" inventory will have around 15% of total movement, or 30% of total items.
  3. "C class" inventory will account for the remaining 5%, or 50% of total items.



ABC analysis based on what criteria?
  • Based on Sales $ -  Wrong method
  • Based on unit movement from the warehouse. Unit may be cases, individual tin cans etc - Correct method
  • Based on anything else - Wrong


Some graphical samples of bad slotting.



 
  

The graphic shows how the products are slotted in a real warehouse.

There are 23 aisles, long aisles. You will notice 2 cross tunnels.

We have used a 3 color code scheme to show the ABC items.

A - Red color               B- Blue color          C - Yellow color

Notice how the RED (A items) are slotted everywhere in all the aisle. And you have both B -Blue and C - Yellow items are also slotted everywhere.


Don't be surprised if your own facility resembles this example to some extent.
 
  

 In this second example, we have fewer aisles.  Same color codes.

 Notice, how the "A" items in RED color are all over the place, The shipping dock is on the South side of the picture.  Many premium slots close to the dock are taken by slow moving "C" items. And those C items are not likely to go anywhere soon.





          How this happens ?  From a good slotting to bad slotting


           Unless you have system to monitor the slotting on a regular basis and make the necessary slot-moves, every warehouse slotting will deteriorate over time.

Such steady deterioration happens due to many, many reasons. We will try to list a few TOP reasons.

           NEW ITEMS


           When we introduce a new item, we have no clue how it will sell. In many product sectors, the New items need to be stocked in the warehouse, delivered to retail stores and stocked on time to support national TV ads or local circulars. Only after few weeks, we will know, if this new item is a winner or a loser. A study done in the Food and Consumer Goods area, indicated that less than 15% of the new items are real winners. So, what happens to the other 85%.  They basically clog the supply chain system and increase the operating costs.

          Back in the warehouse, these 85% of the new items, have taken up available slots and will not budge.


          Theoretical versus practical storage capacity.


          If you add up all the slots (or add up all the cases or pallet storage) capacity, you will arrive at the theoretical capacity. Say, this is 10,000 pallets.

          By the time, you reach about 70% to 85%, you will discover that empty slots may be available. But these empty slots are of the wrong size and also located in the wrong aisles.

          Plus, the time difference between the order picking process (which removes cases, pallets) and the receiving process (which adds pallets, cases).  For instance, you may have just received a truck-load of merchandise and accepted in your system. But you may not have any place to put it. The merchandise is physically in the building. But it is not yet available for release. It is not recorded in your computer inventory system.  Some companies, at this stage, will try to work around the computer system. They will 'advance' the products and release it for picking. Have you ever seen negative on-hand quantities in your computer inventory system. Now you know, one of the causes.

          Once you reach 85% of the capacity, you have reached your realistic capacity. From now on, the warehouse slotting gets worse everyday.



         "Quick stick"


          We have coined this term - "Quick Stick". Imagine, that you are the forklift driver. You are taking 2 pallets of Tomato Soup from the receiving dock to put away the 2 pallets. The warehouse is quite full. Say your actual usage of the facility is somewhere between 85% to 100%.  You are looking for a empty slot to put away the 2 pallets of Tomato Soup. There are NO empty slots in the Soup section. After 5 minutes of searching for empty slots, I am sure that you will give up and put the 2 soup pallets anywhere, there are 2 empty slots.

          Can I fault the Forklift driver for this? No.

          Now imagine, over the next few days, some 10 forklift drivers are forced to do what you did. Once this continues for few days, few weeks, you have almost 50% of the items slotted in the 'Wrong" slots.

          You know how to slot the Tomato Soup pallet in the 'right slot". But you could not.

           We call this process as "Quick Stick".

 

            Instead of ABC, think of TABCD


          In the A category of products, it may be useful to highlight the TOP 20 or Top 40 items.  These TOP 40 items, will be in the facility for a very short period. Provide them a nice large slot, as close to the dock as possible.  They will take care of themselves.

          Category D is affectionately called "Dogs' in our business.  These are items that we have some small stock but they have NOT moved at all in 6 months. The only justification for not moving in 6 months, could be that they are seasonal items. And if they are not seasonal items, you must brand them as DOGS.

          Dogs may be created, when your Ordering system has replaced this Dog item with a newer brand or a factory package and you have not been informed. If this item does not exist in the Order, how can anyone order this item.



Do it yourself slotting


Week 1 assignments - "Getting ready"

   
mostly observations
    discussions with Forklift drivers on the inbound put-away  AND  order pickers
    Often receivin
g and put-away takes place during the day shift
    Order picking takes place in the evening or night
    Write down your observations.
    Carry a Digital Camera and take some pictures to show as evidence to others.  You will need this later.


Week 2 assignments - "Making 3 sets of moves"

     We are going to work with limited number of sku's as a pilot.
     We are going to work with  20 number of C items and also the 20 items of the A items.
     Select a number that you feel practical.

      Please FOLLOW the 4 graphics shown below for the sequence of slot moves.
    
 
 Step 1. Using your inventory / slot database, study the present slotting. Identify 20 SLOW items slotted near the dock. Identify 20 FAST items stuck in slots in the rear of the warehouse.
 
    Step 2. Identify 20 D "dead" or "Dog" items. These are items that have NOT moved (sold) in 3 to 6 months. These could also be items dropped from the ORDER system. Move such D items to the 4th or 5th level of the racks in the rear of the layout. IMMEDIATELY put 'yellow ribbon' on the created EMPTY slots. Like the Police use
 
 Step 3: Move the 20 selected C items close to the DOCK area. Move them to the Empty slots now created by moving the D items.
IMMEDIATELY put 'yellow ribbon' on the created EMPTY slots. Like the Police use.
 
   Step 4.  Move the selected 20 FAST items from the rear of the layout to the Empty slots created by moving the C items in the Step 3.

     These forklift moves can be done on a Wednesday - traditionally slow day.
     We are done with the assignment for Week 2

    
Week 3 assignments - "Impact on picking"

     
Try to measure the impact.
     To make it simple and easy to implement, we asked you not to install any tracking system.
     Have a meeting with the same list of Forklift drivers and Order picking staff and get their feedback.
     In case, you have ANY form of labor productivity system, (starting with Cases per hour), you will see a noticeable difference.

Week 4 summary

     
Write a short summary of your work, how you did it, problems, benefits etc
      Share this write up with this LinkedIn group

Congratulations, you have just improved the productivity of your DC!

Imagine, if you can do this every week, automatically.





Contact::     Karma Logistics Inc  Minnesota     


Please send your comments, questions to   ram.krishnan@karma-logistics-inc.com 


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