Prioritizing Warehouse Improvement Projects

If you’ve been around “continuous improvement” you know that there are always warehouse improvement projects. Most of the time, they’re not hard to find. Projects are often “low-hanging fruit” where processes are obviously in need of help. But with all that opportunity, while it may not be hard to identify what to do, it may be difficult to decide when to do it or in what order.

Completing a big project, but one that addresses the wrong opportunity, wastes time and resources. Think of implementing a gantry picker for 5-10 picks per day. Completing a small project for the right opportunity, like implementing a receiving-to-putaway supermarket, can be much less costly but have many more benefits.

Doing the wrong projects kills morale and wastes time.

So it is critical to assess the whole opportunity landscape and pick the right ones, in the right order, for improvement projects.

This post will help you understand and clarify priorities of improvement for your warehouse operations.

Understand the Current State

First you need to thoroughly understand what is going on now at the site. This will help direct your attention to the biggest opportunities.

You should gain a thorough understanding of your operation’s current state. A good tool for this survey is value stream mapping to gain understanding of the processes, inputs, and throughput bottlenecks happening. Value stream mapping provides a survey of the entire process and can help identify bottlenecks caused by production or quality issues. This should direct your attention to a few immediate candidates for the most impact.

But value-stream mapping is not the whole story.

Getting a thorough understanding means using both performance metrics and data diagnostics as well as doing detailed investigation into the processes occurring on the floor.

For example, your value-stream map may show that picking is the bottlenck. Then your review of picking reporting shows that efficiency is trending down. This would indicate that a deep dive on picking is needed. Then you could discover that the slotting hasn’t been refreshed since the warehouse started up. Then it would be worth actually picking for an hour with associates, where you could learn that the system pick-path is configured incorrectly or that high velocity items are crowded together, leading to inefficiencies.

Each of those discoveries is a relatively quick project to implement which can be added to your list.

Quantify the Opportunity

You want to get the most bang-for-the-buck. And you want to understand what level of cost makes a project worthwhile. But you have to do it in the context of payback, of what improves overall first-pass-yield and facility throughput.

So for each opportunity, quantify the current cost to the business. If facility throughput is a bottleneck, what is that costing annually? What is each process’s defect rate costing in rework time and lost sales/orders?

While a particular project might improve production, it’s essential to understand what the whole-facility bottlenecks are in both quality and production. Improving production from a process with poor quality might be self-defeating, as the rework stacks up and prevents shipping. It would be better in that case to improve quality first and then production.

You may find that increasing throughput is not actually the highest financial or business impact. Perhaps lowering defect rates will improve flow in the facility even more than improving picking production. So it is important to write down the net impact to the business of each opportunity.

For each of the opportunities, quantify the cost to the business per unit time (for example per month or year).

Quantify the Solution

After quantifying the project’s business impacts, quantify the total cost of the solution. For some solutions this might mean a large cost of automation. For others, new software might include manager time for analysis and a contract for development and testing. For other projects you might have only the cost of supervisor time to lay some tape and train associates on the new drop-zone. There may be multiple approaches or workstreams to support each opportunity.

It’s also helpful to input when a solution would be able to be achieved. An expensive solution probably takes a long time to implement. The cost of the ongoing opportunity in the meantime should be added to solution costs to understand the total cost of implementation.

Decision Time

At the end of quantifying the solution, you should be able to compare the business costs of the opportunities to the solution costs. Then you can review which one pays off over what time period, which one fits the business philosophy and strategy, and make a decision.

Helpful hint: When reviewing the project lists, it’s best to prioritize them in order from 1 to N. Sometimes teams are tempted to prioritize project lists with a High-Medium-Low hierarchy. This is helpful for a first-pass take but will create later confusion about which resources should be dedicated to which projects. A clear hierarchy will help the team understand and prioritize together what to do.

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