Driving Warehouse Productivity, the Kaizen Way

Date: October 15, 2020


Kaizen is a Japanese term that literally translates to “continuous improvement.” Any type of organizational process can benefit from the Kaizen approach which looks at standardized and systemized processes in a phased manner. By doing so, it identifies processes that need improvement and their implications, planning improvement steps, executing improvements, and finally reviewing their progress.

During peak season, many third-party logistics (3PL) warehouses have to look critically at their businesses and make lean performance improvements. With volumes significantly exceeding prior years, warehouses need to measure and act on key performance indicators (KPIs) to identify areas to drive efficiency. This can seem daunting for some, but establishing key base line indicators allows you to identify low hanging fruit to optimize in your business.

Identify the KPIs that you can track

Part of the Kaizen process is to work through a phased approach. Any Google search can tell a warehouse to start tracking warehouse productivity by user, track volume movement in the warehouse, or even look at the profit and loss (P&L) for any section of the warehouse. The common issue with these metrics is that they are not always tangible or easy to measure without a robust business intelligence tool or without a warehouse management system (WMS) in place. For warehouses that do not have tools setup to automatically track and measure more complex metrics, standard KPI tracking can be more insightful than you may think. Here are some examples.

 

KPI

Formula

Potential Bottlenecks

Tips to Improve

On-Time Shipping Rate

 

Total # of Units on time /Total Number of Units Shipped

Inefficient Pick processes or Pick and Pack practices with too many labor redundancies

Implement a Batch pick process


Process orders, generate shipping labels, and rate shop within one application

Pick Speed Pick Complete (Time Stamp) - Pick Start (Time stamp)

Paper based process

Warehouse layout/pick line route inefficiencies

Setup Pick bins with unique items

Implement Pick to Bin processes to pick more with each warehouse pass

Order Accuracy 100 - (total mispicks/ total orders) No barcode scanning

Implement mobile scanning, like SmartScan, to automate accuracy checks

Implement pack stations to scan verify items through pack out

Receiving Efficiency Time between inventory receipt & Inventory available for orders

No systemized put away process

Improper utilization of Space/layout best practices

Implement Dock-to-Stock process utilizing a put away/ or automatic location suggestion
Return Rate (Units returned / Units Sold) * 100 Pack accuracy
Damaged inventory

Implement QA on inbound and at pack stations, depending on commodity

Implement Hold/Quarantine locations in the warehouse for damaged inventory management

Align with your customers on return policies

 

The Amazon Effect has further raised expectations of on time delivery, seamless return processing, and service quality. Recognizing the 5-10 key metrics to measure will drive business focus and help clearly find the areas with the biggest opportunities for improvement. In our industry today, most efficiencies are gained from insights and automation, so reviewing outdated or paper-based processes and considering smart investments in scalable technology can prove meaningful for growth-minded warehouse businesses.

The best part about the Kaizen approach is that it continues beyond your initial improvements. As a business’s needs grow, there are new areas for improvement and new solutions that need to be identified. Sometimes coming up with the solutions can be daunting, but thought leaders in your networks, as well as your WMS and technology partners can serve as advocates for you by sharing best practices and helping your business succeed.

To learn more about key KPIs to track during Peak Season, join the upcoming webinar. Or click here to speak to an expert.


Alnoor Bhamani

Written by Alnoor Bhamani

Alnoor is a Sales Engineering Manager at 3PL Central, who works with 3PL warehouses all around the country to help them find software and solutions to fit their individual needs. He believes there's no single 'one size fits all' to warehouse management, and works to understand their business while also providing best practice insights from the successful 3PLs he's worked with in his career.