Some warehouses perform excellently with 99 percent plus perfect deliveries, motivated staff, and they seem to effortlessly move with market changes. These warehouses maintain close collaborations with other links in the chain. Managers play important strategic roles within their companies and are seen as equals with managers from commercial, finance, production, and purchasing.

Other warehouses are a stark contrast. Their performance is mediocre and unreliable. Employees are poorly motivated. Aisles look messy. Managers are completely absorbed in their daily routine. Unexpected events, last-minute customer requests, delays — work seems like an endless succession of fires that need to be put out. How do you escape that daily firefighting routine? And if you succeed, how do you transform your distribution center to top level?

As a consultant, I have the privilege of looking around in many warehouses. Often I see things I recognize from other well-performing warehouses. On the other hand, I also regularly encounter deviating practices. That could be an ingenious solution, but usually it’s just not practical and there are better alternatives. These better alternatives, or best practices, I’ve collected in my book Highly Competitive Warehouse Management. Examples include performance measurement, a flexibly adjustable WMS, and balancing peaks and valleys in the chain. The book shows how to improve a warehouse step by step to top level.

Three pitfalls

The best practices have proven themselves in practice. By implementing them, you can optimize your warehouse. But beware, it’s not wise to start randomly. In practice, we see three pitfalls:

1. Getting stuck in firefighting
2. Implementing new technology before processes are right
3. Deploying chain initiatives from a subordinate position

Ironically, as a manager you’re often so busy solving daily problems that you have no time to solve problems. So you keep wandering in a vicious circle. Desperate, you then try to tackle operational problems with a new WMS. However, if the software has to control outdated processes, it becomes a difficult implementation that yields hardly any benefits. So it’s smart to first streamline processes — eliminate, combine, improve — everything needed to clean up the mess created by years of neglect. The motto is: First organize, then automate.

Moreover, a warehouse often plays a subordinate role within a company and you’re at the mercy of other departments. This causes enormous disruptions that make your firefighter heart beat faster. Fortunately, you just decided not to fall into the first pitfall. Instead, you go searching together with colleagues from other departments for what’s best for the whole company. However, that’s difficult if the distribution center is in the underdog position. It’s important to first build a strong warehouse operation, so you’re ready to operate as an equal partner in the value chain.

Action plan

You can avoid the pitfalls and make your warehouse a top warehouse by implementing the best practices according to this action plan:

1. Create transparency for continuous process improvement
2. Introduce intelligent IT on streamlined processes
3. Claim an equal role in the chain

First, top warehouses ensure they’re not constantly caught off guard by problems, but see them coming in time. This in contrast to many other warehouses, where managers at best have a rough picture of performance, costs, bottlenecks, and service levels, but nothing is formally recorded.

Proven management tools such as service level agreements, process descriptions, activity-based costing, and performance indicators provide transparency in top warehouses. Managers and employees have more insight into operations — measuring is knowing — enabling them to make better choices. Moreover, it motivates them to deliver good performance and pursue objectives.

Second, top warehouses have well-functioning IT systems with extensive features. Many other warehouses struggle with IT. Often you see them trying to implement advanced IT systems before processes are right. This is tempting since managers hope that new systems will solve their operational problems. Usually the opposite is true.

Top warehouses leverage created transparency to first streamline their processes before introducing all kinds of intelligent IT. Moreover, they start with simple IT systems that they use to get their processes in order.

Third, top warehouses have an equal position in the supply chain. Many other warehouses, by contrast, are in a subordinate role and are playthings of Purchasing, Production, and Sales departments.

Top warehouses use their transparency and intelligent IT to make the warehouse a strong link in the chain, both within and outside the company. The warehouse delivers excellent services and can clearly indicate what the effects are of intended chain initiatives. The warehouse is an equal conversation partner and weighs individual interests against chain interests together with other departments.

Maturity scan

Before you get started, it’s interesting to know how mature your warehouse already is. The online Warehouse Maturity Scan determines the maturity of your warehouse or distribution center by measuring the extent to which you apply best practices in transparency, IT, and chain collaboration.

To avoid spoilers, I suggest you first fill in the scan yourself for your own warehouse and then read part 2 of this two-part series.

About the author
Jeroen van den Berg is the author of Highly Competitive Warehouse Management and holds a PhD in warehouse algorithms from the University of Twente. He has been advising companies on warehouse optimization and WMS since 1997, running his own consultancy since 2001. He develops Metrica, a Warehouse Optimization System.