Warehouse Optimization: Where Do You Start?

When it comes to warehouse optimization efforts, starting with a clear understanding of strategic priorities can help create a highly focused improvement plan that leans toward meaningful results.

A frequent shortcoming of many business improvement programs is the failure to align activity with the organization’s financial goals and strategic direction. Warehouse optimization efforts are no different. Warehouse managers may make changes to picking and packing processes and re-align storage locations based on SKU velocity, which achieves some measurable results.

But the financial impact on the company’s financial statements is difficult or impossible to calculate and, therefore, fails to attract much interest or support from senior executives. The company-wide solution to fixing this lack of alignment is strategy deployment (also known as hoshin kanri or policy deployment), which we’ve written about often. (For case studies and other resources type “strategy deployment” into the TBM Blog search box.)

One powerful approach to aligning strategic objectives with warehouse optimization efforts is strategy deployment. This method takes strategic objectives and cascades them down into the organization as annual goals, projects, and individual manager responsibilities. It then establishes a robust monitoring mechanism for tracking progress and taking countermeasures when anything veers off track. While it may take several years for a management team to learn and apply successfully, it empowers you to create a highly focused and aligned plan that addresses clear strategic priorities when identifying improvement priorities.

For example, in this case study about WIKA Instrument Corporation, a manufacturer of pressure gauges and other instruments, the company’s distribution department had a clear strategic directive. They needed to prepare for a projected 25% increase in sales volume. WIKA managers wanted the department to leverage lean methods to be able to accommodate that growth without hiring any more people or adding any floorspace.

To achieve that objective, rather than jump right into an inventory reduction project or something similar, they started with a strategic visioning session. During this session the team identified the projects and a sequence of mutually reinforcing kaizen events that would enable them to achieve their goals based on a cumulative estimate of the results. Those estimates were fairly conservative. Less than one year into plan they had achieved more than half of the three-year improvement targets.