Managing Third Party Logistics - Fulfillment/Distribution- Centers (3PL)


Searchtec Consulting Group

Managing Third Party Logistics - Fulfillment/Distribution- Centers (3PL)

Managing 3PL Centers and its operations are significant to managing supply chain. In consideration, it is critical that the design of a given facility supports a company’s go-to-market strategies. When designing a new or updating the facility, there are several considerations that you may be opting to reflect regarding operational performance along with company’s objectives.

For consideration, here are suggested recommendations for efficient facility.

1. Just the facts

Understanding the key metrics of day-to-day operations will allow you to maximize space and productivity, and manage costs. Gather every fact you can before you start the plan. There are more facts, but here are some examples:

  • Number of unique SKUs

  • SKUs: rack versus floor stack?

  • How items are picked (% full pallet, % case, % each)?

  • Will two-way travel be required in the aisles?

2. Room to breathe

To fully-maximize storage space, understand how honey-combing affects the available space. Here are some suggested tips:

  • For SKUs with multiple locations, pick one all the way to empty rather than having multiple partially full locations

  • Assume that only 85 percent of each location will likely be consumed at all times

  • Keep 15 percent of bulk locations available for inbound put away

If too much capacity is occupied, it won’t be possible to optimize the put-away and zoning. In other words, don't plan for 100% space utilization.

3. Waste not, want not

For simply changing the vertical rack configuration and removing unused space above and below SKUs, you can gain an extra useable space. Other ways to minimize empty space include:

  • Accurate SKU dimensions. How high can they stack? How deep will they go?

  • SKU velocity. Which are high volume runners? Which will be stored in small amounts with very fast turns? Which will need just one pallet?

  • Lot codes and/or strict FIFO rules.

  • Suggestion: Develop a metric for units stored per square foot of space. Then, if the current ratio is 2.1 cases per square foot, challenge your warehouse coworkers to increase the ratio to 2.3 within the next six months. Have someone assigned to watch this KPI and to investigate if the ratio slips lower.

4. People not computers make the difference

Assign the right people in the right places. Remember that space utilization does not end with planning. It’s people who, once properly trained, carry out procedures. Your staffs know well that good space planning starts at the dock as products are received and needs to be managed throughout the process. As you create the management plan, ask:

  • Is the WMS programmed to properly direct tasks to sustain the plan?

  • Who makes the decision about where a product will be stored? (If you leave that decision to the lift driver he might make the best time saving decision and not the best space saving decision.)

  • Who is the space planner?

  • Is the planner aware of what inbound loads are expected? (Consider having the planner develop specific storage instructions for each load.)

5. Identify the right equipment

You can reduce aisle space if you study the profile of the planned shipments. Check out equipment designed especially for narrow aisle picking. Analyze equipment with side guard rails versus wire guided equipment to determine relative benefits.

6. Traffic report

Travel time is a critical factor in the hours that are needed to run a warehousing facility. High volume parcel shipping requires the maximum attention of the greatest volume SKUs. For that, set up a pick line that minimizes the footprint as it can it minimize space?

Avoid congestion! Plan for minimum travel time without creating gridlock; try spacing out the (A) items into different areas.

Simplify: Reduce walking by using conveyors.

7. Food for thought

Some facilities have all-case picking with lift drivers on two-pallet walker-rider lifts. They pick the bottom two levels, while stand-up reach lifts replenish from the above-reserve locations to the pick locations. To keep drivers and pickers out of each other’s way, picking aisles and put away aisles are separated by using a pallet flow rack on the bottom two levels, and a push-back rack on the above reserve levels. In a temperature-controlled environment (i.e. freezer, dairy/deli, meat, produce), reduced space will reduce the cost of cooling. In this case, don’t utilize dedicated pick aisles but rather push-back rack where everyone shares the same aisles. This reduces the footprint, but the trade-off is increased labor requirements.

8. Measure turn over- what’s hot and what’s not

Design a program to track obsolete inventory and find ways identify the slow-moving products. Evaluate ways to manage such items. Also, plan out strategies to handle products with peak demands or cycles.

9. Improve value not cost

Non-traditional warehousing activities—can often involve wasted space. Adopt the leanest possible product flow to maximize your staging areas because it’s less costly for something to be in a storage location rather than at a value-added staging location.

10. Identify your business!

There is no cookie-cutter solution to building a successful warehousing/distribution operation. Each business requires a different facility layout and material flow. And don’t make any assumptions. The following questions might seem too basic, but—much to the regret—we’ve seen these considerations forgotten or ignored:

  • What are your peak demands?

  • How big or tall are your pallets?

  • How many cases fit a pallet? (Is over hang an issue?)

  • How deep is your location and how wide?

  • How wide must the aisles be for the equipment selected?

By giving attention to your processes, your facility will become best of the best.


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