Friday, January 16, 2009

Key Performance Indicators (KPI) of Warehouse/DC

Key Performance Indicators is a set of standards that are used to measure and study the performance, productivity and effiency of a warehouse/DC. Listed below are some KPIs that evaluates a warehouse/DC's performance:



On-Time Delivery
This is the amount of deliveries that are on time. A higher on-time delivery shows that warehouse is reliable and does the planning of transportation well.

Order Fill Rate
It is the rate per day of fulfilling orders. A higher rate shows that the warehouse is fast and efficient in completing orders.

Order Accuracy
The number of orders which are completed with no mistakes, things are packed and shipped out correctly. A higher number of accurate orders show how meticulous the warehouse staffs are.

Location Accuracy
Storing of goods/parts in the correct location so that it is easy to find them and pickers can do their job more efficiently. This shows that they have planned and recorded the information locations well. Look at the picture:

how do you find stock with rack after rack all filled with different goods? It's really up to warehouse planning.

Order Cycle Time
Cycle time is the total elapse time to move a unit of work from the beginning to the end of a physical process. It includes process time and delay time during which a unit of work is spent waiting to take the next action.

Change Orders
This refers to orders which are changed even finalization. Changing orders incurs cost and thus it is best to not have any changed orders.

Perfect Order Completion
The number of orders completed with no mistakes or other problems. Of course, a higher number of perfect orders completed reflects better on the warehouse.

Inventory Turnover Ratio
It calculates how many goods go out compared to incoming goods, it shows how fast inventory moves and the higher the better.

Obsolescence
Goods that are discontinued in the market. A lower number benefits the warehouse in terms of lower holding costs.


Inventory Accuracy
It is when physical count matches inventory records. Accurate inventory records show that the warehouse has good storage systems and keeps records meticulously.

Pilferage/Lost/Damaged Inventory
This is the number of damaged, stolen, or lost goods in a lot. It is better if this number is lower as it shows that the warehouse has proper equipment and procedures to keep inventory safe and has good security.

Lots Acceptance Rate
This is the number of goods that pass quality checks. A higher number shows that warehouse or DC is capable of delivering goods that arrive in good condition.

Days on Hand
The number of days inventory is on hand affects holding costs. Therefore, the fewer number of days the inventory is on hand, the better.

Storage Utilization
It is the measure of how well the available data storage space in an enterprise is used and is especially important during peak inventory times. It is measured by the percent of cubic space available used for storage, and the higher the number, the better.

Dock to Stock Time
It is the time taken from unloading to storing the goods as inventory. A shorter time shows how efficient the warehouse staff and equipment are.

Inventory Visibility
It is the ability to view inventory situations at different locations across the supply chain. By having inventory visibility, management can make decisions to optimize their inventory levels. This helps to prevent excess inventory or stock outs which are key to decreasing operational costs and increasing profit margins.

Cost per Order
It is the cost of fulfilling customers’ orders. It is important to keep costs low.

Employees Safety
A warehouse or DC that strives to keep employees safe at the workplace will have separate exits for employees and goods, safety equipments like fire extinguishers, hoses and sprinklers, and also set safety regulations. Safety is calculated by the number of accidents occurring and it is important to keep the warehouse a safe place to work.

Number of Full Truckloads (FTL)
Number of fully utilized trucks (fully packed). More FTL compared to less-than-truckloads (LTL) shows that utilization of trucks are maximized.

Usefulness and Constraints of KPI

Usefulness of KPI
1) KPI indicates performance of the warehouse/DC. Performance is measured based on different indicators within a warehouse/DC which helps locating and identifying problems to alter performance level efficiently.

2) KPI highlights areas of Improvement for easier and more targeted ways to improve efficiency within warehouse/DC

3) KPI is used as a benchmark for the warehouse/DC to review their strategic plans.


Constraints of KPI
1) It is hard to measure the statistics of the warehouse/DC’s performance as it always varies and normally is only an estimate because of the generalizations.

2) Quality can only be measured in regards to damage or breakdown and it is difficult to measure for services and evaluate the interaction of supplier personnel and customers

3) It does not show reliability limits, capacity limits.

Friday, December 19, 2008

Individual Reflection by Karen

LOM juniors went to ALB to have an experience on what a warehouse really is and also to fully understand many things that we’ve learnt in DCM.

It did catch my attention when it was revealed in the corporate ALB video that the public sector – referring to the Singapore Armed Forces (SAF) – outsourced its logistical activities to the private sector Singapore Technologies Logistics Pte Ltd (STL).

I understand that SAF has extremely high sensitive inventories of which majority are not for the commoners eyes. However, the fact it awarded STL with the contract clearly shows the exceptional amount of trust it has on the service provider.

This has taught me that trust is one of the factors which are vital in ensuring high customer service and satisfaction in the warehousing industry.

The tour around the warehouse was really exciting and also an eye opener for most of us. What really caught my attention was the importance of safety of employees. I mean, of course safety is important, but I never knew of the measures warehouses take.

At the mobile racking system, I stepped into the racking area while the racks were moving and the whole thing stopped operating immediately. There was a sensor that detected me going into the racks. This sensor is placed to avoid any casualties at the work place.

Measures taken to ensure employees safety were also seen at the vertical carousels, which stops moving when someone just puts a hand in the carousel. These measures taken were truly amazing.

When we arrived at the warehouse, we assumed the warehouse had a U-flow layout. It was not until that end of the trip that we realized the warehouse has actually adopted the through-flow, as goods-in and goods-out areas were at opposite sides of the warehouse

All in all the trip was enjoyable and educational, and it definitely aided me in understanding DCM better.

Individual Reflection by Sui

Firstly, I would like to express my many thanks to all the LOM lecturers that were involved in the logistics and planning of the whole field trip to the Army Logistics Base on the 28 November 2008. For sure it took some effort to arrange the whole second year LOM students to visit such a facility which require secrecy.

As such, I thoroughly enjoyed myself that day. I was very glad they had the head of operations from Singapore Technologies Logistics (STL) to personally explain the different areas and services they provided for the Army Logistics Base and MINDEF.

During the presentation, I took notice of the slides and realised the different services provided by STL were categorized under MOS and PODS. Essentially, it just tells us how much of the service is determined to belong to either STL or MINDEF. For example, under Other Distribution Channels, there is the Self Collection Over Counter Issue. This channel is used for controlled equipments such as fire arms and is under the charge of MINDEF. Another example is the mission support – Charlie 130.

After the delicious light snacks they provided for us, we toured the warehouse. I was really impressed with the sophistication of the warehouse. Seriously I thought warehouses were still pretty much “old school” and automation within a warehouse was very limited. But oh how wrong I was! (Although we’ve studied and covered automation in warehouses and logistics operations, I only believed it when I saw it with my own eyes!) So firstly we were introduced to the Automated Storage and Retrieval System (ASRS) which was the pallet ASRS and bin ASRS. The heights of their storage racks are 30m and 9m respectively. Its pretty cool that so many bins can be retrieved within an hour with only 2 pickers. I was also highly impressed with the Profile Checker before a pallet enters the storage area – it detects an odd shaped item and stops the pallet before it enters storage (a red light actually came on!)

Next up was the Mobile Racking System. It was the first time I saw such a massive structure that moves with the touch of a button! What was emphasized was the safety of this system. There is an Auto Stop sensor which stops the entire movement of the racks whenever something hits the sensor – This was the part I pushed Karen Leong into the system’s track to test out the safety system myself!

After which we headed up to the medical storage area. The lift which brought us up to the temperature controlled warehouse was huge! (I even tried jumping up and down to stall the lift but it just too massive.) I found out later that the purpose of such a huge lift was because even the Laser Guided Vehicle (LGV) uses the lift and strategic lasers and sensors are placed to guide the LGV into the lift safely.

At this storage area, they made use of another automated system such as the Vertical Carousel System (VCS) – it’s a tall grey structure with a small gap at the bottom. The pickers there showed us a live demonstration of how to enter the item number from the order slip and then the VCS automatically rotates and comes to a halt when it reaches the item and a light comes on to tell the picker exactly which bin to take the item from. After which the picker is required to scan the items to tally the amount of inventory that is stored in the system and any point of time. The safety aspect of this system was also tested out with one of our course mate put his hand into the VCS gap while the system was rotating. It stopped immediately when the sensor was activated.

The ALB adopts a ‘through flow’ layout and the LGV as mentioned earlier could be found at the storage center entrance.

Overall, I was most amazed and impressed with the safety precautions practiced with these highly advanced and massive automated storage systems used at the ALB.

Hope to have more field trips soon! :D

Thursday, December 18, 2008

Individual Reflection by Min Min

Upon knowing that we might be going on a field trip to Army Logistics Base was astonishing for I was expecting to see guns and machineries that I totally forgo the part where food supplies and medical supplies would be available too.

This trip was to allow all juniors to be able to picture how a warehouse might be like and the systems being used in reality rather than pictures found in books. I was pretty sure that this trip could aid me in answering my exam questions much more efficiently since real life experiences always creates a stronger impact.

Having worked in a warehouse before, this was definitely another eye opener, different from the warehouse I worked in. ALB could afford much higher technology equipments and was a different flow from the warehouse I worked in.

Upon reaching the ALB, we saw the loading bay. So I thought it was a “U” flow which eventually I found out it was a through flow.

We headed upstairs for a talk by a representative from ST Logistics. During the presentation and video, it wasn’t hard to understand the terms used since we’re familiar with them in books. They’ve categorized all items appropriately into general supplies, armaments, medical supplies, etc.

We started exploring the whole warehouse with a leader guiding us and providing us with explanation throughout the whole journey.

I was impressed by the ASRS system and the vertical carousel system. The ASRS was really fast that caught me staring at it while the picker packed and placed it in the bin to be placed into their respective locations. Having read from the book, the carousel system is expensive and are usually used for medical supplies, with the concept of parts-to-picker, we found out that the machine was easy to use and the warehouse that level was air conditioned! Mainly, air con was installed to allow the medical supplies to not be contaminated due to changes in temperature as well as to prolong the life of the supplies.

As any other warehouse, safety is one of the main concerns. Like the carousel system, a sensor was placed that even we found out that the whole system would stop once sensed. The guy at the system told us it was “dumb-proof”. So people who aren’t that smart can also operate that costly system! Technicians would be ready for them 24hr and contracts have been signed that they’ve to reach at most 1 or 2 hours upon request.

Staffs that are in the ST Logistics are also required to report within 4hours when they’re notified to reach at any point in time.

Through the trip, I finally found the difference and distinguish a “u” flow and a through flow. :)
It certainly was an enjoyable trip together with people from our course. It was a good platform for us to bond as well as to learn, just like the Korea trip earlier on. More trips! It certainly would aid us in this subject. Cheerios!

Individual Reflection by Melody

LOM Juniors went to the Army Logistics Base (ALB). The purpose of the trip was to expose us to a real life warehouse that most of us have not really been to. The trip was also to help us better understand the concepts that we have learnt in DCM.

Firstly there was a video and a talk by a ST Logistics staff about the warehouse. From the video and the talk, we learnt that the warehouse has many functions and services, like materials management, receipt services, storage services and distribution services. They store items like the army’s general supplies, armaments, electronic/optics equipment, auto spares, ordinance equipment and medical supplies.

Speaking of medical supplies, during our tour of the warehouse, we were taken to an air-conditioned place where they are stored. The warehouse has adopted a vertical carousel storage system. This system brings the goods straight to the picker or operator and it helps in reducing their walking distance. Not only do they give ready access, goods kept in the vertical carousel are more secured. Also, the temperature in the system is easily controlled, which is an advantage for small goods which require a certain temperature for storage.

Another storage system that is an eye opener is the mobile racking system. Learning from the book I never understood what functions it has and how it operates. However at the warehouse, I finally realized that this racking system used to utilize capacity in a small warehouse, for in the warehouse, no matter how many racks there are only space for ONE aisle is required. Racks are compressed together and only the rack that has the location of the good needed is open. Disadvantage of this system, however, is that the warehouse is required to have a system that remembers the locations of the goods well, which I believe ALB warehouse has.

The ALB warehouse really focuses on the safety of their employees. This can be seen in various parts. Like at the vertical carousels, when the carousel is moving, it is very dangerous if a hand goes in and gets caught and injured. However, they have safety-sensors that sense any object that enters the carousel and stops immediately. Also, at the mobile racking area, racks are moving at anytime and it is very dangerous for anyone to be walking in the middle of the aisles. Thus there is also a sensor that detects any object in between aisles.

The warehouse also installed the ASRS. The ASRS basically allows the storage of both pallets and bins. There is high capital investment on the machines used for this system and I suppose that high maintenance is required too as machines looked are pretty complicated.

The ALB warehouse has adopted a through-flow layout. At first most of us thought that the layout adopted was U-flow as we though the unloading and loading bays were adjacent to one another. However we forgotten the fact that we have walked to the opposite side of the warehouse and soon realized that the loading and unloading bays were at opposite sides.

That was my first time going to a warehouse and was truly impressed by the storage systems, especially the mobile racking system as I never knew racks could move about in a warehouse, and especially when they have so many heavy things on them. All in all, the trip was really enjoyable. =)