I learned some time ago that, “People do what you inspect and not what you expect”. I also learned that
cost of an item is much more important than price of an item. And I learned that most companies want a return on their investment. ROI in your warehouse! Ask yourself this question, do you agree that ROI is an overused acronym. The reason it is used so generously is because it forces seller to focus on benefits buyer will receive and how long after purchase those benefits will be recognized. The reason I say it truly stands for, “Real or Imagined”, is because you have to know what process is costing you now in order to recognize a return.
Your warehouse does a lot to support your company. It has some sophisticated processes and more realistically some archaic ones.
How are those processes measured? How often are they measured? And who measures them? With technology that has been sweeping through distribution centers and not so recent slow down in IT spending, what will be your company’s next move?
Supposedly there are wizards out there that can get your warehouse into tip top shape. They can reduce your cost, they can reduce your personnel, they can make your inventory more accurate and more importantly return on your investment will be substantial. But think for a minute, aren’t those same wizards that brought us Y2K? IT spending came to a screeching halt right after world, as we know it, was supposed to come to an end as well. Company’s updated all of their software, hardware and some internal (front office) processes. “But we
forgot about warehouse!” Someone still has to: receive, putaway, replenish, pick, pack and ship your product. And they have to now do it: at a reduced cost, faster, more accurately and more likely with less people. So what’s return you are receiving on your warehouse investment?
I heard someone say, “People are our most important asset!” You see that statement on walls of company’s in every industry. Well, I am here to tell you that statement is not correct. Especially in your warehouse! Because if you have wrong people, doing wrong things, how is that considered an asset to your company? The correct statement should be, “The RIGHT people are our most important asset(s)!” What happens to those assets in times like we are experiencing now? They are downsized, right-sized, dumb-sized, laid off, and so on. And what
are you left with, some of wrong people trying to perform tasks they are not capable of performing, with very little training. More then likely training department has been right-sized as well. Then we sit back and wait for our operating cost to decrease so we can begin seeing ROI. What’s weird is that it doesn’t come. Or at least not return we were expecting. Why is that? Why is it so difficult for us to comprehend ROI when we are discussing warehouse? It is difficult to comprehend ROI in warehouse because; we do not measure processes or people in warehouse. If we did, would your warehouse be as messy and as dirty as it is? Would days go by with receiving not being completed? Would customer service personnel have to continuously go out to warehouse to verify that system inventory is same as what is physically in bin? Last but not least, would you be processing number of returns you are
currently processing? Probably not! All we know is people are constantly telling us that warehouse is full of assets and not merely costs. But reality of it is, as one CEO told me, “Why should I throw good money after bad?” Next he said, “We have done everything possible to improve our warehouse operations and we have not realized a return on our investment yet”! As always, my questions after hearing those statements are, “What was it costing you before purchase” and “What should it be costing you?” We all have an idea of what, costs associated with warehouse are, but we do not know what they should be. Even when I ask, “What does average picker make in your industry”, no one seems to know. When I ask, “How many pickers should it take on average to handle number of orders you are processing”, no one seems to know. When I ask, “What is average number of returns in comparison to number of
