From MHD: Spotlight on the 7 key warehouse processes

Mal Walker
Are all warehouses the same? Short answer: no, but yes!
This contradiction in terms is probably best explained by the Thai phrase; ‘Same same, but different’. This phrase is used widely in Thailand to explain to naïve tourists (such as myself) the similarities between one product and another.
Let me explain.
Yes, warehouses are the same in 7 key respects. They share 7 key processes. Two relate to inwards flow, (yellow), three to outwards flow (green), plus returns and value adding. Same same!
Now here is the ‘different’ part.
There is a plethora of nuances in how each process is physically conducted and electronically controlled. For example, two competitors with the same products will often have different ways of doing things. Idiosyncrasies across industries adds further diversity. Even third-party logistics companies do things differently.
The SCOR model and companies such as GS1 have blueprints of key processes using barcoding and radio frequency controls, which offer standard ways of reading and recording data, but the physical materials handling logistics and ways of doing things in each warehouse are somewhat unique to each business. This is driven by factors including magnitude of the warehouse operation, storage capacity, temperature, order profiles, legislative requirements, company culture, and volume of goods moving through the facility.
So, what are the key processes and how are they handled?

  1. Receiving

The act of handling products into a warehouse and onto a system. Receipts may be for single products, objects, litres, cartons, packets, crates, kilograms or full pallets. Items maybe large such as pallets, or as small as a split pin. The best way to receive products is via an Advance Shipping Notice (ASN) from a supplier. With this information on system, operators can scan consignment barcodes to bring up the ASN. If the delivery matches the ASN, then goods can be system-received. But at this point they are still at staging, albeit ready for put-away. Some systems allow for goods to be received into inventory at this point, whereas others require the goods to be delivered to a specific stock location before inventory is updated. This depends entirely on the customer requirements and how the system is set up.
Lesson: Organise ASN on your system for automatic receiving and put-away. Ideally, use RF equipment for scanning and updating your management systems.

  1. Put-away

A good system will prompt put-away staff with a note indicating that stock is in staging waiting to be transported to a storage location. The process commences when operators accept the put-away task from the Enterprise Resource Program (ERP) or Warehouse Management System (WMS), and then scanning the relevant barcode of goods to be put away. If there is no barcode, then a manual entry can confirm that the goods have been identified. At this point the system will be directing the put-away staff to deliver goods to the relevant storage location. Once at the location, the operator will either scan the relevant stock location barcode, or manually confirm that the correct location has been found, then place the goods into the slot before confirming that the put-away process is complete.
Lesson: Use a system that can direct put-away to vacant slots according to demand of the goods.

  1. Picking

There are two main types of picking.
Primary. This is the first picking of goods. In some cases, the first picking is delivered directly to a staging area or packing bench for finalisation, consigning and dispatching, thus the first picking becomes the last picking.
Secondary: This is a second picking process. Some primary picks are subject to a second picking process, particularly where picked goods must be allocated to clustered orders (bunch of orders), or discrete orders (single orders) via a sortation process or system. With the boom in online sales across many industries, far more companies are conducting secondary picking processes than ever before.
Once orders are received, it is common for orders to be released ‘real-time’ or in ‘waves’. Real-time orders are downloaded as they are received. Orders accumulated for specific picking times and transport routes are called ‘waves’.
Waves can be released at the discretion of the DC manager according to criteria that they determine. As alluded to above, picking may be discrete, i.e. one order at a time, clustered, i.e. multiple orders at a time, or batched, i.e. picking all the goods at once to sort to specific customer orders.
Often, companies may use all three types of picking. With increasing online orders, companies are increasingly installing picking apparatus such as put walls, put-to-light systems, goods-to-person systems and cross-belt sortation systems, to cope with the larger volume of small orders.
What about accuracy of picking? This is one of the most common questions asked by warehouse managers. Should you scan the product or location, or both during picking?
This depends largely on the degree of accuracy required. If both are scanned accuracy increases, but picking velocity will be lower compared to simply scanning the location. Where voice systems are used, no scanning will be used, but check digits at the location serve to ensure the operator is at the correct location. Voice picking obviates the need to scan at all, but with a touch of risk. The risk lies in the operator achieving the right count, upon picking, without making a mistake.
While companies worry about the accuracy issue, evidence suggests that voice picking and/or scanning the location only, gives a surprisingly high level of accuracy, without impeding picking velocity. For ‘accuracy intensive’ warehouses, accuracy can be enhanced by a statistical sample of QA checks, normally around 10 to 20% of orders.
Lesson: Picking uses a large amount of resources, and can reflect around 60% or more of warehouse staff. Smart picking systems and WMS are a must for increasingly complex businesses.

  1. Packing

There are scores of ways that goods are packed within distribution centres. Rather than delve into the specific details of packing processes, it’s suffice to follow five rules for successful packing:

  1. Goods picked must be traceable in terms of location from which they are picked, plus relevant ‘use-by’ dates and/or ‘batch’ dates and codes.
  2. Accuracy and QA checks must be built into the process.
  3. Goods picking from different zones within the warehouse must be easily ‘combined’ and system-managed to ensure order completeness.
  4. Goods must be packed according to their size, quantity, temperature, toxicity, value, fragility, hygiene and legislative requirements.
  5. Consignments must always be system-traceable to documents and/or invoice numbers for future traceability.

Lesson: Packing is an extension of the picking process and must be system-managed and treated with care to ensure that orders are complete, and accurate.

  1. Dispatching

The successful art of dispatch lies in the operation’s ability to have goods ready for departure, just in time for carriers to load their trucks. The DC manager must therefore balance and forecast packing and dispatching according to carrier pick-up times. Goods that are ready too early, for example, will clutter staging areas, while dispatches that are late, will delay loading and potentially cause late deliveries.
As indicated earlier, many firms resort to using their systems to release orders, for picking and packing in waves, aligned to specific delivery routes or carrier types.
Lesson: Avoid jambs and late deliveries by scheduling picking waves to align with carrier picking up times.

  1. Returns

This is something most companies wish will just disappear! However, returns are an intricate part of most businesses, and alas, the volume of returns is growing for many organisations – mainly due to the e-commerce revolution. Alarmingly, much of returns for many firms is for just one item at a time.
The complexity around handling returns mandates the following rules:

  1. When customers return goods, they should seek, and be given Return Management Authorisation, which outlines what is being returned and why.
  2. All returns must be traceable, to their order, document and invoice.
  3. Companies must have a pre-determined returns process that delineates what is to be done with the goods once received back into the warehouse, e.g. return to stock, repair, destroy, discard, recycle, return to manufacturer, etc.
  4. All credits must be system-recorded together with reasons why the goods are returned.
  5. Inventory must be updated where goods are returned to stock, or held for further action.

Lesson: Returns is a complex part of any business. A defined process must be in place that accurately and reliably records the whole transaction and credit process.

  1. Value-adding

This is the part of the business where products are produced, kitted, assembled, relabelled, modified, ‘burnt-in’, or subject to some other value adding process. The value adding part is about performing work on the product to make it ‘ready for sale’.
This process of value-adding can be complex, particularly when many different items are combined to form a new product. Complexity around handling value-adding processes and the changing nature of component products in and out of shelf locations can be daunting. Over the years, systems have evolved to assist, yet there are many companies that find recording of value-adding inputs and outputs a significant challenge, as the value-adding components may be incompatible with how the logistics system or conventional ERP or WMS have been set up.
Lesson: Review your value-adding processes and make sure that your system can handle the requisite activities and transactions.
To conclude…
So, there you have it, 7 key processes that are ‘same same’, yet ‘different’ for each organisation.
From the above, you will realise that modern distribution centre supply chains are a complex mass of processes, activities and transactions. All of which must be individually crafted by humans to make your warehouse operate effectively
The days of using a pad and pencil or even a spreadsheet to manage warehouse functions don’t seem very long ago, yet the unrelenting technology improvement and complexity of modern-day business dictates that companies invest in appropriate ERP and WMS systems to remain competitive. Equally important is that they are correctly configured to the ‘different’ aspects of your business.
Mal Walker is the manager, consulting, at the Logistics Bureau. For more information contact Mal on 0412 271 503 or email

Crest delivers good numbers for retailers

By Patrick Avenell

BRISBANE: Crest Electronics, an Australian supplier of Philips and Sony peripherals, has released figures concerning the accuracy of its new warehousing system. The results make for good reading for retailers, as the company’s new pick-to-light delivery system means that a retail outlet will get the products they requested quickly and with 99.7 per cent accuracy.

The new system cost over $2 million to install and became operational in late 2005. At that time, Crest employed 35 full time warehouse staff. The new system has allowed the supplier to cut this figure down to 12, improving the cost-efficiency at a similar rate to the efficiency of delivery.

According to Crest Electronics distribution manager Rainer Globke, the most recent distribution statistics show Crest as a trailblazer in retail efficiency.

“The new pick-pack-dispatch system means that any order received before 2pm will get to stores between Mackay and Sydney on the east coast the next day,” said Globke. “This of course depends on our delivery partner fulfilling their agreement with us”.

Globke continued to say that the Mackay to Sydney bracket represented around 50 per cent of all retail outlets, and that most remaining outlets should receive their orders within two days.

In terms of accuracy, of the 2.6 million units of stock Crest shipped in 2007, sent in 134,000 separate cartons, the supplier achieved 99.7 per cent box accuracy. For Crest, this represents enormous savings in redistribution and reduced unsold stock quantities.

For the retailer, it means that a salesperson can confidently give guarantees to its customers of when requested stock will be available for purchase. Additionally, it virtually eliminates the frustration caused by finding incorrect stock in a box and the unnecessary time wasted organising a second delivery.

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