Tools and Techniques to Optimize Warehouse Operational Performance Using SAP Warehouse Management Functionality

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1 Tools and Techniques to Optimize Warehouse Operational Performance Using SAP Warehouse Management Functionality Thomas Klyvø SBN

2 In This Session You will learn how to improve your warehouse offerings using a Lean-inspired approach The goal of the session is to give you a few concrete tools to bring back home so you can: Deliver significant cost savings Increase warehouse service levels The main focus will be on concepts that drive warehouse operational performance and how components within SAP ECC Warehouse Management can best be utilized to support the above 2

3 What We ll Cover Let the customers set the bar for your warehouse operations Know your cost drivers and what to do about them Tact and flow Wrap-up 3

4 Which Processes Should We Perform in the Warehouse? The core task of the warehouse is to store and make goods available for delivery when the customer places an order. But if we look more closely, we will often find more services offered. Packaging to customer requirements (stacking to a certain pallet height or type) Various forms of labelling (applying customer s own labels or a customer brand name) Light forms of assembly (putting together a tool-kit) Special delivery (rush orders or special shipping conditions, i.e., fragile or cooled freight) Apply light quality control procedures or other types of checks Extra processes cost a lot of money and grow over time! 4

5 Does the Customer Value Your Warehouse Service Offerings? Customers are different. Some value a good price, while others prefer superior delivery speed and certainty. If a customer really values a service maybe he is ready to pay for it? A price tag is a good way to find out how important a service is to a customer Find out what really matters to which customers Go through your service offerings and match your services with the various customer types and preferences 5

6 Revise Your Warehouse Service Offerings Your warehouse services must be determined strategically to fit into your company s overall value proposition! Define and agree on fixed order deadlines between Sales and Warehouse departments. If the deadline is not met, the customer will have to expect later delivery. In cases where customers ask for quicker delivery than what the deadline dictates, offer this as a special, payable service In cases where your customer asks for special services, like special packaging or product labelling, offer this as a special, payable service If customers value a service they should be willing to pay for it 6

7 Create Stability and Flow in Your Processes Defining fixed rules for when you execute orders with special services has the following advantages: Ensuring stability around your main processes Standardizing the execution of special orders, making the execution closer to the stable normal orders Only customers willing to pay will ask for faster delivery, which will generate more flow through the main picking processes less time spent putting out fires 7

8 How to Handle Customer-Specific Tasks in SAP When met with a customer request for performing additional tasks during shipping, you should evaluate: Is this request a small adjustments of an otherwise standardized product, and can these adjustments be done after production?» In that case, use Value-Added Services (VAS) in the warehouse to structure the process Is this a larger adjustment that should most optimally be performed during production?» Consider using a Make to Order process, where the entire order is handled customer-specifically already in production 8

9 Value-Added Service Supported in Both EWM and ERP WM An SAP solution that will let you handle specific customer requests A VAS order is determined by condition technique in delivery Picking order is created for delivery, destination storage type is changed by the system from Shipping Area to Work Center Products end up in Work Center bin after picking. Here, they can be repacked, relabeled, etc. After processing, the VAS order is confirmed, which moves products to the shipping area where Goods Issue is posted Delivery Picking Stock Pick to Work Center VAS Work Center Shipping Area 9

10 Why Use VAS Functionality in SAP? Guide the warehouse worker to a work center with the tools needed for performing the VAS task. This also ensures that the special handling is actually performed. Gives you the possibility of creating a standardized flow around special processing Consider assigning and training a smaller group of warehouse employees as VAS Specialists» Through warehouse queue determination you can make sure the VAS orders are guided to these specialists only You can decide to process VAS picking at a special timeslot each day and think of the VAS orders as another picking wave 10

11 Create Stability Remove Rush Orders from the Standard Picking Process There are multiple ways of achieving this; for instance, through a rush sales order type which triggers a special delivery type being created straight away when saving the sales order to the system This delivery type then can be singled out in VL06O when looking over the picking workload 11

12 What We ll Cover Let the customers set the bar for your warehouse operations Know your cost drivers and what to do about them Tact and flow Wrap-up 12

13 Know Your Cost Drivers! The largest part of your total warehouse costs comes from labor wages In the developed world, depreciation of most equipment purchases in the warehousing area and even warehouse buildings makes up a rather small percentage of the collective warehouse cost Most of your collective warehouse cost is found in the wages of your warehouse workers Your workers time is precious and should be prioritized carefully! Labor, Wages Equipment, buildings Administration IT systems Total warehouse costs Source: Implement Consulting Group studies 13

14 Know Your Cost Drivers And What to Do About Them! Focus on the most time-consuming activities Look for processes with many hands involved The two most time-consuming activities in most warehouses are: Move from one task to the other within the warehouse (idle transportation time) Picking, packaging, and labelling 14

15 Three Time-Saving Initiatives for the Warehouse Your most work-intensive processes, picking and packing, benefit from the below principles: Excel with ABC Reduce idle transport time with multi-picking Reduce touch points with Pick & Pack 15

16 Excel with ABC To help reduce idle transport time, a good old friend can help: ABC classification Very often, a small part of your stocked materials constitute a large part of your picks: And a very large part of your materials are seldom picked In a recent project for a global wind power manufacturer s spare parts warehouse, we found that: 6% of the materials made up 70% of all picks 64% of the materials had not been picked within the past three years 16

17 Reduce Time Spent on Idle Transport Time Within the Warehouse Utilize your A, B, and C categorizing by placing goods in the warehouse according to picking frequency, thereby reducing the total warehouse travel distance The high volume A products (green) are placed in the most accessible parts of the warehouse, while B and C products are given increasingly inaccessible warehouse spots Control your stock placement, and you will control the distance each picker has to travel 17

18 Identify Your A Storage Bins For ABC categorization to be useful within the EWM warehouse, your warehouse bins must also be categorized. Identify your Fast and Slow bins using bin sectioning data. 18

19 SAP ERP WM Supports ABC for Warehousing Usage If You Are Creative! SAP ERP contains out-of-the-box reports to evaluate your product usage and perform an ABC classification Standard SAP MM reporting Material master data on plant level The warehouse is controlled by specific Warehouse Master Data. Utilize mass-update tools in SAP standard to copy the plant-specific ABC indicator into the Warehouse-specific data views. Material master data on warehouse level 19

20 SAP EWM Features the Powerful Slotting Tool SAP EWM has a more integrated way of handling the updating of stock placement indicators called Slotting Using slotting, you first set up rules for what should affect your Warehouse Product master data Hereafter you can, with regular intervals, run a slotting run, which will automatically update the parts of the product master data controlling putaway 20

21 Rearrangement in SAP ERP In SAP ERP, you again have to be creative In a custom query (QuickViewer below), combine the tables for current Stock Placement, Master data, and your Warehouse Bins Execute query searching for products with sub-optimal placement Moving the products to a better placement is a manual process 21

22 Three Time-Saving Initiatives for the Warehouse Your most work-intensive processes, picking and packing, benefit from the below principles: Excel with ABC Reduce idle transport time with multi-picking Reduce touch points with Pick & Pack 22

23 Reduce Time Spent on Moving Between Picking Tasks Using Multi-Picking Many warehouses still use the simple one man, one order principle when structuring the picking tasks This method is easily executed, but highly ineffective for picking smaller orders in a larger warehouse Consider 3 lines for picking in 2 different orders The total travel time is made out of the green plus the red route 23

24 Pick Smarter One Man, Several Orders Identifying orders with similar products and picking them on the same trip through the warehouse will utilize the full carrying capacities of the picker and greatly reduce the time used travelling through the warehouse! Consider the same 3 lines picked in 1 route through the warehouse The total travel time is now made out of just one route considerably shorter than the two routes put together 24

25 Greatest Impact Is Found in Single-Item Order Structure Warehouses The below table shows the order structure of a mid-sized spare parts warehouse (~ picks per year). Left axis shows count of orders, right axis shows number of picking lines in each order. 25

26 SAP ERP WM Can Group Several Orders Together in a Consolidated Picking List In ERP WM, you can group together deliveries and make a common picking list (TO) for multiple deliveries This way, one Warehouse worker can pick products for several customers in one picking session A handy way to do this is from VL06O, which can be configured to show the number of items in each delivery: Same monitor shows you the weight and volume of the items you group together 26

27 Three Time-Saving Initiatives for the Warehouse Your most work-intensive processes, picking and packing, benefit from the below principles: Excel with ABC Reduce idle transport time with multi-picking Reduce touch points with Pick & Pack 27

28 Reduce Time Spent on Packaging and Labelling Reduce Touch Points It is part of Lean philosophy to avoid over-processing Avoid handling materials more than needed in the value-creation process Lean consultants will normally do this by thoroughly analyzing your work processes and identifying and eliminating any extra, non-value adding process steps 28

29 Handover Between Pick and Shipping The standard SAP shipping process Create Sales order Create Outbound delivery Pick outbound delivery Pack outbound delivery Post Goods Issue Looking closer at the process steps for Picking and Packing with a good knowledge of SAP reveals room for improvement Utilizing SAP standard, you can merge the Picking and Packaging steps Create Sales order Create Outbound delivery Pick & Pack delivery Post Goods Issue Reduce handover. Avoid double processing. Save time. 29

30 Pick & Pack Has Several Advantages The Pick & Pack process is carried out using mobile execution terminals with all the advantages of this (in-process validation, accuracy, etc.) With the warehouse Pick & Pack process, the packaging into the final Shipping Units is performed during the pick process This way, the process step Pack delivery becomes obsolete The time used for double handling, double registration, and carrying over information from picker to packer is eliminated 30

31 The Pick & Pack Process Explained 1. Picker starts the picking process on mobile Picking Terminal 2. Pre-created Handling Unit label is scanned or a new label is created and printed from the terminal 31

32 The Pick & Pack Process Explained (cont.) 3. The Picker is shown where and what to pick. Picking is confirmed by scanning bin number. Hereafter, the picker moves on to the next product. 4. When finished or packaging material is full, picker confirms that picking is done to the HU 32

33 The Pick & Pack Process Explained (cont.) 5. In order to continue the picking, picker is asked to scan (or create) the next picking HU 6. After picking is finished, the delivery is packed with the Handling Units scanned by the picker 33

34 Three Time-Saving Initiatives for the Warehouse Your most work-intensive processes, picking and packing, benefit from the below principles: Excel with ABC Reduce idle transport time with multi-picking Reduce touch points with Pick & Pack 34

35 What We ll Cover Let the customers set the bar for your warehouse operations Know your cost drivers and what to do about them Tact and flow Wrap-up 35

36 Tact and Flow Lean Principles to Increase Your Productivity Strive for an even flow through your warehouse Tact can help you identify (and solve) bottlenecks and overload situations Identify your average processing capacity per hour (the tact) Try to even out your warehouse tasks to raise efficiency Resources wasted Overtime or missed deadlines Too few Too few Too few Too many Too few tasks tasks tasks tasks tasks 36

37 Let the Shipments Set the Tact for Your Warehouse It might seem obvious, but the finished goods picking activities of your warehouse are very closely connected to the shipments leaving your yard! For every truck leaving, there is a deadline to be reached and potentially missed. However, often, daily warehouse tasks are seen as one big workload (day s orders for picking) This approach often results in general inefficiency in the morning, followed by a very busy afternoon Having only one common deadline will make it difficult to see when you are running late, and will generally be inefficient 37

38 Let the Shipments Set the Tact for Your Warehouse (cont.) By having a well-planned shipping schedule, you are able to spread out your picking activities over the entire day, thereby ensuring: Even workload with a fast pace (short deadlines) and, thereby, even utilization of picking resources Clear and visible picking deadlines ensuring that delays are quickly identified and that the right effort is put in to catch up 38

39 SAP Can Tie Together Shipping and Picking SAP ERP has an option for creating picking waves according to your transportation planning This means you can create one picking wave per shipment and: Initiate the picking (create TOs) for each wave simultaneously Monitor total picking progress by the picking wave 39

40 Plan Your Picking by the Shipment Without picking waves, you can still orchestrate your picking by the shipment Use Shipment List (VT11) to view the status of each shipment 40

41 Execute by the Shipment Create Transport Orders by setting shipment status Initiate the picking for all deliveries in a shipment by setting a status in the shipment using activity profiles for the status buttons 41

42 What We ll Cover Let the customers set the bar for your warehouse operations Know your cost drivers and what to do about them Tact and flow Wrap-up 42

43 Key Points to Take Home Put a value on your warehouse service offerings, don t let them grow over time (and don t give away for free without careful consideration) Look primarily for improvements in the picking and shipping areas of your warehouse (most hands on deck ) Reduce warehouse idle transport time by utilizing ABC categorization and multi-picking Explore the Pick & Pack transaction to reduce touch points Tie together shipping and picking activities to create flow and sense of urgency in your warehouse operations 43

44 How to contact me: Thomas Klyvø 44

45 Disclaimer SAP and other SAP products and services mentioned herein as well as their respective logos are trademarks or registered trademarks of SAP SE (or an SAP affiliate company) in Germany and other countries. All other product and service names mentioned are the trademarks of their respective companies. Wellesley Information Services is neither owned nor controlled by SAP SE. 45

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