M.B.M. de Koster RSM Erasmus University PO Box 1738 3000 DR Rotterdam Netherlands Tel. +31-10-4081719 Fax: +31-10-4089014 firstname.lastname@example.org
Warehouse assessment in a single tour Abstract
This paper presents an assessment method for warehouses based on a single facility tour and some Q&A. The method helps managers and students that visit a facility to get more information from tour visits through a simple and rapid assessment form. Since its inception, it has been applied to a number of cases, successfully identifying weak and strong points of the operations.
Over the last decades, many companies have offshored manufacturing activities to Asia Pacific and Eastern Europe. Since the consuming markets have not moved, this has put an increasing burden on the distribution operations of such companies. Companies have centralized warehouse operations in few, but often large facilities responsible for distributing products over a large region. Managing efficiency and effectiveness (service) is a great challenge for managers of such facilities. As a result, they feel a great need to benchmark warehouse operations, not only their own, but also their competitors’. However, assessing the performance of a distribution facility is a tricky business. Even after having visited a large number of them, it is still difficult to tell after a visit, whether this was a best-in class operation, just above-average, or even relatively poor performing. Nevertheless, even short tour visits can reveal a lot of information to the trained eye. This paper proposes a method to help managers getting more information from tour visits, through a simple and rapid assessment form. The form should be filled out immediately after the visit. The evaluation has been inspired by the ideas of Gene Goodson in Harvard Business Review on rapid plant assessment (Goodson, 2002). Since its development, the method has been successfully applied in several visits, with different groups of managers (with and without warehouse experience), and students. The major functions of a warehouse are to store products in order to make an assortment for customers, to assemble customer orders, sometimes to add value to the orders by customization activities, organize transport to the customers, and ship orders timely, in the way desired by the customer. Warehouse performance therefore, has multiple dimensions. Often, performance is measured in terms of ratios of output and input factors. Output factors include production (shipped orders, lines and units), quality (for example, order completeness, error-free and on-time delivery), flexibility (possibility to cope with changes in customer demand), agility (process adaptation to changed environment), and innovativeness (use of new supply-chain concepts yielding competitive advantage). Inputs are the resources used to achieve the outputs. These include the number of full-time equivalents (work hours used per year), investment in systems, buildings and IT infrastructure, process organization (i.e. the management), or the assortment carried. Some researchers have tried to develop benchmark tools for warehouses (McGinnis et al, 2002; Hackman et al., 2001; De Koster and Balk, 2005). One such tool is DEA (data envelopment analysis), which expresses the warehouse efficiency as a ratio of weighed output and weighed
input factors, normalized on a 0 to 1 scale. Although DEA is a powerful tool, it is usually difficult to obtain the necessary data at the required accuracy level. Also, for every factor that is included in the efficiency analysis, more cases are needed in order to have statistically meaningful results. Furthermore, the warehouses should be comparable, which in practice may be difficult to realize. It is also difficult to compare warehouses in different countries, even when they operate in the same industry branch (think of cultural differences, or just of the number...