You Might Have A Bad Warehouse If... The Sign "Keep Door Closed During Audit" is Displayed

This bad warehouse practice is brought to you by Gary King founding partner and chief consultant at Business Fit Associates.   Gary reveals highly questionable auditing and inventory management practices of a company he witnessed during an ISO audit. 

"I was accompanying an ISO Registrar during an ISO 9001: 2000 pre-certification audit," he wrote. "At this particular warehouse distribution location that served fortune 500 companies as a 3PL, we came across a trailer backed up to an open dock door with its trailer door closed. A sign hanging from a chain attached to a light fixture just inside the warehouse read: 'Keep Door Closed During Audit'.

When the auditor asked about the purpose for the sign the response from the dock supervisor was: "This is where we put product that we didn't have time to identify or determine who it belongs to. We didn't want you to include it in your audit."

Gary continued: The auditor's response was can we have a look anyway? The dock supervisor' replied, 'I guess its okay since the trailer is outside of the warehouse you can't count it in the audit anyway, right?'  Without waiting for a response from the auditor, the dock supervisor rolled the door up and exposed a trailer filled front to back with pallets of customer product.

When the auditor asked how long it took to fill the trailer, the dock supervisor said not long, 'We filled it on second shift last night; it took us about two hours. The other three trailers out in the yard took us a couple of days because we were busy cleaning up and getting ready for your visit.'

At this point Gary says he excused himself to use the the men's room, "Where I proceeded to laugh out loud for at least five long minutes before I could compose myself enough to rejoin the auditor on his walk through."

Funny? Yes, but the incident exposed a serious problem at this warehouse. The activity that Gary described defeats the whole purpose of an inventory audit -- or any audit for that matter -- that is, to get the most accurate count possible of the stuff on the shelves and its value.

Not to mention time that was wasted “getting ready” for the auditor’s visit.

And how is it possible for even the most perfunctory of warehouse management systems to have four trailer loads of product laying about that can’t be identified? Plus they were essentially hidden outside of the warehouse. It almost sounds illegal.

This episode reveals not only an unwholesome and resistant approach that undermines the auditing process, but it also leaves money and product off the books and … where? In addition it reveals a shocking and unethical approach to inventory management training.

This was an out of control inventory control system. As The Warehousing Education and Research Council Best Practices Guide notes, “Well-documented and defined processes are the foundation of inventory control. Processes should detail specific tasks and requirements.” Do I need to mention that those specific tasks should not include middle-of-the-night inventory moves to prepare for an audit?

The guide adds that defined and documented procedures “should be the only way inventory is managed and transactions processed,” and employees must have a “complete understanding” of those procedures and expectations.

“Documented processes should be the only acceptable way.” Hiding product ruins any hope of an accurate, documented cycle count or properly measuring inventory activity.

As the guide further explains, it’s also all about achieving the “right company mindset…inventory accuracy must be seen as every employee’s responsibility, not just the responsibility of those who perform inventory transactions.”

In this case keeping the door closed illustrates a cockeyed mindset, leaves money somewhere in limbo, and product in the dark.

I really love your feedback - and love your contributions to share those bad warehouse stories to help educate the profession on what NOT to do, and maybe what to do if you’re not doing it.

If you've got an example of a bad warehouse practice, send me your story and photo(s) to [email protected]. If I feature your example in one of my blogs, WERC will send you a free copy of the WERC Warehousing & Fulfillment Process Benchmark & Best Practices Guide (a $160 value).

Your submission can be anonymous if you like so you don't get your boss or company in trouble! I'll be collecting examples all year and the winner will receive a free warehouse assessment by Supply Chain Visions, a $10,000 value. The runner up will win a free conference registration to the WERC 2011 conference (a $1,375 value).

You Might Have A Bad Warehouse If... You Feel Like Indiana Jones When Picking Product

It may be fun to act like Indiana Jones and go on an expedition for that perfect treasure, but if that treasure you are after is an order you are trying to fill or a slot you are seeking out for a replenishment I am probably safe in suggesting you might have a bad warehouse.   I have seen put-away operators who were forced to dismount their fork trucks and in a few cases actually climb the racks (fortunately the racking was only 2 levels high) taking precious time to arrange and re-arrange product to fit. Then the process was reversed when order pickers needed to pull product from inventory to replenish the pick racks. They had a hard time finding the right SKU and pulling the correct quantity. Workers at these warehouses were frustrated with the process, but there was just not enough space and far too many SKUs (stock keeping units) to fit in the stocking locations.

The photo on the left and the photo on the right (click on photos to enlarge) show  multiple SKUs on a shelf. Each of the shelves shown in the photos on the right and left were recorded as single warehouse locations or slots in the company’s warehouse management system and each cardboard bin was a unique SKU. 

If the two examples above don't make you cringe, I've got another example for you. The photo below shows a single cardboard bin with multiple SKUs. Incredibly enough there were bins within bins and multiple bins on a single shelf. Again, this company’s inventory management system only recognized the shelf as a location. When the order picker gets to the right slot – they have to visually sort through the boxes to find the right item, which can (and most often does) lead to picking errors.

 

While these photos represent a company that was fairly orderly (all the boxes were placed neatly in the rack), we frequently see storage areas where SKUs flow over into nearby locations or where the location is not well defined, such as when pallets are stacked in a “bulk” or “overflow” area.

So what can a company do when faced with such a challenge?

• Best practice is to have a single SKU to a stocking location, to have all locations clearly labeled and defined, and to track inventory by a unique location.
• Some near term options might be to split up a larger location into smaller (like the above company did by using the smaller cardboard bins on the shelf) – but to assign each smaller location its own slot in your inventory management system. This would mean placing a location slot label under each cardboard bin so there is a one to one relationship for a SKU and SLOT.
• A longer term solution would be to optimize your cube by aligning your storage equipment to your product profile. For example, a better approach for the company in the third photo might be to use carousels to increase the density of their storage area since the product in each cardboard bin was relatively small.

Good location management will pay dividends in reduced labor costs and improves accuracy. For more benchmarking information read the sections on Slotting and Storage and Inventory Control in the Warehousing Education and Research Council’s “Warehousing & Fulfillment Process Benchmark & Best Practices Guide” available from the WERC Online Store.

With today’s warehouse management systems there is really no reason why most any size business can’t use some form of location management system. There are the major players such as Highjump, Manhattan Associates, RedPrairie and SAP (and many more) as well as a number of new “on demand” WMS systems, such as SmartTurn and SnapOnDemand.

Many consulting firms can help with a warehouse organization. Fortna, Forte and enVista are three really good boutiques that are known for sorting through warehouse operations problems for companies.

I really love your feedback - and love your contributions to share those bad warehouse stories to help educate the profession on what NOT to do, and maybe what to do if you’re not doing it.

If you've got an example of a bad warehouse practice, send me your story and photo(s) to [email protected]. If I feature your example in one of my blogs, WERC will send you a free copy of the WERC Warehousing & Fulfillment Process Benchmark & Best Practices Guide (a $160 value).

Your submission can be anonymous if you like so you don't get your boss or company in trouble! I'll be collecting examples all year and the winner will receive a free warehouse assessment by Supply Chain Visions, a $10,000 value. The runner up will win a free conference registration to the 2011 WERC conference (a $1,375 value).